ESCANABA, Mich. (WJMN) — Council members for the City of Escanaba finalized their decision Thursday night to part ways with the largest municipal pension manager in the state.
City Manager James McNeil says the reason for the city pulling its money out of the MERS fund stems from a lack of transparency, misrepresentation of data, and poor money management. Before the vote took place, a representative from the Municipal Employees’ Retirement System of Michigan appeared for the second time before the council to defend the organization’s management of the $15 billion fund.
MERS Regional Manager Marne Daggett summarized points from a letter sent to the council, saying MERS had provided the city a list of private investments in February, and that the fund’s evaluations are verified by an independent bank, which is regularly audited. Daggett also defended the fund’s management, saying it had shortened its smoothing period after 2016. That’s a process of moving income and expenses between fiscal years to portray steady earnings.
Before it came to a vote, McNeil commented on the letter saying what MERS had provided in February still had not provided the information that was asked for, and that the fact MERS had lengthened its smoothing period from five to ten year between 2008 and 2016 was an example of its “track record of poor policy.”
Another defense made by Daggett was that comparisons between money management plans “isn’t always apples to apples” because of variations between assumptions companies make in their calculations. Daggett urged the city to undergo an independent review to compare costs to taxpayers of MERS and other plans, and said MERS respected the city’s decision and would be available to help it along the way.
Both the decision to terminate participation in the MERS fund and adopt the city’s own retirement fund management plan were passed with all members’ votes except council member Todd Flath, who Local 3 has reached out to for comment.
A statement to Local 3 from MERS reads, “We strongly encourage the City of Escanaba to perform a thorough independent review and comparison of the fees, fee structure, commissions and other costs that will be borne by taxpayers and compare MERS to whichever investment group they plan to transition to. We are confident in terms of transparency, fiscal stewardship, actuarial practices, cost savings and rates of return that MERS will emerge as a superior value to taxpayers and retirees in Escanaba.”
City Manager McNeil also provided a statement, reading, “The city has long been frustrated with the lack of funding progress, especially after a long period of strong market returns. We believe there have been multiple missteps that have meaninfully set funding back. Now, the city has concerns related to the private investment holdings and the exposure to valuation risk. With the self-managed Act 345 Pension, we have proved that a system can achieve a high level of funding with a diversified portfolio of publicly traded securities and sound actuarial practices. We have a talented team and elected officials that understand the importance of the matter.”
You can watch the full meeting on the city’s YouTube channel.
