Monday, August 31, 2015
Current Weather
Loading Current Weather....
Published: Monday, 2/9/2009

2 Detroit city pension funds down $2.5 billion


DETROIT - Two Detroit municipal pension plans have lost $2.5 billion over 18 months, and analysts say the 30 percent drop could create a cash crunch in a police and firefighters retirement fund.

The losses between June 30, 2007, and Dec. 31, 2008, aren't much different from those of other American public pension systems hit by the worldwide economic downturn.

For example, holdings by the California Public Employees' System fell 26.7 percent to $184 billion, and the Florida Retirement System Pension Plan lost 28.6 percent of its worth, falling to $97.3 billion, the Detroit Free Press reported yesterday.

An analyst for Detroit Police and Fire Retirement System, Richard Huddleston, wrote board members Jan. 28 that while the fund had $3.1 billion at year's end, only $1.27 billion was readily available.

"The cash requirements are dangerously high," Mr. Huddleston said.

He said cash management could become an "untenable proposition."

"I'm concerned," said City Councilman Barbara-Rose Collins, a member of the police and firefighters fund board. "We should be responding to this as an emergency."

Without a stock market recovery within a few years, Detroit might have to raise contributions to the police and fire fund from about 25 percent of payroll now to as much as 50 percent by 2011, said actuary Norman Jones. He works for Gabriel Roeder Smith & Co., which advises the fund.

Contributions to the Detroit General Retirement System fund are now 10 percent of payroll and also might double, Mr. Jones said.

An increase would be cushioned by the fact that the retirement funds are financing their contributions over 30 years with pension obligation bonds.

Detroit's police and fire fund had $4.4 billion on June 30, 2007, and $3.1 billion on Dec. 31, a 29.5 percent drop. The general retirement fund dropped 30.8 percent, from $3.9 billion to $2.7 billion.

Recommended for You

Guidelines: Please keep your comments smart and civil. Don't attack other readers personally, and keep your language decent. If a comment violates these standards or our privacy statement or visitor's agreement, click the "X" in the upper right corner of the comment box to report abuse. To post comments, you must be a Facebook member. To find out more, please visit the FAQ.

Points of Interest