HOUSTON (FOX 26) - With a $5.6 billion unfunded pension obligation threatening to slowly bleed the City of Houston into bankruptcy, Mayor Sylvester Turner says he has constructed a permanent solution and is building both the union and legislative support to push it through.
"This plan brings about an immediate quantifiable benefit for City of Houston and for Houstonians," says Mayor Turner while flanked by members of Houston City Council and various stakeholders.
It's complex, but what Turner proposes is refinancing the massive pension debt to be paid off over 30 years. The mayor says the restructuring will help slice $2.5 billion from the current obligation and give the City some financial breathing room to begin fully funding its current pension obligations. Turner adds that the City will issue $1 billion worth of bonds to make good on what it owes toward pensions from past years.
"This fixed payoff schedule is like a 30-year consumer mortgage with a defined end," explains Turner. "No longer will we kick the can down the road in this city."
Critical to the reform plan's success are concessions from the police, firefighter and municipal worker unions. As part of what he calls "shared sacrifice," Turner says the changes will include immediate reductions in annual cost of living adjustments and other financial benefits.
Notably absent from the announcement were representatives from the Firefighters Relief and Retirement Fund who aren't yet fully supporting the plan.
"Would I have preferred that we all be standing together today to just make it perfect? Yes, but at some point in time, the train has to leave the station," says Turner.
While Turner's plan may sound good, the runner-up in last year's tightly contested mayoral race claims the numbers don't make sense.
Bill King says Houston residents should be wary because Turner's pension bailout plan will eventually require a tax hike and potentially a large one.
"There's no way you can keep a defined benefit plan without a substantial property tax increase," says King. "I mean the numbers just don't add up. So, this plan will not work unless you also repeal the revenue caps next year."
Mayor Turner says the City looked hard at shifting from pensions to 401K type retirement plans and there was little or no benefit for decades.
Meantime, a spokesman for the firefighter's union told FOX 26 that it has big reservations over the amount of sacrifice its members are being asked to make as well as cost management controls in the proposal that could cut benefits more deeply in years to come.