Pension debt debate continues in 2019 Prescott Council election
Editor’s Note — This is the first in a series of questions that The Daily Courier posed to the five candidates running for Prescott City Council, leading up to the Aug. 27 primary.
For the first time in years, Prescott’s pension shortfall is on a downward trend — thanks largely to revenue from a voter-approved sales tax increase.
After last year’s high of $86.4 million, this year’s Public Safety Personnel Retirement System (PSPRS) “unfunded liability” is down to about $69 million, and city officials estimate that the pension debt will be virtually paid off by December 2025.
Still, some in the community would like to see the city devote a larger chunk of its budget to paying off the PSPRS debt even sooner.
The issue came up during the City Council’s recent approval of the 2019-20 budget, and it also has emerged during the ongoing election campaign leading up to the Aug. 27 City Council primary.
In 2017, Prescott voters approved a 0.75% sales tax increase, with the revenue dedicated to paying down the city’s pension debt.
Based on higher-than-projected sales tax revenues, Budget and Finance Director Mark Woodfill has projected that the pension debt will be paid down about two years before the required sunset of the sales tax in 2027.
The Proposition 443 ballot wording stated that the 0.75% sales tax would end either in 10 years (on Dec. 31, 2027), “or at such time as the city’s PSPRS unfunded liability is $1.5 million or less.”
For the current fiscal year, the city will pay nearly $13 million from the Proposition 443 sales tax revenue, as well as $7.3 million from the city’s general fund to cover the PSPRS’s “annual required contribution” (ARC).
But Prescott Councilman Phil Goode has maintained that the annual payment should be about $1 million higher, with the payment based on the amount that PSPRS required before the Proposition 443 money began reducing Prescott’s ARC amount.
The Daily Courier asked each of the four candidates running for Prescott City Council, as well as one for mayor, to respond, in 70 words or less, to a question regarding PSPRS debt:
Should the city be putting more of its general fund money toward paying down the Public Safety Personnel Retirement System (PSPRS) debt beyond the current annual required contribution (ARC)? Why or why not?
Steve Sischka: Certainly not this year. CTC (Citizens Tax Committee, a tax watchdog organization) has pointed out that the PSPRS fund managers have not had a banner year as far as investment returns are concerned. Why would we want to send more money for them to get a lousy return on? The city is doing exactly what it promised the voters it would do. We are paying the Annual Required Contribution out of the general fund and sending all of the (Proposition) 443 sales tax money to pay down the unfunded liability.
Cathey Rusing: The voter-approved sales tax, paying off the unfunded PSPRS liability, has 8.5 years remaining. Unfortunately, there is also an unfunded portion of the ARC which is on an 18-year schedule. If we synchronize that to the 8.5-year timeline AND use general fund contributions, we could eliminate both debts and the tax at the same time. I’m a member of the CTC (Citizens Tax Committee).
Billie Orr: If there are excess funds, the council should make that determination annually. The city has paid all Prop. 443 money to the unfunded liability and the ARC (annual required contribution) out of the general fund. We are on schedule to pay down the unfunded liability two years early. Council committed $3.5 million for a new airport (terminal) and $1 million to public safety, which allowed us to hire two police officers for downtown and a second K-9 officer. Public safety needs must take priority.
Jim Lamerson: Yes. Get rid of the interest payments sooner the better. But if something time-sensitive comes up beyond the ARC, council needs to evaluate, like the airport.
Greg Mengarelli: Two years ago, a local group organized to support Prop. 443 to increase our sales tax by 0.75% for the purpose of paying down our PSPRS debt that was well over $80M. The promise from that group was that the city would use all the new tax to pay down the PSPRS unfunded liability and the annual required contribution would be paid out of the general fund. That is exactly what we are doing. I believe this council would consider paying “extra” out of the general fund when possible. This decision could be made at the end of a fiscal year if there was ample money left in the general fund.