Highland Park Park District pays shortfall
Updated: December 24, 2012 10:08AM
HIGHLAND PARK — Not that long ago, the Park District of Highland Park had nearly enough assets on hand in its Illinois Municipal Retirement Fund account to pay the benefits already earned by employees and retirees.
But in a half-dozen years, the district’s pension obligations swelled, while the pooled assets in the statewide plan failed to earn anywhere close to the projected rate of return.
As a result, the park district’s shortfall — known in pension parlance as the “unfunded actuarial accrued liability” — grew from $1.3 million to $6.2 million, even though the district’s employer contributions rose by 62 percent, according to the district’s Comprehensive Annual Financial Report for the fiscal year that ended last March.
This month, the park district will pay off that $6.2 million shortfall using reserve funds from its corporate and recreation accounts.
“By paying off this liability, we essentially will save $16 million over the course of the next 20 years,” said Elliott Becker, director of finance for the Park District of Highland Park. “From a financial standpoint, it is a total no brainer.”
Becker attributed the sharp rise in the district’s unfunded liability both to the market swoon of 2008 and IMRF’s assumptions about payroll increases and investment returns.
The plan assumes payroll will grow by 4 percent annually and that investments will earn 7.5 percent on average. When earnings fall short — as they have during the market downturn — the plan passes the additional unfunded liability onto the local government. The plan then raises the employer’s contributions as a percentage of payroll to make up the shortage over time.
The park district’s employer contribution rate was set to rise to nearly 14 percent of payroll starting Jan. 1. With the lump-sum payoff, the employer contribution will be around 8.6 percent. Employees contribute another 4.5 percent out of their paychecks.
Executive Director Liza McElroy contended the pension-boosting pay hikes given to her predecessor and two other park executives between 2005 and 2008 did not contribute to the shortfall.
Ralph Volpe, who retired as executive director at age 57 in 2009, saw his compensation soar from $138,734 to $435,204 during the four years that were used to determine his pension benefits.
His deputy executive director, Dave Harris, received payments of more than $200,000 in addition to his base salary of $130,300. The pay of finance director Ken Swan jumped from about $125,000 in 2005 to more than $218,000 in 2008.
Taxpayers’ uproar over those late-career pay spikes and bonuses prompted three park commissioners, including then-Park Board President Lorry Werhane, to resign. Swanson also resigned amid the furor.
The park board has since adopted a compensation policy that prohibits “pension spiking” and puts limits on compensation increases. The compensation policy also requires that commissioners sign off on compensation packages with the executive director, indicating they fully understand and accept the pension implications as disclosed.