Many thought the .88 percent sales tax increase painful, but get ready: Payson still faces a $19 million deficit owed to the Public Safety Personnel Retirement System (PSPRS) for police officers and firefighters.
The town’s already paying 50 or 60 percent of each officer’s salary into the retirement system, but must find a way to reduce the outstanding deficit.
Local governments statewide are scrambling to cope with the deficit, which averages about 50 percent of the total money needed to cover the cost of police and fire pensions. The crisis stemmed from a formula that boosted benefits with investment gains, followed by the impact of two recessions that cost the investment fund billions.
Some cities fear bankruptcy.
Currently, the statewide PSPRS bill stands around $8 billion.
Acting Payson Town Manager Sheila DeSchaaf and Chief Financial Officer Deborah Barber recently attended a seminar staged by PSPRS for town officials.
They came back with some hope.
“The (PSPRS) board is going to have to vote on some potential changes to their assumptions, and is soliciting feedback from members,” said DeSchaaf.
“It sounded like (PSPRS) would phase in changes gradually so as to minimize budget problems for entities,” said Barber.
The two expect a modeler to come in January to examine their “individual scenarios and run ‘what-ifs.’”
Payson has 27 active firefighters paying into the system and 11 retired firefighters collecting benefits. Still, the retirement system for the fire department is only 53 percent funded, with a debt of $6.5 million and an average pension of $50,000.
The Payson Police Department has 23 active members and 21 retirees, according to the latest PSPRS figures. For police, the deficit totals $13 million, with only 34 percent of promised pensions funded. The average pension for a Payson police officer is $45,000 annually.
The Roundup recently ran a three-part series on the years-long onset of the crisis and asked every Payson council member for comment on the topic. Payson has been making extra payments of $600,000 annually from the recent sales tax increase. But it would take about 32 years for those payments to make up the current $19 million shortfall, which has been getting bigger each year for the past several years.
Three of the seven council members replied.
Councilor Suzy Tubbs-Avakian said, “we need to pursue an investigation on what other towns/cities have done to achieve the beginning steps to relieve their debt and build our coffers in the future.”
But she also understands, “this is not an easy task, as our constituents do not appreciate being taxed or services being cut.”
Mayor Tom Morrissey said, “this is indeed sobering to say the least.”
He blames the recession that “caused many financial challenges in almost uncountable ways,” but recognizes “every financial setback cannot be blamed solely on the recession.”
Morrissey would like to “seek advice from experts who have had experience in turning large organizations around from financial ruin to financial stability.”
He said he has a friend living in the area who has “turned several companies and a few agencies around during his career,” and this friend has “offered to be of assistance to me in a volunteer capacity to help find a way to get us on a more reasonable and viable path as we address this.”
Councilor Steve Smith said, “The current system is too costly as people are living longer and did not contribute properly during their years of service.
“Current employees are burdened with a (poorly managed) retirement system that has only created increasing debt — not much different from our current Social Security situation,” he said.
Smith has concerns that “when the .88 percent sales tax sunsets in 7.5 years, we will be in a terrible way unless we move now to create more revenue.”
Smith had some recommendations:
• Create incentives for a new business to develop in Payson, which would bring jobs and a greater tax base.
• Cover the event center and pave the parking lot so the town can host events year-round, including things like a monthly flea market. The town could charge rent for spaces, plus parking.
• The town could start its own RV park. He estimates yearly revenues could reach $1.8 million. The town could buy the private Payson Golf Course and put the RV park there — while continuing to operate nine holes as a municipal course.
• Increase bed tax and use the money for a new Visitors Bureau and Economic Development Center co-located with the chamber of commerce.
“There are many ways to address this situation, but doing what we are currently doing does not make sense,” said Smith. “I think we should pay the minimum, invest our extra funds in development interests that have a real return on investment and ride this thing out.”
DeSchaaf believes Payson might not be as bad off as other towns.
“We are not anticipating being as adversely impacted by the changes because we took a very conservative approach to repayment,” said DeSchaaf. “Those who chose to spread their obligations out/make lesser repayment will not fare as well.”