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City pension obligations grow $2M

PRESCOTT - The amount of Prescott's public-safety pension liability has risen to about $72 million, with the recent addition of survivor benefits for the families of three fallen seasonal Granite Mountain, say city officials.

Prescott Budget and Finance Director Mark Woodfill reported on Wednesday, May 27, that the pension benefits to the widows and children of fallen Hotshots Andrew Ashcraft, Sean Misner, and William Warneke would add about $2 million to the city's "unfunded liabilities" in the Public Safety Personnel Retirement System (PSPRS).

The city previously had been working with a $70 million total for its unfunded pension liabilities, but that was before the 2014 and early-2015 decisions to award pensions to widows Juliann Ashcraft, Amanda Misner, and Roxanne Warneke.

On Wednesday morning, the Prescott Board of the PSPRS approved paying the first monthly pension installments (totaling $4,037 for Ashcraft, and $4,071 each for Misner and Warneke) in June 2015.

In addition, board secretary Melissa Fousek said the families would receive retroactive payments for the months from the June 2013 deaths of the Hotshots through May 2015.

During multi-day hearings in May 2014, and January 2015, the local fire board voted to include Ashcraft, Misner, and Warneke in the pension system, despite the city's contention that the seasonal Hotshots did not meet the PSPRS requirements.

The Ashcraft decision was later upheld in Yavapai County Superior Court, and the Prescott City Council subsequently opted not to appeal the Misner and Warneke decisions to Superior Court.

Six of the 19 Hotshots who died fighting the Yarnell Hill wildfire were classified as permanent employees by the city, and were enrolled in the PSPRS system. Their pension costs were largely covered by a 2014 allocation of $5 million by the Arizona State Legislature.

City officials have emphasized that Prescott's public-safety pension problems were not caused by the Hotshot tragedy, but by a series of circumstances involving the PSPRS's handling of pension investments.

The PSPRS problem began in the late 1990s, when the tech-stock bubble burst, officials say, and was exasperated in 2007 with the start of the recession. Although the State Legislature tried to improve the situation in 2011 with pension reform, the changes failed to stand up in court. While Senate Bill 1609 eliminated the annual 4-percent cost-of-living increases to PSPRS retirees, the Arizona Supreme Court ruled that move unconstitutional in 2014, causing governments to make retroactive benefit increases to retirees.

City officials also have emphasized that any future PSPRS reform measures would not affect Prescott's $70 million (now $72 million) obligation to employees and retirees.

In a presentation to the Prescott City Council on Tuesday, May 26, the chairman of the League of Arizona Cities and Towns' Pension Reform Task Force agreed. Scott McCarty said the involved governments would have to deal with the underfunded obligations, regardless of pension reform.

McCarty, the finance director for the Town of Queen Creek, said his community plans to pay off its unfunded liabilities through its budget reserves. "We're a real young department - less than 10 years old - so our unfunded liability is more of a manageable number for us," he said, noting that Queen Creek's number is about $2 million.

Prescott, which just celebrated its 150th anniversary in 2014, has long-standing police and fire departments. Currently, the city has more retirees in both its police and fire departments than it has on staff. In an attempt to pay off its unfunded PSPRS liabilities, the city has proposed a 0.55-percent sales tax increase that would run for 16 to 20 years. The issue will be on the city's Aug. 25 primary ballot.

Woodfill said the addition of the $2 million for Hotshot pensions likely would not have a significant impact on the payback schedule. "It's hard to tell, because it really depends on investment earnings," he said.

Also at the local PSPRS fire board meeting, members heard an update from Fousek about a recent inquiry by Brendan McDonough, the lone surviving Hotshot, about medical disability benefits through the PSPRS. Although McDonough approached the city's human resources department in March 2015 about the possibility of applying for the benefits, Fousek told the board this week, "We have not heard back from him."

Follow Cindy Barks on Twitter @Cindy_Barks. Reach her at 928-445-3333 ext. 2034, or 928-642-0951.

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