In May 2010, Grand Rapids Voters bailed out City Hall by approving a city income tax increase of $7.5 million per year for 5 years. Voters were told by city officials that the money was needed to prevent fire and police layoffs and to give the City Manager time to “turn the ship around.”
City leaders are currently diverting over $5 million a year of this money to a “transformation” fund that pays the health care claims of public employees who retire before age 65. Why? Because the City provided a rich benefit that it failed to fund. These retiree health care claims cost the City $10,979,788 in 2010 and $9,400,197 as of November 7, 2010. (Source: Scott Buhrer, City CFO, November 7, 2010)
The unfunded liability for early retiree health care is $222 million that will likely cause the City serious financial difficulty for the next 35-40 years.