Estimate predicts pension savings
HUNTINGTON -- The city of Huntington's police and fire pension contribution for this fiscal year is expected to be $459,000 less than originally anticipated, but the difference may go toward another pressing financial matter.
The new pension estimate of $9.67 million, derived from an annual actuary report that was completed two weeks ago, was relayed Tuesday to a committee tasked with identifying the city's most pressing financial challenge.
The committee members belong to Mayor-elect Steve Williams' transition team. Williams split the team into four committees -- finance, economic development, public safety and public works -- and asked each one to report its findings to him before he takes office Jan. 1.
Finance Director Deron Runyon and Huntington Firemen's Pension Board Secretary Scott Mellert gave brief presentations to the finance committee Tuesday about how the pensions are funded and calculated, among other things.
Pension costs remain the city's largest financial burden, but they have stabilized somewhat because of a new funding method that was adopted in 2009. The city's annual contribution, however, is still susceptible to factors such as investment returns and longevity of retirees that the city has little or no control over.
During Runyon's presentation, he said the $459,000 reduction in the city's pension contribution occurred because the police pension fund met funding standards that raised the estimated annual investment return from 5 percent to 5.5 percent. The municipal police and fire pensions are funded by a combination of sources, including the city, the state, employee contributions and investment earnings.
Runyon advised that the reduction should be used to address financial problems with workers' compensation. To maintain self-insured status, the city must maintain a letter of credit with a bank, a surety bond or government bonds in the amount of almost $5.4 million. It currently falls about $1 million short of that mark, Runyon said.
Mellert, meanwhile, told committee members Jim Insco, Clint McElroy and Sean Hornbuckle that moving the firemen's pension fund to City National Bank in recent months has resulted in healthy investment returns and fees being reduced by half.
"We've been thrilled with their service," Mellert said. "When we made the switch a year ago, we started with $5 million in investable funds and, as of Nov. 30, we had just over $9 million."
Some of that amount is new money from contributions, Mellert said, but City National recently compared the pension fund's rate of return to other municipal funds across the state during the past year.
"As of Sept. 30, we had seen a rate of return of 7.7 percent," Mellert said. "The best rate of return for all of the municipal pension funds was 8.7 percent. Some were in the negative range."
Representatives of the Huntington Policemen's Pension Board did not attend the finance committee meeting.
Insco, the committee's chairman, said he will schedule two more meetings before the committee delivers its final report to Williams.