P.A. Ucci forwarded this email to me from May 2005:
Original Message —–
Sent: Saturday, May 21, 2005 1:28 PM
Subject: City Pension Funding
The City budget in six years has increased 78 % to $194.9 from $109.2. It has been stated that much of this increase was the result of negative market conditions requiring the city to increase pension assets to satisfy actuarial guidelines. It appears that this need to bolster assets was unique to City pension funds. The County, School Board and ECUA pension funds did not require extra support even though the investment climate was the same .
What I learned, attending a recent four hour session of the quarterly pension board meeting, was both rewarding and valuable. As a result, some ideas for consideration and change are suggested, totally undaunted by my unblemished record that any changes that I have proposed in past years have received nothing but polite lip service. The City, as represented by elected Council members ( with one exception), and by some mystical power become permanently immunized against change starting on the very exact moment that their election is officially confirmed.
The Finance Department informs me that the “financial experts” who manage and oversee three city pension funds are paid upwards of $660,000 dollars yearly. What does the recent performance record show? The interest and net appreciation of pension assets of $198.6 million was 9.6% after deduction of management fees. At first blush, this is a respectable return. However, this return loses much of its allure considering that the Dow Jones industrial average during the time frame increased 30 %.Though not researched, there is reason to believe that indices like the S&P 500 and others performed equally well.
The above, in context with the undisputed fact that only a few “financial experts” managing mutual funds consistently produce better investment returns than indices, raises major doubt on the wisdom of the City continuing to shell out $667,000 yearly for management fees. If there are regulations that hinder change, the City should do all in its power to modify the rules.
As mentioned in a previous email, and related to the above, it is a rape of taxpayers to keep a $54 million fund (don’t recall its name) in a local bank paying a ludicrously low interest rate when many equally secure higher paying investment vehicles are readily available.