Not unlike many municipalities in Illinois, Elgin's pension funds are underfunded, but the city's finances are OK overall, Sheila Weinberg, founder and CEO of the Institute for Truth in Accounting, said at a public forum this week.
The Northbrook-based nonprofit group examined Elgin's audited comprehensive annual financial report dated Dec. 31, 2012, Weinberg said Wednesday at the event organized at the Gail Borden Public Library by Elgin Octave, a fiscally conservative group.
Weinberg's staff calculated Elgin has $227.1 million in assets and $277.6 million in unfunded liabilities, including $157 million in unfunded pension benefits for police, fire fighters and other municipal employees, and $21 million in unfunded retirees' health care benefits, based on the financial report.
That yields a $50 million shortfall that Elgin should include in its budgeting for "true accounting," Weinberg said.
"Relative to other governments, honestly, (in Elgin) they are not in that bad a shape," she said.
Elgin Chief Financial Officer Collen Lavery said the city is meeting its annual required contributions to fund its police and firefighters pension plans at 90 percent by 2040, as mandated by the state.
Lavery pointed out the city will have to pay the unfunded amount only when all current employees are fully vested and eligible for pensions.
The Elgin City Council acted proactively this summer -- instead of waiting until 2014 -- by approving a $2.5 million transfer to the police and fire pension funds from the general fund's reserves, Lavery said. She recommended the move after getting the latest independent actuary calculations about pension contributions.
Weinberg said the city is "shorting" its retirees' health care fund.
Lavery acknowledged the city is not meeting its required $2 million annual contribution. "We'll get closer to that in time," she said.
Lavery said she plans to ask the city council to increase its annual contribution from $500,000 to $1 million contribution in 2014.
Weinberg also questioned why Elgin's unfunded pension liability rose by almost $25 million from 2011 to 2012.
That's when state tables regarding disability, mortality and turnover rates were updated, Lavery said. "We incorporated that in our calculation and it spiked everything," she said.
Weinberg deemed high the report's projected 7.75 percent rate of return on its pension funds investments. But in fact, the current return is about 11 percent, Lavery said. "The last couple of years have been great for the funds," she said.
Toby Shaw, the only city council member who attended the forum, said it's "healthy" to get opinions from outsiders about the city's finances.
"From a city perspective, it looks pretty good," he said. "The pension liability issue probably is something that's not uncommon that needs to be addressed."
The city council should be mindful of the big picture, not just yearly budgets and five-year plans, Shaw said.
"For example, when we add police staff or any other position, we have to look at the overall (pension) impact moving forward."
The unfunded pension issue wouldn't be so daunting if cities employed fewer police and fire personnel, said forum speaker Steve Stanek, research fellow at the conservative Heartland Institute in Chicago. Elgin police data shows serious crime in Elgin is at a 40-year low.
"I can't comment on whether we are under or overstaffed at any department yet," said Shaw, who was elected to his first term in April.