Eichenthal Involved With Firm That Gets City Pension Reform Work

Saturday, July 27, 2013

David Eichenthal, former city finance director, is involved with the firm that was given the work for reform of the city Fire and Police Pension.

Mr. Eichenthal in 2011 left the Ochs Center to head the Chattanooga office of Public Financial Management Inc., (PFM).

He worked for a number of years at the Ochs Center with Monique Berke, wife of Mayor Andy Berke, but Berke officials said they felt no need to bid the work, which was awarded to PFM for $90,500 plus expenses.

Lacie Stone, Berke spokesperson, said, "This is a professional services contract. Tennessee Code Annotated Section 12-4-106 classifies 'fiscal agent, financial advisor or advisory service'as professional services. Professional services contracts are provided by highly skilled practitioners who are subject to testing, licensing, and high ethical standards in order to perform their trade. The award of professional service contracts is based on 'competence and integrity' and it is prohibited to award a professional services contract on the basis of competitive bids."

She said the PFM pension work "is under one agreement and we have just added additional fees to an existing contract." That contract was last extended in 2003.

Ms. Stone said the pension work "is being staffed entirely by PFM’s Philadelphia office (not their local office)."

Travis McDonough, the mayor's chief of staff, told City Council members that PFM was able to cut Lexington, Ky’s unfunded fire and police pension fund liability by approximately 45 percent.

In Lexington, a number of concessions were made by both sides as the city's unfunded liability was cut from $300 million to $161 million. The Lexington agreement included lower annual cost-of-living adjustments, increased contributions from active and future employees and a remodeled new-hire plan. 

Reformers in Chattanooga may be looking at the program's DROP plan of lump sum payments to retirees in lieu of monthly payments, annual three percent cost of living increases and 25-year retirement eligibility.

Officials said Steve Parks was eligible for a DROP of some $150,000 when he retired in 2006.

The city’s pension fund contributions have increased from $5,274,726 in 1998 to $7,258,925 in 2007 and $14.4 million for the upcoming budget. Mr. McDonough said they are slated to continue to rise under the current scenario.

The Chattanooga Fire and Police Pension Plan has been managed since 1948 by a board composed of three current firefighters, three current police officers and the mayor. A committee studying the issue in June 2008 recommended that the City Council increase the size of the board to nine members and include two private citizens with financial expertise and a designee of the mayor with voting power. In a compromise, the makeup of the pension board was to change with the addition of a city employee named by the mayor and a citizen named by the City Council with input from the pension board.

At the time, Dan Johnson, chief of staff to Mayor Ron Littlefield, said changes made in 2000, including adding the DROP, were supposed to be revenue neutral, but he said instead the system quickly went from a $13 million surplus to heavy liabilities. He said city contributions also shot up.

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