Tredyffrin Receives 92% Fund Ratio Score from PERC

On January 21, 2013, a letter to the editor appeared in Main Line Suburban Life written by Chris Smith of Paoli.  In his letter, ‘Willistown’s pension-fund shortfall must be addressed’ , Smith questioned how the supervisors planned to finance the $2.6 M pension shortfall?  Smith pointed out that Willistown’s EIT is already at the highest level legally permitted.

Due to their pension shortfall, Willistown Township has received a Fund Ratio Score of 77 from Pennsylvania’s Public Employee Commission (PERC) that means that Willistown is only 77% funded against its liability.  Every two years municipalities are required to submit their actuarially determined liabilities and in December PERC released their report, ‘Act 205 Distress Scores Based on the 2012 Actuarial Valuation Reports – 12/12/2012’. All municipalities contained in the report have listed all of their reported pension plans filed with PERC.  The distress score based on the aggregate funded ration of a municipality’s pension plan. The score is used to determine a distress level and a municipality’s corresponding funding ratio.

Willistown’s Fund Ratio Score of 77% was an improvement from 2010 when PERC listed their pension funding at 65%.  A Community Matters reader sent me Smith’s letter and suggested that I review the report for Tredyffrin.  According to the December actuarial report from PERC, Tredyffrin Township received a Fund Ratio Score of 92%.  In 2011, Tredyffrin reported assets in its public pension fund of $36,994,373 and liabilities of $40,257,326 for a shortfall of $3,262,954.  Willistown’s Fund Ratio Score improved during the previous two years, Tredyffrin’s unfunded accrued liability of $1.4 M ranked a slightly higher 94% PERC score in 2010 versus 2012.

Of the 51 Chester County municipalities listed in the report, unfortunately approximately 50% received rankings in the ‘distressed’ category – Thornbury Township received the distinction of receiving a ‘severely distressed’ ranking of 23% with assets of $7.6 M as opposed to liabilities of $33 M.  Twenty-five Chester County municipalities are listed in the ‘not distressed’ category including Tredyffrin Township.  It was interesting to note that several Chester County municipalities received extremely high Fund Ratio Scores from PERC including our neighbors, Malvern Borough (122%) and East Goshen Township (125%).

In addition to Tredyffrin’s pension fund ratio score of 92%, there is some encouraging economic news – this month, Auxilium Pharmaceutical announced its moving its corporate headquarters to Lee Road in Chesterbrook and yesterday we learned that Teleflex, a medical device manufacturer is moving its headquarters from Limerick Township to Swedesford Road.   With Auxilium and Teleflex moving into the township, that’s 300+ new Tredyffrin workers.

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  1. Pattye – It is good news that Tredyffrin will have some new businesses, but it is mainly good news for the property owners. The cases you cite are not truly indicative of any encouraging economic news locally. These are both existing businesses simply moving offices, and other than the 300 new workers each paying the $52 LST, there is no direct economic benefit to Tredyffrin that I can see…

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    Pattye Benson Reply:

    I think it is more than the $52 LST — at a minimum these companies are empty office buildings. Teleflex is moving in from Limerick Twp, so there maybe employees who will want to move here for T/E School District. In the case of Auxillium, they were barely outside the township in the Great Valley Corporate Center. BTW, I drive through that area daily and there are a number of empty buildings. Here’s an interesting comment that someone sent me — both Teleflex and Auxillium are moving from municipalities that have EIT. Do we think that the fact that TT does not have an EIT played a factor in that decision? Doubtful — no EIT didn’t keep Shire in Tredyffrin. Having 300+ new employees to Tredyffrin Twp will help the local restaurants don’t you think? Just trying to be hopeful for 2013 :) Now if someone could PLEASE find someone to take the old Genuardi’s store in Chesterbrook — I think it is going on 3 years since the store closed. In fact, from a redevelopment standpoint I wish some big developer would take down the entire shopping center and rebuild.

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    Not so fast Reply:

    The direct economic benefit of these 300 new workers to TT is $52 each, annually (if collected- but that is another story). That is the only revenue.

    You are correct that there may be ancillary benefits of new workers, or maybe the net result is that these new TT companies are actually a negative? Using your example let’s suppose that some of those employees do move to Tredyffrin. Do they have kids? how many? do they buy a home or rent? If they buy an avg value TT home, and add a few kids to the district this would be a negative to TESD very quickly. If they only rent and bring some kids this would be a negative to TT AND TESD – they would use township and school resources without adding ANY new revenue to the system. Sure they will probably eat and buy stuff in TT, good for a few retailers, but again NO DIRECT benefit to TT – no merc or sales tax here. The system is clearly flawed in that it sounds positive but in reality could really be a net negative. An EIT with offsetting prop tax breaks would certainly do a lot to add some balance back…

    BTW – I agree with your point that the lack of TT EIT probably had NOTHING to do with either of these companies coming to TT. Contrary to the opinions of one TT Supervisor, most businesses wouldn’t think that way – as there is no certainty in the future of EIT in TT – despite all of the political rhetoric to the contrary.

    I drive through the area every day also, I understand the vacancy currently, and the increasing vacancy on the horizon.

    One last thing, I would be careful what you wish for re a developer and Chesterbrook Shopping Center – I doubt many would be interested in that space for new retail or retail redevelopment. Clearly retail has failed there for a number of reasons – and unfortunately 300 or even 3000 new daytime workers in Chesterbrook is not going to change that. I shudder when i think what kind of use the TTPC and TTBOS would allow in Chesterbrook SC (or have already allowed by past actions….)

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  2. Excellent job by Tredyffrin Supervisors weathering the stock market twists and turns. They deserve a shout-out ! We wish the Tredyffrin team were in charge in Willistown.
    Willistown however is sad. Township Supervisor Norm MacQueen is running for County Controller touting his experience as an Investment Manager. When MacQueen was sworn in the Willistown funds were 89% funded. He promptly took them down to 65% funded losing a lot of money the taxpayers will never get back. The only make-up will be increased real estate taxes
    How can Investment Manager (isn’t he supposed to be competent at this?) MacQueen do so poorly while Tredyffrin performed consistently well in tough markets?
    Stranger than fiction – The irony of this record seeking a bigger job which oversees County pension money is unbelievable.

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  3. Hey Pattye…great news about the new tenants moving into our community. What do you use as source for that? Is it on a Township website somewhere?

    One of the good things for the community in securing new tenants relates to property values. It can certainly be argued that a vacant property is less valuable and therefore its Assessed Value can often be challenged successfully resulting in lower real estate tax revenues for the municipality. A leased office building, on the other hand, maintains and/or enhances it’s value. That would be one of the local impacts of new tenants in the community. In addition to the benefits mentioned above…

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    Pattye Benson Reply:

    Neal — Philadelphia Business Journal

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    Neal Colligan Reply:

    Duh…thanks! :-)

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    Not so fast Reply:

    Neal – you are correct that in some cases bldgs which have been vacant for a while have had some success getting prop tax reductions with the vacancy being weighed as a factor. BUT, 300 folks are not moving that needle in these buildings – there was no reduction opportunity that was mitigated by these new leases.

    I am simply trying to be realistic here, and also point out the massive disconnect in TT where news like this might actually be a net negative to the township and its taxpayers. It is time to change something and balance the tax burden more equitably.

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  4. Not sure where the great news is. 92% says to me that we are 8% shy of what we need. By my calculations, that means we are about 1 million shy in our fund balance. At first, that may seem good compared to some other munis. But what is the reality? The reality is that 100% of the reserves are encumbered. This could be a very big issue come 2014 when those liabilities have to be recognized. IT can be argued that 100% of our fund balance + another million should go into the trust fund. That means we are starting from scratch again. In fact, we rely on those fund reserves for unexpected items.

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    thought Reply:

    TR
    It is good news. Tredyffrin is in great shape Plans that are 90% funded are in good shape and the gap can be closed easily by continued good investment performance. Tredyffrin’s consistency in the 90’s for multiple years shows strength and stewardship The funded calculation the actuaries use is complex and is described in full in Township year end financials. Townships that had wild swings down (tanked with huge investment losses) generally show incompetent or worse, meddling Supervisors who picked or changed to stupid money managers or interfered with professional money managers, or gave the business to incompetent buddies or business associates.
    I don’t know what happened in Willistown but to go from 90% to 65% just doesn’t pass the smell test. Something is creepy. No other Township took the losses described in the post. Skilled money managers protect you in down markets I am curious who Willistown used as money managers and when they began

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    TR Reply:

    I agree with you, plans that are 90% funded are in good shape. What you can’t do is double dip. You cannot claim the plans are funded 90+% and still claim the reserves for the general fund. You need to pick one or the other to get a real picture of things. As for what happened in Willistown, that’s for WR to worry about…;-) I’m TR.

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