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The Cookeville City Council will keep Cookeville Regional’s payment in lieu of taxes firm for the next seven years in exchange for an aggressive retirement repayment schedule.
Council approved the plan Thursday night with only Charles Womack voting against. The CRMC Board of Trustees must approve the plan. That board meets next week.
The council will ask the CRMC Board of Trustees to take over the retirement accounts of former Cookeville General employees. In addition, the city’s state retirement contribution would be reduced by 10.54 percent. The city would receive credit in its state account for the money it has overpaid during those 20 years. The city would also receive credits for the interest it could have made on some 20 years of contributions.
As Cookeville gets credit in its account, Cookeville Regional’s TCRS bill will increase.
“Paul (Korth) and the Board have been completely cooperative in this,” City Manager James Mills said. “For the last two years, we’ve worked hand-in-hand to try to get this resolved. He understands that this has happened. Nobody intended for it to happen, but now it’s been found. We all want to correct it.”
When the two entities separated in 1999, the 743 medical center employees moved off the city’s payroll and onto Cookeville Regional’s payroll. The state created new accounts for the employees under CRMC. It did not, however, move over the city-portion of the employee’s records. That means the city has paid the retirement contributions based on the pre-1999 employment, not CRMC.
Mills submitted the actuary study to council members this week. It was commissioned by the city last month. It sought to figure out just how much more Cookeville has paid into the Tennessee Consolidated Retirement System (TCRS) than it should have. Mills said the city pays about 21 percent of an employee’s salary into TCRS.
Two other repayment options were presented in the study. The first would have reduced the city’s contribution rate to 3.2 percent. The second option would have reduced the rate by 7.44 percent and would have given the city credit for what it has paid over the last 20 years. The options gave the city latitude to decide how it wanted to impact the medical center budget.
The change would not go into effect until the 2022-2023 fiscal year. However, the state required the city and CRMC’s Board of Trustees to approve the plan by June 30. If not, the plan would not go into effect until 2023-2024.
Cookeville Regional paid the city $800,000 this year and will do so again next year for the payments the city made for CRMC employees this year and next. Mills said those two years were not included in the actuary study.
Council Member Eric Walker has said repeatedly during the budget process that the payment in lieu of taxes needed to be reevaluated to see if CRMC could do more financially for the city. Last night, he said the medical center’s willingness to help the city recoup the retirement money showed cooperation.
“It has been a huge burden on the city to have to take on paying for this for so long and I think that that’s something that we can work with,” Walker said. “I completely understand that it’s very important for the hospital to be able to afford something like this and not have additional unknown expenses in the future.”
Council Member Mark Miller proposed the seven-year window for holding the payment in lieu of taxes steady. Currently, the city gets $700,000 from CRMC, a number that has not changed for 17 years.
“I do want to give my commitment to the hospital board because this would be an extreme scenario, three would be extremely generous to the city,” Miller said. “So I think, in my opinion, a long term solution is probably best if I can know we’re going to pin a lot of this was nobody’s fault at all. But at the end of the day, the city has been paying essentially for hospital employees. We are correcting it now and we have the opportunity to correct it for the city.”
Walker said he thought the seven-year time frame was too long, tying the hands of future councils.
The council also asked attorney Dan Rader to consider whether the council could enter into a contract with Cookeville Regional to set the payment in lieu.
