WASHINGTON - District of Columbia Mayor Sharon Pratt Kelly agreed to pay the city's retirement board more than $197.6 million as part of a settlement in a suit that originally tried to bar the mayor from transferring promised pension fund contributions to the city budget.
The mayor needs to make the outstanding contribution of $189.7 million three days after the city gets its federal payment for fiscal year 1995, which is expected in early October.
Ms. Kelly has until Dec. 31 to come up with the rest of the interest payments and other fees, or will be held in contempt of court for, again, failing to pay what was promised. Ms. Kelly also has agreed to make the fiscal year 1995 quarterly contributions on time.
Ellen O'Connor, the district's chief financial officer, said the district would use funds from its federal payment, requested at $673 million for fiscal year 1995. Ms. O'Connor said the contribution would not hurt the city's cash flow once the federal payment to the city is made.
"The district agreed that the pension contribution is an obligation," Ms. O'Connor said. "The question was always the liquidity and our ability to discharge the obligation."
Once the board receives the contribution in the fall, it will rebalance the fund, and will hire two new fixed-income managers, said James A. Tydings, chairman of the $2.6 billion board.
In February, the pension board filed suit in Superior Court against Ms. Kelly to force her to pay the fund nearly $230 million owed in missed contributions during fiscal year 1994. Ms. Kelly said she decided not to pay the pension fund in order to help patch up a $308 million shortfall in the city's budget.
The mayor did pay the fund $40 million in early May, leaving a $189.8 million balance.
When Congress created the D.C. Retirement Board in 1979, it divided the board's funding responsibility between itself and the City Council until the year 2004. For fiscal year 1994, Congress agreed to pay the fund its regular contribution of $52.1 million; the City Council expected to pay $306.4 million, in quarterly installments of $76.6 million.
Meanwhile, the pension fund had to liquidate assets in order to pay benefits. The board already liquidated $150 million and is considering liquidating an additional $50 million, Mr. Tydings said. The mayor agreed the district will pay nearly $800,000 in transaction fees for the liquidations.
In a settlement announced June 8, the district also will pay the fund any lost investment income from the missed contributions plus three percentage points.
Earlier, the board estimated it would lose $32 million by July 1 in investment income from assets liquidated to pay benefits and on contributions not made.
"We thought that this arrangement was better because it makes the fund whole, plus three" percentage points, said Robert Gallagher, principal at Groom and Nordberg, Washington, who represented the board in the suit.
If Ms. Kelly makes all the payments on time, the court order will be dropped, Mr. Gallagher said. It would not stop any future mayor from trying to withhold payments to take care of the city budget, Mr. Gallagher agreed.
"Once the order expires July 1, 1995, they're riding on a clean slate," Mr. Gallagher said.
