The New Orleans City Council voted today to dip into the Police Department’s budget and transfer $2 million to the Fire Fighters Pension and Relief Fund (FPRF), a fund which was been devastated by investment losses in recent years (more on those losses below).
The vote was unanimous, as the state Supreme Court ruled earlier this year that the city had to cover the fund’s funding shortfalls after neglecting to make tens of millions of dollars worth of required payments into the system.
But city officials claim the $2 million pulled from the police budget will have little effect on operations. From NOLA.com:
Led by Councilwoman Stacy Head, who sponsored the move, the council stressed that the re-appropriation won’t hurt police operations.
The department’s 2014 budget was built on the assumption that the NOPD would be adding hundreds of officers this year, said Councilman Jason Williams. Those officers haven’t materialized.
The council’s move to shift the money earmarked for the new officers is merely a recognition of that fact, he said.
“It’s like we bought food for a family of five but there are only two people in the house,” Williams said.
Mayor Mitch Landrieu had promised to add 150 officers to the department this year, but so far the department has produced only a single training academy class of fewer than 30 people.
Thanks in large part to those empty staffing positions, Head said, the NOPD is currently running a surplus of about $9 million.
The Firefighter’s Fund is in a precarious position due to a confluence of several factors, including 1) the city’s aforementioned neglect of its required annual contributions and, 2) severe investment losses over recent years.
Trustees of the Firefighters Fund claim that, between 2010 and 2013, New Orleans shorted payments by $54 million.
As far as investments go, the Fund has had its fair share of failures, according to an audit released this year.
[The auditor’s report can be read in full at the bottom of this post.]
In 2008, the fund invested $15 million in a Cayman Islands-based hedge fund, Fletcher International Ltd. But the hedge fund went bankrupt and New Orleans lost 100 percent of its investment. Richard Rainey reports:
[The investment] initially showed 12-percent annual gains, according to the audit. When the pension board tried to collect some of its apparent earnings in April 2011, it got no answer, according to the audit. Fletcher would file for bankruptcy in October 2012, leading the fund’s auditors to report the $15 million lost in 2013, Meagher said.
But that wasn’t even the FPRF’s biggest investment loss. That honor goes to a failing golf course, as Richard Rainey explains:
[The fund’s] biggest hit last year came from a failing golf course in Algiers. The Lakewood Golf Club, valued at more than $39.2 million in 2012, lost $17.5 million of its worth by December. Another golf course, this one in Austin, lost the fund another $3.5 million last year. Both sites are in the process of being put up for sale, Meagher said.
All told, the Fund lost $40 million in 2013. Since 2010, the Fund has lost 51 percent of its value.
You can read the full auditor’s report, originally obtained by The Times-Picayune, below:
[iframe src=”<p style=” margin: 12px auto 6px auto; font-family: Helvetica,Arial,Sans-serif; font-style: normal; font-variant: normal; font-weight: normal; font-size: 14px; line-height: normal; font-size-adjust: none; font-stretch: normal; -x-system-font: none; display: block;”> <a title=”View 2013 Firefighters Pension Audit on Scribd” href=”http://www.scribd.com/doc/236842433/2013-Firefighters-Pension-Audit” style=”text-decoration: underline;” >2013 Firefighters Pension Audit</a></p><iframe class=”scribd_iframe_embed” src=”//www.scribd.com/embeds/236842433/content?start_page=1&view_mode=scroll&show_recommendations=true” data-auto-height=”false” data-aspect-ratio=”undefined” scrolling=”no” id=”doc_33716″ width=”100%” height=”600″ frameborder=”0″></iframe>”]
Photo by Wally Gobetz via Flickr CC