Delray Beach: Two options noted for addressing pension fund gap

By Jane Smith

In mid-August, Delray Beach commissioners learned the city has a 19.8 percent shortfall in funding the city’s general employee pension fund.
Jim Smith, chairman of the General Employees Retirement Fund Committee, said the rate of return on investments will be reduced from 7.25 percent to 6.75 percent for the budget year that starts Oct. 1, and about $570,000 extra will be needed above the $2.3 million that was planned.
That’s because investment returns are declining while costs are rising. For example, in addition to the 20 employees hired in the current budget year, people are living longer, Smith said.
“The oldest retired Delray Beach employee receiving general fund benefits is 102,” he said. “She has received 479 payments over 40 years.”
There are two ways to close that gap, Smith told commissioners. The first is to reduce payouts and the second is to increase employee contributions.
The statewide average employee contribution is 5.9 percent, according to a Leroy Collins Institute report published in May. Delray Beach general employees now contribute 3.05 percent, the report indicated. The report gave an A rating to the city’s general employees fund.
The contract for the general employees is up in 2021. At that time, Neal de Jesus, interim city manager said, the commission could direct the city manager to negotiate for an increased retirement contribution from employees. But he suggested the City Commission should be prepared to give up something in exchange.
If the general employees choose to go with the Florida retirement system, they would pay 3 percent of their salaries but receive only half of the benefit amount that Delray Beach gives, Smith said.
In other budget news, de Jesus said the commission’s desire to cut the tax rate slightly will keep the city’s general fund reserves at 23 percent, down 2 points from the 25 percent goal. The proposed amount reserved is $31.9 million. The amount that cities hold in reserve varies statewide. No set amount is required.
Staff was asked to cut departmental budget requests by an average of 2 percent.
Several capital improvement projects will now be paid using the penny sales tax dollars, said Missie Barletto, assistant director of Public Works. They include the design of the Thomas Street Stormwater Pump Station and parts of other projects.
Mayor Shelly Petrolia asked the city clerk to reconsider purchasing a piece of equipment that would allow more meetings to be streamed live. The encoder was pulled from the next year’s budget because it cost $58,000, said Katerri Johnson, city clerk.
The city decided to use a service to provide captions of its City Commission and Community Redevelopment Agency meetings, instead of buying equipment that would have to be replaced in three to five years, Johnson said.
As long as the equipment doesn’t require additional software or other purchases, Petrolia wanted it for residents who can’t come to the various advisory board meetings, such as the Historic Preservation and Site Plan Review and Appearance boards. The city was set to have a tentative budget hearing on Sept. 5 and a final budget hearing at 4 p.m. Sept. 17.

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