Dallas City Council concerned over underperformance of the police, fire pension fund
DALLAS - In less than two months, the Dallas City Council is set to vote on a plan to create funding soundness for the Dallas Police and Fire Pension.
But one council member questioned why the fund is continuing to underperform.
It turns out the sins of the past are continuing to haunt the pension fund today, causing the fund's return to remain well below the national and Texas average.
The clock is ticking for the city of Dallas to come up with a plan to pump more than $11 billion into the Dallas Police and Fire Pension System over 30 years.
City CFO Jack Ireland explained to council members how the fund began to crumble in 2016.
"Poor real estate investments, drop structure, run on the bank," he said.
The former Board and Pension Director Richard Tettamant lost hundreds of millions of dollars with risky real estate investments, creating a then $7.5 billion shortfall in 2016.
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Retirees have not received a cost of living increase in eight years now, but new hires are also complaining about how much they are contributing to the plan.
Councilmember Paul Ridley said those investments continue to weigh down the fund today.
In 2017, the city and pension fund worked to make sweeping changes to retiree benefits and the board governance structure.
But Ridley said the fund's performance today should be better.
"Performance has been 2% at a time the stock market has soared. I don't understand how professional fund managers could earn so little on such a large fund," he said.
Ridley said he agreed with the staff recommendation for increased oversight.
Numbers from the city showed only a 1.5% three-year return, which is lower than Houston, Austin and San Antonio and also lower than national and Texas returns for similar-sized funds.
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"I think we need to fire whoever is managing this investment fund and get someone who can meet… Our actuarial assumption is 6.5%, and we are only 2%," Ridley said.
Ridley hopes the consulting firm the city hired, Commerce Street Investments, will shed light on why the pension fund is underperforming.
Late Tuesday afternoon, FOX 4 spoke with the executive director of the pension fund.
Kelly Gottschalk explained that the fund managed to sell $1.4 billion in bad assets since 2016, but they can't get out of the remaining bad assets that are tied up in oil and gas investments by the previous regime.
Gottschalk said they can't just give up the assets either because it is still money the fund needs.
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FOX 4 obtained an email labeled ‘confidential’ where the leader of the city's bond task force informed the mayor and city council members that before the city seeks to use its entire bonding capacity for infrastructure needs, it may need to consider concerns about the police and fire pension.
The city is still researching how to fill the $11 billion shortfall.
Options include selling city assets, issuing pension obligation bonds, shifting a quarter of the sales tax rate from DART to the city and asking voters to increase the property tax rate.