Last month, we pointed out that it would be advisable for Bloomfield Township Treasurer Dan Devine to seize upon the wisdom and wealth of experiences many township residents who work, or have worked in, the financial services industries, and are willing to volunteer their time to sit on an investment advisory committee which would work with the treasurer and review, recommend and advise the township board of trustees on pensions and other financial matters. That was in light of concern by some officials that investment fees on the 2013 $80-million pension obligation bond issue came in nearly $300,000 more than several board members thought would be paid to the investment advisory firm hired by the township, Gregory Schwartz & Company.
Between its equity fund managed by Schwartz and a defined benefit pension plan first put in place for the township in 1961 and now managed by Prudential Retirement, Bloomfield Township currently has over $210 million in pension and other investments. They also have a growing pool of retirees who are vested in the pension plan, with 12 employees retiring in 2014. A report states the obligation to pay retirement benefits to retirees will likely extend beyond the next 50 years.
In December came the disclosure that investments in the township's Prudential Retirement defined benefit pension plan are drastically underperforming, and have been since at least 2004-2005 with the knowledge of trustees, forcing the township to contribute millions to the fund annually out of township operating funds to keep it fully-funded and available to retirees. From 2010 until 2014, Bloomfield Township was budgeting $10.3 million each year to add to the Prudential plan. Recently, they learned Prudential's shortfall forced them to take over $12.5 million out of that equity account with Schwartz and put it in their defined benefit plan. Another $8.5 million will also be needed before the end of 2014 to maintain it. That's $21 million dollars more to a $120 million pension fund that has the potential to tap out the better- performing equity fund – reducing it to $68 million.
"The short-term performance by Prudential in failing to meet its own actuarially assumed rate of return on the GOA is of concern as it relates to the long-term sustainability of the Defined Benefit Pension Plan as projected by Prudential in 2013," wrote Devine in a historical perspective for a study session of trustees on December 2. At the December 2 study session, Devine requested a search committee to find a consultant to conduct a sustainability study.
In e-mail correspondence from 2013 included in the study session packet, Devine, township supervisor Leo Savoie and former township finance director Ray Perkins express concerns regarding changes in Prudential's actuarial assumptions which show they had thought about adding more money to the equity portion when they issued pension obligation bonds in fall of 2013 in order to achieve a more favorable rate of return. Yet as early as 2004, to our minds, Devine, as the financial steward of the township, should have analyzed Prudential's chronic underperformance. That's at least 10 years of consistent multimillion dollar infusions from the township's budget to meet pension obligation shortfalls – it's staggering to think of both the amount of money, as well as what else that taxpayer funds could have gone to pay for that would have benefitted residents.
We recognize that trustees consistently approved all allotment requests over the years, but the financial responsibility of the township rests in the hands of the township treasurer, and to a lesser extent, the supervisor. Savoie has only been supervisor since 2011, and since at least 2013, according to e-mails, he has been working on how to fix the actuarial shortcomings in Prudential's defined benefit plan. Devine has been the township treasurer for the last 15 years. While he did raise some questions and suggested changes in the 2001-2002 time period, we are not convinced he has focused on this problem as he should have.
Beyond the question of how to address the latest investment problem in the months ahead, an equally important issue is how well the treasurer has performed the duties of his elected office, a question that the public will ultimately have to decide.