Association hopes to preserve retirement benefits trust that includes Florence

By Charles Tomlinson
Lake City News & Post Editor
Published: September 7, 2008

The Municipal Association of South Carolina will ask the state’s high court to hold another hearing on its order to dissolve a post-retirement benefits trust that Florence joined earlier this year.

The S.C. Supreme Court made its ruling in response to a friendly lawsuit to determine whether the S.C. Other Retirement Benefits Trust, known as SC ORBIT, could invest in equities as well as government-backed securities.

The court ruled investing in equities would be unconstitutional for the trust and said the trust must be broken up.

Equities are riskier but should yield a higher return on an investment, said Florence City Manager David Williams, who serves as board chairman of the trust.

Funding such retirement benefits was one reason Florence City Council voted earlier this year to increase franchise fees for cable television, natural gas and electricity companies serving the city. The fees, which are passed on to customers, rose from 3 percent of gross receipts collected by the cable, gas and electricity companies to 5 percent of those collections.

The association accepts the first part of the court’s ruling, but decided Aug. 28 to ask within a matter of days for a rehearing on the opinion that the trust must be dissolved.

The second part of the ruling was unexpected, Williams said.

“There’s still time to take a different avenue depending on how this thing turns out,” he said.

If the trust is dissolved, it could be replaced with another trust or entity charged with investing the funds, Williams said.

The city has invested no money in the trust yet, he said.

The trust itself has never invested in equities and had agreed not to unless a Supreme Court ruling or state constitutional amendment allowed such investing, said Howard Duvall, executive director of the municipal association.

The trust was established in May 2007 to help cities and towns comply with GASB 45, a new standard set by the Government Accounting Standards Board to account for “other retiree benefits,” such as health insurance.

The standard requires a government to report a liability to account for its retirement benefits or contribute annually to an irrevocable trust.

The trust aims to give local governments a way to avoid growing liabilities that can hurt governments’ abilities to borrow money by damaging their bond ratings, according to the municipal association.

The November ballot in South Carolina, however, will feature questions on whether the state and local governments can invest in equities, Duvall and Williams said.

Voters in 2006 gave their approval for the South Carolina Retirement System to invest in equities.

Florence is one of 11 members that already have joined the trust, with at least 40 other governmental bodies undergoing an actuarial evaluation or developing a resolution to join, Duvall said.

The other members are Charleston, the Charleston Water System, the North Charleston Sewer District, Winnsboro, Easley Combined Utilities, Mount Pleasant Water Works, Rock Hill, Clinton, Sumter and Greenville, he said.