Paradise Valley continues to grapple with public safety pension promises

The Paradise Valley Town Council meets at 6401 E. Lincoln Drive. (file photo)

The Town of Paradise Valley is continuing to look at new strategies to pay down old pensions with defined contribution promises.

The Paradise Valley Public Safety Police Retirement Board recently completed a review of its disability claims, which translates to every dollar in salary paid to a police officer an additional 68 cents per hour is paid for previous and continuing pension obligations.

Paradise Valley Town Council was provided an update Thursday Sept. 28 at Town Hall, 6401 E. Lincoln Drive.

There are 15 former Paradise Valley police officers who have been awarded disability terms for injuries incurred during their public safety service, numbers show.

Today the Paradise Valley Police Department employs 24 patrol officers and has a total headcount of 34 when both administration and dispatch are considered. Of the disability claims, 11 occurred in the line of duty, seven injuries in the office or during training.

The economic downturn that impacted public safety pension portfolios nationwide has left many public pension plans severely underfunded and not able to keep up with the defined benefits expected by retirees.

Paradise Valley has a small police work force due to the size of the community. The town, however, has the highest proportion of disabled police officers in the state, town officials say.

The Arizona Public Safety Personnel Retirement System is a 236-member organization managing the pension plans for eligible public safety personnel entities statewide.

The Arizona Constitution recognizes public employee pensions, while PSPRS and its duties were established in the late 1960s to ensure public safety employees equal footing in terms of pension eligibility, contribution rates and benefit formulas.

These payments are determined by years of service and salary levels set by municipal, county or state governments.

PSPRS invests cash set aside by these governments to maximize returns for beneficiaries and help offset public expenses associated with providing retirement benefits.

This fiscal year the Town of Paradise Valley is attacking its unfunded liability as town council allocated a $5 million payment to that fund in the first of a three-year pay-down model. Town leaders say the effort will save the municipality $11 million over the life of the liability.

The Town of Paradise Vally is carrying $19.7 million in unfunded liability to support public safety pension obligations.

The medical audit

One key focus of the local board review were the findings of a medical audit that outlined the beneficiaries claims and to determine if a pre-existing condition could negate the original application for disability provisions.

The findings suggest two beneficiaries of disability payments did have a clear pre-existing medical condition that may have negated their eligibility to receive certain pension rights.

“Out of the 14, two were questionable based on pre-existing conditions but the board at the time did not think the pre-existing condition made a difference,” said Town Manager Kevin Burke in a Sept. 26 phone interview.

“Once you make the award you cannot rescind that decision — all 14 remain in effect.”

Paradise Valley Councilman Paul Dembow says the system itself needs to be changed.

“I look at the PSPRS in the same light I do Social Security; it won’t be around soon unless our politicians address it,” he said in a Sept. 26

Paul Dembow

statement.

“Something substantial must be done. I read once that everyone wants to cut programs that are bankrupting our town, state and country unless that program benefits them. Who wants to tell a first responder who’s saving your life, ‘great job thanks!’ and ‘we can’t pay you what you were promised?’”

Mr. Dembow says the town council is committed to fulfilling promises made.

“As a council we committed our dollars to paying down the program as quickly as we can,” he said.

“Our residents allowed us to spend the funds we already have, which has put us in a position to pay off the debt quickly so it stops eating over a million dollars a year in interest alone.”

The Paradise Valley Public Safety Police Retirement Board, which is a five-member volunteer board empowered through state law that meets quarterly, is not recommending any beneficiary be removed from the local funding obligation.

Strictly big picture

Mr. Burke says the unfunded liability faced by the Town of Paradise Valley is getting smaller.

“The big picture, the unfunded liability is now shrinking rather than growing,” he said. “Our percent funded for retirement has been at 27 percent but now we are at 32 percent.”

Paradise Valley Director of Administration and Government Affairs Dawn Marie Buckland says that’s no accident, pointing out the municipality is looking to mitigate the effect of an 8 percent assessment on the outstanding balance.

Dawn Marie Buckland

“Council approved a pretty aggressive payment plan. This year they made an additional $5 million payment toward that unfunded liability,” she said in a Sept. 26 phone interview. “They are looking to pay that amount down to save taxpayer dollars.”

Ms. Buckland estimates the municipality will save about $400,000 in assessments due to the additional PSPRS payment this fiscal year. The town’s required annual contribution to the PSPRS fund is $1.7 million, numbers show.

Councilman Dembow says the annual assessment is a drain on precious General Fund resources.

“The interest alone is over a million dollars a year for the debt,” he said.

“Paying this down is the most critical thing our town can do! Nothing else eats, without any benefit, more than the unfunded liability. We can’t use debt to pay off the unfunded liability so we can’t trade paying out high interest rates for lower ones.”

Councilman Dembow agrees actions at the state level have helped bring future pension costs in line with sustainability, but it’s the promises of previous years that are causing problems today.

“Yes, they have improved. Perhaps my analogy is not accurate, but putting on a Band-Aid on a small cut on your finger is an improvement if you’re bleeding, but if you have major head wound, the band-aid won’t matter much,” he noted.

“We need a system that mimics more of what the rest of society has to take care of them when they retire. Without a sustainable, long-term solution we will be addressing this issue down the road or we’ll have fewer public safety personnel.”

Northeast Valley Managing Editor Terrance Thornton can be contacted at tthornton@newszap.com

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