Innovative Pension Strategy Paying Off for City of Wheeling
File Photo by Eric Ayres
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WHEELING -- The city of Wheeling’s new approach to tackling unfunded police and fire pension debts has come to fruition thanks to new state legislation that makes it possible.
And the city is already seeing significant savings, according to Wheeling City Manager Robert Herron. In the long-term, a total of about $17 million is expected to be saved over the course of the next 25 years.
"The city of Wheeling deposited $110 million in a West Virginia Investment Management Board account on behalf of the police and fire pensions for the city of Wheeling," Herron told city leaders this week, noting that the deposit was made on Monday. "This represents for the first time in the state of West Virginia that municipal pension obligation bonds have been successfully sold, as well as taking current investments and converting them from a private investor into the state’s investment management board."
With the help of a push by local and state leaders - including officials from the city of Wheeling - W.Va. House Bill 4756 was signed into law earlier this year in Charleston. Since then, city leaders have been working with a team of attorneys, public finance officials, and pension liability and pension financing experts have been working with the city to finalize the sale of tens of millions of dollars in pension bonds that will be used as a new method to address these previously outstanding debts.
"As a result of that, the city now has the police and fire pension funds fully funded, and the remaining part of the process moving forward with these funds is debt service on a pension obligation bond that ended up being about $10 million less than what our obligation was prior to going through this exercise over the past nine months," Herron said
Herron added that the new method of addressing pension debts is by far the most "actuarially sound" compared to previous options.
Under the new legislation that was signed into law by Gov. Jim Justice this spring, the city of Wheeling became the first and only municipality in the state to be eligible for participation in this new method of addressing outstanding pension debts. The new method of funding through revenue bonds becomes an option only after a municipality has at least 40% of its debt already funded. Prior to this recent transaction, Wheeling’s fire pension was already funded by about 49.5%, and the city’s police pension was about 54% funded.
Even before the new method of funding outstanding pension debt became available to the city, Wheeling was making great strides in paying down these debts. The city manager explained that about 20 years ago, this was not the case.
"In 2001, the city’s police pension was funded at about 3%, and during that same time, the fire pension was funded at about 2%," he said.
Taking advantage of new methods of funding the debt over the years, Wheeling was able to accumulate tens of millions of dollars in its pension funds.
"It got to the point where it made sense financially to fund the remaining unfunded liability through pension revenue bonds," Herron explained.
The city’s existing pool of money for this account combined with the new money from the sale of the pension bonds in July ultimately resulted in the total deposit of $110 million in the West Virginia Investment Management Board account.
"We’ve already seen the savings from this first transaction," Herron said, noting that because of this new avenue of paying off the debt from these pensions, Wheeling City Council recently had to approve a revision to the 2022-23 budget to reflect a $543,156 downward adjustment.
Budgetary impact projects related to the pension obligation bond estimate a remaining positive variance of between nearly $150,000 and $532,266 during this current fiscal year alone.
"We do anticipate additional savings once the actuarial reports catch up with this transaction, which we anticipate occurring sometime in October through the state municipal pension oversight board’s required actuarial studies that are done in the fall of each year," Herron said. "So we are excited about that."
This groundbreaking effort has been one of many steps being taken to keep the city of Wheeling on fiscally solid ground through challenging times.
"I’d like to congratulate (Wheeling Finance Director) Seth MacIntyre and (City Solicitor) Rose Humway-Warmuth for their work on this, as well as city council to have the vision to approve the ordinances that were necessary to accomplish this transaction," Herron said.