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City of Houston sues Fireman's Pension fund (again)

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Mayor Parker, City Attorney Dave Feldman, and Finance Director Kelly Dow explain the legal and financial basis for the litigation against the Houston Firefighters' Relief and Retirement Fund Jan 22 2014
Mayor Parker, City Attorney Dave Feldman, and Finance Director Kelly Dow explain the legal and financial basis for the litigation against the Houston Firefighters' Relief and Retirement Fund Jan 22 2014
photos by Marc Pembroke
Mayor Parker explains lawsuit against Houston Firefighters Pension
photo by Marc Pembroke

At a press conference Wednesday morning at 8:0 in the Proclamation Room at City Hall, Mayor Annise Parker, joined by City Attorney David Feldman and Finance Director Kelly Dow, announced that the City of Houston has filed a lawsuit against the Fireman's Pension Fund. The complaint asks the court to overturn a statute, end alleged unlawful pension expenditures for lobbying, and stop the practice of “spiking” by which pensions at retirement are based on the highest paycheck received in the last year of service including overtime.

Feldman explained that the reason the Fireman's Pension Fund has no obligation to meet and confer with the City as do police and municipal employee funds is because of a special statute that allows payment rules and expenditures to be set in Austin rather than Houston. The statute is structured with different rules for cities of different sizes but only Houston is in the top tier, so no other city is obligated to operate this way. Over the years, as other major cities grew the legislature has amended the statute so that it always applies only to Houston. Feldman argues that this amounts to unfair and arbitrary treatment, and that it should be declared unconstitutional.

In an earlier suit to obtain information from the Firefighters' Pension Fund in 2012 Feldman stated

“In 1997, the Legislature enacted Article 6243e.2(l), the statute that currently governs the Fund, and its baseline contribution rates and benefit levels. Houston is the only

city in the State of Texas subject to Article 6243e.2(l), as the statute applies only to

municipalities with populations of at least 1,600,000. Article 6243e.2(l) also specifies that the controlling majority of the Board must be composed of firefighters. “ (Harris County District Court Case number 201228760)

The problem is that without the right to meet and confer with the pension manager the city is obligated to pay ever-increasing amounts without prior notice or inclusion in the budget. As the number of retired firefighters grow, and more retirees increase their final paychecks by taking more overtime in their last year, the costs become more and more unmanageable.

According to the Mayor's press release:

In the face of growing concern about its ability to meet long-term retiree pension obligations, the City of Houston filed a lawsuit today against the Houston Firefighters’ Relief and Retirement Fund (HFRRF), one of three pension systems covering City employees. The lawsuit seeks to enable the City to have the same input on contributions and plan design for HFRRF that it already has with the Houston Police Officers Pension System (HPOPS) and the Houston Municipal Employee Pension System (HMEPS).

“State law that applies only to Houston is unreasonably restricting our ability to protect taxpayers and keep our commitment to secure and sustainable firefighter retirement benefits,” said Mayor Annise Parker. “It is clear from the difficulties experienced by other cities that this is an issue that must be addressed. We have to have the ability to negotiate these benefits at the local level and be able to verify the financial health of HFRRF. We cannot and will not kick the can down the road.”

Through the “meet and confer” process with HPOPS and HMEPS, the City is already able to negotiate employee contributions, retirement ages and benefit levels for police and municipal retirees. In the past, these negotiations have resulted in agreements that have improved the city’s ability to meet its long-term obligations for these two pension systems. Under existing state law, there is no similar process available for the firefighter pension system. Contrary to the laws that apply to other cities, Houston is excluded from the important financial decisions about benefit levels and the contributions to support those benefits for its firefighter retirees. These decisions are made by boards controlled by current and retired firefighters who have an obvious conflict of interest. Several attempts to obtain a legislative cure for this problem have been unsuccessful.

“Litigation is the only remaining option available to the City,” said City Attorney David Feldman. “Instead of Houston determining, or even having a meaningful say about the level of its own contributions to HFRRF, that decision is being made by people likely to benefit from the decision. The City is asking the court to declare unconstitutional the laws that allowed this. The suit also seeks to end the practice of HFRRF using taxpayer money to lobby in favor of such laws.”

Firefighters retiring with 30 years of service are currently eligible for an average initial monthly lifetime annuity of 94 percent of their average pre-retirement salary, plus an average estimate lump sum of approximately $850,000. The value of the average combined benefits for these retirees is estimated to be $1.6 million, which is equal to a lifetime monthly annuity of 197 percent of their average pre-retirement salary.

The City’s lawsuit does not seek any change in benefits being paid to current firefighter retirees, nor would it have any impact on HPOPS or HMEPS. The lawsuit was filed by the City’s Legal Department in the state district court of Harris County. Information about the lawsuit is available on the City’s website.”

The case is styled as “City of Houston vs. Houston Firefighters' Relief and Retirement Fund. Case no 201402548- 7

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