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Day of Reckoning for Richard Tettamant

As I first told you (must credit FrontBurner!), today is the day that Richard Tettamant almost certainly parts ways with the Dallas Police and Fire Pension System. Don’t feel bad for him. He’s had a good, long, two-decade run at the top of the pension system. In 2012, he made about $373,000. And his own personal pension will provide him enough money in retirement that he’ll never spend much time on the Power to Choose site, worrying over electricity prices. Tettamant will be comfortable into his old age.

Now, the 9,000 or so firefighters and cops whose retirements depend on Tettamant’s stewardship of their money — well, we’ll see how the fund’s risky real estate investments shake out in the coming years. This might be a preview of things to come. In 2006, out in Pima County, Arizona, the pension bought 286 acres for $27 million. Never mind that just a year prior to that sale, the land had changed hands for just $3.3 million. The pension had big plans for the dirt, and it must have figured the investment would pay off. It won’t. After a lot of wrangling, the Arizona Daily Star reports today, it now appears the pension will sell the land to the county for $7.5 million, taking a nearly $20 million loss.

What valuation did the pension books reflect for the Pima County land? Was it the purchase price or something closer to the real market value? Apply those questions to all the pension’s real estate — which accounts for half of the value of the fund — and you get an idea of the sort of ugliness that might emerge in Tettamant’s wake.

UPDATE (12:24): Tettamant was voted out this morning.

  • Wylie H Dallas

    It’s rare that I say I told you so…. but I’ve been predicting this disaster for the last several years. I take no joy in this news…. it is my personal belief that, at the end of the day, we may find that the pension fund’s mismanagement may have cost taxpayers and first responders nearly $1 BILLION.

  • columbiasooner

    286 acres for $27 million isn’t bad for oceanfront property in Arizona.

  • Abby Nonymous

    Can someone tell me what’s wrong with investing in an S&P 500 index fund, other than you can’t renrich your cronies with it? Did I just answer my own question?

  • Glenn Hunter

    No doubt Tettamant was rigid in his ways and lousy at PR, but these Chicken Little charges about the fund verging on blowing up over “risky” investments seem way overdone. In April Pensions & Investments reported that over the 20 years ended September 2013, the Dallas police and fire system was the second-best performing public fund in Texas, with an annualized return of 9%. In 2013 P&I reported the Dallas fund had an annualized 30-year return of 10.1%. Reuters says 8% has been typical for big funds over the last couple of decades. The Dallas fund has had its problems post-Great Recession, but so has just about every public fund in the country. For the five years before 2012, Reuters says, average big-fund returns were 3.2%. For the year ended June 30 2012, CalPERS returned just 1%–way below its 7.5% target. I don’t think Tettamant’s ouster indicates the police and fire fund is on the brink of “disaster”; more likely he was booted by cops and firemen angry about further changes in their DROP program–the same thing’s happening all over the country–with no small amount of aid and comfort from people still ticked at the guy over Museum Tower.

  • Avg. White from the PC

    You’re right, Glenn. The pension fund and journalists should have spent more time digging into how these deals transpired and who received sweetheart real estate deals as a result of these investments. THEN, they should fire him, which wouldn’t be hard.

    On the other hand, Tettament’s dismisal now is more convenient because it might take some heat off the bold face names in Dallas who may or may not have benefited from his investment choices.

  • Edward

    But are those returns based on the possibly unrealistic numbers they have been providing – $$$ based on what they invested and not the actual worth?

  • Wylie H Dallas

    The fund did pretty decent until sometime after 2000. However, once they made the deep dive into direct private equity and real estate, everything went off the rails.

    I wouldn’t trust any of the fund’s reported performance figures over the last 5 years. Let’s talk again in a year, after the smoke has cleared and we can get a real sense of what Tettamant & Tomasovic did with the fund’s money over the last several years.

  • Wylie H Dallas

    You did…. Plus, you don’t get the opportunity to play king-maker and travel the world in style if you just invest in the index.