County Prepares Pension Pitch

Grand Traverse County officials are gearing up for a key meeting next week that could decide the fate of the county’s pension plan.

County staff and commissioners will meet with Municipal Employees’ Retirement System (MERS) leadership in Lansing at 8:30am Thursday to pitch a proposal that could save the county $13.5 million in retirement costs. The county’s unfunded liability is expected to reach $52.6 million this year, leaving the pension plan only 45 percent funded.

County Administrator Tom Menzel plans to ask MERS to extend the county’s amortization – or repayment – schedule from 12 to 16 years. The move would significantly lower the county’s required annual payments by spreading them out over a longer period of time. In exchange, the county is offering to trim costs, look for funding opportunities to make additional plan payments, and explore other good-faith efforts to show MERS its commitment to paying off the debt long-term. If MERS agrees to the proposal, Menzel says the county can fund its pension plan at an 82 percent level by 2031.

“There were 32 different scenarios we worked on, and this is the one we felt was the best compromise,” says Menzel. “It doesn’t put the burden on the taxpayers, it forces the organization to work through the debt, and also still continues our (county) service deliveries.”

In June, county commissioners approved making a separate one-time $5.1 million payment to MERS to reduce the pension debt and raise the plan’s funding level from 45 to 51 percent. That was the county’s first good-faith gesture, says Menzel. At next week’s meeting, county officials will also discuss plans to reduce retiree healthcare benefits and use those funds for additional pension payments, renegotiate pension multipliers and eliminate cost of living increases, and use departmental fund balances to pay down the debt.

Several of those options will require negotiations with the county’s collective bargaining units. “It’s a collaborative effort,” says Menzel. “Staff, commissioners, MERS, the unions. Should one entity decide not to participate, we go back to what we have now…and the county will be forced to make some pretty severe cuts starting next year.”

The county will also ask MERS for a more customized investment plan. The county’s assets are now “lumped in” with approximately 880 other municipal plans in a high-risk investment portfolio. That portfolio lost Grand Traverse County roughly $500,000 last year. Menzel says he wants to “work with MERS to create a more reasonable investment strategy that is customized to the county’s individual portfolio and risk tolerance.”

Menzel says that rather than an immediate up-or-down vote, he expects MERS to take a few weeks to review and discuss the proposal. “There may be some negotiations, or they may come back with some other options,” he says. Should MERS and the county come to an agreement - which Menzel hopes will be in the near future, given looming budget preparations for next year - Menzel says the terms will be put into writing and binding.

“They had a verbal agreement with us back in 2011, ’12, ’13, when they gave the county a break in funding and we were supposed to make structural changes,” he says. “We never did. So they don’t trust us. I need to do something that shows we’ll actually do this. We’re hoping this is a good compromise everyone can live with.”