Defined Benefit Pensions Will Eventually Bankrupt Port Orange

bankrupt2If the consequences weren’t  as serious as they are it would indeed be amusing  to watch the two Bob’s, both of whom along with their immediate family  are or soon will be slurping  down taxpayer funded defined benefits pensions,  accuse each other as being the less responsible regarding the defined benefits pensions that are hanging over the heads of Port Orange taxpayers like the sword of Damocles.
At the risk of the Bob’s accusing me of being less than enthusiastic about the prosperity that must see  breaking out all around us and dampening their desire to place the  ‘Port Orange Pension Issue’  firmly between the covers of the unicorn coloring book let me point out that:

  •    union members didn’t so much   ‘slash their own benefits’  as they  slashed  the benefits of new hires,  AND it is yet to be seen if those new hires will continue to accept these reduced benefits when their numbers control these unions.
  •   funded ratios within these plans are based on an all time high stock market valuations that  are  being propped up by Fed stimulus, illusory accounting,  and massive deficit spending,
  •    IN A domestic economy with negative 1st quarter GDP growth,  falling productivity and  consumer spending,  and a labor force participation rate stuck at a 35 year low,  with what jobs that are being created in low paying sectors,
  •  AGAINST A  back drop  where our traditional  ally  the Europeans have  just imposed negative interest rates in an effort to stimulate their  economies,   and  that is likely to be just about as  successful as administering medicine to the dead,
  •   AND WHERE OUR traditional enemies Russia and China are intent on dumping the dollar for international settlement purposes.

A history of  ever increasing cost of  future benefits that are themselves based on indeterminate future events prompted the private sector,  where taxation is not an option,   to abandon defined benefit plans decades ago.
The time is long overdue for responsible elected representatives in Port Orange to  no longer tolerate  70 year residents  bagging groceries at Walmart & Publix to pay the property taxes required to  fund retirement and  double dipping of 50 year olds.
They need to call  for  defined contribution plans  not to punish City employees but rather to place them on the same playing field as private sector employees,  and in so doing  REMOVE THE UNFAIR OBLIGATION CURRENTLY ASKED OF PROPERTY OWNERS WHICH IS TO GUARANTEE THE ECONOMIC FUTURE OF CITY EMPLOYEES IN A WORLD WHERE THEIRS IS NOT.
And before my naysayer friends in the Fire department start with their ‘ there goes Ted wanting to screw us,  tell me in logical terms why I would  want to do that ?  How would I benefit ?   The answer is I don’t and I wouldn’t.
BUT there is a way I would and that is if your pension dollars  were better invested and some  of you morphed into businessmen with a commercial stake in the community and joined me on Tuesday evenings  complaining about the bone head decisions our Council makes more often than not.
As we speak the value of the Fire Plan is approximately  $ 30 million.   That would  buy  3 Apartment complexes the approximate size of The Park at Countryside on Dunlawton  and I would bet my last dollar that such an investment run by your business manager right here in Port Orange where you can keep an eye on your investment  would provide  greater returns and security than the overpriced stock market in which you plan is currently invested and over which no one has any control. 
If I were King of this plan for a day I would settle the un-funded claim with the City in exchange for complete control over its investments and a $15,000  per member per year contribution for 15 years plus  15% of salary in annual contributions to plan members.   
The Plan  would be better off and so would the taxpayers your members serve on a daily basis.
The day will come when the market will crash and perhaps take years to rebound.  When that day comes the only plan I have ever heard from Dennis,  Drew, Scott and the Bob’s  would be to try and raise  taxes enough to offset those losses.
That is  a bet I would encourage plan members to try and avoid,  preferring instead to bet on the private sector investment that has provided everything we enjoy in this great land  of ours.  
Ted Noftall

5 thoughts on “Defined Benefit Pensions Will Eventually Bankrupt Port Orange

  • June 9, 2014 at 10:20 pm

    Ted, the pension plans invest in the private sector, the very same sector and often use the very same instruments that are used by defined contribution plans. (including REITs that buy apartment complexes).
    The beauty of pensions is that they try to apportion risk over the lifetime of the plan, adding funds during the good times, and losing during the bad times. If properly administered they work, however, if the pension managers fail to properly fund programs they will not work. This is not a problem with the concept, it is a problem with the management.
    As to your doomsday scenario — collapse of the currency, collapse of the economy, the retiree is screwed either way, their 401 k and/or pension will be worthless, so what does it matter which they have. If the economy collapses as for example in Detroit, pensions will be slashed. Short of doomsday, pensions work and have for generations, our recent pension problems are just another example of the recent lack of fiscal discipline on the part of elected officials.
    Unhappily, even if we don’t have pensions, fiscally irresponsible elected officials have a wide range of additional opportunities to bankrupt our cities. Let’s keep pensions for the good they can do, and throw out of office those who lack fiscal integrity.

  • June 10, 2014 at 3:02 pm

    I’m Already Screwed and Have no Economic Future
    Here’s a story that should make all you haters of slurping scumbag public employees happy. When the city allowed the general employees to go from a defined contribution to a defined benefit pension plan we were given a choice of going with a 401 or the defined benefit plan. I chose the 401 because the original defined benefit plan was pretty lousy and I preferred to be in control of my money. I was doing pretty good when we had a good economy. I know nothing about market investing. In the first month after Obama was elected I lost 1/3 of my money and enjoyed almost no investment gain from that point on by putting it all in a safe account that guaranteed no losses. My only gain was from contributions. After 36 years I was forced to leave my employment with the city and now 9 months later my 401 is almost depleted and I have no other personal income. We all have to live with our choices. My only regret is that I wish I could have kept my job at the city for a few more years. I guess I’ll go bag groceries.I hope this cheers a few of you up and makes your day! Don’t pee yours pants laughing! I figured this would make at least a couple of you feel better about yourselves! Have a nice life!

  • June 10, 2014 at 6:41 pm

    Your economic news does not cheer me in any form or fashion Rick.
    BUT what it does do is reinforce my belief that there is no moral basis whatsoever to expect residents, such as yourself and those who have experienced similar retirement setbacks of whom there are many, And those who never had any retirement savings to begin with of whom there are more again, TO GUARANTEE THE ECONOMIC FUTURE OF CITY EMPLOYEES IN THE DEFINED BENEFIT PENSION PLANS.
    You have an obvious wealth of knowledge in your specialty, And I hope you you get to put it to good use again.
    Ted Noftall

  • June 10, 2014 at 7:01 pm

    The City’s pension plans assets are well north of $100 million and even a modest market correction in the 25 % range if that reversal were to last longer than the creative accounting smoothing periods would demand considerably higher contribution rates from you guessed it …. the very residents who have no such economic security blankets themselves.
    If defined benefit pension plans are anything more than a Ponzie scheme requiring contributions from the many for the benefit of the few….. Why have they become a thing of the past in the private sector ???

  • June 10, 2014 at 8:43 pm

    In the early 1970s I was working at a glass shop in Gainseville putting myself through college. The work was hard but the pay was good–I was making $3.60/hr when the minimum wage was $1.60/hr! Feeling flush one year I thought about sitting out of school for awhile and saving up for a new car, but after putting pencil to paper (calculators were still too expensive for most of us) I saw that no way could I afford a new car even at my extravagant wages.
    The average auto worker at the time was making $15.00/hr and a young man in Florida making $3.60/hr simply could not afford the product. Was this the fault of the unions? Absolutely not–it took a combination of strong unions and a management mindset that thought it had a monopoly in the marketplace to put a new car out of my reach. Because of the nature of free enterprise, however, many of us soon found ourselves driving cars with weird names like Volkswagen and Toyota.
    What worries me about unions in government is that there really is a monopoly involved–I cannot choose from among several different City governments nor can I simply refuse to pay the going price. While everyone should have the right to voluntarily organize and to negotiate with their employers, the lack of self-correction in government makes it easier for management to raise the price (taxes) of the product than to increase productivity or otherwise cut costs.
    The past six years have been the biggest kick in the teeth to the average private sector employee since the Great Depression. The Pollyannas who are happy and bubbly about decreased unemployment and increased property values are ignoring the facts that people are now employed at lower wages and that houses now cost a much higher percentage of their earnings. Taxes should be decreasing rather than increasing.
    Mike Gardner
    618 Ruth St
    Port Orange, FL 32127


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