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Vice Mayor Steve Byington said the measure’s approval will allow $422,137 to be drawn for the police pension fund to pay off the state fund. The legislation will also transfer $422,000 from the general fund to the police pension fund to cover the cost.
The expenditures were not included in the 2019 budget, Byington said, adding that $32,000 will be drawn from the Equipment Replacement Fund to purchase a vehicle for the director of Engineering and Public Works, while that same amount will be taken from the General Fund to cover the cost.
“That will allow the city to make two expenditures not already included in the 2019 budget,” he explained to council. “One is the early payoff of a liability owed to the state of Ohio and the other is the purchase of a vehicle for the use of the director of Engineering and Public Works.”
Byington said the moves make good fiscal sense for the city and the numbers add up in a positive way.
“The OPFP was created by the Ohio General Assembly in 1965 to replace hundreds of individual local police and fire pension plans,” he said. “At the time, many cities, including Oakwood, had pension liabilities on paper exceeding the assets needed to pay future retiree benefits. In other words, once the state assumed control of local pension plans, many local governments owed money to the state.”
According to Byington, those liabilities were placed on a 65-year payment schedule with payments beginning in 1970 and continuing through 2035.
“The current payoff figure for Oakwood’s remaining liability is $422,137, which continues to incur interest at an average rate of 4.25%,” he said. “Due to the difference between that interest rate and the amount generated by city investments, council has determined that it costs the city more to carry this debt and paying off this liability early is the most prudent use of city resources.”
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He noted that by paying off the liability early, the city will save about $175,000 in interest expenses that would otherwise accrue between now and 2035.
The city plans to hire a director of Engineering and Public Works later this year, its first since 2014. The city manager has assumed those duties for the past five years. “The city no longer has a vehicle available for use by that person in that position and needs to acquire one,” Byington said.
In January, Oakwood approved its first balanced budget in the five years since the estate tax was eliminated. The city began the year with a balance of $10 million, according to City Manager Norbert Klopsch.
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