Comments on: City Place Vote Postponed

By: Karen Sidney

Karen Sidney — Fri, 05 Jun 2009 21:16:53 +0000

The numbers I provided are from actuarial projections prepared for the city. The projections assume a negative 25% return on investments from 6/30/08 to 6/30/09. The net VEBA liability is projected to increase $21 million during fiscal year 2009. $9 million is from higher cost of providing future benefits and $12 million is from decline in investments.

The net liability for the pension goes from $20 million on 6/30/08 to $151 million on 6/30/09. That’s a $131 million increase, with $14 million from higher cost of providing future benefits and $117 due to the decline in investments. The decline in investments hit the pension harder because it had $410 in investments at 6/30/08 compared to $64 million for the VEBA.

By: Stewart Nelson

Stewart Nelson — Fri, 05 Jun 2009 16:32:43 +0000

It probably will not change much as the investment returns from the period 6/30/08 to 6/30/09 will be essentially zero.

By: Karen Sidney

Karen Sidney — Fri, 05 Jun 2009 16:05:10 +0000

The net VEBA liability (total liability less actual value of assets) was $162 million at 6/30/08. Projected net liability at 6/30/09 is $183 million.

By: Stewart Nelson

Stewart Nelson — Fri, 05 Jun 2009 15:45:29 +0000

What are the total liabilities of the VEBA account now? $200M. Seems like the money is flowing the wrong direction! Some day they will have to start paying out and when there is not any money there they will turn to the taxpayers to bail the City out.

By: Karen Sidney

Karen Sidney — Wed, 03 Jun 2009 15:19:10 +0000

The problem with the VEBA and pension plan was disclosed in footnote 16 on subsequent events in the 6/30/08 audit. The city was funding the VEBA (retiree healthcare) by using assets in the pension plan. The IRS said the city took more out of the pension plan than allowed by the Internal Revenue Code. The city and the IRS then worked out an agreement under the IRS voluntary compliance program. The ordinance changes are just implementing that agreement.

What is troubling is that the city says it cannot afford to repay the pension fund and make the required payment to the VEBA. That means that the debt for retirement benefits, which is the ultimate responsibility of Ann Arbor taxpayers, will continue to grow.