After a threat of a lawsuit and a two-hour closed door meeting, the Atlanta City Council on Wednesday approved an ordinance that consolidates the city’s three pension boards and gives the mayor’s office substantially more power over more than $3 billion in investments.
The decision came following months of debate and protests from members of the three independent pension systems — for firefighters, police and general employees.
The change was proposed by Mayor Kasim Reed’s administration several months ago and approved just three weeks before he leaves office.
The new legislation will give the city’s next mayor, Keisha Lance Bottoms, the ability to appoint 10 of the new super board’s 15 members. It passed with a 10-4 vote: Yolanda Adrean, Andre Dickens, Mary Norwood and Howard Shook voted against it.
The council then unanimously passed a resolution recommending that the new city council taking office next month consider amending the makeup of the board so there are seven elected trustees and only five appointed by the mayor. That makeup would also include one city council member and one member from the Atlanta school board.
The super board makeup recommended by the resolution was a compromise Shook negotiated with the administration and pension board trustees over the past two weeks. It is unclear why that board composition became a recommendation instead of being incorporated as part of the ordinance.
Shook said he was too busy to answer questions after the meeting. Likewise, Doug Strachan, chairman of the general employees pension fund, did not respond to messages left on his cell phone and email.
But councilwoman Carla Smith said there were technical reasons the compromise board makeup couldn’t be incorporated into the ordinance, and she is confident next year’s council will approve it.
Currently, the general employees’ board has nine members: five are elected by government employees or retirees; one is a member of the Atlanta school board; and three are appointed by the mayor’s office.
The police and fire boards each have six-members: three elected by employees or retirees and three appointed by the mayor’s office.
Pension board members have expressed concern that the makeup of the super board would give too much power to the mayor’s office, which could then direct investments to political supporters. A spokesperson for Reed has said that the idea of consolidating the three pension systems originated with the mayor’s 2014 “Blue Ribbon Commission on Waste and Efficiency in Government.”
Daniel T. Fahner, a Chicago-based attorney who represents the Atlanta’s general employees pension fund, said the city did not have the authority to modify the composition of the three boards because they are independent bodies created by state law.
Any change to the boards’ makeup requires approval by the state legislature, Fahner said.
“It consolidates too much power in one person, the mayor in this case,” he said. “It would likely constitute a power grab.”
Fahner told the council that the board would file a lawsuit to have the ordinance declared invalid if it passed, raising the possibility that a judge would have to decide the issue.
That threat caused the council to retreat to a closed-door executive session for more than two hours.
Reed’s efficiency commission report estimated that consolidating the pensions systems, along with other changes, could save between $500,000 and $1 million immediately and as much as $25 million after 10 years.
It also recommended assembling a “cross-functional team, possibly of experts and employee representatives” to evaluate the pension boards and make recommendations for strengthening the system.
The mayor’s office on Wednesday did not immediately provide documentation that such a team had been created. It also did not provide a more recent estimate on how much money the consolidation would save.
A spokesman did say: “Mayor Reed will be out of office before this consolidated board is formed. Any allegations that claim this consolidation is a ‘power grab’ by the Mayor are patently false and ridiculous.”
The city’s pension boards have been criticized for mismanaging funds and for being dysfunctional.
Last month Larry Gray, a former adviser to all three Atlanta pension boards, was suspended and fined by the U.S. Securities and Exchange Commission for intentionally defrauding the Atlanta and MARTA retirement systems.
Angela Green, an elected trustee on the city’s General Employees Pension board who filed the SEC complaint that led to Gray’s resignation and the sanctions against him, was supposed to be on a conference call with Gray’s replacement but a consultant did not place her on the call.
During the November meeting, Green said she and Strachan, the general employee board chairman, got into an argument about the call and police were summoned.
“I told him he was an opportunist and a liar … and the next thing I know the police were called on me,” Green said.
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