Pension Fund – A Painful Vote

Keeping Belts Tight to Insure the Future 

One of the benefits to working for Coral Gables is the city’s impeccable finances, confirmed by triple-A ratings from investor watchdogs S&P, Fitch, and Moody’s. Among other things, this means that when you retire, your pension is not going to disappear. 

To meet its future pension obligations, the city needs a fund of approximately $605 million. Unfortunately, the fund is still almost $190 million shy. So, each year the city pays a required minimum amount toward this “unfunded liability” – $22.7 million this past year. In addition, since 2015 the city has gone beyond the required payment, with an additional $6.8 million last year and another $5.1 more the year before. 

At the present rate, so long as there is not a stock market crash, the fund should be whole by 2027, says the city’s finance director Diana Gomez. To reach that goal, however, the city must keep its purse strings tight when it comes to granting a cost-of- living increase to retirees. Each year, union representatives come before the City Commission to ask them to approve an increase for those who retired before 2014. (Those who retired after that year get an automatic raise when the full retirement fund earns 10 percent or more in annual investment return). And each year they are turned down. The reason? Any increase will add to the unfunded liability. 

At the December commission meeting, the request was for an 8 percent increase. According to Gomez, had that COLA (cost of living allowance) been granted it would have added an immediate $27.8 million to the unfunded liability. So, with heavy hearts, the commission again turned down the raise. “This is not an easy vote, and it pains me,” said Mayor Vince Lago. “But we can’t put [more] debt on the pension fund, after the sacrifices we have made to pay it down… We have to ensure the future for so many people who work so hard for the city.” 

By: Andrew Gayle