Colorado Springs’ mayor and chief financial officer disputed this week a report that claimed Colorado Springs has a debt burden of more than $504 million, or $3,100 per taxpayer, and gave the city a ‘C’ grade for financial health.
The “Financial State of the Cities” report, released Jan. 24 by financial watchdog group Truth in Accounting, analyzed data for the largest 75 U.S. cities based on fiscal year 2016 comprehensive annual financial reports.
It claimed Colorado Springs “hides” more than $130 million in retiree health care debt and concluded that, although better off than other cities, “Colorado Springs still owes more than it owns.”
The report said the city has more than $636 million in unfunded pension promises, for which little money has been set aside.
TIA founder and CEO Sheila Weinberg compared the situation to a massive credit card balance and said the city had not truly balanced its budget by charging “promised pension benefits to the taxpayers’ credit card.”
Mayor John Suthers said the only time unfunded pension liability is a true debt is when the fund closes.
“There are some closed pension funds for police and fire,” Suthers said. “We get the bill and have to pay for the unfunded liability for that year.”
Suthers noted that most cities have unfunded pension liability, and all are required to put that liability on their books, which Colorado Springs has done.
Colorado Springs has participated since 1944 in Colorado PERA (Public Employees’ Retirement Association), which provides retirement and other benefits. Both employers and employees contribute a percentage of pay to the PERA trust fund.
“In hindsight, maybe the city would be better off having its own fund, but at the time it was considered better to join the state fund,” Suthers said.
He said the PERA municipal fund is an open fund that is nearly 60 percent funded.
“No pension fund is 100 percent funded,” he said. “They’re deemed fairly healthy if they’re 60 percent funded, and the liability stretches over decades. The notion that we ought to sell our parks or buildings to have 100 percent funded is a nonstarter.”
He did note that other PERA funds, such as the school fund, were not as healthy as the municipal fund.
“There’s no question that PERA needs reform,” Suthers said, adding that he hoped Colorado’s gubernatorial candidates would address its issues, including total unfunded liability of about $50 billion.
In the meantime, “there is nothing the city can do but hope the state will make reforms to reduce the unfunded liability,” he said.
Other than pension liability, Colorado Springs’ debt is about $48 million, “quite low for a city of our size,” Suthers said. The debt includes $15 million borrowed at a very low interest rate for the Police Department’s new Sand Creek substation and remaining debt on the U.S. Olympic Committee building downtown.
General accounting standards require the city to include unfunded pension liabilities in its annual budgets, Chief Financial Officer Charae McDaniel said.
“We report the debt as well as unfunded liabilities in our comprehensive annual financial report that we provide every year,” McDaniel said. “I have no idea why they say we’re hiding it.”
McDaniel said she was not able to determine what was included in TIA’s debt burden figure.
“We were able to find a few of their numbers, but we were not able to verify all of them,” she said.
“We have clean audits each year” by an outside auditor that reviews the city’s financials, McDaniel said. The city complies with requirements of the Governmental Accounting Standards Board as to what needs to be included in financial reports.
“We’re very much in compliance with all the accounting standards,” she said.
As for the taxpayer debt burden figure, “I wouldn’t say it’s a standard calculation,” McDaniel said, “nor would I say it’s an indicator of the financial health of the city.”