After A “Run On The Pension Fund” Dallas Mayor Demands Halt Of Withdrawals
by Tyler Durden
ZeroHedge.com
Dec 1, 2016
We’ve written several times over the past couple of months about the epic meltdown of the the Dallas Police and Firefighters Pension (DPFP) (see here, here and here for background). It all started when the Pension Board discovered that one of their real estate managers had been consistently overmarking illiquid real estate investments. That discovery resulted in an FBI investigation of the manager and a $1BN write down for the DPFP. In the wake of the writedowns, Dallas policemen and firefighters rushed for the exits and withdrew over $500mm in assets.
Fearing a “run on the bank” that could push the whole city of Dallas into bankruptcy, Mayor Mike Rawlings has just sent a scathing letter to the DPFP Pension Board demanded that withdrawals be halted immediately until the “solvency and actuarial soundness of the Pension System is restored.”
As the Board is well aware, at the beginning of this year, the actuarial value of assets under your supervision and control were reset to market value, resulting in a $1 billion valuation loss. This significant markdown was the result of years of mismanagement and abuse.
Critically the Pension System’s actuary warned that the Pension System would become insolvent even sooner if Deferred Retirement Option Plan (“DROP”) funds are drawn down in less than a ten-year period.
Despite this clear warning, you have inexplicably paid out nearly $500 million in lump-sum DROP withdrawals over a matter of mere months – notwithstanding your power to unilaterally restrict or limit DROP withdrawals. In doing so, you have knowingly allowed DROP funds to be withdrawn at record levels, cognizant that doing so is irreparably harming the Pensions System’s solvency and liquidity.
Already, as a result of your actions, the Pension System’s ability to pay its members’ future benefits has been irreparably reduced from a period of 15 years to 10 years. Further, both the City of Dallas and the Pension System have projected that DROP withdrawals, if unabated, will lead to a liquidity crisis in the Pension System with the next 90 days, causing a forced sale of illiquid assets. Your Board Chairman summed it up best when referring to the payment of DROP withdrawals: “- the continuation of this practice would be financial suicide.” And yet the practice continues.
Given the urgency of this matter, I request a response within 48 hours as to whether the Board will immediately cease DROP payments until such time as the solvency and actuarial soundness of the Pension System is restored.
The Rest…HERE
