2022 Bond Info
On Feb. 15, 2022, the Longview City Council called a $45.6 million bond election to stabilize the Longview Firemen’s Relief and Retirement Fund. Longview voters will consider the bond during the May 7 election at voting locations established in conjunction with Gregg and Harrison Counties.
Voters will consider “the issuance of $45,600,000 of bonds by the City of Longview, Texas for the purpose of funding all or a portion of the City’s unfunded, accrued liability to the Longview Firemen’s Relief and Retirement Fund, and levying a tax sufficient to make the payments of principal and interest thereon.”
What is the Longview Firemen’s Relief and Retirement Fund?
The Longview Firemen’s Relief and Retirement Fund (LFRRF), also known as the Longview Firefighters’ Relief and Retirement Fund, is a pension that provides benefits to retired Longview firefighters and other Fire Department employees. The fund was originally established in Longview in the early 1940’s in accordance with state law.
The LFRRF is governed by a 7-person board, as established by state statute. The board consists of three active members of the Longview Fire Department, elected annually for 3-year terms; the City finance director or his/hers designee; two civilian members; and the Mayor or his/hers designee, which has historically been filled by a council member in Longview.
The City of Longview is financially responsible for the LFRRF. It is considered part of the City of Longview’s financial reporting entity and is included in the City’s Comprehensive Annual Financial Report as a Pension Trust Fund.
Why is the bond being considered?
In October 2021, the City of Longview hired a third-party actuarial firm to evaluate the status of the Longview Firemen’s Relief and Retirement Fund and provide recommendations. The firm recommended that the City of Longview consider utilizing a $45.6 million pension obligation bond to reduce the unfunded liabilities of the pension.
- VIDEO - Presentation from HUB International at Jan. 27, 2022 City Council Meeting
- VIDEO - Discussion of Options at Feb. 10, 2022 City Council Meeting
The pension’s unfunded liability is a debt already owed by the City of Longview in order to provide benefits to pension members. If approved, the proposed pension obligation bond would be used to reduce that unfunded liability.
If the bond were approved by voters, what would happen next?
If approved, the election provides the City Council with the authority to issue a bond. The proceeds from the bond would be invested as part of the LFRRF investment portfolio.
If the bond were approved by voters, how would the bond impact the taxes of the average homeowner?
If voters approve the bond, it is estimated that a 2-cent property tax increase would be required to fund the bond. The estimated impact of a 2-cent tax increase on the average Longview homesteaded property valued at $166,867 is $33.37 per year.
Note: The total bond payment is estimated to cost $2.7 million annually. The 2-cent tax increase only covers approximately $1.1 million of the annual bond payment. The remainder of the bond payment would be paid by reallocating existing budgeted city payroll contributions and absorbing the remainder of the cost into the annual general fund budget.
How is the LFRRF pension currently funded?
The LFRRF pension is currently funded through payroll contributions by the City of Longview and current firefighters. The City of Longview contributes 19% of fire department payroll to fund the pension. Additionally, Tier 1 firefighters (those hired prior to 2016) contribute 17% of their payroll. Tier 2 firefighters (those hired 2016 and later) contribute 15% of their payroll.
If the bond were approved, the LFRRF would continue to be funded by payroll contributions, but a portion of the City of Longview’s contributions will be utilized to pay the bond obligation as well.
What is an unfunded accrued liability?
Unfunded accrued liabilities can be simplified as total liabilities minus total assets.
The Texas Comptroller’s website provides the following description.
[A sustainable pension] must balance its revenue (contributions and investment income) with its expenses (benefits and administrative costs). This balance can be assessed in a number of ways; the most basic is to compare a plan’s assets to its liabilities — the amount ultimately owed to its members. If the amount owed exceeds available assets, it has what’s called an unfunded actuarial accrued liability (UAAL). Put simply, public pension plans accumulate unfunded liabilities in every year in which their actual costs exceed their projected costs or revenue fails to meet projections.
Does the state have any requirements to reduce a pension’s unfunded liability?
HB3898 (87R) was passed in 2021 to become effective in 2025. All public pension plans in Texas must have an annualized UAAL of 30 years or less. Essentially this means that pensions must have a plan in place by 2025 to have liabilities funded within 30 years. The LFRRF does not currently meet the HB3898(87R) mandated standard.