A recent audit of the Firefighters’ Pension and Relief Fund of New Orleans obtained by the Times-Picayune reveals that the fund has lost more than half of its value since 2010. The Mayor of New Orleans, Mitch Landrieu, has been ordered by a court to start paying into the fund to make up the difference with taxpayer money but has thus far balked, insisting that the structure of the board managing the pension be completely revamped.A passage from the Times-Picayune report vividly illustrates the source of the Mayor’s frustrations:
In March 2008, fund managers put $15 million in a Cayman Islands venture run by the hedge fund Fletcher International Ltd. It initially showed 12-percent annual gains, according to the audit. When the pension board tried to collect some of its apparent earnings in April 2011, it got no answer, according to the audit. Fletcher would file for bankruptcy in October 2012, leading the fund’s auditors to report the $15 million lost in 2013, [Tommy] Meagher [a firefighter and secretary-treasurer of the pension fund’s board of trustees] said.Its biggest hit last year came from a failing golf course in Algiers. The Lakewood Golf Club, valued at more than $39.2 million in 2012, lost $17.5 million of its worth by December. Another golf course, this one in Austin, lost the fund another $3.5 million last year. Both sites are in the process of being put up for sale, Meagher said.He attributed those losses to previous audits that included the values of proposed hotels and shopping centers on the courses that never came to be.“I’m not saying it isn’t money, but when you estimate something to be worth something and it doesn’t end up being that, then it looks on paper like you lost money,” he said.
The firefighters are trying to play ball with the mayor to a certain extent, having voted to replace the entire managing board last year. In addition, the union increased the number of representatives from the Mayor’s office on the board to three out of a total of seven seats.But Landrieu appears to be digging his heels in, insisting that the Mayor’s office gets a majority on the board and that some difficult cuts be instituted before any more money is disbursed. After all, New Orleans doesn’t have the luxury of a slush fund to just dip into when new demands of millions of dollars in payments just pop up like this. Payments into the firefighter pension will mean either serious cuts in city services or tax hikes across the board.Something’s got to give. And if the experience of Stockton, Vallejo, or Detroit are any guide, the fallout won’t be pretty.