LARGO -- Largo will pay almost 16 percent more in required contributions to the police officers and firefighters retirement plan because of a lack of expected investment performance.
Even as the city's contribution to the plan goes from 11.41 percent of pay to 13.22 percent, this figure is 3.6 percent lower than it could have been thanks to a change in the funding method.
Get into the kind of numbers involved in the actuarial doings of pension plans and the terrain gets complex and complicated.
But Kim Adams, the city's Management Service Director, spelled out the situation on the police and fire pension and actuarial report review as clearly as it could possibly be done at the Largo City Commission's workshop meeting Tuesday.
The report, done by Gabriel, Roeder, Smith & Company, an actuarial firm, is based on investment earnings for fiscal year 2003 of 3 percent, considerably below what had been the assumed rate of return of 8.33 percent.
Adding to the expense, requiring the city to make up for the shortfall, were salary increases in both departments averaging 7.8 percent, which was 30 percent higher than the anticipated 6 percent.
When there is a shortfall in the funding of these plans, under state law the city must make up the difference to keep the funding viable because the plans are the defined benefit variety; that is, they are guaranteed to pay the stated amounts to retired personnel, and are not subject at payoff time to the vagaries of the market, as is the case with many private pension plans.
The Retirement Board of Trustees has proposed several changes which must be approved by the commission.
One of them would allow reduced payments to a disabled retiree if that person is re-employed as a police officer or firefighter in another jurisdiction.
Another would allow investment in greater risk instruments which increases the potential for greater return (but also with the concomitant risk of loss).
While commissioner members discussed the idea of putting some investment money in bonds rated BBB, they will vote at next Monday's regular meeting on the question.
A couple of the proposals would provide additional benefits, but there is no cost to the city because they would be paid for by the participants.
Even with the disappointing rates of return in recent years, the average rate for the retirement plan since 1991 has been 10.2 percent.
In 1991, investments in the plan returned a whopping 21 percent and return was in double figures from 1995 to 2000 (with a high of 17.7 percent in 1995).
The commission also heard from RCC consultants and Harold Schomaker, the Information Technology manager, on the police computer consultant report.
The Community Development Department outlined design standards for large scale retail establishments, to get away from the "big box" look.