The Board of Trustees of Detroit's General Retirement System and a group representing Detroit retirees are lodging strenuous complaints against a proposed change to the makeup of the pension fund's board.
Among the proposed changes to the terms of employment for city workers imposed earlier this week by Detroit Mayor Dave Bing, according to a draft of the document, the mayor's control of the pension fund board would increase, while city workers and retirees’ roles would diminish.
Similar changes are in store for the Police and Fire Retirement System, which approved a resolution Thursday authorizing the board's outside counsel, Clark Hill PLC, to “protect the interests” of the system's members.
According to the resolution, the police and fire board would have 13 seats — it now has 12, but was set to change to 17 — with most seats likewise under the mayor's control. More information about the changes to that board was not available.
Mr. Bing imposed the new terms under the consent agreement between the city and the state, which frees him from the duty to bargain with labor unions whose contracts have expired.
The pension board structure described in the draft document would consist of: the mayor, the City Council president, the city treasurer, the budget director, the finance director, the human resources director, three members elected by members of the retirement system, and two mayoral appointments confirmed by the council, one a current retiree and one with a background in investment and municipal finance.
That roster expands the total number of pension board members, but decreases the number of seats controlled by retirees.
The current board makeup includes five trustees elected by members of the retirement system and one retiree elected by retired city workers. The mayor has three appointments — himself, the city treasurer, and a resident who isn't a city employee or retiree. That appointment must have board approval. The City Council also has a seat on the board.
In essence, writes Thomas Sheehan, chairman of the pension fund, in a letter to Mr. Bing, control of the pension system would be in the hands of the administration. This, he adds, would create an environment in which corruption could flourish; he cited malfeasance under former Detroit Mayor Kwame Kilpatrick.
A document presented to the council earlier this week by Chris Brown, Mr. Bing's COO, said that the pension funds “may be significantly underfunded,” and that the fund's unfunded liability “may be higher than previously estimated.”
Mr. Sheehan said the general fund is 87% funded.
The city has missed payments to its pension funds in the past; Shirley Lightsey, president of the Detroit Retired City Employees Association, wrote in a letter to Mr. Bing that the fund would have little power to compel the city to make payments or make amends with the fund’s board in the administration's hands.
The city did not respond to a request for comment.
Nancy Kaffer is a reporter at Crain's Detroit Business, a sister publication of Pensions & Investments.