Pension plans a hot topic at State of the City Address - Action News 5 - Memphis, Tennessee

Pension plans a hot topic at State of the City Address

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MEMPHIS, TN -

(WMC-TV) - Memphis Mayor A C Wharton has a warning for taxpayers: If the city does not remedy the ailing employee pension system, taxpayers could spend $100 million more each year to keep up with the growing debt.

The mayor used Wednesday's State of City platform to speak directly to taxpayers and make his case for pension cuts or bust. The mayor told a room of local leaders Wednesday that a series of factors led to the current pension crisis.

First, he says the courts ordered the city to pay city schools $120 million, which was not in the budget. Then, he says housing reappraisal losses and the stock market recession hit hard.

"Our pension fund lost almost 500 million dollars in value," said Mayor Wharton during the State of the City Address.

The mayor explained when the stock market falls, taxpayers pay the shortfall.

"The City of Memphis and its taxpayers are not the ultimate guarantors of what the pension payment should be, regardless of the market," he added.

With the city hundreds of millions of dollars behind on its contribution to the pension system, Wharton wants to convert the pension to a 401k so employees carry more of the burden.

"To meet our required payments, we have no choice but to go to our general funds. That money comes from the taxpayers," he said, adding that changing the pension model will return money to the city's infrastructure.

"I do not mind going to the taxpayers and say, 'I'm using the money to pave your streets or to fix your potholes,'" he said. "But it is a bit difficult to go to our residents and say we want to raise your taxes to take care of our pension plan when I look them right in their face knowing full well that they do not have a pension plan."

The mayor will present his budget to the council in April. That is when the council will decide what to do with the pension system.

To read the mayor's State of the City Address in its entirety, click here: http://ftpcontent4.worldnow.com/wmctv/memphis-sotc.pdf

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