continued Interestingly, one filing indicates that the city's wastewater system stopped the underfunding strategy in the middle of last year and is now funding its pension program in accordance with actuarial requirements. Several questions are obvious, but one stands out: was the city edging into honest funding because Wall Street was looking over its shoulders?
The city has an insurance benefit account for health benefits. It admits that if there are no further contributions to the account, it will be exhausted by the middle of next year.
Time and again in its January 27 filings, the city refers to "errors" made in previous prospectuses. Verily, if these can be defined as "errors," then "murder" can be defined as "overzealous application of zero population growth beliefs."
"Some of the errors are small things, and some are large things," says Shipione. "They suggest intentional perversion of the truth."
So what were some of the purported "errors"? Well, they include such things as misstating the actuary's position on underfunding; understating the net pension obligation by using a longer amortization period; incorrectly stating such things as interest rates, bond maturities, interest payable on bonds, and the amount of a line of credit; and violating conventional accounting standards.
The city admits it understated the total amount payable on operating leases for a 24-year period by $127.2 million.
Hardly surprisingly, "Most of the errors are in favor of inflating the assets and diminishing the liabilities," notes Shipione. "It is not comforting to look at a financial statement and see this level of problems. People say, 'How can we trust anything they say?' "
Throughout the documents, the city sheepishly admits to making a purported "error," and then adds, "Bah, humbug." The words, "This did not affect the actual financial statements, as such," are ubiquitous.
For example, the city admits to a net overstatement on prospective interest income of $26.2 million. But it "did not affect the financial statements, as such." Hmmm. The $127.2 million understatement of amount payable on operating leases (of which the general fund has responsibility for $72 million) "did not affect the financial statements, as such." Oh?
I confess I can't figure why these sums do not affect the financial statements. Maybe the "as such" verbiage is a hedge. I have consulted others, and they scratch their heads, too. The city's disingenuousness on its pension crisis requires the convening of a special grand jury.
Alas, my attempt to reach the city for explanation was, as usual, in vain.