KHOU's Greenblatt continues scrutiny of Hilton Americas/pension fund finances
KHOU-11's Mark Greenblatt is continuing his reporting on the pension fund shortfall and related Hilton Americas accounting.
Yesterday, Greenblatt described the refinancing proposal that was discussed in a budget hearing:
The problem started when Houston tried to use the Hilton Americas Hotel to reduce some of the debt it owed to pension plans by handing over a promissory note. The note promised that the city would eventually pay $300 million to the pension fund.
The $300 million was supposed to come from the sale of the convention center hotel. But the city has not found a buyer yet, which means it still owes the debt.
“I called it an accounting sleight of hand,” said City Controller Annise Parker.
Parker said she warned city leaders years ago not to do the deal. However, the promissory note is not the only thing she doesn’t like.
Parker doesn’t like the huge interest rate that the city agreed to pay on the $300 million loan.
“We have been deferring the interest on those payments. So you do not have just the 8.5 percent, but the interest on the interest,” said Parker.
Greenblatt had difficulty getting any sort of substantive response from Mayor White's staff on the matter.
Today, Mayor White defended the financial arrangement:
“I want to assure Houston employees that their pensions are secure. And I want the taxpayers to know that these debts are all affordable,” said Mayor White.
[snip]
“We have borrowed money to make some of the pension payments. And that's because the pension payments are a long term obligation,” said the mayor, when asked if this is the right thing to do.
Local accountant Bob Lemer is unconvinced:
“When you cut through all the fluff, all the Mayor did was take an existing debt and shove it into the future,” said Bob Lemer, retired partner from Houston’s Ernst and Young. “It’s beyond me why they are turning their head to this.”
It seems fairly simple, actually. Most politicians prefer to defer painful decisions if at all possible. Shrinking that unfunded liability in the pension plan significantly would have required either upsetting municipal workers by going after promised benefits, dedicating much larger contributions to the pension fund (most likely funded by a tax increase), or some combination of the two. Painful! Therefore, the problem gets some band-aids and future pols will get to revisit the issue.
But hey, we'll have a Tolerance Bridge at least!
UPDATE: Carolyn Feibel reports some better news re: the hotel and pension fund (which still has a huge unfunded liability, but not quite as huge).
Posted by Kevin Whited @ 12/03/08 11:14 PM | Houston Miscellany | Technorati | Sphere | Comments (25)
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