The Transylvania Times -

Courthouse And Pension Obligations

 

January 15, 2018



The Christmas day letter from a Transylvania County employee cast doubt on the affordability of a new courthouse. The “wage freeze” precedent set when the Morris Road Facility was completed is key to the argument to rethink the Commissioners’ $31 million decision to relocate the courthouse.

Subsidizing the courthouse project at the employees’ expense will negatively impact morale, retention and hiring, and the quality of services to Transylvania residents, including the vulnerable.

However, county wages are only part of the issue.

In my view, the commissioners should carefully consider and evaluate the following fundamental flaw in the county’s operating budget.

State and local government allocate an average of 3.8 percent of their operating budgets to pensions. Based on the 2016 Transylvania budget, this implies a pension funding of $2 million. The 2016 pension provision was in fact $933,000, 7 percent of payroll. When combined with employees’ contributions (7 percent), Transylvania is under-providing $800,000 annually (versus a prudent 20 percent of payroll or $2.6 million). As far back as the late 1990s, as CFO and CEO of two large engineering firms, I closed pension plans, which were not fundable at that level.

The pension disclosures in the county’s 2016 accounts reflect more disturbing “information.” The last actuarial valuation was performed in 2014, based on 2005-9 actuarial factors and assumptions. The extreme “elasticity” in one of those assumptions (the discount rate) means that a 1 percent change would entail a six-fold increase in annual pension expense ($6.8 million).

A further concern is that pensioner health care costs ($1.6 million in 2016) are reported on a “pay as you go basis.” In summary, the numbers are stale and do not compute.

Pension accounting is complex and arcane - a global problem, and not one to be laid at the door of the commissioners. That said, my earnest plea to our elected and salaried officials is to thoroughly examine the long-term financial health of Transylvania County before embarking on a major project like a new courthouse.

We should not be going on a world cruise without checking that the 401k balance can swing it.

Gregory Ayres

Pisgah Forest

 
 

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