Paradise Valley likely to pursue aggressive plan to pay off PSPRS liability

The Paradise Valley Police Department is at 6433 E. Lincoln Drive. (File Photo)

A view of municipal offices at the Town of Paradise Valley where decisions like paying down PSPRS unfunded liability are typically decided. (File Photo)

Paradise Valley Town Council has decided to move forward with a three-year plan to pay down its unfunded liability of public safety pensions, which has reached $18 million, with a proposed resolution.

The resolution needs the town council’s approval as the resolution is on the consent agenda, an agenda where there is no discussion only a vote, for Thursday, Oct. 13’s town council meeting.

However, Dawn-Marie Buckland, director of administration and government affairs, said the town council seems to be in agreement on the resolution.

Dawn-Marie Buckland

Dawn-Marie Buckland

“Everybody has said they are aligned with this,” Ms. Buckland said during an Oct. 12 phone interview. “They’re excited to do the right thing by the community and ultimately, save an awful lot of money in taxpayer dollars.”

In essence, the resolution confirms that the town council will try to pay off its unfunded liability in three years as opposed to its current 22-year plan.

According to the plan, the town would pay off only $2.3 million in its 8 percent assessment fee, which could save the town about $4 to $6 million. The 8 percent assessment is what the town must pay each year on any outstanding balance.

With this plan in place, Ms. Buckland said she does expects the General Fund reserve policy threshold to drop because not only does the town plan to pay for unfunded liability but also for the repaving of Tatum Boulevard and Lincoln Drive.

“If we were to pay it all off in three years, we could drop as low as 48 percent in the reserve fund balance,” Ms. Buckland said. “But then again, by not paying that 8 percent assessment every year, it recovers very, very quickly.”

Ms. Buckland said she expects the General Fund reserve threshold to hit its lowest in the third year of this plan.

“Immediately after that, the year after that, we would be back to 67 percent, 77 percent the year after that and 87 percent the year after that,” Ms. Buckland said.

The town’s General Fund reserve threshold currently sits at 90 to 110 percent as a result of a town policy.

A view from the top

Paradise Valley Councilman Paul Dembow said when he steps back and looks at the plan as a whole, he is happy with it.

Paul Dembow

Paul Dembow

“The math for me was easy,” Councilman Dembow said in an Oct. 13 response to e-mailed questions.

“The town currently spends over a million dollars a year for interest on the money we owe the pension fund. Paying that off early frees up that money to be used for projects versus 8 percent interest on money owed. We have the money, we just can’t spend it. The sooner we can pay it off, the sooner we can save the money or use it for capital investments.”

The next step, pending the town council’s approval, is for the council to process the spending of money on paying off the unfunded liability through the budget process.

Ms. Buckland said the first payment in this plan will be included in next year’s budget request and the town council will need to authorize it to be included in next year’s budget. Just like other budget requests, Ms. Buckland said this payment will be reviewed and weighed against other priorities the town may have financially.

Additionally, the resolution states “each year the town will revisit the schedule to ensure that current revenues are sufficient to allow for the continuation of the aggressive payment schedule.”

There are two main problems surrounding Paradise Valley’s current pension plans.

The first is the town has 33 retired police officers collecting a pension of about $45,000 annually. However, there are only 23 active members contributing to the pension plan along with taxpayer dollars.

Secondly, as a result of the Arizona Public Service Personnel Retirement System formula, Paradise Valley is paying 62 percent of a police officer’s salary toward their state pension plan, carrying an estimated annual total financial obligation of about $1.5 million.

Local leaders say the underlying push to make a change to the General Fund reserve fund policy is to pay that $18 million in unfunded liability to PSPRS, which manages the pension plans for Paradise Valley, eliminating the 8 percent assessment.

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