The Public Employees Retirement Association says the city owes $201,228,597 to assure that Memorial Health System employees receive retirement benefits they earned while working at the city-owned hospital before it was leased to an outside agency last fall.
Last year, PERA said the bill would be $240 million to $250 million, so this figure could be considered an improvement for the city. But it's not that simple.
For one thing, when University of Colorado Health took over Memorial under a voter-approved, 40-year lease agreement, it paid the city $185 million to cover the PERA backfill for roughly 4,000 departing employees. So despite the smaller bill, the city still didn't extract enough from UCH last year to cover it.
Secondly, the city continues to maintain it owes nothing to PERA. The city contends that the employees left just as they would have if they had resigned, and the city doesn't pay PERA money for future retirement benefits when employees resign.
The payoff is being litigated in a lawsuit, with the $185 million (and other funds paid by UCH to the city) in escrow pending the outcome of that suit. While PERA has filed a motion for summary judgment, the city downplays that, having said in a prepared statement on May 24 that it's "a standard motion that both parties will file in this type of case."
"We remain confident that the City will prevail," the city said in that statement.
In the meantime, PERA modified what it believes it's owed based on the latest actuarial figures, says PERA attorney Adam Franklin.
"Due to the very positive investment returns of Colorado PERA, the funding of the division improved, thus having the impact of lowering the unfunded liability due from the City," he says in an e-mail.
From a news release about PERA's 2012 performance:
The Colorado Public Employees’ Retirement Association (PERA) investment returns for 2012 were 12.9 percent, according to the Comprehensive Annual Financial Report released by the PERA Board of Trustees today.
“Due to the strength of PERA’s investment return in 2012, $4.6 billion in asset value was added to the trusts, which was $1.8 billion more than our anticipated return,” said Gregory W. Smith, PERA’s Executive Director. “Not only is this good news for the Colorado economy, it shows the importance of the reforms in 2010’s Senate Bill 1 that were recommended by the Board of Trustees and adopted in a bipartisan effort of the Colorado General Assembly in response to the economic downturn.”
Investment returns for the 10-year period were 8.4 percent exceeding the Board-established 8.0 percent assumed rate of investment return. PERA’s annualized investment returns for the 30-year period have been 9.4 percent, also exceeding the investment rate of return assumption established by the Board of Trustees.
The city also is facing a legal action from a dozen or so Memorial employees who had special retirement deals the city stopped honoring when it handed the keys to Memorial to UCH.
That case might be close to being settled. City Council has met several times recently in executive session on matters involving negotiation over Memorial.
It's already paid out nearly $1 million to end a lawsuit alleging the city improperly defeased Memorial's bond debt.