City of Memphis 2019 Sales Tax Referendum Presentation to City Council- March 3, 2020 Mayor Jim Strickland 1
2019 Sales Tax Referendum We, the undersigned registered voters of the City of Memphis, Tennessee, hereby request that the Memphis City Council adopt an ordinance to increase the sale and use tax in the City of Memphis by 0.5%, from 2.25% to 2.75%. The proceeds of this tax increase shall first be used to restore and maintain the health care benefits for Public Safety employees (employees and pre-65 retirees of the Memphis Police Services and Fire Services Divisions) to the levels in effect as of July 1, 2014 , and to restore and maintain the pension benefits of said employees hired prior to July 1, 2016, to the levels specified in the 1978 City of Memphis Pension Plan . Any remaining proceeds shall be used for street maintenance and/or pre-kindergarten education . All funds must be spent for the purposes designated above. These funds are to be used in addition to, and may not be used to replace or supplant any current funding for the above purposes. Such tax shall be collected by the Tennessee Department of Revenue. A lawsuit for recovery of any tax illegally assessed or collected shall be brought against the City Treasurer of the City of Memphis. As stated in Tenn. Code Ann. 67-6-707, if, within thirty (30) days from the filing of this petition, the Memphis City Council does not adopt said ordinance and file a certified copy of such ordinance with the county election commission, this petition shall constitute an ordinance requiring a referendum on the question to increase the city sales and use tax. 2
2019 Sales Tax • Commissioned Police Officers Referendum • Commissioned Fire Fighters • Paramedics Impacted Cohort • Police and Fire Dispatchers 3
2019 Sales Tax Referendum Impact to Healthcare and OPEB Restore and maintain the health care benefits for Public Safety employees (employees and pre-65 retirees of the Memphis Police Services and Fire Services Divisions) to the levels in effect as of July 1, 2014 Estimated number of active employees currently under age 65 3,674 Estimated number of retired currently under age 65 693 Estimated number of disabled currently under age 65 301 Estimated total “restored” Pre -65 4,668 Estimated number of spouses and children of active employees returning 490 4
2019 Sales Tax Referendum Impact to Healthcare and OPEB Restore and maintain the health care benefits for Public Safety employees (employees and pre-65 retirees of the Memphis Police Services and Fire Services Divisions) to the levels in effect as of July 1, 2014 OPEB: Change in Actuarially Accrued Liability $369,100,000 Change in Estimated Benefit Payments FY21 $ 6,550,000 (1/2 year convention) Change in Estimated Benefit Payments FY22 $ 15,230,000 *Healthcare: Change in Estimated Benefit Payments FY21 $ 1,290,000 (1/2 year convention) Change in Estimated Benefit Payments FY22 $ 2,695,000 *These numbers are subject to change as we are currently in the RFP process for a potential new vendor. 5
2019 Sales Tax Referendum Impact on Retirement Plan Restore and maintain the pension benefits of said employees hired prior to July 1, 2016, to the levels specified in the 1978 City of Memphis Pension Plan Impact related to employees hired during the period January 1, 2009 through June 30, 2016 Based on current valuation assumptions and discount rate of 6.5% Estimated Number of employees 757 Est Change in Unfunded Actuarial Accrued Liability (UAAL) $28,760,000 Estimated 401(a) asset transfer of contributions $ 7,910,000 Estimated Change in UAAL after 401(a) transfer $20,850,000 Estimated Annual Change in Actuarially Determined Contribution (ADC) $3,000,000 6
2019 Sales Tax Referendum Special Revenue Fund • This will be a RESTRICTED FUND • Incoming revenue segregated and tracked from General fund • Finite universe of expenditures • Required, recurring annual pension and benefit expenses • Required, annual reserve contributions per schedule • No other recurring / permanent obligations permitted ( i.e. pay raises) • Discretionary public safety, paving and pre-k expenses • Effective for incremental revenue generated commencing January 1, 2020 • Forecast revenue and growth based on Department of Revenue (conservative) calculations 7
2019 Sales Tax Referendum Flow of Funds 8
2019 Sales Tax Referendum Annual allocation process 9
2019 Sales Tax Referendum Estimated Allocation Program ESTIMATED Allocation plan FY20 FY21 FY22 FY23 FY24 FY25 Total Notes Revenue 25 52 53 54 55 56 295 2.4% growth FY20-21, 2% thereafter Public Safety Recruiting and retention Expenditures Required, Recurring, Annual Pension Expense 0 2 3 3 3 3 14 ADC @6.5% discount rate Required, Recurring, HC Expense 0 2 3 3 4 4 16 Required, Recurring, OPEB Expense 0 10 16 19 20 22 87 Required, Annual Pension Reserve Contribution 2 1 1 1 1 1 7 Required, Annual OPEB / HC Reserve Contribution 7 6 4 3 3 3 26 Total required 9 21 27 29 31 33 150 Public Safety Discretionary: Sign-on / Retention Bonus, 12 15 14 12 11 10 74 Wellness, Firehouse Renovation, Takehome Car Program Total, Annual Public Safety 21 36 41 41 42 43 224 Remaining proceeds 4 16 12 13 13 13 Discretionary PreK and Paving Expenses Asphalt paving 0 14 10 10 10 10 54 Pre-K Reserve fund 4 2 2 2 2 2 14 total 4 16 12 12 12 12 68 10
City of Memphis 2019 Sales Tax Referendum 11
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