A Coral Gables advisory board wants to give retired employees a near 6 percent cost-of-living increase to their pension benefits, but city commissioners put the brakes on that plan Tuesday.Under city rules, whenever the city’s pension fund earns more than 10 percent on its investments in a year, the pension board can recommend that some of the gain be dispensed to retirees as a “cost-of-living adjustment,” or COLA. Despite the name, however, this adjustment is not tied to the inflation rate, which is now about 2.2 percent. In effect, it’s a windfall for retirees if the pension fund has a good year.But the rule does not take into account the overall health of the pension fund. While Coral Gables has enough money in the fund to pay current retirees, it is more than $200 million short of what it needs in the long term to provide promised benefits when current employees retire in the future.Earlier this year, commissioners imposed higher pension contributions and reduced benefits on future police retirees after City Manager Pat Salerno and the police union were unable to reach a deal despite 18 months of negotiations. All officers’ annual pension contributions increased from 5 to 10 percent of wages. And officers whose pension benefits had not yet vested — meaning officers with fewer than 10 years of service — will no longer be able to retire on 75 percent of their working pay after 25 years. Instead, they will get a maximum of 67.5 percent after 25 years. On Tuesday, commissioners voted 3-2 to reject the Retirement Board’s request to provide a 6 percent cost of living increase for retirees in January. Commissioners Ralph Cabrera and Maria Anderson dissented. The Retirement Board oversees pension money for police officers, firefighters and other unionized workers.City Attorney Craig Leen, and the city’s pension attorney, Jennifer Cowan, said that the city’s COLA rule conflicts with state law, and when that happens, state law prevails. The pension board argued that since its return on assets for the budget year that ended Sept. 30 was 16.7 percent, a return that exceeds the threshold of 10 percent that triggers COLA increase, the city should pay the requested 5.95 percent boost. But state law says the city must come up with the money at the same time as it approves any such increase. “State law prohibits transfers to future taxpayers any portion of cost to be paid by current tax payers,” Leen said. “The COLA is unfunded and, in my view, an additional benefit that is not funded should not shift to future taxpayers.”The city’s actuary, Mike Tierney, confirmed that funding “needs to be in a plus position.”According to the plan actuary, the Coral Gables Retirement Plan had a cumulative net actuarial loss of $82.8 million. The plan has an unfunded liability in excess of $200 million. If the city pays the requested cost of living increase that figure would amount to $1.6 million over 30 years — or $48 million.Ron Cohen, an attorney representing the unions, argued that the cost-of-living increase was not an additional benefit.“You’re supposed to fund it,” Cohen told the commission, citing the ordinance which calls for annual cost of living increases. “When the plan makes enough money on one factor then this COLA will be paid, it’s a trigger. To say it is additional because it hasn’t been prefunded is the tail wagging the dog.”Anderson agreed. “We have an ordinance in place that has triggers. I wish the question had been asked properly to the state so we would have clarity. … I think it’s the right thing to do from a human point of view.”Cabrera agreed: “When all of this is said and contemplated, it really is about doing the right thing. Not about siding with one or the other but doing the right thing. It’s an easy decision to support the ordinance.”Cabrera is running for mayor, and support of the employee unions can be important in city races. But given the city’s $200 million in unfunded employee pensions, police officers have interests at odds with city taxpayers: The city workers want to keep their pension benefits, while the taxpayers, presumably, do not want tax increases to foot the bill.On Tuesday, the other three commissioners, including Mayor Jim Cason, followed the city attorney’s interpretation of the law.“Twenty million to future taxpayers of the city is problematic to me. I see it as a $20 million tax increase. That’s why I’m taking this position but at the same breath, we do need to do something for our employees and the way this is phrased concerns me,” Commissioner Frank Quesada said.Vice Mayor Bill Kerdyk Jr. said he sees the cost of living increase as an additional benefit. “I concur with the city attorney at this point.”Cason urged Leen to approach the state’s Division of Retirement for clarification. “I want to make sure the state answers the right question. I would like to see our attorney go back in a more fulsome way and get as quick an answer as possible to see what is the state’s position.”Leen agreed to do so and to share his findings with the other legal team. “The COLA won’t go in effect Jan. 1,” he said, after the commission’s vote.In other business, Cabrera hoped to reverse the commissioners’ 3-2 vote last month to authorize a beautification project that will add landscaping, trees and an irrigation system to the medians of LeJeune Road from Altara Avenue to Mendoza Avenue at a cost of $305,635.Anderson had also voted against the project, citing the way it had been presented to the commission, but Kerdyk, Quesada and Cason voted to fund the project.“We got a document that showed three blocks of a 30-block project,” Cabrera said, as he argued that medians could slow emergency vehicle response time on LeJeune, one of the busiest streets in the city.Resident Felix Pardo also urged a re-vote on the issue, citing the “safety issue” and that the center of the street as it exists now provides “a safe haven to stop and try to merge into the lane.” However, doing so is illegal and dangerous and could result in a traffic citation, Salerno said, adding that the Florida Department of Transportation’s strict standards for approval meant that it took six months for the state to OK the project. Independent traffic consultant Tim Plummer, who was asked to look over the city’s plans, felt the design of the islands was safe and valid. “With the FDOT it’s much tougher to get approval. They always take into account safety and operations,” he said.Acting Police Chief Scott Masington, who spoke at Cabrera’s request, also could not say that the project would slow response time. “I don’t know how to quantify that this median design changes our response time.”The beautification project will move forward. Follow @HowardCohen on Twitter.
Coral Gables
Coral Gables