WHEREAS, the Dallas Police & Fire Pension System (“Pension System”) is projected to run out

of money to pay monthly pension payments, including those that are constitutionally protected,
in about ten years, and that its unfunded liability is currently about $3.5 billion;

WHEREAS, in 2005, the Pension System approved a plan amendment to give new members an
ad-hoc cost of living adjustment (“COLA”) instead of a guaranteed 4% COLA, but that such
amendment was not enough to eliminate the Pension System’s unfunded liability;

WHEREAS, in 2011, the Pension System approved a plan amendment to create a lower tier of
benefits for members hired after March 1, 2011, and made other changes amounting to
approximately $50 million in savings, according to the Pension System, but was again not
enough to eliminate the Pension System’s growing unfunded liability;

WHEREAS, in 2014, the Pension System amended the plan yet again, this time to reduce interest
credited to the Deferred Retirement Option Plan (“DROP”) accounts and to simultaneously
reduce the DROP participants’ contributions from 8.5% to 4%, and while saving approximately
$185 million, according to the Pension System, that savings was still not enough to eliminate the
Pension System’s still-growing unfunded liability;

WHEREAS, in 2016, the Pension System announced further plan changes to reduce the Pension
System’s costs, including changes to the DROP accounts, but without limiting lump-sum
distributions in the DROP policy, which combination caused a “run on the bank,” which
exacerbated the Pension System’s funding situation and catalyzed numerous lawsuits against the
Pension System;

WHEREAS, the 2016 proposed changes would not have eliminated the Pension System’s
unfunded liability and would have been yet another temporary fix to the problem; regardless, the
Pension System members voted against the changes;

WHEREAS, the Pension System is governed by a state statute that can only be changed by the
Pension System members or the Legislature, and the City has been in frequent negotiations with
all parties to come to a legislative solution that will provide its past, present, and future first
responders and their families with a secure and stable retirement;

WHEREAS, in addition to trying to permanently fix the Pension System, the City is defending
itself in numerous lawsuits related to a decades-old pay referendum, and that any solution to the
Pension System must also address the pay referendum lawsuits;

WHEREAS, the Pension System’s financial situation threatens the City’s abilities to recruit and
retain sworn personnel for the City’s police and fire-rescue departments and could create a public
safety crisis; for example, current police staffing is down to 2.5 police officers per 1,000
residents, below the City Council’s stated goal of 3 police officers per 1,000 residents, a shortage
of over 600 police officers;

WHEREAS, current options to address the Pension System’s unfunded liability include: (1) for
the City to do nothing and maintain its current contribution rate into the Pension System, which

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would leave retirees without a pension in as few as ten years and is therefore unacceptable to the
City; (2) paying all of the City’s bonding capacity into the Pension System, which will leave no
money for streets, libraries, and other essential City services, and as such, is also unacceptable to
the City; (3) raising property taxes, which are already a substantial burden on many Dallas
residents, and which have already helped pay the City’s contribution to the Pension System
every year, without fail; (4) raising sales tax, but the City is already at its maximum rate; (5)
recouping or prospectively adjusting payments that are not constitutionally protected; (6) placing
the burden of the Pension System’s liabilities on the backs of new hires through reduced benefits
and higher employee contribution rates; (7) annuitizing current DROP participants’ accounts
over their lifetimes; and (8) redirecting a fraction of the one-penny in sales tax revenue currently
sent to DART back to the City, for the City to spend on public safety;

WHEREAS, the options above are all premised on the Pension System’s current assumed rate of
return on investments, also known as a discount rate, of 7.25%, which is significantly higher than
what national pension experts recommend;

WHEREAS, State Representative Dan Flynn, Chairman of the Texas House Pensions
Committee, has proposed a “Compromise Plan,” one that shares the sacrifice, incorporates some
of the options listed above, and which primary features include: (1) the City contributing an
additional $22 million annually, on top of its current contribution; (2) increasing employee
contributions to 13.5% of pay; (3) eliminating COLA for all participants and beneficiaries; (4)
increasing the normal retirement age to 58 for all members; (5) providing a multiplier of 2.5%
for all members; (6) annuitizing current DROP participants’ accounts over their lifetimes; (7)
providing DROP participants with interest, for a limited time, based on a Treasury rate, as those
accounts exist on September 1, 2017; and (8) fully funding the Pension System in about 43 years
but providing that the Board shall consider rules to recoup or prospectively adjust payments that
are not constitutionally protected;

WHEREAS, the Compromise Plan is a good start except that it still relies on a discount rate of
7.25%, which pension experts have agreed is unrealistic and too high, and that the Compromise
Plan’s 43-year amortization period is well beyond the 15-25-year periods the State Pension
Review Board recommends; and, as such, the Compromise Plan would be just another temporary
fix;

WHEREAS, to make the Compromise Plan a permanent fix for the Pension System, it is
necessary to lower the discount rate to a more realistic rate of return and amortize the unfunded
liability in fewer than 43 years;

WHEREAS, for the Compromise Plan to fully fund the Pension System in 30 years, a period
consistent with what City staff has proposed, the Pension System will need approximately $450
million in additional revenue at the unrealistic discount rate of 7.25%;

WHEREAS, the only remaining viable revenue source from the City is to divert a fraction of the
one-penny in sales tax revenue currently sent to DART back to the City, for the City to spend on
public safety;

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WHEREAS, a 1/8 of one penny in sales tax revenue could fill the gap in the Compromise Plan,
thereby providing a permanent fix for the Pension System and averting a public safety crisis;
Now, Therefore,

BE IT RESOLVED BY THE CITY COUNCIL OF THE CITY OF DALLAS:

SECTION 1. That, in order to permanently fix the Pension System, the City supports the
Compromise Plan if it includes passage of a voter referendum redirecting 1/8 of one penny of
sales tax revenue from DART to the City, in a phased-in approach and consistent with existing
DART bond covenants, to be used for public safety, as described below.

SECTION 2. That, if approved, revenues from the DART referendum shall be directed into a
public safety fund administered by the City, and money from that fund will be used, in order of
preference, to: (1) appropriate money to the Pension System to the extent necessary to reduce the
discount rate from 7.25% to no more than 5%, as actuarially recommended, and in order to get
the Fund to a closed 30-year amortization period; and (2) increase salaries for sworn personnel of
the City’s police and fire-rescue departments, especially new sworn personnel hired on or after
March 1, 2011.

SECTION 3. That the DART referendum shall be considered at the November 2017 election.

SECTION 4. That the Compromise Plan legislation shall also provide the City with sovereign
immunity related to the ongoing pay referendum lawsuits.

SECTION 5. That the Compromise Plan legislation shall include the DART referendum.

SECTION 6. That this resolution shall take effect immediately upon its passage in accordance
with the Charter of the City of Dallas and it is accordingly so resolved.

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