Eastpointe considering new public commission to address legacy costs

By: Brendan Losinski | Roseville - Eastpointe Eastsider | Published February 1, 2019

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EASTPOINTE — The city of Eastpointe is considering the formation of a new legacy commission to address the ongoing issue of pension and other post-employment benefit costs.

The City Council is considering the proposal. The goal will be to find ways to fund the legacy costs: $42.8 million in pension liability and $32.2 million in Other Postemployment Benefits (OPEB) liability.

“What I’m hoping to accomplish is to get a group of current employees, retirees, business owners and residents together to recognize we have a significant funding issue in OPEB and pensions, accept it’s the city’s responsibility to address it and come up with solutions that all interested parties can agree on,” said City Manager Joseph Sobota.

The purpose of the commission would be to develop methods to fund the pension and OPEB liability.

“The commission would be viewing options for raising revenue or reducing expenses,” said Sobota. “They would not engage in collective bargaining (with unions), but they will take it as a factor in its considerations.”

As currently proposed, the commission would be a 12-member body. The members would be selected by the City Council out of all the available candidates. However, the council would have to ensure that the commission would contain representatives belonging to certain groups.

One retired member and one active member from the police command and police patrol unions would be selected, one retired and one active member from the firefighters union would be selected, and one retired and one active member from among the clerical, labor and court unions would be selected.

“Candidates would be nominated by the unions, or a candidate can independently volunteer,” explained Sobota. “The other six (nonunion) members would be chosen out of all the volunteer candidates. This would consist of four residents and two business owners. … We are planning on reaching out to the Chamber of Commerce to see if they wish to nominate any particular business owners.”

Those wishing to submit themselves for the commission may do so by applying on the city’s website or picking up an application from the City Manager’s Office. More information can be found by calling the city offices at (586) 445-3661.

Pension and OPEB liability has become a common problem for many municipalities in Michigan in recent years, particularly in older communities with more retirees.

“Health care costs have increased dramatically in the last decade,” said Sobota. “Many communities that had a previously healthy pension program had to, voluntarily or involuntarily, grant additional benefits due to (the state of Michigan’s) Public Act 312.”

Sobota said the road to funding these costs is a long one, but one the city has to embark on or else it will face disaster.

“The concept of pensions and OPEB costs isn’t an easy concept to describe or explain,” he said. “I like to (illustrate it by saying) that we could sell all of the city’s buildings, roads, property and equipment, and we still wouldn’t have enough to pay for our unfunded liability. There would still be a $31.7 million deficit.”

Mayor Suzanne Pixley said that while she supports action to address legacy costs, she wants more information on the specific limitations and powers of the commission before voting on the matter.

“You can come up with all kinds of different plans, but you can’t tell (Municipal Employees’ Retirement System) how you’re going to spend it,” she said. “I feel we need more information on it before we vote — specifically with how we can act on the commission’s decisions and how money can be invested.”

City officials do agree that action has to be taken regarding pension and OPEB liability, and it has to be taken soon.

“I do believe the unfunded pension and OPEB liability is the most pressing financial issue facing Eastpointe,” remarked Sobota. “I think if we do not address this, the financial solvency of the city will be a going concern. Involuntary tax judgements have been used in other communities, and we don’t want to see that done in Eastpointe.”

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