The shadow of Detroit hovered over Burlington city hall on Tuesday as more than 100 municipal employees and local residents gathered for a "summit" on the city's underfunded pension system.
The name of the Midwestern financial disaster area was spoken just once, and then only to reassure the audience that Burlington's pension problems are nowhere near as dire as Detroit's. The Queen City's situation is actually only slightly worse than that of the average U.S. municipality, a national expert on pension issues noted.
Still, the gap between current resources and future obligations is relentlessly widening in the pension plan that covers close to 1000 municipal workers in Vermont's largest city. Mayor Miro Weinberger put it succinctly in introducing the topic addressed by a dozen stakeholders during the three-hour session: "We've gone from having a significantly overfunded system to a significantly underfunded system. Taxpayers' contributions to the system have increased dramatically."
In 2000, Burlington had 115 percent of the revenues needed to pay projected pension costs. By fiscal year 2013, the city's pool of funds was only 70 percent of the size needed to meet future payments. This "unfunded liability" currently amounts to $58.6 million.
Why did that negative turnaround occur?
There were two main reasons, explained Joe McNeil, who took part in negotiations with city workers throughout a 38-year career as Burlington city attorney.
The administration of Mayor Peter Clavelle made a trade-off in 2000: enhancements in pension benefits in exchange for greater contributions by city employees to the cost of their health insurance. With return on the city's investments going up and up as a result of the 1990s' dot-com boom on Wall Street, there was seemingly sound reason for the Progressive mayor to offer such a deal. Burlington taxpayers were contributing a total of less than $50,000 to the municipal pension fund in 2000.
But two years later, the pension system began slipping into the red.
Then recessions hit -- solidly in 2003 and overpoweringly in 2008, McNeil noted. Desperate to prevent the stock market spiral from pulling the local pension deficit into a vortex, the city began raising property taxes to cover the cost of retirement benefits for municipal workers.
Burlington was in effect lengthening the taxpayer leg of what McNeil described as the three-legged stool supporting the pension system: employer (taxpayer) funding, return on investments, employee contributions. Having 13 years earlier contributed a total of $44,000, Burlington property taxpayers will have to lay out $8.3 million in fiscal 2014 to help stabilize the pension system.
For the average homeowner, explained Chief Administrative Officer Bob Rusten, that means $425 of his or her $1750 municipal property tax bill will go into the municipal pension fund. In 2006, the same homeowner would have paid $141 in taxes to cover pension benefits.
If that steep trajectory continues, McNeil warned, "there will inevitably be political consequences."
Unless a solution is found, the former city attorney added, "we won't have enough money to meet our obligations. And it can't be found unilaterally," McNeil cautioned. "It won't happen unless there is across-the-board buy-in."
Seated at an arced table on the opposite side of Contois Auditorium, representatives of four of Burlington's municipal unions (pictured above) made clear they're disinclined to give back pension benefits. It's not as though city workers are living lives of luxury in retirement, the union chiefs pointed out.
George Lovell, an official with a government workers' union that represents many Burlington employees, noted that a city worker making a $40,000 annual salary will receive about $17,000 a year in pension payments. Along with Social Security benefits, Lovell said, that provides "a fairly decent but not overly generous" retirement package.
Police and firefighters don't qualify for Social Security benefits, however. "A city pension is all we have to provide for dignified retirement," noted Joe Keenan, president of the Burlington Firefighters Association.
Keenan and Jeffrey Wimette, business manager for the union that represents many Burlington Electric workers, both said that increases in employees' contributions to their pension plan and reductions in benefits make it harder to recruit and retain workers. "Burlington has become a training ground for other departments in Vermont," Keenan said, citing an exodus of Queen City firefighters due to better pension deals on offer elsewhere. Many utility workers go where benefits are better, Wimette added.
Putting out fires and collaring crooks are difficult, dangerous gigs, the cops' and firefighters' representatives declared. "Police work is a young person's game," observed Burlington PD Chief Mike Schirling. A cop's average life expectancy is only 66 years, which amounts to an average of 10.6 years of retirement, Schirling asserted.
Complicating efforts to shore up its pension system, Burlington has an unusually wide array of benefit plans for its employees, noted Boston-based pension consultant David Driscoll. Coverage of the city's roughly 1000 workers is divided among more than 20 different pension schemes, he said.
"It's an incredibly complex topic," Chief Schirling remarked, noting that two unions with separate pension arrangements represent Burlington police department employees.
For the most part, though, summit speakers managed to avoid wonkery. And after the dimensions and intricacies of Burlington's pension problems had been outlined, McNeil underscored the need for early action.
"It's easy to kick this down the road a few years, but that's not a responsible way to act," he said. "We must not inflict our problems on our kids and grandkids."
Elizabeth Kellar, a national expert on pension issues, offered a similar take in her comments to the summit. Devising a fair solution to the problem of financing city workers' retirement should be seen, she suggested, as a matter of "inter-generational equity."