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Facing Steep Increase in Pension Costs, Park Hills is Advised to Change Financial Practices

A review of the City of Park Hills's budget shows a need to address growing expenses.

David Baker was brought in as a consultant by city council to take a look at the Park Hills finances.

"I found some things that showed that expenses will overtake revenues at some point in the future," said Baker at this week's caucus meeting. "There are two ways to avoid that: increase revenues or decrease spending, or both."

He also recommended that the city create at least a ten-year capital improvement plan to plan adequately for the future.

Baker said he would like the city to change the way it accounts for money, telling council that the 12 special funds are like "buckets of money", and saying he wants to pare those down, making them look a little more like regular governmental divisions of funds. He acknowledged that the city was trying to separate the funds so they could only be used for the purpose they were set up for, but under the governmental definition of Special Revenue, council can put all the money in one fund and still have it earmarked for a specific project.

"That way it puts everything in the general fund where it belongs, and then it has the correct carry-forward," said Baker. "The state says cities have to have a balanced budget, and the funds can't go below zero."

Baker explained that he wanted the city to make adjustments to apply to the budget and to plan for the future. He said that usually a city manager can do all that he is recommending, because they are usually skilled at tracking revenue and expenses, as well as at securing grants. But, he agreed that the city is not at a point where it can support the hiring of a city manager, something council debated earlier this year.

The city can account for all its funds and will be more transparent after implementing the changes, Baker said.

Councilwoman Pam Spoor asked city attorney Todd McMurtry about the contract for Baker, wanting to know if there is an exit clause where either of the parties can terminate the contract with notice, and McMurtry said he would look it over.

Baker said he is a forward-looking person, and he thinks the city should be forward-looking and plan for the future.

Meanwhile, one major concern about the city's finances - its pension contribution - is expected to grow as the state faces a more than $5 billion shortfall across the pension systems over the next two years.

"We have paid into (County Employee Retirement System) everything they told us to pay, on time, but the state is not a good steward for the money," said Mayor Matt Mattone. "This is not a city disaster, but we will bear all the burden of resolving it. It is going to be really painful."

He went on to say that because the legislature did not fund the pension system like they insisted the cities and counties do, their system, KRS, is only about 14 percent funded, whereas the CERS is approximately 70 percent funded.  

Mattone told council that everyone in the city who employed in a hazardous duty role, pays approximately 31 percent of their salary into the retirement system, and non-hazardous pays about 18 percent of their salary into retirement. The city currently pays $115,000 per year into the fund. The Kentucky League of Cities has come up with numbers on how the payments will increase, and conservative numbers show the payments will go to $183,000, while other numbers take the payment up to $209,000.

"One the low side our payments will increase $67,000, and on the high side it could be $93,000," said Mattone. "Now I sometimes think they might be trying to scare the bejesus out of us, but the can's been kicked down the road for awhile, and by no fault of our own we are in this mess."

He said the city has to figure out where the money is going to come from, and if the legislature has a special session in October like he thinks they will, a plan to step in the debt relief remedy could roll out next year. Still it is a very heavy burden for the cities to bear, especially on top of the price for the new digital emergency communication radios that the entire Northern Kentucky area is required to purchase.

Written by Patricia A. Scheyer, RCN contributor
Photo: David Baker talks to Park Hills city council (RCN)