By MELINDA WILLIAMS
In an effort to offset unfunded Virginia Retirement System liabilities that increased by almost $150,000 in a year’s time, Pepper’s Ferry Regional Wastewater Treatment Authority has created a restricted bank account that will be used to fund those liabilities.
According to Authority Executive Director Clarke Wallcraft, VRS is funding the state retirement system to a 65-70 percent confidence level. As a result, Pepper’s Ferry and “the vast majority of local governments have unfunded liabilities related to their retirement plans.”
As of June 30, 2012 VRS was reporting Pepper’s Ferry’s unfunded liabilities at $841,442 – a $147,750 increase over its liabilities on June 30, 2011. Wallcraft said the Governmental Accounting Standards Board (GASB) is now requiring local governments to show their unfunded VRS liability on their balance sheet, so the reserve account will partially offset the unfunded liabilities.
Wallcraft said the Authority’s board of directors authorized him to establish the account with $100,000 deposited from the Authority’s operational checking account. An additional $100.000 will be transferred to the account, in monthly installments of $8,333, during the current fiscal year so that the account balance stands at $200,000 plus accrued interest by the end of the fiscal year (June 30, 2014).
“It is anticipated that future budgets will contain additional funding to reduce the unfunded liability for the retirement plan,” said Wallcraft. The board of directors will determine those amounts during development of each annual budget.
Wallcraft told the board that proceeding in this fashion is “sound financial planning that builds on an already outstanding financial position, and will result in the Authority having full financial disclosure on the financial balance sheet.”
He noted the board of directors “has already assumed the strong financial position of improving and replacing capital assets on a pay-as-you-go basis, while simultaneously paying down the existing long-term debt of the Authority.” All of the Authority’s current long-term debt will be retired by 2024.
Development of the reserved VRS unfunded liability account will “only bolster the financial path laid out by the Board. Further, the Authority’s auditor agrees that offsetting the retirement liability in this manner is sound financial management,” he told board members.
According to Wallcraft, the Authority’s net income for the 2012-13 fiscal year, as of May 31, was $780,953 and its “cash position” was $220,000 above budget estimates.