Macon-Bibb County Mayor Robert Reichert has vetoed an attempt to rebid the job of investment consultant for the Macon-Bibb pension plan, his first veto since the January 2014 creation of the joint city-county government.
Reichert signed the veto Thursday, just two days after commissioners voted 7-2 to reopen the bidding process. Commissioners Mallory Jones and Scotty Shepherd cast the only votes against rebidding the contract.
Independent Portfolio Consultants of Boca Raton, Florida, was hired to oversee the pension plan’s investments in September 2014. In a first-quarter report given last week, IPC representatives said the value of the plan’s holdings has risen by more than $4 million to $115 million in six months.
But commissioners, led by Gary Bechtel and Larry Schlesinger, acted on the assertion that IPC’s hiring was influenced by County Manager Dale Walker’s past professional acquaintance with one of the firm’s executives.
“If Gary Bechtel, who’s chairman of the Operations & Finance Committee; and I, who are two of the most consistently supportive members of the commission -- supportive of the mayor -- are waving a red flag, there really has to be something substantial in there,” Schlesinger said Friday.
Cheryl Underwood, senior consultant for IPC, was a benefit adviser for the Municipal Employees’ Retirement System of Michigan from 2004 to 2007, while Walker was chairman of that organization’s board.
At this past Tuesday’s meeting, County Attorney Judd Drake told commissioners that “just knowing the person” is not a legitimate bar to later hiring someone.
Reichert’s veto includes four justifications, firmly backing Walker and IPC. Reichert said:
Commissioners voting to rebid the contract cuts the employees and retirees of the pension plan out of the decision-making process.
There is no sufficient reason to go back through the request for proposals process with the commitment of time and expense. Additionally, the performance of the current investment consultant is exceptional.
The negative impression created by reissuing the request for proposals so soon after the last one sends the wrong signal, not only to our current financial consultant, but to the financial market in general.
It’s necessary to support the county manager, and Reichert said he has found that Walker took no inappropriate action during the selection process. Reissuing the request for proposals implies that Walker took inappropriate action. Reichert called that “unacceptable and unfair innuendo.”
Macon-Bibb spokesman Chris Floore said rebidding the pension consultant job could cost from $2 million to $10 million per pension fund.
“It’s an estimate based on the size of the funds and what is happening in the market,” Floore said by email.
Macon-Bibb has sought and received upgrades on the former city’s bond rating, and confirmation of the former county’s quality, with rating agencies citing solid financial planning and relatively well-funded pension plans.
Schlesinger said commissioners only learned of Walker’s prior connection to Underwood after IPC’s selection, so commissioners want a chance “to make sure we got it right the first time around.”
“Not everything was ethically disclosed prior to the selection of IPC by the commission,” Schlesinger said. “I don’t think that the process was as transparent as it should have been.”
Macon-Bibb has three pension systems, and IPC has managed investments for all of them, but only the one for current city-county employees is managed by commissioners. The other two have their own boards, though two commissioners sit on each.
“Knowing what I know now, I don’t believe that all three pension boards really did their fiduciary responsibility, because none of the pension boards interviewed anyone other than IPC,” Schlesinger said.
Schlesinger said he thinks the administration intended to choose IPC even before bidding occurred.
IPC was hired in early 2014 to manage short-term investment of the government’s cash on hand, and reported increasing that return fourfold, to $109,000, within the first six months.
In September 2014, commissioners approved a five-year contract for IPC as the pension plan’s investment consultant, but only did so by a one-vote margin. At the time, Bechtel wanted to hear more from the other six bidders, and Schlesinger tacked a 30-day termination clause onto the contract.
In March, commissioners held off on establishing a separate board for the active pension plan, leaving themselves in charge for the purpose of re-evaluating the choice of IPC. The Tuesday vote to seek a new round of bidding came after a long closed-door discussion.
Bechtel said he thinks the veto discussion and challenge will be handled fairly smoothly. He said he admires the ability of commissioners and the mayor to work together even in disputes, without affecting other issues, he said.
“It will come back up at I believe the May 5 commission meeting,” Bechtel said. “We’re working to try to override (the veto) and will hopefully have the votes to do so that night, because it’s important that we get this out with an RFP so the proper amount of due diligence will be done in choosing the investment (consultant).”
It takes six votes from the nine commissioners to override a mayoral veto. Reichert used his veto power a few times as mayor of Macon, but this is its first use since he became mayor of the consolidated government.
Schlesinger said there is a growing sentiment among commissioners that they’re too often “rubber stamping” administration proposals, and this is an opportunity to demonstrate their ability to develop their own ideas.
“I don’t know why anyone would, at this point, change their vote that they cast the other night,” he said.