To the Editor:
Your June 11 article, “Returns on city pension plans outperform state plan,” was good and welcomed news. It stated that the rates of return on all of the city’s pension funds for the past year ranged from 12.6 percent for Fire II to 12.9 percent for Municipal. For the 10-year period, the results for the pensions ran from 8.3 percent to 8.4 percent. I put more reliance on the 10-year results because pensions are by nature long-term investment vehicles. I also looked to the 10-year because the results include the 2008-2009 stock market debacle.
I thought of all of the times former Councilman Bob Cushman, Ward 4 Councilman Solomon and Ward 9 Councilman Merolla have attacked the mayor and his reliance on a 7.5 percent rate of return target for the city pensions’ funds. As a note, 7.5 percent is also the rate of return used by the state. “Not facing reality” was one of the kinder things that was said on their attacks on the mayor.
To me, planning on 7.5 percent and getting between 8.3 percent to 8.4 percent looks like awfully prudent management by the mayor.
A bell went off in my head and I got a hold of an article in the Beacon that was published May 24, 2012, almost exactly a year ago. The title was “Fiscal warning from researcher puzzles mayor.” The article discussed a paper written by Eileen Norcross of the Mercatus Center at George Mason University. She was scathing on her analysis of the Warwick pension, stated that only a risk free return of 2.4 percent should be used in evaluating pensions and that the city needed to triple its annual contributions to the pensions by $39 million to a total of $51 million. Can you imagine what that would have done to our tax rate?
Fortunately, no one paid her any attention.
Well, wait a minute. Cushman, Solomon and Merolla did, as they used Norcross’ paper to bolster their argument that the mayor is “not facing reality.” Unbelievably, Councilman Merolla made the comment that lowering the expected rate of return saved the city money. That’s like having a CD paying 5 percent roll over at 1 percent and congratulating yourself.
I see the mayor attacked all the time by certain members of the council. I think that we need to look back over time to see how the attacks square with reality. Clearly, these people’s hysterical attacks on the mayor’s management of the city’s pensions would have seriously hurt this city if they had been listened to.
The mayor has done a good job of administering the city’s pensions. The passage of time proves that.
Let’s keep that in mind the next time the mayor is attacked.
Joseph H. Weaver
Ward 8 Republican Leader