DALLAS - Houston is suing operators of the city firefighters' $3.5 billion pension fund in an effort to limit contributions to the retirement plan covering about 3,700 active firefighters and 2,900 retirees or survivors.
Mayor Annise Parker called the current plan is financially unsustainable.
Houston's employee pension funds are underfunded by $2.6 billion, according to Standard & Poor's.
The city negotiated a cap on city contributions to two other employee pension funds in 2004 but was unable to adjust the Houston Firefighters' Relief and Retirement Fund because a 1997 state law limits local control of the fund. The city's lawsuit claims that the state law is unconstitutional.
"Our desire is to force the parties to the table so we can begin the process of negotiating," Parker said in announcing the suit.
Bryan Sky-Eagle, president of the Houston Professional Firefighters Association, called the lawsuit a "nuclear bomb" because it came five days after the beginning of collective bargaining.
"They're not just trying to reduce contributions, they're trying to blow up the state law," Sky-Eagle said. The firefighters union is not directly involved in the lawsuit, but Sky-Eagle said the action has a negative impact on negotiations.
The HFRRF was created by state statute and has been administered by its board of trustees since its founding in 1937. HFRRF has grown by $1.5 billion to $3.5 billion over the last decade, according to officials with the fund. About 75% of that growth came from investment returns, 18% from city contributions and 7% from firefighter contributions, HFRRF said.
The city filed a previous lawsuit in May 2012 to obtain data behind the $61 million annual bill from the pension fund.
Through the 2004 negotiations, the city was able to limit rising contributions to the Houston Police Officers Pension System and the Houston Municipal Employee Pension System.
The plans have a combined 78% funded ratio and an unfunded liability of $2.6 billion, according to Standard & Poor's, which rates the city AA with a stable outlook. The other post-employment benefits (OPEB) unfunded liability is $2 billion, according to S&P.