Dallas Squares off with Another City Pension Fund — This Time the One for Civilian Employees

The Employees' Retirement Fund of the City of Dallas received a temporary restraining order against the city, preventing from taking action against two newly re-elected trustees.

Published in the Dallas Morning News - September 28, 2018

Dallas City Hall is back in what has become a familiar spot: a legal fight against an employee pension system.

This time, the $3.6 billion Employees' Retirement Fund — which counts 7,900 active members and more than 7,000 beneficiaries — is the city's target.

City officials want the retirement fund's board members to be subject to term limits, which would stop two current trustees from serving again. But pension leaders don’t want to be told what to do.

"The reality is that the City Council thinks A, and we think B," the fund's executive director, Cheryl Alston, said after an emergency meeting Wednesday night. "We've been working for months to try to get to a resolution, but that's clearly not happened."

The fund won its initial battle in state District Court on Thursday, receiving a temporary restraining order. The order prohibits the city and its interim city attorney, Christopher Caso, from taking action against two newly re-elected trustees: board Chair John Jenkins, a deputy Park and Recreation director, and Tina Richardson, a city financial manager.

Cheryl Alston is executive director of the Employees' Retirement Fund.(Robert W. Hart / Special Contributor) The governmental bodies have been butting heads over the governance issue since August 2017, when the City Council unanimously passed a slew of city code revisions that included a term-limits ordinance directly aimed at the Employees’ Retirement Fund.

The council approved the new rules, which limit pension board members to three consecutive terms, in the wake of the Dallas Police and Fire Pension System imbroglio. That system's unraveling finances in recent years led to clashes with the city in court and before the state Legislature.

Legislators ultimately passed sweeping changes to the police and fire system, including an overhaul of its board governance.

The civilian employees fund is on far more stable financial ground than its public-safety counterpart. But the fund's leaders had to win voter approval in 2016 for benefit cuts for new hires. And the system's financial position is bolstered by pension obligation bonds — an arbitrage bet that puts pressure on the fund to earn more money than the interest payments on the debt.

The system is also governed by a local ordinance rather than a state law, and its seven-member board of trustees has only three spots for directly elected city employees.

Those seats haven't seen much turnover in the last decade. Jenkins has served four consecutive three-year terms since 2005. Richardson, first elected in 2010, is on her second straight term, and Carla Brewer has served since 1999.

The city's attorneys argued in court that the change to the Employees' Retirement Fund was a matter of best practices and aligned the fund’s policies with the rest of Dallas’ commissions and boards. The dispute has jeopardized a trustee election that took place in August. Jenkins ignored the city's new ordinance and won new terms that are set to start next year. Richardson is running this month for re-election.

On Sept. 7, Caso, the interim city attorney, sent the fund's trustees a letter arguing that the pension board "lacks the power to seat an ineligible candidate." Two weeks later, on Sept. 21, Caso wrote to Jenkins and Richardson, telling them that they had been ineligible for re-election and would face legal action if they attempted to serve again.

The Employees' Retirement Fund dismisses the new ordinance as invalid because the changes were made to a section of the city code dealing specifically with term limits, not the chapter that sets out governance of the retirement fund. The language of that chapter, known as 40A, dictates that changes to the fund must be approved by the pension board, adopted by the City Council and approved by voters.

The fund's attorney, Seth Roberts of the Dallas law firm Locke Lord, called it a "three-legged stool" and argued that, in this instance, two of the three legs were missing. In the chapter's creation, Roberts said, the City Council intentionally put "self-limiting" language into the city code. He said that while the fund is "not opposed to the idea of term limits," he's concerned that the council bypassed the rules.

In Thursday's court hearing, Assistant City Attorney Chhunny Chhean countered that because Chapter 40A is silent on the issue of term limits, other chapters of the city code can be "read together in harmony" with it.

Max Patterson, the executive director of the Texas Association of Public Employee Retirement Systems, said in a written statement that no other public employee pension system in Texas has term limits, because "it is counterproductive to good pension fund governance."

“Dallas should abandon this idea,” Patterson wrote. “These arbitrary term limits the Dallas mayor and city council want to make will wind up in court and found to be at odds with current statutes while costing Dallas taxpayers hundreds of thousands in legal fees.”

The city is expected to file its own petition soon, adding Jenkins and Richardson to the lawsuit. A preliminary hearing on an injunction is expected in the next two weeks.