MORGANTOWN — Morgantown City Council on Tuesday initiated the process of addressing the more than $110 million in liabilities currently represented by its police and fire pension plans.
The body voted unanimously to close both plans to new entrants and move the city over to the “Optional II” method of financing made possible by the West Virginia Legislature in 2023.
So, what exactly does that mean?
For the city’s current police officers and firefighters, as well as all existing retirees, there is no change. Their pension plans will remain as promised.
For all officers and firefighters hired after the effective date of the ordinances closing the plans, it’ll mean their retirement will be through the West Virginia Municipal Police Officers and Firefighters Retirement System and not the city’s private pension plans.
And for the city’s property owners, it’ll likely mean higher fire fees.
As part of the city’s plan to pay down liabilities on the fire side – and help fund the department into the future – the pension changes appeared on council’s agenda alongside an ordinance implementing a one-time, 15% increase in fire fees.
That ordinance also received unanimous support on first reading.
If ultimately adopted, the fire fee will jump from 9.42 cents per square foot to 10.83 cents per square foot. The additional charge for each square foot of additional space above the third floor will go from 5.95 cents to 6.84 cents.
The changes would take effect July 1, 2025. The city is anticipating the increase would initially generate just over $611,500 annually based on recent fire fee collections.
For the city, the switch to Optional II puts it on a path to eliminate a looming fiscal catastrophe that’s been silently growing, year over year, for decades.
Currently, the city’s funding model requires it to contribute 107% of what it contributed the year prior. That equates to about $2.7 million total for the two pension plans this year. Hitting that 107% threshold triggers the state’s Municipal Pension Oversight Board to release the city’s portion of the state premium tax, which equaled about $1.6 million this year. Those two pools of money to the employee contributions to create the annual payment on the city’s obligations.
Starting in July 2020, the city began collecting its municipal sales tax, 25% of which is earmarked to pay down the pension liabilities.
But even as the annual contributions to the plans continued to grow, the city continued to lose ground.
In 2015, the city’s police pension was 25% funded. The fire pension was 27% funded.
By 2023, those numbers had fallen to 21% and 24%, respectively.
Under the optional II plan, an actuary determines the city’s annual contribution needed to cover the fund’s normal cost and amortize any deficiency by a deadline of 2063.
The plan forward for the city is actually a compromise recently discussed during a meeting between city leadership and representatives of the police and fire pension boards.
The city will freeze its annual general fund contributions at current levels and immediately release the roughly $10 million in accrued sales taxes revenues for investment by the police and fire pension boards.
That amount would then be credited back against the city’s annual minimum contributions amortized through the end of the pay-down period, and the city would place 25% of all future sales tax revenues directly into the pension funds.
