Forecast for city pensions: ‘Is it bright, or cloudy?’

By John Howell
Posted 3/10/16


It’s a matter of spin.

On Monday morning in a press release Mayor Scott Avedisian touted that the valuation of the city’s pension plans as of July 1, 2015 surpassed $400 …

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Forecast for city pensions: ‘Is it bright, or cloudy?’



It’s a matter of spin.

On Monday morning in a press release Mayor Scott Avedisian touted that the valuation of the city’s pension plans as of July 1, 2015 surpassed $400 million. He said the recently released actuarial report “shows that the plans continue to trend in a positive direction.”

At Monday night’s council meeting, when Joseph Newton of the actuarial firm of Gabriel Roeder Smith & Company (GRS) gave an overview of the plans, Council members Joseph Solomon, Steve Merolla and Ed Ladouceur projected another picture.

The three argued that the assumption the plans would grow by 7.5 percent annually is pie in the sky and that actually the combined unfunded liability of the four plans is far greater than $270 million.

“This isn’t Monopoly money we’re talking about here,” said Solomon who pressed Newton for information at how GRS arrived at the 7.5 percent projection.

“Do you know of any plans that averaged 7.5 percent in the last 10 years?” he said. Newton didn’t name a plan.

The three councilmen also dug into the report forwarded them last week and the presentation Newton made that night, observing that amounts differed between the two presentations. Newton attributed the differences to varying time periods. He said the 7.5 percent projection is based on historical information and estimates from as many as 26 financial institutions.

“I feel the 7.5 percent is reasonable,” he said.

Ladouceur wasn’t comfortable, however.

“Now I’m finding out,” he said of the city’s four plans, “that in some cases there’s millions of dollars difference.”

Merolla questioned how the plans have performed since July 1, 2015, a period during which the market took a nosedive. Newton observed that assets have declined during that period, but that short timespans are not reliable in calculating the long-range performance of funds. According to Solomon and Merolla’s calculations, an assumption of 6.2 to 6.5 percent growth would be more realistic.

Such a change would require increased municipal contributions to fund the plans. GRS recommends the city contribute $28 million to the plans in the upcoming fiscal year.

The mayor’s office pointed out that the actuarial analysis reveals all four plans improved funded levels. The city’s open plans are funded at 93 percent for Fire II, 89 percent for Police II and 75 percent for Municipal. According to GRS, plans funded at 80 percent and above are healthy and financially stable.

The troublesome plan is the Police and Fire I that is now closed. The funded liability of the plan increased from 24 to 25 percent during the year.

GRS noted that if the city remains on the current schedule, the Plan would be fully funded by 2036. Further the administration observed, “by adhering to the recommendations in the report, there will be a dramatic decrease in long term contributions and all previously projected spikes in annual funding requirements will be eliminated.”

To remain on schedule, the city’s annual contribution must continue to increase at steady 2.75 percent per year.

The total unfunded liability for all plans has decreased by $6.4 million with the largest decrease of over $2.7 million occurring in the Police and Fire I plan.

As of June 30, 2015, the overall market value of the city’s pension plans totaled $413 million.

In a statement Mayor Avedisian said, “These reports highlight the fact that our pension plans continue to move in the right direction. All of our pension plans have improved, our unfunded liability has decreased and the overall market value of the city’s pension plans has exceeded $400 million at fiscal year end.”


7 comments on this item Please log in to comment by clicking here

  • JohnStark

    In the last 15 years, the S&P 500 has averaged 5.7% per year with dividends reinvested. The Barclay's Aggregate Bond Index has averaged 4% over the same time period, a time of dropping interest rates which is good for bonds. Good luck with the 7.5% projections. This all highlights the need to do away with public sector pensions.

    Thursday, March 10, 2016 Report this

  • Thecaptain

    "The plans have exceeded 400 million". Unfortunately the unfunded liabilities exceed 600 million with 261.9 million unfunded just in Police /Fire 1 alone. That unfunded number is expected to continue to rise each year until it hits 275.5 million unfunded in 2021. What is also not mentioned in this article is that even though the taxpayers will add 314 million to the fund in the time period of 2012 to 2026, the accrued liability is only reduced by 4.6 million. Just swipe the taxpayer credit card.

    We have real financial wizards here in Warwick. But don't believe me, I could be bluffing. Just ask for the actuarial report from Gabriel Roeder Smith by contacting me at and I will send it to you.

    Oh , I almost forgot the wonderful health care plan, the one that we give away the free lifetime healthcare to all our hero's. It currently is at 290+ million liabilities with not one red cent in the till to cover expenses. Surprised yet? You shouldn't be. What do you expect when you have crafty Scotty for a mayor, an elementary school drop out semi-functional moron as the council president, and a finance chairwoman who knows nothing about finance. GO TEAM WARWICK

    Thursday, March 10, 2016 Report this

  • Reality

    Scottie's fraud was exposed Monday night. The city pension plans have not met their benchmarks for 10 and 20 yr time frames. The city auditors stated if these plans were properly funded according to their ACTUAL RETURNS the taxpayers are on the hook for an additional $65 million.

    Councilwoman Vella-Wilkinson as Finance chair has not held one hearing on this issue. She has spent inordinate value council time on the rights of gun owners.

    Ms Vella-Wilkinson....many taxpayers can wait to expose your do nothing record on the council as you run for the General Assembly.

    Thursday, March 10, 2016 Report this

  • Reality is the link to youtube that will show Mr. Newton's testimony before Warwick City Council.

    Judge for yourself if Warwick has a pension problem

    Friday, March 11, 2016 Report this

  • WarwickWatch

    Friday, March 11, 2016 Report this

  • davebarry109

    I'm surprised that the city keeps taking about Police I pensions. Police I pensions have not been used since the 80's. There cannot be many people left alive that are still collecting this pension. Most of them will be gone before the pension is a serious problem, as they are all in their 60's or 70's.

    It is heartening to see that Police and Fire II pension plans are fully funded well north of 80%. Most municipalities would kill for those figures. Having said that, newly joining members should get lesser benefits to maintain the solvency of the funds. Raise the retirement from 20yrs to 25 minimum. It is 25 in Massachusetts and many other states. Very few have a 20 yr pension. Also, no more 75% retirements. Lower it to 60% and you'll save even more money. It is obvious that we can no longer afford to pay people 70-75% of their pay for 30 years of retirement.

    New people joining the police and fire departments (and dare I say it, the teachers unions?) would be joining with a knowledge of what they are getting. Getting any pension now is a blessing. Take it and invest in the 457 more heavily than you would have.

    Saturday, March 12, 2016 Report this

  • richardcorrente

    Dear Mayor Avedisian,

    How can you lie like that?

    Projecting the pensions at a rate of return that we have NEVER had is an outright lie. At 6.5% Warwick loses about $45,000,000. At 6.1% (which is what we have averaged over the last 10 years) Warwick loses $100,000,000.

    Our liabilities are 5 times greater than our assets.

    Stop misleading the taxpayers! Read the comments of all these people. They are taxpayers and they VOTE.

    Thank you JohnStark, Thecaptain, Reality,WarwickWatch, and daveberry109.

    You all told the Warwick taxpayers the truth. I think we can all agree, we need pension reform. My administration will take on the task of making pensions better for everyone, WITHOUT TAKING ANYTHING AWAY FROM EXISTING PLANS! No one will work for 30 years at a reduced salary and then get their "promised pension" reduced as well. It won't happen. I won't let it.

    Read about my plan at www.correntemayorwarwick especially the part about voluntary pension buyouts.

    Enjoy the Spring.

    Richard Corrente

    Democrat for Mayor

    Sunday, March 13, 2016 Report this