The Dallas Police and Fire Pension System's continued poor performance is a threat to city's credit rating, the bond rating service Moody's said this week.
On July 9, a revised audit of the system revealed it had about $3 billion in assets, 6 percent less than was reported to the pension fund's board in May, according to Moody's. The asset revision was the second for the plan in 2015, which highlights the risk the fund poses to the city's credit. As the pension system's unfunded liabilities grow, so does the weight on the city, which is on the hook for its police and firefighters pensions.
Because of the audit revision, earlier this month the pension's board reduced how much it expects to earn from investments in the future from from 8.5 percent to 7.25 percent. At a rate of 7 percent, Moody's projects the pension system could be out of money by 2038.
In an attempt to right the ship, the pension has installed a new executive director, Kelly Gottschalk, and suspended enrollment in the lucrative "DROP" program. The Deferred Retirement Option Plan allowed police or firefighters to work the 20 years needed for a full pension, continue working, and have their pension payments deposited into an account with a yield as high as 10 percent. Dallas City Council member Scott Griggs, who's also a member of the pension board, says hard work's ahead, but he's keeping the faith.
"We have our work cut out for us and we are going to return the Pension System to health and growth," he said.
The pension system and DROP have served as one of the primary tools to retain Dallas officers. Dallas pays less than neighboring departments, but the DROP program has made more than 200 cops millionaires.
"We've always had the lowest pay. Our health benefits are some of the worst in the state," Dallas Police Association President Ron Pinkston told The Dallas Morning News in January. "But we had a great pension for a young recruit to hang his hat on coming to Dallas — other than the ability to chase some of the worst criminals in the state."
Currently, Dallas' Moody rating is Aa1, the second highest possible.
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