Wheeling Remains State’s Success Story for Funding Pensions
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WHEELING - Just a few years after launching a new and innovative approach to tackling unfunded police and fire department pension obligations, the city of Wheeling has already saved millions of dollars - with both accounts fully funded.
The city of Wheeling became the first and is the only city in the state of West Virginia to adopt this new strategy to fund this liability through the sale of Pension Obligation Bonds. This approach became available to municipalities in the Mountain State back in 2024, and officials in Wheeling helped champion legislation that led to the adoption of this new financing initiative.
City Manager Robert Herron recently reviewed with Wheeling officials the city’s annual reports for police and fire pension relief funds, which are required by the West Virginia Municipal Pensions Oversight Board.
Herron explained that the city has come a long way over the past 25 years when it comes to tackling this fiscal obligation.
"Since 2002, this community as a whole has addressed the issue of unfunded pension liabilities with gusto," Herron said. "Across the country, unfunded pension liabilities for police and fire - or any other pension funds, municipal, etc. - can really drag down a community from a financial perspective, even to the point where some communities are forced to declare bankruptcy as a result of unfunded liabilities for pension funds."
The city manager noted that back at the beginning of the 2002 fiscal year, the city of Wheeling’s fire pension fund had $3,911,000 in it, and the police pension fund had $2,929,000.
"They both were 5 percent funded," Herron noted. "The unfunded liability in 2002 was over $61,000,000. Today I’m happy to report that the fire department assets which are included in this report are $83,043,000 for the fire, and for the police are $57,687,000. Both are fully funded."
Wheeling not only has both pension accounts funded, it also has millions in reserve, Herron added.
"We also have a $5,741,000 bond contingency reserve fund," he said. "So our police and fire pension funds are in incredibly good condition. They are overfunded, which bodes well not only for the future of the retirees and their families but also for the financial wellbeing of the city of Wheeling."
This is thanks to the Pension Obligation Funds and the efforts that laid the groundwork to put Wheeling in the position to tackle this debt, officials noted.
"In 2020, the city spearheaded the state law that was passed in one session to permit the sale of Pension Obligation Bonds," Herron explained. "The city sold bonds in the fall of 2020 for $42,192,000 which fully funded both police and fire."
While the city barely had a dent in these funds 25 years ago, efforts were made over the past two decades to address these fiscal obligations in the most effective ways that were available under state law at the time. Before 2024, municipalities in West Virginia had two different options to manage unfunded liabilities for police and fire pensions - the Alternative Plan and Optional Plan. Both methods present fiscal challenges for municipalities, but the city of Wheeling was able to chip away at its unfunded pension obligations by using both over the years.
"If the city were still on the Alternative method of financing - which was the case from the late 1990s to 2012, today that cost would be $8,085,000 to the general fund," Herron said. "When the Optional plan was closed and the bonds were sold in 2020, the annual contribution from the general fund to the police and fire pension funds was $4,959,000 out of the general fund every year."
These methods put the city in a position to take advantage of the new approach that became available in 2024 through the sale of Pension Obligation Bonds. In fact, Wheeling was the only municipality in the state that was eligible to do so when this new strategy became law.
The new method of funding through bonds becomes an option only after a municipality has at least 40% of its debt already funded. At the time that Wheeling sold bonds for this purpose, the city's fire pension was already funded by about 49.5%, and the city's police pension was about 54% funded.
Herron noted that the city still pays into the debt for pensions, but the annual contribution is significantly lower than in previous years. Figures from the end of this past fiscal year show the savings, Herron noted.
"On June 30, the city’s contribution to debt service for the entire bond program was $2,190,000 - so it’s almost a $6 million swing had the city stayed with the Alternative Plan, and it’s a $3 million swing from the Optional Plan in 2020," he said. "So it’s truly a success story. What I’m most proud of is the fact that the assets are over $83 million for fire and $57 million for the police. That’s a compliment to all city councils that have been involved but also to the community for supporting what needed to be done to deal with these unfunded liabilities for our pension funds."
To date, Wheeling is the only municipality in the state to take advantage of this approach to addressing pension obligations. Herron noted that after the option became available, the cities of Beckley and Martinsburg were "close" to using this method, but the economic landscape changed across the country.
"We are the only ones - mainly because we worked this out and got the bond sale done right before interest rates went through the roof," Herron explained, noting that other municipalities could not jump on board when interest rates became too high. "Because interest rates exceeded the actuarial assumption, it didn’t work financially. We got in under that happening. So as interest rates come down, more communities will take advantage of it. But there’s a tipping point in which it makes sense, and we were well under that tipping point and got in just in time."