Four years ago, when serving on the Memphis & Shelby County Metropolitan Charter Commission to consolidate city and county governments, there were numerous issues that we were facing in terms of the long-term benefit for our city. The divide that existed on these issues stemmed mainly from our resistance to change, and it didn't matter what logic, math, or business sense told us to do differently.
We took solace in holding on to what we've got with the attitude that ignored the trend lines. To have a buy-and-hold mentality when your stock is falling, has been on persistent decline, and is in an industry that is being eliminated, creates financial suicide.
One such issue that we forecasted on the Charter Commission was the City of Memphis pension plan. We made a forecast on the direction of our pension, and unfortunately, four years later this prediction has come true.
What many in the City of Memphis do not understand is that city taxpayers went to the polls in 2010 and voted to approve by a simple majority to consolidate city and county government and in that was pension reform that switched from a defined benefit plan to a defined contribution plan – a 401(k) of sorts. This was one of the major factors in consolidation where we saw strong protest and outcry from the unions, but the City still decided at the time it was the direction our city needed to go. Unfortunately, because the county voted down city and county consolidation, the governments did not merge and pension reform was denied.
Fast-forward to today and we have multiple actuaries estimating just how much debt we are in, but the fact remains the same. No matter whose number you use, the City of Memphis finds itself in deep debt because of spiraling pension costs. Debt is never an indication of financial health. The truth is that we cannot afford our current pension system and we must change it immediately to put Memphis back on the right track.
There are so many factors as to why we are in this situation, ranging from our tax base decreasing, economic downturns, lack of provisions to safeguard pension funds, lack of forecasting and prudent management, as well as having one of the most generous pension plans in existence. This pension plan has not changed in over 60 years, even while life expectancy has lengthened – allowing employees to collect longer or even come out of retirement – setting the stage for collecting two pensions.
Let us not forget that Memphis is in Shelby County, which already has the highest tax base in the state; so much so that if you looked at the top 10 list of highest tax rates of Tennessee municipalities, the majority of them would be in our county. Couple that with the fact our population has been stagnant the last 30 years while Tennessee's population has grown 37 percent. We as a community must take matters into our own hands, especially when it comes to things that we have direct control over.
Changing our pension plan to defined contribution is one such matter that has major positive implications for our city. This is the difference between sending our city into a financial tailspin with reactionary band aid reform or creating the opportunity to allow more tax dollars to go to proactive economic and community building. Defined Contribution will aid in creating more prosperity in our community and allow Memphis to catch up with the times. In the last five years, we have been making some strides to better our community – from the Overton Square renaissance to Sears Crosstown, to better libraries and parks and many other economic development initiatives. We've even seen an encouraging increase in talent and human capital retention.
I would hate to see all of this abruptly stalled – or eliminated – because we could not get our spending habits together. So please, spread awareness and encourage City Government to make the switch to a retirement system that is fair to employees and the City's taxpayers. Memphis needs Defined Contribution.
I encourage you to take action and email City Council at www.reformmem.com. Click the yellow "email all" button and let our Council members know that it's time to modernize our retirement system to keep Memphis moving forward. It's time for Defined Contribution.
(Andre Fowlkes is president of Start Co.)