Lexington mayor appoints task force on pensions

LEXINGTON, Ky. (AP) - Lexington's mayor has appointed a task force to make recommendations about how to address $221 million in unfunded liabilities in the city's police and fire pension fund.

Mayor Jim Gray told the Lexington Herald-Leader the outlook for the fund is "bleak" and could grow big enough to threaten the fund's ability to pay benefits to retirees (http://bit.ly/qCtiAP ).

Gray said Thursday the pension fund's total debt, including medical expenses and bonded debt, is estimated at $536 million.

"That's more than twice the size of the city's annual general fund budget," Gray said.

Cities throughout the nation are facing a similar financial crisis, with some considering bankruptcy.

Lexington is in a unique position as the only Kentucky city with a pension fund operated and funded on the local level but controlled by the state legislature.

Unless the problem is addressed, the city could face "a significant disruption in the level and quality of all services performed by local government," he said, because it reduces the money available for things like parks and recreation, streets, social programs and the arts.

Tim Kelly, the recently retired publisher of the Lexington Herald-Leader, will lead the task force. The vice chairman will be lawyer Gene Vance. Other members include representatives of police, fire, the council and businesses, and people with pension finance expertise.

Gray invited all members of the Fayette County legislative delegation to contribute ideas to the task force.

Kelly said there was some debate about whether the $536 million figure was accurate, saying it could be larger.

"The city has been issuing bonds, pushing payment way down the road," Kelly said. "That's dicey."

A new three-year contract ratified in September by the firefighters is expected to bring an estimated $4.7 million in savings over three years. It calls for a two-year wage freeze and other pay concessions.

The union also agreed to reduce city health insurance costs by $100 per firefighter per month for the first year of the agreement, reduce vacation and holiday leave time, and reduce extra pay for holidays for two years.

Gray said the police and fire unions are aware of the city's financial situation.

"Three years ago (when the last contract was signed) might as well have been 20 years ago," Gray said. "This time, we are very intentionally asking police and fire representatives to join us around the problem-solving table."



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