Mar 18 2009

Service cut backs at City Hall

Published by at 7:13 pm under Budget

Amazing!  The headlines of the Ann Arbor News broke the bad news today about how the losses in the AA City Retirement Pension Fund may force cuts in services over the next three years.  The worst case scenario that Mr Crawford outlined to the reporter is another example of how disingenuous City staff can be.  The fact of the matter is that the worst case scenario Mr Crawford computed was on December 31,  2008 when the Dow was at 8800.  It is not 20% below that and now and I am sure Mr Crawford hopes that he even can make the worst case scenario now!

Defined Benefit Plan

It is amazing to me that the City still offers a defined benefit retirement plan.  They cannot meet the financial obligations that they have now so why are they still oferring a form of pension that virtually no business offers any longer?   I am sure that in addition to “praying” for 7% a year in investment returns, they are also counting on the generosity of the Ann Arbor tax payers to help meet a moral obligation.  I will try to do some calculations on this in the next month but I think they will find that between the VEBA Trust that is less than 25% funded and the Pension Trust that is less than 70% funded, they would need to raise taxes by 15 to 25% to get them out of the hole.  How can the City Council continue to do business the way they are?  I have concluded that they are either in denial or they know they will not be in office when the proverbial feces hits the fan.

The pension plan has lost 50% of its value in the last 18 months.  At 7% annual return, it will take over ten years just to get to where we were 18 months ago!  The pension plan that 8 years ago was funded at 140% is now funded at less than 70%.  We should force our City Managers to stop promising defined benefit plans and take the pension plan out of the hands of well intentioned amateurs before we will all be forced to leave the City because we cannot afford our already ridiculous taxes.

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