BATH — The Bath City Council on Wednesday will consider revising its policies that would allow the city to withdraw nearly $9 million in surplus funds from the Maine Public Employees Retirement System and invest the money.
The revised policy, if approved, would keep the principal intact while allowing the city to withdraw and spend the interest earned, Bath Finance Director Juli Millett said Monday.
The surplus accrued as a result of city government overpayments to the state retirement fund over nearly two decades, from the late 1970s until the mid 1990s. The account grew and compounded with interest over the years, and became orphaned in 1996 when the state changed to a consolidated retirement system.
In 2010, federal Internal Revenue Service officials ordered the state to offer the money left in the stranded funds back to municipalities, changing course from a nearly 40-year-old state policy that kept the accounts off limits to cities and towns that contributed to them.
No active employee retirement accounts remain associated with the $8.8 million surplus, and the overpayments were entirely made by municipal government, not city employees as part of their contributions to the retirement plan.
The IRS ruled that cities can leave the money in the state retirement system or take it back and manage it locally.
At a workshop in February 2011, City Manager Bill Giroux and financial adviser Joe Cuetara, of the Bostonbased Moors & Cabot Investments, recommended the council reclaim the funds and invest them, using only the interest generated each year to cover annual retirement fund obligations and save for future capital projects.
On Monday, Giroux said that the current proposal would follow that same recommendation.
The proposed revisions were vetted by the council’s Finance Committee — Councilors Meadow Rue Merrill, Andy Winglass and Bernie Wyman — and include the creation of an investment committee and guidelines for investing and spending the interest earned on that principal, according to Millett.
Also on Wednesday, the council will address the following agenda items:
— Consider second passage of a proposed ordinance that would exempt active members of the military from excise taxes.
— Presentation of a proclamation to the Morse High School debate team.
— Consider first passage of a proposed ordinance change to parking for disabled people on Front Street.
— Consider approving an order exercising the alewife fishing rights at Winnegance Lake to be administered by the Winnegance Alewife Commission as per the harvest plan.
— Consider approving an order exercising the alewife fishing rights at Whiskeag Creek to “rod and line.”
— Hear a report from Giroux.
— Hear an update on Bike and Pedestrian Committee activities.
— Consider appointing one member to the Bath Housing Authority board of directors for a five-year term.
Following the regular meeting, the council will hold an executive session to discuss personnel matters and discuss real estate.
The council will meet at 6 p.m. Wednesday at City Hall.
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