After more than ten months of negotiation and discussion, City Council voted 16-1 on Wednesday to pass a resolution of support for specified reforms of the three pension systems which are established to ensure a dignified, assured, and reasonable retirement for municipal, police, and firefighter employees. This process and these reforms were communicated transparently and repeatedly to council members, outside interest groups, the press and others.
For the first time since 2001, each of the three systems agreed to concessions and adjustments that displayed commitment to shared sacrifice for the benefit of our community. As the number one challenge facing our city, we commend our employees for agreeing to these reforms that will promote the financial health of their retirement systems and the city. These reforms can serve as a national model for other cities facing similar challenges.
For the past 15 years, the pensions for city retirees became unsustainable, and suffered chronic under-funding by the city, and pension debt grew to nearly $8 billion. Inaction or delay was no longer an option.
he reforms commit the city to making full annual payments, eliminate the pension debt after 30 years, and observe a more realistic 7% rate of system returns. We agreed to the issuance of $1 billion in pension bonds that help make up for years of short payments by the city to police and municipal employees. This is not new debt, these were dollars already owed to the plans. The pension systems agreed to benefit changes that reduce what the city owes by $2.5 billion. This is significant. Retiree's checks won't get smaller, and reforms are structured so thousands of police and firefighters don't immediately take retirement. Our plan takes Houston's pension issue off the table. Finally, we accomplished this all without increasing sales or ad valorem taxes.
Independent pension experts and think tanks such as the Kinder Institute, the Arnold Foundation, the Greater Houston Partnership, and others have issued supportive statements about the terms and conditions of the reforms. We as committed fiscal conservatives on City Council are confident that these reform packages fulfill both reasonable assurances to City employees and ensure sustainability for taxpayers in the years ahead.
We are committed to serving our city on Council to support sound fiscal policies. Mayor Turner and talented members of his Administration accomplished this, and developed pension reforms that will balance our checkbook going forward, and guarantee honorable retirements to Police, Fire, and Municipal employees. We look forward to supporting the passage of legislation in Austin next year that will fulfill the terms of these agreements.