Reveal. Decision frozen November 1, 2016. Outcomes from records dated May 31, 2017 and July 25, 2017.
On November 1, 2016 the newest audited record showed members' DROP accounts at $1,516,615,000 and cash plus short-term investments at $107,059,073, both at December 31, 2015. The later report says members withdrew more than $600,000,000 in DROP lump sums during 2016. Below, the left column holds only what the July 21, 2016 report published; the right column holds what the 2017 report and the enacted bill establish.
Yes. Before any further outflow surge, protect a liquidity reserve and adopt an orderly sale policy for real estate and private equity now.
Frozen in analysis.json from DP15 report, issued .
Unit conversion for the original DROP table: DP15 printed p. 44 states "table units: thousands", so each entry is multiplied by 1,000. As printed, the combined plan's year-end balance reads $ 1,505,721 (thousands) and the supplemental plan's $ 10,894 (thousands); in dollars they are $1,505,721,000 and $10,894,000. Distributions print as (111,802) and (773) (thousands), meaning outflows of $111,802,000 and $773,000. Later-report amounts printed in millions or billions are written out in full dollars here.
Knowable by Nov. 1, 2016
Combined plan $1,505,721,000 plus supplemental plan $10,894,000 equals $1,516,615,000 at December 31, 2015. The MD&A rounds the total to $1,520,000,000.
DP15 report, pp. 20, 44, issued
Established later
Total DROP balances were $1,540,000,000 at July 31, 2016, "prior to the increase in DROP withdrawals", about 58% of total Plan assets. The date is before the cutoff, but the figure was first published in 2017.
DP16 report, p. 4, issued
Knowable by Nov. 1, 2016
2015 DROP table distributions totaled $112,575,000. The MD&A said increased withdrawals were only "presumed" to reflect anticipation of amendments. No 2016 withdrawal figure had been published.
DP15 report, pp. 20, 44, issued
Established later
Members withdrew more than $600,000,000 in DROP lump sums during 2016, mostly in the latter half, against $81,000,000 in 2015 and $56,000,000 in 2014. The report links this to uncertainty over plan amendments, doubts about the city's commitment and press attention. The 2015 lump-sum figure is a narrower measure than the left column's table total; the excerpts do not itemize the $31,575,000 difference.
Passage open below
DP16 report, p. 4, issued
Knowable by Nov. 1, 2016
Net position fell $396,000,000 in 2015, "driven primarily by declines in real estate and private equity investments".
DP15 report, p. 4, issued
Established later
Net position fell $531,000,000 in 2016, "primarily as the result of payments of lump sum amounts" from DROP, so the report does not blame asset losses alone. Seven property sales cut the real assets portfolio by $58,000,000, a change in reported value rather than cash.
DP16 report, pp. 4, 16 to 17, issued
Knowable by Nov. 1, 2016
Cash and cash equivalents plus short-term investments were $107,059,073 at December 31, 2015. The adopted cash target was 2%. No later cash balance was published.
DP15 report, pp. 24, 49, issued
Established later
Withdrawals "created substantial liquidity strains" and "caused debt compliance issues"; equity and fixed income were sold to meet them. Cash stood at 14.1% against a 2% target at December 31, 2016, which the report ties to sale-closing timing and the December halt, not to restored health.
Passage open below
DP16 report, pp. 5, 6, issued
Knowable by Nov. 1, 2016
Real estate was 23.48% of the portfolio at December 31, 2015, against a 12% target adopted in 2016. No sale schedule, buyer evidence or sale price was published.
DP15 report, p. 6, issued
Established later
Real estate was 25.7% at December 31, 2016, against a 12% target, because liquid assets were sold to meet DROP demands. Seven wholly-owned properties sold during 2016 provided proceeds of $57,000,000. No per-property price or realized capitalization rate is given.
DP16 report, pp. 6, 16 to 17, issued
Knowable by Nov. 1, 2016
No fund-sale plan appears in the report. The frozen call proposed an orderly, competitively bid schedule toward the adopted targets.
DP15 report, pp. 6, 49, issued
Established later
In December 2016 the board approved selling 26 fund investments, with total proceeds of about $246,000,000. Only $133,000,000 came in before year-end; $113,000,000 followed in 2017. Unfunded commitments fell about $130,000,000 per the transmittal letter, but $53,000,000 plus $54,000,000 per the MD&A; the $23,000,000 gap is not reconciled in the excerpts.
DP16 report, pp. 6, 16 to 17, issued
Knowable by Nov. 1, 2016
"Upon retirement with DPFP, the member is able to withdraw amounts from their DROP account." The frozen call claimed no power to stop distributions.
DP15 report, p. 28, issued
Established later
The board temporarily halted DROP lump-sum withdrawals in December 2016 and in January 2017 passed a policy on how and when balances could be distributed. These are board actions, not statute; the excerpts do not state the legal basis for the halt.
DP16 report, p. 6, issued
Knowable by Nov. 1, 2016
No statute restricting DROP distributions appears in the report.
DP15 report, issued
Established later
HB 3158 restricts certain DROP distributions, subject to exceptions. The legislative summary:
"House Bill 3158, effective September 1, 2017, prohibits certain distributions out of a DROP participant's DROP account, subject to certain exceptions, and provides for the bill's severability and effective date."
The enrolled text, Section 6.14(e-3), says the board "may by rule" allow a retired participant to:
"(2) subject to Subsection (e-4) of this section, in the event of a financial hardship that was not reasonably foreseeable obtain a lump-sum distribution from the participant's DROP account resulting in a corresponding reduction in the total number or in the amount of annuity payments."
So a hardship lump sum stays possible where board rules allow it. The 2016 report's shorter line, "HB 3158 does not allow DROP balances to be distributed in response to lump sum requests," describes ordinary requests and should be read with that exception. The summary also says the bill "takes effect May 31, 2017" except as otherwise provided; this page does not resolve which provision takes effect on which date.
TX17 enrolled bill and TX17S bill summary, dated
Passage closed. Opening it marks the two rows it supports and the 2016 bar in the chart.Passage open. The rows it supports and the 2016 bar are now marked.
"The Plans’ net position decreased by $531 million in 2016 primarily as the result of payments of lump sum amounts from Deferred Retirement Option Plan (DROP) balances in the latter half of the year. With uncertainty surrounding the impact of potential plan amendments, fueled by lack of assurance of the City of Dallas’s commitment to participate in a solvency resolution, and fed by negative attention in the press, members withdrew over $600 million in lump sum payments from their DROP balances during 2016 compared to only $81 million and $56 million in 2015 and 2014, respectively."
"The vast increase in DROP distributions created substantial liquidity strains for the portfolio and caused debt compliance issues. In order to meet the liquidity demands created by DROP withdrawals, equity and fixed income sales ensued. In addition, private equity holdings were sold to move the actual portfolio holding closer to the asset class policy levels."
"The timing of closing certain secondary sale transactions and the halt of lump sum DROP balance withdrawals in December resulted in excess cash (14.1% actual compared to 2% target) at December 31, 2016."
Quoted from the DP16 report, pp. 4 to 6, issued . Source units are millions as printed; the rows above state them in full dollars.
Not claimed here: any realized property capitalization rate, any final sale price, the exact cash on hand in November 2016, any assurance that the system is funded after the reform, or the motive of any named person.
| ID | Document | Date | Column | Link |
|---|---|---|---|---|
| DP15 | 2015 annual financial report, Dallas Police and Fire Pension System | Knowable | DP15 report | |
| DP16 | 2016 annual financial report, Dallas Police and Fire Pension System | Later | DP16 report | |
| TX17 | HB 3158 enrolled bill, Texas Legislature | Later | TX17 enrolled bill | |
| TX17S | HB 3158 enrolled bill summary, Texas Legislature | Later | TX17S bill summary |