PROVIDENCE, R.I. (WPRI) – A U.S. District Court judge ruled Friday that Providence officials failed to prove how the city would have saved millions of dollars if its longtime actuary didn’t make errors in analyzing the city’s 2012 pension reform ordinance.
U.S. District Court Chief Judge William E. Smith granted a motion for summary judgment filed by Buck Consultants, the firm the city accused of negligently overestimating savings it would generate from suspending retiree cost-of-living adjustments (COLAs) by at least $10 million.
Lawyers for the city argued that Providence relied on Buck’s opinion that the COLA suspension would save the city $180 million when it negotiated a pension settlement with its public safety unions and retirees, but the estimate should have been $170 million. If Buck gave an accurate assessment, lawyers argued, the city would have sought an additional $10 million in savings from the settlement or moved forward with the original pension reform ordinance.
In his decision, Smith called the city’s damage theories “inherently speculative,” arguing that officials did not “present any evidence showing that it actually could have succeeded in getting any further concessions from the unions, let alone in what amount.”
The city originally sought $10.8 million in damages, charging that about $700,000 in miscalculated immediate savings from the COLA suspension equaled $10.8 million when compounded annually over 28 years.
Smith’s ruling was first reported by Rhode Island Public Radio.
A spokesperson for the Elorza administration said Monday the city must still meet with its outside legal counsel before determining whether it will appeal the decision.
The city’s pension reform settlement – and its lawsuit against Buck – came under former Mayor Angel Taveras, who served one term in City Hall between 2011 and 2015.
In 2013, Judge Sarah Taft-Carter approved an agreement between Providence and its unions that allowed the city to cap all pensions, suspend cost-of-living adjustments (COLAs) for a decade and eliminate 5% and 6% compounded COLAs for good while also moving retirees to Medicare. City officials said the settlement reduced Providence’s unfunded pension liability by $170 million.
That pension shortfall continues to haunt the capital city.
According to The Segal Group Inc., Providence’s new actuary, the city’s pension fund was just 29% funded as of June 30, 2014, meaning its $357.7 million in assets would cover less than one-third of the retirement benefits the city has promised its workers over the years.
The gap between the city’s pension assets and its pension obligations is supposed to be closed over the next quarter-century thanks to rising contributions from taxpayers and workers along with the fund’s investment earnings.
Providence continues to assume its pension fund investments will earn an average annual return of 8.25%, and projects the city’s pension system will be fully funded by 2041 if the investment forecast is accurate and contributions are made on schedule.