Evanston’s Finance and Budget Committee closed in on a policy statement for how to wipe out the city’s public safety pension funding gap Tuesday night.

Despite a variety of disagreements over exact wording, the panel reached agreement that the money to have the pension programs reach 100% funding by 2040 would come from:

  1. Property tax revenue at the prior year’s levy level, plus
  2. The maximum share of Personal Property Replacement Tax revenue consistent with state requirements, plus
  3. Unrestricted reserves in the city’s general fund, plus — only if the first three proved insufficient,
  4. An increase in the the property tax levy.

How much money would need to be contributed each year would be set by the City Council based on the recommendation of the city’s actuary about what rate of return assumptions are reasonable.

The city’s pension actuary firm, Foster and Foster, has estimated that closing the pension funding gap, assuming a 6.5% return on investments, will require spending about $6 million more per year on pension fund contributions than the $25 million the city is contributing this year.

But the projections show that once the funding gap is closed the required contributions would drop to a total of less than $5 million a year by 2042.

So the long term benefit to future city taxpayers appears to be very dramatic.

The public safety pension funds have been hovering around a 50% funding level in recent years, despite previous, less dramatic efforts by the City Council to increase contributions.

The committee has been struggling to reach agreement on the policy statement for several months. It now hopes to be able to vote on the final wording at its July meeting

Once that vote is taken, the proposal will be referred to the full City Council for adoption, hopefully in time to be used in developing the 2024 city budget.

Any policy the council adopts is subject to being changed by a simple majority council vote at any time — and to just not being followed in setting a given year’s budget.

But committee members hope that the act of adopting a policy statement will create some incentive to actually follow it in future years.

Related story: Protect homeowners from pension pain?

Related topic: City budget

Bill Smith is the editor and publisher of Evanston Now.

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