by Mish

The Dallas police and fire plan is only 45% funded. Lump sum withdrawals have escalated, and it’s only a matter of time before such withdrawals are halted.

The fund needs a billion dollars in funding this year, the equivalent of the entire city budget,  just to keep up with outflows.

Bankruptcy is inevitable. No one should be surprised.

Please consider Dallas Stares Down a Texas-Size Threat of Bankruptcy.

Picture the next major American city to go bankrupt. What springs to mind? Probably not the swagger and sprawl of Dallas.
But there was Dallas’s mayor, Michael S. Rawlings, testifying this month to a state oversight board that his city appeared to be “walking into the fan blades” of municipal bankruptcy.
Over six recent weeks, panicked Dallas retirees have pulled $220 million out of the fund. What set off the run was a recommendation in July that the retirees no longer be allowed to take out big blocks of money.
Now, the Dallas Police and Fire Pension System has asked the city for a one-time infusion of $1.1 billion, an amount roughly equal to Dallas’s entire general fund budget but not even close to what the pension fund needs to be fully funded.
“It’s a ridiculous request,” Mr. Rawlings, a Democrat, said in testimony this month to the Texas Pension Review Board, whose seven members are appointed by Texas governors, all Republicans for the last 20 years.
This month, Moody’s reported that Dallas was struggling with more pension debt, relative to its resources, than any major American city except Chicago.
“The City of Dallas has no way to pay this,” said Lee Kleinman, a City Council member who served as a pension trustee from 2013 until this year. “If the city had to pay the whole thing, we would declare bankruptcy.”
The city is expected to call for an overhaul in December. But it has no power to make the changes, because the fund is controlled by state lawmakers in Austin. The Texas Legislature convenes only every other year, and Dallas is preparing to ask the state for help when the next session starts in January.

Beset by Withdrawals

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The Wall Street Journal reports Dallas Police and Fire Pension Fund Beset by Withdrawals.

Dallas police and firefighters are withdrawing hundreds of millions from their retirement plan following a series of investment blunders, heightening the risk that a major U.S. pension fund could run out of money.
“Everybody suspected it was in trouble” and “nobody knew what was going to happen,” said former officer Keith Strickland, 56, who retired in August and withdrew his savings. Officers and firefighters have withdrawn $508 million in the past four months.

Dallas Police and Fire Pension Actuarial Valuation

Let’s dive into the Dallas Police and Fire Pension Actuarial Valuation as of January 1, 2016.

Contributions vs. Benefits and Expenses

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Dallas Pension Assets Marked to Reality

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Funded Ratio

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Dallas Pension Net Liability

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Dallas Pension Assumptions

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The above charts are before $500 million was pulled.

Dallas is not the only city in trouble, but Dallas mayor Michael S. Rawlings stands out from the others in honest assessment of the situation.

I have written about zombified cities over the last few years. In most cases the can has been kicked.

Zombified Cities

There is absolutely no way Chicago, Oakland, Baltimore, Philadelphia, LA, Houston, and numerous other cities can meet pension obligations without a major restructuring of promises.

Given that public unions seldom if ever agree on even the smallest of pension concessions, expect many of those haircuts to happen in bankruptcy court.

85% of Pension Funds to Fail in Three Decades

On April 11, 2014, I wrote 85% of Pension Funds to Fail in Three Decades.

The analysis was not mine, it came from Bridgewater Associates. My conclusion was Bridgewater is overly optimistic.

Massive Number of Municipal Bankruptcies on Horizon
I wonder what Bridgewater’s model would predict starting with losses for the next seven to ten years, because that is what I think is highly likely.
Given the only way to shed  pension obligations is bankruptcy, one hell of a lot of municipal bankruptcies are on the horizon unless some other legal maneuver is found.

Mike “Mish” Shedlock

Criminal Witch Hunt in Dallas Pension Fiasco

In the wake of the near collapse of the Dallas police and fire pension fund, a Dallas News editorial says Former Police, Fire Pension Managers Should Face Criminal Investigation.

Dallas Police and Fire Pension Halts Withdrawals in Solvency Crisis, Lawsuits Await

The Dallas Police and fire pension fund was hit with an alleged “liquidity” crisis that forced the Dallas mayor Mike Rawlings to file a legal motion to halt withdrawals

Dallas Pension Showdown: Mayor Seeks to “Target Those Who Got Rich From System”

The Dallas Police and Fire Pension plan is severely underfunded. Not even a $1.1 billion taxpayer bailout the plan officials request will make the plan whole.

Not Just Dallas: Fort Worth Employees’ Pension Plan in Deep Trouble

Dallas isn’t the only city in Texas with a sick retirement fund. Nearby Fort Worth is also in deep trouble.

Dallas Police Retiring in Droves, Taking Lump Sum Pensions, Fearing the Money Isn’t There (And It Is

The Dallas police and firefighters pension fund has just 45% of the money it needs to cover benefits. The fund rates to be out of money in 15 years at the current rate of withdrawals.

Detroit, Fresh Out of Bankruptcy, Discovers $195M Pension Shortfall

On December 10, 2014 the city of Detroit exited bankruptcy. It was the largest municipal bankruptcy in US history.

Pension Benefit Guarantee Corporation Running Out of Cash, Millions Affected

The Pension Benefit Guarantee Corporation (PBGC), an entity created to “guarantee” pensions of private corporations, is on the verge of bankruptcy.

Hartford Solicits Bankruptcy Proposals from Law Firms

Hartford, Connecticut, is on the verge of bankruptcy. It has a budget hole of $14 million this year, and a projected $65 million hole next year.

Pension Anecdotes From Pension Tsunami

In response to Pension Problem Too Big To Ignore? Jack Dean at Pension Tsunami pinged me with an interesting anecdote: