Joe Saino, who writes the blog MemphisShelbyInform, has long been preaching the dangers of Memphis’ financial situation. When the Commercial Appeal asked if we were becoming the next Detroit, Saino reacted.
The CA reported:
“We’re not going to be the next Detroit,” said University of Memphis economist John Gnuschke. “There’s not going to be another Detroit. They had the perfect storm. But that doesn’t mean we don’t have problems.”
Just last week, the Memphis City Council balanced the budget by voting for a 29-cent increase in the tax rate to $3.40. Still looming is an unfunded pension liability. City pension funds are short by $624 million. Borrowed cash could fill the funds. But total Memphis municipal debt already has reached 7 percent of taxable assessed valuation — a rate considered high by credit-rating analysts. That puts Memphis squarely where Detroit stood two decades.”
Saino found that “What the article did not point out is the $1.2 billion unfunded OPEB liability (basically retiree health care and life insurance).
“What is coming next January 1, 2014 is Obamacare. What will this do to the health care costs for City of Memphis employees and retirees? The City of Memphis (as well as the County and the MLGW) are self insured as far as health care costs. The City and the County pay 70% of this cost and the MLGW pays 75%. Only for this coming year did the City agree to bring up the percentage to 30% for the employees and the retirees from the 26% they had been paying. What will happen when Obamacare arrives?
“What needs to be done now is to reform all three pension systems (the City, the County and the MLGW) and move to a defined contribution plan as the state has done for state employees and teachers. This won’t save a lot at first but over the years it could have a huge effect. As to health care under Obamacare, who knows. As Nancy Pelosi famously said, ‘You have to pass it to find out what is in it.’ Well we are beginning to find out to our horror.”
The City Council blithely goes on its way, deciding to tax, but not to curtail too much spending. For example, they want to give MLGW $10 million for 60,000 smart meters. This is bad, but it is just the beginning. Figure out the cost when the 1.3 million MLGW wants to supply with smart meters is needed.
Such expenditures are ridiculous and unnecessary. Do they think the Feds will bail them out? Does it come from Obama’s stash?
The short sightedness of our elected officials and of an electorate that refuses to see anything beyond the next 24 hours, is appalling.