The board that oversees the city-parish’s retirement system wants the parish’s retirement ordinance amended so the proposed city of St. George can be assessed an appropriate share of retirement costs if it successfully incorporates this fall.
The city-parish’s retirement board has told the Metro Council the amendments are needed to ensure the retirement system is able to continue paying out earned benefits to existing and future retirees of city-parish government should St. George incorporate as a separate city within the parish.
The proposed amendments the Metro Council is set to discuss at a public hearing on Wednesday don't specifically identify St. George as the reason behind the proposed changes, but legal opinions from the retirement board's attorney and special counsel do.
The attorneys also acknowledge the changes could be challenged in court.
The financial impact that incorporating a fifth city in southeast East Baton Rouge Parish would have on the city-parish's retirement system and the parish's general fund as whole, was at the center of debates this summer over a legislative bill that tried to establish the framework of how St. George would transition into its own city should voters in the proposed city approve the incorporation measure in the Oct. 12 elections.
Gov. John Bel Edwards vetoed the bill, saying the last-minute changes made to the bill would have unfairly allowed the new city to split from under the city-parish umbrella without paying its share of accrued liability to the retirement system.
The City-Parish said Wednesday it would lose $48.3 million annually if residents in the southeastern part of East Baton Rouge Parish form a se…
"Unfunded accrued liability" is basically what the city-parish owes employees who have retired but doesn't have the funds to do right now.
Drew Murrell, a spokesman for the St. George movement, called the proposed amendments "a step in the right direction" but didn't miss the opportunity to take a dig at Mayor-President Sharon Weston Broome and her administration.
"We've tried two times this year to sit down with them and figure out what they think we owed," he said. "They don't talk to us, saying it's 'premature.' If that's true, isn't it premature to try and pass this ordinance?"
Broome's spokesman Mark Armstrong confirmed Murrell's comments, saying Broome feels it's too early to hash out specific transition details when the vote hasn't even taken place yet.
Armstrong added, "The item is being initiated by the retirement board. We understand why they are concerned and we support that."
Denise Akers, general counsel for the retirement board, said the amendments mirror withdrawal liability language most statewide retirement systems already have. She said the board became concerned the city-parish wouldn't be able to meet its funding obligations to the retirement system given estimates of how much the parish's general fund would lose if St. George successfully incorporates.
At present, that estimate is between $53 million to $48 million annually, which is revenue generated annually from a 2% sales tax.
"We know a lot of retirees are anxious about the stability of the retirement system," Akers said. "We wanted to take the steps necessary to make sure pension plans are properly funded."
According to an annual financial report released in January, the city-parish unfunded accrued retirement amount is nearly $600 million.
The ordinance proposed by the retirement board sets up a formula and process to calculate the amount that St. George, and any other city that incorporates in the parish, owes to pay off the debt.
Based on a three-year average of sales tax revenue within the proposed boundaries of St. George, Akers estimated St. George would be on the hook for at least $45 million in accrued liability debt to the city-parish should it incorporate this year.
"That amount could be higher," she said. "In the ordinance we're proposing a 15-year payment install plan which would average out to them paying approximately $5 million a year or as high as $6 million annually."
The committee that drafted St. George's first-year budget did set aside approximately $4 million for "legacy/retirement costs" to the city-parish.
St. George proponents also met last week with officials from the retirement system about the proposed amendments.
Although Murrel didn't express any objections to the proposed changes, he said he's hopeful the item will get deferred this week so their camp and others have more time to properly review the measure.
"I think there is some language that needs to be tweaked," he said. "(but) we've always said we want to pay our share of expenses we've incurred."
One in an occasional series of stories on the possible creation of a new City of St. George in the southeastern part of East Baton Rouge Parish.