The boards of the Atlanta General Employees' Pension Fund and Atlanta Police Officers' Pension Fund have filed a lawsuit against the city of Atlanta, former mayor Kasim Reed and Mayor Keisha Lance Bottoms regarding the city's December ordinance to consolidate the city's three pension fund boards.
The third pension fund, Atlanta Firefighters' Pension Fund, is not part of the lawsuit. The complaint, filed on Dec. 27 in the Superior Court of Fulton County, charges that the Atlanta City Council, which passed the ordinance to consolidate the boards on Dec. 13, was the "city's attempt to rush through two procedurally flawed and ultra vires (beyond the powers) ordinances that adversely impact the city employee pension funds," according to the complaint. The plaintiffs on Dec. 29 also filed a motion for a temporary restraining order for the board consolidation.
A December news release from the office of Mr. Reed, who was mayor at the time, said the ordinance "will result in an improved governance structure in line with best practices for pension boards nationwide, bringing financial expertise to the pension investment decisions, reducing administrative costs of servicing three separate boards and ensuring investment performance is optimized so that the annual pension contribution cost from the (city's) general fund is the lowest it can be in all financial cycles." The ordinance was one of Mr. Reed's last acts as mayor. Ms. Bottoms was inaugurated as the city's new mayor on Tuesday.
The lawsuit alleges the city does not have the authority to pass the board governance ordinance because the "city employee pension fund boards of trustees are creations of state law and the state did not delegate its authority to affect board governance ... the governance ordinance is unreasonable and fails to meet the 'clearly reasonable' requirements as required by (Georgia code) and the Supreme Court of Georgia," and the city also violated a city charter requiring advance notice of the introduction of the ordinance to the City Council.
According to a copy of the ordinance, the new City of Atlanta Defined Benefit Pension Plan Investment Board would be made up of 15 trustees, consisting of an independent chair appointed by the mayor for a five-year term, a vice chair who would be the mayor or a designee, three City Council members appointed by the mayor, a participant in one of the three pension plans appointed by the mayor, as well as the city's chief financial officer and commissioner of the department of human resources, both of whom are in mayoral-appointed positions. The remaining seven would be either elected by participants or appointed by other city officials.
Daniel T. Fahner, partner at Morgan, Lewis & Bockius and attorney for the pension boards, said in an emailed statement on Dec. 14: "The ordinance would consolidate the GEPF, fire and police boards into one 'super board' and would grant the mayor of Atlanta the authority to appoint a majority of the members. The effect would be to strip the funds' stakeholders, the beneficiaries, of their voice in making decisions with regard to the investment of their funds. That is, to say the least, improper,"
In a letter to Morgan, Lewis & Bockius dated Jan. 2, Robert S. Highsmith Jr., attorney with Holland & Knight, and S. Derek Bauer, attorney with Baker & Hostetler, attorneys for the city and Mr. Reed, said that neither fund's board "is a legal entity or body politic with capacity to sue or be sued."
"If the lawsuit is pursued, the city also intends to pursue claims against them in their individual capacities for, in addition to abusive litigation and other causes of action, breaches of their fiduciary obligations to the city and its citizens with respect to their governance of the respective pension funds," the letter said.
According to the city's most recently available comprehensive annual financial report, the Atlanta General Employees' Pension Fund, Atlanta Police Officers' Pension Fund and Atlanta Firefighters' Pension Fund had $1.3 billion, $957 million and $617 million in assets, respectively, as of June 30, 2016.
Officials at Ms. Bottoms' office could not be immediately reached to provide further information.