Ordinance designed to ensure pension funding
An ordinance designed to ensure that administrations sufficiently fund municipal pension plans gained City Council approval Monday, although the city has followed a plan of meeting annual required payments for years. City contributions to its pension plans will total $25.3 million in the fiscal year starting July 1, which have been budgeted.
That hasn’t always been the case. During the early 1990s, a prior administration shortchanged what actuaries recommended in payments in an effort to reduce taxes. Similar actions in other municipalities have put them on the brink of bankruptcy.
Sponsored by Ward 3 Councilwoman Camille Vella-Wilkinson, the ordinance reads that the city “shall make its annual required contribution to each of its pension funds every year and shall not divert pension funds or funds necessary for the annual required contribution to the general fund.”
It continues, “However, if an extreme or unforeseen circumstance prevents the city from making its annual required contribution to any of its pension funds or requires a diversion of pension funds, such nonpayment of the contribution or diversion of funds shall only occur with the approval of the City Council after a public hearing.”
At the meeting, Merolla asked if Vella-Wilkinson drafted the ordinance because she was under the impression that Mayor Scott Avedisian wasn’t making the annual required contributions.
Vella-Wilkinson said Tuesday afternoon, that is not the case at all. Rather, it is her understanding that the city had not been consistently making contributions before the mayor came on board. Avedisian, she said, has been “meticulous” in the effort.
“My belief is that he’s met his contributions the whole time he’s been in office [and] not many city and town administrators can state that as a claim,” said Vella-Wilkinson. “We’re very fortunate that we have a mayor who’s been looking out for the welfare of the city employees. I think it’s important.”
Still, Vella-Wilkinson said during the interview, as well as the meeting, the whole idea of the ordinance is to provide pension protection to city employees and ensure that it is not solely up to the administrator to decide whether the annual contribution fund is met. Instead, the council must also have a say.
“I know I can count on Scott but I don’t know who’s going to follow him and put the same priority in the contributions,” she said Tuesday. “It’s our responsibility and I believe it provides additional gateways to safety.”
But why does Vella-Wilkinson feel this way? As a legislator, she said each time she has contacted a department head or an employee in the city for help, whether it be to assist a constituent or aid her with a piece of legislation, they have come through with shining colors.
“I think we have the best city employees in the state,” said Vella-Wilkinson. “We don’t have the money to give them a pay raise so the least we can do is make sure their future is secure. I look at the quality of services we have and the dedication our employees put to their jobs and I stand by the fact that they are top-notch.”
Also, she feels it will alert employees, as well as constituents, if the fund is diverted. The general public in other municipalities, she said, should be aware that perhaps the reason their property taxes were being changed is because there was a diversion of revenue.
Vella-Wilkinson said administrators in other municipalities diverted funds and weren’t making their contributions so as not to raise taxes.
“There wasn’t anything illegal about it, but it doesn’t mean that it’s ethical. In my view, it’s unethical when you have a group of employees who are expecting that because they put in their funds to the pension that the administers are going to put in their contributions, as well.”
In an interview yesterday, Avedisian explained the city implemented a 40-year plan to fund the Fire I and Police 1 pensions 18 years ago. Since then, the government has implemented new standards calling on municipalities to implement 30-year plans to meet pension funding requirements. Implementing a 30-year plan now would reduce annual payments, but prolong the payoff resulting in millions more for the taxpayers.
“You will hear some people say that we are not making our annual required contribution. If you are looking at a 30-year plan, that is correct. However, I had to meet with the director of revenue, the auditor general, the budget officer and the director of municipal affairs and said, ‘If you want me to re-amortize the 22-year plan to 30 years, I’m going to save a lot of money this year but it adds eight more years of pension payments to the plan,” he said.
“We make the annual required contribution from the locally adopted ordinance that sets forth a 40-year funding formula instead of a 30-year plan. Again, Warwick was one of the first communities to do that before there were any standards telling you to do that,” he said.
In other action, the council gave first passage to an ordinance that should make it easier for the city to sell land that it is holding because of the lack of tax payments.
Ward 5 Councilman John DelGiudice, who introduced the measure, said someone wanting to buy a piece of property held by the city for prior taxes, should no longer be required to pay fees to clear the property, the title, all back taxes and the appraised value of the property.
At the meeting, DelGiudice said he previously met with members of the city tax office, planning department and clerk’s office to review the issue. It was recommended that rather than have the buyer pay all the back taxes and the appraised value, the buyer pay whichever is greater, as well as all other fees.
According to DelGiudice, the goal of the ordinance is to get these properties back on the tax rolls without over taxing potential buyers.
“From what I’ve been told, we’ve had roughly 14 inquiries during the past year and only three were sold,” said DelGiudice, with Acting Tax Collector Ken Mallette confirming his numbers. “Most of them have backed out due to the cost.”
In some cases, he said, people are being asked to pay almost double the actual value of the property. One particular piece of property in Ward 5, for instance, was appraised at $2,200 and back taxes and fees were $2,500.
Council President Bruce Place agreed before speaking in favor of the ordinance.
“There were two people in my ward that were set to buy the property but then had issues with the back taxes,” said Place. “The property was a mess. People use it as a dump, so they refused.”
In fact, said Mallette, there’s another side to it, as the 11 properties that weren’t closed in the past year actually cost tax dollars.
“We’re carrying that burden,” he said.
Further, the ordinance states that there now be an open bidding process as opposed to a closed process. In other words, potential buyers can bid against each other.
Colantuono asked what the procedure would be if two offers were identical and Mallette said they would continue to place bids until an agreement is met.
Moreover, Solomon wanted to know where the excess funds go. When Mallette told him they are diverted to the general fund, he questioned if it should go back to the original property owner.
Malette said, quite often, property owners are deceased and people who inherited the property don’t want it.
“These owners are not to be found,” Mallette said. “It’s very, very rare that a property owner steps forward and says, ‘I’m entitled to this property because it was my great, great grandfather’s.’ That doesn’t happen.”