City Council’s Feb. 24 work session, scheduled for 1 p.m., didn’t get underway until 2:22. Councilors weren’t shirking their duty — they were meeting behind closed doors in executive session, considering an undisclosed legal matter.
It seemed obvious that they were discussing the city’s strategy regarding the Public Employees’ Retirement Association lawsuit, but no one was talking. Afterward, councilors refused to comment, as did various attorneys.
The stakes couldn’t be higher. PERA had won the first round when retired District Court Judge Harlan Bockman dismissed the city’s claim that it owed nothing to PERA after the Memorial Hospital lease to University of Colorado Health. UCH had given the city a payment of $259 million to take care of any possible liability, but our peerless leaders had a different plan: Keep the cash!
State statutes for entities seeking to withdraw from PERA are clear. In his decision, Bockman referenced them.
“The Court finds that the City and MHS violated the statutory termination provisions by failing to apply to the PERA Board to withdraw,” Bockman stated, “and by failing to comply with all of the statutory termination provisions prior to withdrawing its status as a PERA employer.” Further, the judge continued, “The mandatory process ensures that a withdrawing employer pays for the accrued, unfunded benefits of its retirees and employees before leaving PERA.”
In October 2012, when the suit was filed, PERA calculated the city’s liability at $185 million. With accrued interest, it’s now more than $200 million.
The city has paid two law firms, Hogan Lovells and Fulbright & Jaworski, $1.6 million, and the clock is still running.
Undeterred, on Feb. 25 the city appealed Bockman’s ruling. It’s reasonable to ask why there was no public process, or whether any councilors disagreed.
In a Kafkaesque voyage through a bureaucratic hall of mirrors, we asked Councilors whether the appeal had been authorized in executive session. None would answer, directing us to City Attorney Wynetta Massey, who would not speak to us, referring the question to public communications, which forwarded our question to Massey.
Her response: “Regarding your questions about the decision to appeal the PERA case, the City Attorney’s office will not be commenting on this because it is a pending litigation matter.”
Such transparency! Was the decision to appeal transmitted from outer space by alien overlords on the Planet Zark?
Joking aside, Council and its legal advisors appear comfortable with making secret, unaccountable decisions on an unimaginably large scale.
They’re not playing with the city’s chips. Whatever money is left after settling with PERA will fund the Memorial Health Foundation. Under its charter, the foundation cannot disperse grants until its assets exceed $100 million, but that day may be far in the future.
According to a source, the city could have settled with PERA for $150 million in 2012, but chose to go for the gold ring. That would have put $109 million in the foundation’s coffers, and the community might have already received millions in grants. But if the litigation continues for another two or three years and PERA prevails, the foundation might be emptied.
While no players would speak on the record, the city’s legal advisors apparently believe the potential liability is far less than $185 million
“It’s $75 or $80 million at most — at least that’s what our actuaries say,” said an individual familiar with the city’s position, noting Bockman’s decision did not specify the amount owed by the city.
An attorney with no ties to the city also was optimistic, saying, “Bockman is a retired judge. Does he want to go to the golf course with his retired judge buddies and say, ‘Oh, by the way, I just ruled to destroy your pension plan?’ ”
The city contends it owes nothing because Memorial was leased to a nonprofit entity, and statutes governing withdrawal from PERA do not apply. But Bockman’s opinion appears not to leave the city much wiggle room.
“Under the city’s interpretation the employer would never owe anything as long as it was current in its payments as of the date of withdrawal from PERA,” Bockman wrote. “This interpretation … is inconsistent with the fundamental nature of a defined benefit plan.”
Did Council ask for independent analysis or rely upon the existing legal team for advice on whether to appeal? No such attorneys were in the executive session. Was Council’s decision influenced by politics, given that local governments have long chafed under PERA’s burdens and the difficulty of withdrawing from the system? Could winning in court pave the way for withdrawals by other city entities?
We don’t know — but the risk/reward ratio doesn’t appear to favor the city.