Police retirement system hikes cost to municipalities

Municipalities across Louisiana have just gotten word that they'll be slapped with a whopping hike to their required contribution to a police retirement fund that's infamous for its costly, failed golf-course investments.

The Municipal Police Employees' Retirement System, whose former lawyer is in federal prison for stealing money, sent a memo last week letting government officials know the employer contribution rate is expected to rise 4.5%, to 31%, beginning July 1.

For Baton Rouge, that means paying MPERS $1.75 million, although Finance Director Marsha Hanlon says the amount will be split between two budgets because the city's fiscal year is based on a calendar year.

MPERS already has the second-highest rate among public pension plans in the state, behind the Louisiana State Police Retirement System, which charges 55.9%. By comparison, the Sheriff's Pension & Relief Fund rate is 12.5%.

Communities are already beginning to feel the pain, as is evident in conversations at the Louisiana Municipal Association gathering in Baton Rouge this week. The increasingly unaffordable rate is forcing some small-town mayors to contemplate shutting down police departments and relegating law enforcement to sheriff's offices, while some officials in urban areas are talking about hiring freezes.

Hanlon says that, although the rate hike wasn't expected for 2012, the city will consider tapping revenue projected to exceed original budget estimates, continuing its review of filling vacancies as they occur, or utilizing reserve funds. Overall, the MPERS contribution amounts to less than 1% of Baton Rouge's general fund budget.

“In no event will there be a need for layoffs of personnel,” Hanlon says. “Baton Rouge is fortunate in that our economy continues to grow, so we are in a better position than some small communities to handle budgetary adjustments as they arise.”

MPERS blames the recession and poor-performing stock market for the increase, but the retirement system remains unwilling to divest itself of one of its worst-performing investments: golf courses.

In November, the board learned from an independent auditor that MPERS had lost a total of $46 million in Stonebridge Golf Club, Olde Oaks Golf Club and its surrounding real-estate development near Bossier City. The actual value of the properties has been appraised at just $11.2 million.

West Monroe Police Chief Christopher Elg, an MPERS trustee who was not on the board when the decisions were made to invest in the golf courses, recommended last fall that MPERS hire a real-estate firm to auction off the courses, but the board voted it down.

Meanwhile, the properties continue to drain more money from the retirement system, according to minutes from recent meetings. Last fall, trustees approved another $314,500 to cover expenses through the end of the year at Stonebridge and Olde Oaks. The board also paid to settle lawsuits related to the properties, including $40,000 to former Olde Oakes golf pro Martin Stuart, and another $7,000 to a company that performed survey work at StoneBridge and later sued MPERS for payment.

MPERS's former attorney, Randy Zinna, is serving his sentence at the Federal Correctional Complex in Pollock. He admitted defrauding MPERS and five other victims out of $1.2 million over a five-year period, in part to pay sports gambling debts. All told, he diverted $5.1 million from a real estate subsidiary of the police pension to his private law firm’s escrow account, but repaid $4.2 million of it. The 54-year-old is scheduled for release in February 2014.