Fire Fighters Sue Providence After GoLocal’s Riley Unveils Missing $60 Million
Thursday, May 21, 2015
IAFF Local 799 today announced the intention to file a lawsuit against the City of Providence regarding use of a decades-old accounting process that does not correctly represent the funds available in the City’s pension system. This accounting flaw was unveiled by GoLocalProv's MINDSETTER™ Mike Riley who unveiled the missing funds in the pension system in GoLocalProv last October. Riley has written repeatedly about the implications to the City's pension fund and the potential long-term impact on the City's budget. Riley's investigation may lead to an SEC probe.
The lawsuit filed by the Fire Fighter's Union will seek to force Providence to make a $60 million ARC payment into the pension system immediately, as they had reported in previous audits.
“The past accounting practice, only recently rectified by the city’s auditor, does not accurately represent the city’s yearly required contribution to the fund,” said Paul Doughty, President of Local 799. “Our concern is that this practice dates back farther than we originally understood when the issue came to light, and that our members may suffer – or may have already suffered – a loss because of this unorthodox and potentially illegal practice. Further the city may have mislead investors over that time period. On behalf of our members, the emergency responders who dutifully protect city residents, we want the court to order the city to properly fund the pension system, and make the ARC payment in the fiscal year it is appropriated."
“As I’ve said in the past – it is easy for politicians to play loose and fast with the ARC payment, quietly borrowing millions of dollars, required and promised to city workers, by not paying their annual required contributions. We worked hard, in the very recent past, to step in and negotiate reasonable reforms to the city pension system – but this causes significant concern. We want to be sure that the sacrifices we made were truly made in good faith and comply with all applicable laws and regulation.
Related Slideshow: Providence Pension Liability
A new report shows that Providence’s pension fund—even after the recent reform—is still in trouble. The below slides break out the key numbers for the pension fund, including the unfunded liability, the assumed and actual rates of return, the current level of benefits, and how long it will take the city to pay off the unfunded liability. Figures are current as of July 1, 2013 and are taken from the new Jan. 31 actuarial report from Segal Consulting.
Impact of Lower Rates of Return
$72 million:The city unfunded liability increased by this amount when the city lowered its assumed rate of return by a quarter of a percentage point, from 8.5% to 8.25%
$506.2 million: The estimated increase in the unfunded liability were the city to use the 6% assumed rate of return recommended by Moody’s Investors Service.
Current Cost of Pension Fund
City Contribution: $58.1 million
Employees Contribution: $10.9 million
Net Investment Return: $18.1 million
Cost of Retiree Benefits: $95.4 million
Note: Net investment return is the return on investments after investment and administrative fees have been paid.
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- Providence Pension Crisis by the Numbers
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