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City officials said they were glad to have reached a tentative settlement with former employee William McGuigan in the lawsuit he filed to force the city to pay into the retirement fund $173 million.
Read more about the deal, which the City Council will consider Tuesday, here.
The officials said they preferred a settlement over litigating the matter because it allowed them five years to pay off the debt and it ensure that “the city will never again be sued for any unfunded issue,” as City Attorney Mike Aguirre said at a press conference.
But McGuigan’s attorney Michael Conger said the city could have possibly had 10 years to pay the bill, not just five. State law allows the city to ask a judge to get that leeway if it can prove that the payment would cause financial hardship. The interest would still run on the debt.
Mayor Jerry Sanders’ spokesman George Biagi said there was too much risk involved in that request, and that if it were denied the city would have to pay the $173 million all at once.
“That’s too big a risk to take. With the five years, it’s guaranteed,” Biagi said.
The other claim, about this being the last underfunding lawsuit against the city, is arguable.
The settlement requires the case to be transformed into a class action suit so that it includes all pensioners, and that the case against the city be dismissed.
But another former city employee and Conger client, William Newsome, is suing the retirement board and the city for breaching a 1996 agreement, known as Manager’s Proposal 1. In the 1996 deal, the city and the retirement board agreed that the funding ratio of the pension fund would never dip below 82.3 percent. That means there must be $82.30 available in assets for every $100 that is available. Currently, the funding ratio is about 68 percent.
In 2002, the board allowed the city to skip that requirement. This lawsuit alleges that the holiday was granted by the board, who breached their fiduciary duty, and that the city aided and abetted the deal by luring employee trustees by boosting the benefits for workers.
However, that case is expected to be consolidated into Aguirre’s primary case, which aims to cut the city’s $1.4 billion pension deficit in half by stripping away the benefits that Aguirre says are illegal, so it will likely be resolved at the same time.