The Sweet Home City Council reversed its position last week and decided to join a lawsuit against the Public Employees Retirement Board. The Sweet Home Fire and Ambulance District also will join the pending lawsuit.
The city will pay a $150 fee to Mersereau and Shannon, LLP, the attorneys representing cities and school districts in the lawsuit.
The lawsuit contests proposed employer rates for 2003. School District 55 faces an increase from 12.73 percent to 18.58 percent. The City of Sweet Home faces an increase from 6 percent to 6.72 percent. Sweet Home Fire and Ambulance District faces an increase from 12.55 percent to 18.57 percent.
The City of Sweet Home’s police officers are members of the Public Employees Retirement System. Other employees are members of ICMA.
School District 55 is considering whether to join the Oregon School Boards Association in the lawsuit.
Among extreme rate increases, the City of Huntington faces an increase from 41 percent to 108.42 percent. When the new rates are set, they will take effect on July 1.
The City of Sweet Home had a Public Employees Retirement System (PERS) surplus of $1.2 million as of September. Once 2001 liabilities were calculated, that surplus decreased to $522,000.
Finance Director Pat Gray anticipates that surplus will likely be gone when 2002 figures are completed leaving Sweet Home with unfunded liabilities if the investment market does not improve or PERB does not change its mortality tables.
Sweet Home Fire and Ambulance District has an unfunded liability of $272,000 counting 2000 and 2001.
The lawsuit will contend that the PERB improperly calculated the employer obligation for payment of benefits to retirees who invested in variable accounts and chose the money match option. The lawsuit further claims that the PERB distributed earnings to employee accounts with without maintaining proper reserves and used outdated mortality tables, which prescribe higher monthly retirement payments than are justified.
With those factors adjusted, rates for 2003 should be lower than staff is recommending to the PERB, according to attorneys in the lawsuit. The proposed PERS rates do not conform to a previous order by a judge.
Initially, the City of Sweet Home had chosen not to join the lawsuit, with its small rate increase, Finance Director Pat Gray said. She had believed the cost of joining the lawsuit was money the League of Oregon Cities was hoping to recoup for funding the lawsuit. The City of Sweet Home paid $4,407 in dues to the League of Oregon Cities this year and will pay $4,447 next year.
She contended that it should have been part of services to the city by the League.
She learned that the fee was to be paid directly to the attorneys, Gray said. In the long term, the court decision will affect the City of Sweet Home, especially as it faces an upcoming unfunded liability.
“They said you might want to put your name on it instead of being the silent majority not mailing in your ballot,” Gray said. As such, the city’s decision shows support for the lawsuit.
Then she attended a finance directors conference.