New Orleans Firefighter Pension Fund Reform
Overview
The Business Council-led resolution of the long-running dispute between the city of New Orleans and its firefighters over the management and solvency of the New Orleans Firefighters Pension & Relief Fund (“Fund”) is a noteworthy accomplishment. After a year of research and deliberation among a broad set of interested parties, a comprehensive solution was crafted to resolve two of the city’s most significant open-ended financial burdens — a severely underfunded and distressed pension fund and an unsatisfied judgment for back-pay estimated at approximately $200 million.
At the urging of the Business Council, Mayor Mitchell J. Landrieu established a ten-person Firefighters Pension Reform Working Group (“Working Group”) tasked with conducting a systematic and broad scale review of the Fund’s policies, practices, and financial performance in hopes of arresting the ballooning pension liabilities that threatened the city’s long-term fiscal stability. Membership included city officials, firefighter representatives, and citizen representatives with expertise in relevant business fields such as finance, accounting, and risk management.
The Working Group’s mandate was to make recommendations to Mayor Landrieu, the New Orleans City Council, the Louisiana Legislature, and the Fund’s Board of Trustees regarding improvements to the pension plan. The outcome resulted in the resolution of the long-standing back pay issue and changes to the structure, benefits, contributions, and policies ensuring that the Fund remains sustainable and affordable for retirees, active firefighters, the city, and taxpayers. Vijay Kapoor of the Kapoor Company and Segal Consulting were retained to serve as a mediator and provide technical and actuarial analysis of the Fund and plan design alternatives.
The city and firefighters reached a settlement that accomplished each of the goals championed by the Business Council at the outset of our involvement in the dispute: (i) ensures the Fund’s long-term financial health; (ii) enhances the city’s ability to recruit and retain firefighters; (iii) protects taxpayers; and (iv) strengthens the city’s fiscal health and services. The settlement is projected to provide cost savings of $275 million over 30 years. Shortly after the agreement was reached Moody’s Investors Service called the deal “a credit positive for the city.”