Taylor v. City of Gadsden (958 F. Supp. 2d 1287, 2013)

United States District Court for the Northern District of Alabama 2013-07-29

Citations

Full opinion text

memorandum: opinion AND ORDER

VIRGINIA EMERSON HOPKINS, District Judge.

Joe Taylor, Jeff Mayben, Lecil Harrelson, Jeff Morris, John A. Calvert, David Putman, and Derreck Sherrill are firefighters employed by the City of Gadsden (“the City”). They filed this putative class action lawsuit against the City and Gadsden Mayor, Sherman Guyton, in his official capacity. The complaint alleges that mandatory increases to their required pension contributions, imposed by a recent act of the Alabama Legislature, and resolutions of the City, violate Article I, section 10 of the U.S. Constitution and Section 22 of the Alabama Constitution. (Doc. 1, p. 1.)

This case comes before the court on the cross motions for summary judgment filed by the defendants (doc. 46) and the plaintiffs (doc. 48). Also before the court is the plaintiffs’ motion to strike certain evidence which was submitted in support of the defendants’ motion for summary judgment. (Doc. 56.) Finally, although not set out as separate motions to strike, each party has “denied” many factual statements offered by the other in support of the motions for summary judgment. Because most of these denials actually dispute the admissibility of the evidence offered in support of the fact, the court includes a section of this opinion treating those denials also as motions to strike.

For the reasons stated herein, the plaintiffs’ motion to strike will be GRANTED. The individual denials of facts will be ruled on as noted herein. Finally, the defendants’ motion for summary judgment will be GRANTED, and the plaintiffs’ motion for summary judgment will be DENIED.

I. STANDARDS

A. Motion to Strike

Federal Rule of Civil Procedure 12(f) provides that “[t]he court may strike from a pleading an insufficient defense or any redundant, immaterial, impertinent, or scandalous matter....” Fed.R.Civ.P. 12(f). A key limitation in Rule 12(f) is the phrase, “from a pleading.” Rule 7(a) lists the pleadings which are allowed in federal court. Fed.R.Civ.P. 7(a). This list does not include a party’s brief in support of a motion, nor does it include an affidavit or portions of a deposition. Therefore, the Rules do not allow the court to “strike” these documents.

At the same time, federal courts often treat a party’s motion to strike certain evidence as an objection to that evidence’s admissibility. See, e.g., Ross v. Corp. of Mercer Univ., 506 F.Supp.2d 1325, 1333-34 (M.D.Ga.2007). Such objections are significant in resolving a motion for summary judgment, because a district court may not consider evidence, at that juncture, which could not be reduced to an admissible form at trial. See Macuba v. Deboer, 193 F.3d 1316, 1323 (11th Cir. 1999).

Until 2010, Rule 56 lacked a formal procedure to challenge such inadmissible evidence. Then, the advisory committee added Rule 56(c)(2), which provides:

A party may object that the material cited to support or dispute a fact cannot be presented in a form that would be admissible in evidence.

Fed.R.Civ.P. 56(c)(2). Although the plaintiffs have filed a Motion to Strike, the motion challenges the admissibility of the affidavit, and portions of a deposition. Therefore, the court will treat the plaintiffs’ Motion to Strike as an objection under Rule 56(c)(2).

The advisory committee’s note to Rule 56(c)(2) provides that:

[An] objection [under Rule 56(c)(2) ] functions much as an objection at trial.... The burden is on the proponent to show that the material is admissible as presented or to explain the admissible form that is anticipated.

Fed.R.Civ.P. 56 advisory committee’s note to 2010 amendments (emphasis added).

B. Motion for Summary Judgment

Under Federal Rule of Civil Procedure 56, summary judgment is proper if there is no genuine dispute as to any material fact and the moving party is entitled to judgment as a matter of law. Fed.R.Civ.P. 56(a); see also Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) (“[S]ummary judgment is proper if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law.”) (internal quotation marks and citation omitted). The party requesting summary judgment always bears the initial responsibility of informing the court of the basis for its motion and identifying those portions of the pleadings or filings that it believes demonstrate the absence of a genuine issue of material fact. Celotex, 477 U.S. at 323, 106 S.Ct. 2548. Once the moving party has met its burden, Rule 56(e) requires the non-moving party to go beyond the pleadings in answering the movant. Id. at 324, 106 S.Ct. 2548. By its own affidavits — or by the depositions, answers to interrogatories, and admissions on file — it must designate specific facts showing that there is a genuine issue for trial. Id.

The underlying substantive law identifies which facts are material and which are irrelevant. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986). All reasonable doubts about the facts and all justifiable inferences are resolved in favor of the nonmovant. Chapman v. AI Transport, 229 F.3d 1012, 1023 (11th Cir.2000). Only disputes over facts that might affect the outcome of the suit under the governing law will properly preclude the entry of summary judgment. Anderson, 477 U.S. at 248, 106 S.Ct. 2505. A dispute is genuine “if the evidence is such that a reasonable jury could return a verdict for the nonmoving party.” Id. If the evidence presented by the non-movant to rebut the moving party’s evidence is merely colorable, or is not significantly probative, summary judgment may still be granted. Id. at 249, 106 S.Ct. 2505.

How the movant may satisfy its initial evidentiary burden depends on whether that party bears the burden of proof on the given legal issues at trial. Fitzpatrick v. City of Atlanta, 2 F.3d 1112, 1115 (11th Cir.1993). If the movant bears the burden of proof on the given issue or issues at trial, then it can only meet its burden on summary judgment by presenting affirmative evidence showing the absence of a genuine issue of material fact — that is, facts that would entitle it to a directed verdict if not controverted at trial. Id. (citation omitted). Once the moving party makes such an affirmative showing, the burden shifts to the non-moving party to produce “significant, probative evidence demonstrating the existence of a triable issue of fact.” Id. (citation omitted) (emphasis added).

For issues on which the movant does not bear the burden of proof at trial, it can satisfy its initial burden on summary judgment in either of two ways. Id. at 1115— 16. First, the movant may simply show that there is an absence of evidence to support the non-movant’s case on the particular issue at hand. Id. at 1116. In such an instance, the non-movant must rebut by either (1) showing that the record in fact contains supporting evidence sufficient to withstand a directed verdict motion, or (2) proffering evidence sufficient to withstand a directed verdict motion at trial based on the alleged evidentiary deficiency. Id. at 1116-17. When responding, the non-movant may no longer rest on mere allegations; instead, it must set forth evidence of specific facts. Lewis v. Casey, 518 U.S. 343, 358, 116 S.Ct. 2174, 135 L.Ed.2d 606 (1996). The second method a movant in this position may use to discharge its burden is to provide affirmative evidence demonstrating that the non-moving party will be unable to prove its case at trial. Fitzpatrick, 2 F.3d at 1116. When this occurs, the non-movant must rebut by offering evidence sufficient to withstand a directed verdict at trial on the material fact sought to be negated. Id.

Although there are cross-motions for summary judgment, each side must still establish the lack of genuine issues of material fact and that it is entitled to judgment as a matter of law. See Chambers & Co. v. Equitable Life Assur. Soc. of the U.S., 224 F.2d 338, 345 (5th Cir.1955) (“Both parties filed and argued motions for summary judgment, but this does not warrant the granting of either motion if the record reflects a genuine issue of fact.”). “When there are cross-motions for summary judgment, the court must consider each motion separately, drawing all inferences in favor of each non-moving party in turn.” D & H Therapy Associates, LLC v. Boston Mut. Life Ins. Co., 640 F.3d 27, 34 (1st Cir.2011); see also, Byce v. Pruco Life Ins. Co., 1:09-CV-1912-RWS, 2011 WL 233390 (N.D.Ga. Jan. 21, 2011) (“[T]he filing of cross-motions for summary judgment does not give rise to any presumption that no genuine issues of material fact exist. Rather, ‘[cjross-motions must be considered separately, as each movant bears the burden of establishing that no genuine issue of material fact exists and that it is entitled to judgment as a matter of lav/ ”) (quoting Shaw Constructors v. ICF Kaiser Eng’rs, Inc., 395 F.3d 533, 538-39 (5th Cir.2004)).

The court will consider each motion independently, and in accordance with the Rule 56 standard. See U.S. v. Diebold, Inc., 369 U.S. 654, 655, 82 S.Ct. 993, 8 L.Ed.2d 176 (1962) (“On summary judgment the inferences to be drawn from the underlying facts contained in such materials must be viewed in the light most favorable to the party opposing the motion.”). “The fact that both parties simultaneously are arguing that there is no genuine issue of fact, however, does not establish that a trial is unnecessary thereby empowering the court to enter judgment as it sees fit.” Wright, Miller & Kane, Fed. Practice & Proc. § 2720, at 327-28 (3d ed. 1998).

II. ANALYSIS

A. The Plaintiffs’ Motion to Strike (Doc. 56)

The defendants have not responded to the motion, and so have not satisfied their burden to show that the evidence is admissible. For that reason alone, the motion is due to be granted. Regardless, as shown below, the material is not admissible.

1. The Affidavit of Lisa Rosser

The plaintiffs argue that “[t]he affidavit of Lisa Rosser ... is inadmissible hearsay, not based on first hand evidence and does not demonstrate that the affiant is qualified to testify about such matters.” (Doc. 56, p. 2.) The motion appears to attack the entire affidavit. While affidavits which fail to meet the standards set forth in Rule 56 may be stricken, “if an affidavit contains some improper material, the court need not strike the entire affidavit, rather it may strike or disregard the improper portions and consider the remainder of the affidavit.” Thomas v. Alabama Council on Human Relations, Inc., 248 F.Supp.2d 1105, 1112 (M.D.Ala.2003). In this case, however, the entire affidavit is inadmissible.

The affidavit is very short. Although it is Rosser’s affidavit, it begins by saying: “Before me, the undersigned, a Notary Public in and for said County and State, personally appeared Kenneth and Debbie McElroy ... who being by me first duly sworn, deposes and says as follows[.]” (Doc. 47-15, p. 1) (emphasis added). The body of the affidavit then reads:

1. According to Governmental Accounting Standards Board (GASB) guidelines for municipalities, a city should have on hand a “reserve fund” or “unassigned funds” an amount equal to three times its monthly operating expenses. We are informed by our auditors that most cities have four-to-six months in their reserve funds.

2. According to the 2013 budget, the City of Gadsden’s monthly operating expenses were projected to be just under $3.8 million.

3. Therefore to be within GASB guidelines the City would need to have $11.4 million in its “unassigned funds” line item.

4. As of September 30, 2012, the City’s “unassigned funds” balance was about $7.8 million. It had dropped from $10.9 million as of September 30, 2010; and from $9.9 million as of September 30, 2011.

5. GASB promulgates standards and guidelines by which accountants and auditors are governed. These include standards and guidelines for public entities. GASB standards are recognized in the financial industry as setting forth reporting procedures by which public entities should operate.

(Doc. 47-15, pp. 1-2.) The affidavit is then signed by Lisa Rosser, after which the following appears:

I, the undersigned, a Notary Public in and for said County and State, hereby certify that Lisa Rosser, whose name is signed to the above and foregoing Affidavit, and who is known to me, acknowledged before me that, being informed of the contents of said instrument, she executed the same voluntarily on the day same bears date.

(Doe. 47-15, p. 2.)

Federal Rule of Civil Procedure 56(c)(4) states that: “An affidavit or declaration used to support or oppose a motion must be made on personal knowledge, set out facts that would be admissible in evidence, and show that the affiant or declarant is competent to testify on the matters stated.” Fed.R.Civ.P. 56(c)(4). See Hamilton v. Coffee Health Grp., 949 F.Supp.2d 1119, CV-10-S-3621-NW, 2013 WL 2635304 (N.D.Ala. June 6, 2013) (quoting Rule 56(c)(4)). In addition to stating that the affidavit is being executed by “Kenneth and Debbie McElroy,” the affidavit makes no attempt to identify who Lisa Rosser is, in what capacity she testifies, or that her affidavit is based upon her personal knowledge. Accordingly, the entire affidavit lacks a showing of both competence and personal knowledge. It is therefore due to be stricken. “Affidavits which set forth conclusory arguments rather than statements of fact based on personal knowledge are improper.” See, e.g., Story v. Sunshine Foliage World, Inc., 120 F.Supp.2d 1027, 1030 (M.D.Fla.2000). Accord, Leigh v. Warner Bros., Inc., 212 F.3d 1210, 1217 (11th Cir.2000).

The plaintiffs next argue that paragraph one of the affidavit contains hearsay. “Hearsay” means a statement that: (1) the declarant does not make while testifying at the current trial or hearing; and (2) a party offers in evidence to prove the truth of the matter asserted in the statement.” Fed.R.Evid. 801(c). In this case, the guidelines are an out of court statement, summarized by the affiant to prove the truth of the matter asserted in the guidelines, that “a city should have on hand a ‘reserve fund’ or ‘unassigned funds’ an amount equal to three times its monthly operating expenses.” Similarly, the auditor’s opinions are out of court statements restated by the affiant to prove the truth of the matter asserted, that “most cities have four-to-six months in their reserve funds.”

The general rule is that inadmissible hearsay cannot defeat a motion for summary judgment where there is no indication that it is reducible to a form that would be admissible at trial. Wyant v. Burlington Northern Santa Fe Railroad, R.C., 210 F.Supp.2d 1263 (N.D.Ala.2002) (quoting, Pritchard v. Southern Co. Ser vices, 92 F.3d 1130, 1135, amended in part on rehearing, 102 F.3d 1118 (11th Cir. 1996), cert. denied, 520 U.S. 1274, 117 S.Ct. 2453, 138 L.Ed.2d 211 (1997)). No such showing having been made in this case, paragraph one is due to be stricken as inadmissible hearsay.

Paragraphs two, four, and five set out information regarding the City of Gadsden’s monthly operating expenses, its unassigned funds, and the functions of GASB respectively. These paragraphs are also due to be stricken because the affiant does not explain how she has such information. Accordingly, she has not shown that she is competent to testify to these facts. Further, she does not state that she has personal knowledge of these facts. “Naked conclusions are not sufficient to create a genuine factual issue.” Mader v. City of St. Petersburg, 725 F.Supp. 492, 494 (M.D.Fla.1989).

Paragraph three is an opinion. Under the Federal Rules of Evidence, a witness can testify in the form of an opinion if the witness is properly qualified as an expert and certain other requirements are met. See Fed.R.Evid. 702. In this case, Rosser is not identified as, nor has she been qualified as, an expert. If a witness is not qualified as an expert, she can only testify in the form of an opinion if the opinion “is limited to one that is:”

(a) rationally based on the witness! ]’s perception;

(b) helpful to clearly understanding the witness’s testimony or to determining a fact in issue; and

(c) not based on scientific, technical, or other specialized knowledge within the scope of Rule 702.

Fed.R.Evid. 701. None of these exceptions have been shown to apply. Paragraph three is due to be stricken for this reason as well.

2. The Deposition of Diane Scott

The plaintiffs attack the following portion of the Scott deposition as inadmissible lay opinion testimony.

Q. In your opinion, would a municipality with a 27.98 percent contribution rate be prudent to adopt the 2.5 increase in employee contribution rates?

MR. FITZPATRICK: Objection. She’s not been qualified as an expert here, and she’s not been shown to have any basis for making an opinion about Gadsden and its finances.

Q. That’s a very good objection, but I can still hear your answer.

MR. FITZPATRICK: And it’s entirely speculative.

MR. HOWARD: Okay.

A. In general, when you look at employee benefits as a percentage of salary, which this is it, you start to think of certain things. First is your FICA ratio at 7.65 percent. Okay? Then you’ve got a health insurance percentage. Let’s just say that’s about 10 percent. I don’t know what theirs is. Okay? You’ve got between SUI and FUI — let’s just say about a 1 percent. Okay? And then you look at a retirement percentage. And if you’ve got 22 percent there — 23 because it rounds up, you’ve got — you’ve got 41.65 percent of salaries as your benefits — 20 percent of benefits. In general, I think that that is a little high — is high. Okay? In the other organizations where I have worked and — we did not have benefits at 40 percent of salaries. It was unsustainable.

(Doc. 47-5, pp. 124-126.)

Scott has not been qualified as an expert. No showing has been made that this opinion testimony is otherwise admissible. It will also be stricken.

The plaintiffs also state:

During examination by the City’s lawyer, Scott wandered into a rambling discussion speculating about what might happen if a city failed to make its pension contributions, future changes in accounting rules, and what might happen if bond rates increased and ratings decreased. See, doc. 47-5, pp. 90-106.

(Doc. 56, p. 3.) The plaintiffs do not cite to specific testimony in these 16 pages. A review of these pages shows mixed fact and opinion testimony. In the absence of an objection to specific sections on a specific basis, the court will not comb through these pages in an attempt to imagine every objection the plaintiffs may have. However, to the extent that the defendants use certain portions of the Scott deposition to support their motion, the court will address admissibility as to that section, to the extent the plaintiffs have objected thereto.

3. Conclusion

Based on the foregoing, the motion to strike will be GRANTED. The entire affidavit of Lisa Rosser, and the above quoted portion of the Diane Scott deposition will be STRICKEN.

B. Individual Factual “Denials” Treated as Motions to Strike

All facts listed in this section have been omitted from the “Facts” portion of the court’s opinion on the motion for summary judgment. All facts are offered by the party indicated below, and are the subject of a “denial.” However, each is denied not because the objecting party provided evidence to support a contrary view, but because the party denying the fact contends that the evidence which supports the proffered fact is inadmissible. In the interest of brevity, the court will not restate each objection in its ruling. However, each ruling will be based upon those objections unless otherwise indicated.

1. Defendants’ Facts Not Included

a. “General accounting standards for municipalities hold that this percentage should never be over 60 percent.” (Doc. 51, p. 4) (citing 47-1, p. 115-116 (Rosser deposition)).

The citation for this fact is Rosser’s testimony that “most accounting standards will tell you that this percentage should never be over 60,” and explaining that she was referring to “gap standards.” (Doc. 47-1, p. 115.) This testimony is hearsay to the extent that it attempts to summarize the standards. Further, Rosser is offering an expert opinion when she has not been qualified as an expert. For these reasons, and for the reasons stated in its opinion on the motion to strike Rosser’s affidavit, this fact is excluded.

b. “Because the population in the City of Gadsden has continued to decrease over a number of years, its tax base has continued to decrease.” (Doc. 51, p. 6) (citing 47-1, p. 119).

In the cited portion of Rosser’s deposition, she testifies that her biggest concern was the number of employees the City had “[b]ecause the population in the city has decreased over the number of years; yet, we continue to increase our number of employees.” (Doc. 47-1, p. 119.) Then, in response to the question ‘Your tax base is going down?” she answered ‘Yes, it is.” (Doc. 47-1, p. 119.) Contrary to the cited “fact,” her testimony does not link the lower population to the tax base going down. If it did, it would be excluded as an expert opinion offered by a non-expert. Therefore, this “fact” is disregarded as unsupported by the evidence cited.

c. “Beginning with fiscal year 2015, employers (such as municipalities) must place on their financial statements the amount of unfunded liabilities they have. In many cases such will outweigh their assets. This would have a significant, even ‘devastating’ impact on a city’s ability to issue bonds.” (Doc. 51, p. 10) (citing 47-5, p. 35 (Scott deposition)).

This statement cites Scott’s testimony to this effect. Scott has not been qualified as an expert, and no showing has been made that this opinion testimony is otherwise admissible. Further, the citation does not support the opinion about the impact on the City’s ability to issue bonds. Also, to the extent Scott is quoting a source, the opinion is hearsay.

d. “Other criteria to determine actuarial soundness include whether historically the ARC has been met, and whether there is a cap on what the employer must provide. Failing to meet the ARC on even one occasion contributes to greater liabilities placed on the books affecting credit and bondworthiness.” (Doc. 51, p. 51) (citing doc. 47-5, p. 96).

This is also based upon an expert opinion offered by Scott, who is not an expert. It will not be included for this reason and because the fact is not supported by the citation given.

e. “Aside from the GASB rule change about unfunded liability on the employer’s books, other impending changes in GASB rules and in Moody’s evaluations could affect existing bond issues, decreasing a rating and increasing the interest rates on such bonds.” (Doc. 51, p. 12) (citing doc. 47-5, pp. 99-103).

This “fact” is excluded as inadmissible “expert” opinion testimony by Scott.

f. “A ratio of about eighty percent (80%) is considered acceptable by Scott.” (Doc. 51, p. 12) (citing (47— 5, p. 112.))

This fact is supported by an inadmissible statement of expert opinion by Scott.

g. “The City is supposed to have reserve funds of three times its monthly operating expenses, according to the standards of the Governmental Accounting Standards Board.” (Doc. 51, p. 17) (citing 47-15 (Rosser affidavit)).

The only support for this fact is the Rosser affidavit, which will be stricken for the reasons set out earlier in this opinion.

h. “The Governmental Accounting Standards Board (GASB) promulgates standards and guidelines by which accountants and auditors are governed. These include standards and guidelines for public entities. GASB standards are recognized in the financial industry as setting forth reporting procedures by which public entities should operate.” (Doc. 51, p. 17) (citing 47-15).

The only support for this fact is the Rosser affidavit, which will be stricken.

i. “According to the 2013 budget, the City of Gadsden’s monthly operating expenses were projected to be just under $3.8 million. Therefore to be within GASB guidelines the City would need to have $11.4 million in its ‘unassigned funds’ line item.” (Doc. 51, pp. 17-18) (citing 47-15).

The only support for this fact is the Rosser affidavit, which will be stricken.

2. Plaintiffs’ Facts Not Included

a. “The employees’ agreement was to contribute additional funds in excess of 6% for a three year period.” (Doc. 49, p. 13) (citing 47-1, p. 50).

This fact is not based upon the witness’s personal knowledge. Rosser testified that this was an “assumption,” and that “[ojther than hearsay, [I] really didn’t know what their agreement was.” (Doc. 47-1, p. 50.)

b. “Although the employees’ contribution costs to retirement increased by 30%, Rosser testified it was justified because its ‘a dad-gum good retirement.’ ” (Doc. 49, p. 16) (citing doc. 47-1, pp. 147-148).

First, the cite the plaintiffs give is wrong. The quoted material appears on page 146 of document 47-1. Second, the plaintiffs misstate the testimony. Rosser was asked “what did the employee get in return for the loss of that salary? In other words, how did the employee’s pension benefit increase?” (Doc. 47-1, p. 146.) After an objection to the form of the question, Rosser answered: “One day when I retire, I have a dad-gum good retirement. I didn’t lose a thing.” (Doc. 47-1, p. 146.) Rosser’s opinion as to the soundness of the retirement plan, and how good it is, is inadmissible.

c. “The increase in employee contributions did not improve the actuarial soundness of thé pension plan.” (Doc. 49, p. 17) (citing doc. 47-1, pp. 149-150).

Ironically, this statement is based upon the same type of lay opinion statement by Rosser to which, when offered by the defendants, the plaintiffs have objected and moved to strike. The defendants move to strike the statement because “the term, ‘actuarial soundness’ is an oft-repeated misnomer that has little significance to the city’s adoption of the increased contribution measure. A plan’s ‘actuarial soundness’ is gauged by looking at the unfunded liability ratio; it has little or nothing to do with the contribution rates per se.” (Doc. 58, p. 9) (citing 47-1, p. 159 (Rosser deposition); 47-5, p. 77-78, 82-89 (Scott deposition)). This appears to be an objection to relevance.

“Actuarial Soundness” is not an issue here. The City does not argue that the rates were increased to “shore up” the plan. They argue that they were increased to reduce its costs. Further, these statements constitute inadmissible expert opinion testimony by a lay witness.

d. “Guyton believed the City was paying 26% in retirement costs which he believed was the highest in the state.” (Doc. 49, p. 18) (citing doc. 47-2, pp. 23-24 (Guyton deposition)).

This support for this fact is deposition testimony which is not based upon the witness’s personal knowledge. As to these numbers, Guyton states in his deposition that “I never read anything to tell me that, but supposedly the people who had checked on it said that’s about right.” (Doc. 47-2, p. 24.)

e. “The pre-merger actuarial study determined that additional funds were needed to resolve the unfunded liability.” (Doc. 49, p. 30) (citing doc. 47-8, p. 16-17 (Smith deposition)).

The fact is supported by the following exchange in the deposition of Randy Smith:

Q. Do you have any knowledge, and, if so, I’m going to ask you the source of your knowledge or the basis of your knowledge, about how somebody came up with paying 35 months an additional 5 percent into that supplemental fund?

A. Definitely.

Q. How did that come about?

A. Well, we had an actuary done from the State to see what it was going to cost the City in additional funding to convert money. We had like $8 million in our retirement fund. And, after you donated that or put that into the fund, then, to pay off the unfunded liability, the State came back with the number, I think at that time it was going to be 17 percent’ of the entire City’s severance in order to pay off the unfunded liability, which was probably going to take 17 years. We are starting year 10 of that now. The total increase then, when you combine that with what the City was paying — and I forget the exact percentage is paid on the other city employees, I think it was three or four percent, with the 26 percent of police and firemen salaries. The additional cost was going to be 1.3 million. That’s where the Committee came in.

(Doc. 47-8, p. 16-17.) This summary is inadmissible hearsay.

f. “When the merger was discussed in 2000 and 2001, it was anticipated that the unfunded liability would be amortized over a 17 year period.” (Doc. 49, p. 30) (citing doc. 47-8 p, 39).

First, the “fact” is not found in the cited testimony. Smith testified that “it was amortized over 20 years.” (Doc. 47-8, p. 39. ) He also stated that “they projected, if the returns remain the same as they have in the past, it would probably be paid down in 17 years.” (Doc. 47-8, p. 39.) Second, even though Smith was on the committee, there is no foundation for how he knew about how long the liability would be amortized.

g. “It was well known that the City would be paying a large amount for a long time.” (Doc. 49, p. 30) (citing 47-8, p. 40).

This statement is supported by Smith’s testimony that “everybody knew that the City of Gadsden would have to pay a lot .of money over a long time.” (Doc. 47-8, p. 40. ) Smith’s opinion that “everybody knew” is excluded as speculation.

h. “During the pre-merger negotiations, it was anticipated that the City’s contributions would increase and peak over a 12 year period. The state ERS representative confirmed that such a trend would continue.” (Doc. 49, p. 160) (citing 50-12, pp. 18-20 (Matlock deposition)).

A review of the evidence cited reflects that Matlock “assumed” that this would be the case, based upon his “understanding” of what he was told by a state representative from the ERS. This statement is a conclusion based upon hearsay.

i. “Calvert initially made an extra contribution to ERS to ‘buy into’ the program.” (Doc. 49, p. 32) (citing 50-13, p. 9 (Calvert deposition)).

When asked in his deposition whether he ever paid 11 percent, Calvert testified that “[tjhere again, to my knowledge, I’m not up on all the numbers.” (Doc. 50-13, p. 8.) He said “I thought we paid an extra amount to get into the program. And then it was scaled back for us.” (Doc. 50-13, p. 8.) He stated that it was his understanding that the extra amount was “to buy into the program,” and “[o]nce we bought in, it was supposed to go to six percent. That’s my understanding. I don’t know how accurate that is.” (Doc. 50-13, p. 9.) These statements reflect that Calvert did not know whether he was paying more, and, even if he did, was not sure where the extra money went. The “fact” will not be considered.

j. “Harrelson has learned that the 5% extra he contributed to the Supplemental Fund was not used to resolve unfunded pension liabilities, but simply kept by the City.” (Doc. 49, p. 34) (citing 50-14, p. 34 (Harrelson deposition)).

Harrelson testified only as to his “understanding.” (Doc. 50-14, p. 34.) He said he “found out” that the City just kept that money, without explaining how he got this information. (Doc. 50-14, p. 34.) He said he was “pretty sure” that the City did not pay down the unfunded liability but just put the money into its general fund. (Doc. 50-14, p. 35.) He admitted later that he didn’t know if the City put the money into the general fund and then later sent in the money towards the unfunded liability. (Doc. 50-14, p. 36.) When asked again how he knew the City did not use it for paying off the unfunded liability he said: “I know the City. They didn’t.” (Doc. 50-14, p. 36.) The witness’s opinion, which is clearly not based upon his personal knowledge, cannot support this “fact.”

k. “Mayben has learned at union meetings that the additional 5% was not used by the City to reduce unfunded liabilities.” (Doc. 49, p. 35) (citing 47-13, pp. 13, 20 (Mayben deposition)).

Mayben testified that “to the best of [his] knowledge” the extra money did not go to pay the unfunded liability. (Doc. 47-13, p. 12.) He said his knowledge was based on “rumors” and from “what was discussed at the Union meetings.” (Doc. 47-13, p. 13.) Mayben’s testimony is excluded as hearsay.

l. “There were several factors why the actuaries said the former PFRF was going broke. Those included the sliding scale increases provided to retired employees.” (Doc. 49, p. 35) (citing 47-13, p. 19).

The defendants object to this statement as “an answer to an improper leading question,” “testifying without personal knowledge and otherwise without sufficient foundation or other indicia of reliability, and this otherwise constitutes inadmissible opining.” (Doc. 58, p. 21.) The cited portion of Mayben’s deposition reads:

Q. And the reason that the actuary said that the fund was going broke was because the benefits for—

MR. HOWARD: Object.

BY MR. FITZPATRICK:

Q. —for retired employees were, in the opinion of some, rather generous?

A. Yes, sir. Sliding scale. There were several different things that were contributing factors, I believe.

(Doc. 47-13, p. 19.) Mayben is not testifying based upon his person knowledge. He is recounting what he remembers the actuary report saying. This is excluded as hearsay.

m. “It was agreed that the police and firefighters would pay an extra 5% for three years, and the responsibility to resolve the balance of the unfunded liability was the City’s.” (Doc. 49, p. 35) (citing doc. 47-13, p. 21).

The defendants properly object that testimony supporting the statement was based only on the witness’s “understanding.” (Doc. 47-13, p. 21.) No foundation for it was cited.

n. “By increasing Mayben’s pension contribution, the City of Gadsden reduced its costs.” (Doc. 49, p. 35) (citing doc. 47-13, p. 27).

The defendants properly object that testimony supporting the statement was based only on the witness’s “understanding.” (Doc. 47-13, p. 21.) No foundation for it was cited.

o. “The additional payment for three years was to ‘pay us in full’ for costs related to the prior PFRF.” (Doc. 49, p. 37) (citing doc. 47-14, p. 23 (Morris deposition)).

Morris’s cited testimony is actually: “they said after we paid, that would be the end of it.” (Doc. 47-14, p. 23.) To whom “they” refers is not stated. When asked to explain what his statement meant, he stated: “We were supposed to pay three years total at five percent, that would pay us in full. That would allow us to go on State Retirement.” (Doc. 47-14, p. 23.) This testimony is a speculative conclusion based upon inadmissible hearsay.

p. “Additional special pension costs of the merger were to be absorbed by the City.” (Doc. 49, p. 37) (citing 47-14, p. 27).

The support for this fact is the following portion of Morris’s deposition:

Q. Was it understood between the employees and the City that further special costs of the merger would be absorbed by the City?

MR. HOWARD: Object to the form.

THE WITNESS:

A. Yes.

(Doc. 47-14, p. 27.) No foundation for this “understanding” has been cited. Further, the statement is speculation as to what others “understood.”

q. “The step increase may be repealed in the future.” (Doc. 49, p. 38) (citing 47-14, p. 32).

The support for this fact is the following portion of Morris’s deposition:

Q. Did the City lower the amount of pay that people get under the pay scale?

MR. HOWARD: Object to the form.

THE WITNESS: Yes.

BY MR. FITZPATRICK:

Q. So that one and a quarter percent increase, could the City take that away if it wanted to?

MR. HOWARD: Object to the form.

THE WITNESS: Yes.

(Doc. 47-14, p. 32.) The defendants object to this fact only “to the extent that the witness is asked to testify as to whether a step increase may be repealed in the future.” (Doc. 58, p. 23.) As to this point, the testimony is speculative and excluded.

r. “The City should have reduced personnel costs by cutting salaries or reducing the number of employees.” (Doc. 49, p. 40) (citing 47-10, p. 29 (Putman deposition)).

Putman did testify to this, but he was not shown to be an expert, or to be in the position to make such a statement. His statement lacks foundation and therefore is excluded.

s. “The City was motivated because it wanted the employees to agree to move from a City funded Blue Cross plan to the State Health Insurance Plan to reduce the City’s health insurance costs.” (Doc. 49, p. 41) (citing 47-11, pp. 13-14 (Taylor deposition)).

This fact is based upon the following testimony from Taylor: “The City was interested, because I think at the time, according to the Mayor and the Finance Director, Tony Stapler, the pension fund was creating a problem with them as far as bond market was concerned. It was shown as a detriment to them. So they were as motivated as us to try to get this done.” (Doc. 47-11, p. 13.) The defendants properly object that this testimony “is without sufficient foundation, is based upon inadmissible hearsay, and is speculation.” (Doc. 58, p. 25.)

t. “The problems with the PFRF were significant and the employees believed that by paying the extra cost for a few years they would have a sound pension.” (Doc. 49, p. 41) (citing 47-11, pp. 24-26).

This statement is the plaintiffs’ summary conclusion taken from three pages of testimony. It is not a “fact.” Further, to the extent that it attempts to summarize anything to which Taylor testified, he cannot speak for what other persons “believed.” This “fact” is excluded.

u. “At the time the City adopted the local option in 2011, it repeatedly told the Gadsden Times that the City was in good financial condition.” (Doc. 49, p. 41) (citing 47-11, pp. 34-35).

The fact cites for its support the testimony of Taylor, as to what the City told the newspaper. It is inadmissible hearsay and therefore excluded.

v. “At the time of the merger of the systems, it was anticipated that the cost of amortizing the unfunded liability of the PFRS would be spread over 20 years.” (Doc. 49, p. 42) (citing 47-11, p. 46).

The portion of Taylor’s deposition cited is inadmissible hearsay. Referring to the Alabama ERS representative, he testified:

When the lady came both times, she explained, even to us at our level, that the funding was amortized over 20 years, that over the 20 years it was set almost like a bell curve of a test where the contributions could rise, could rise, could rise, and then they would begin to fall off on the City’s behalf.

(Doc. 47-11, p. 46.)

w. “It was also agreed in 2002 that the extra costs of the unfunded liability would be borne by the City.” (Doc. 49, p. 42) (citing 47-11, p. 512).

The defendants properly object that this fact is based upon Taylor’s “understanding.” No foundation for his testimony has been cited.

x. “Sherrill paid an additional 5% pension contribution for three years which was put in the City’s general fund rather than applied to his pension.” (Doc. 49, p. 43) (citing 50-20, p. 9 (Sherrill deposition)).

The fact cites a portion of the Sherrill deposition where he states that he “thought [it] was going to be paid on the pension, and it wasn’t.” (Doc. 50-20, p. 9.) When asked why he would say that, he stated: “It was put into the general fund.” (Doc. 50-20, p. 9.) However, Sherrill admits in his deposition that he does not know where the money went after it went into the general fund. (Doc. 50-20, p. 9).

y. “The rights to participate in the pension system and receive future benefits are considered part of the employee’s overall compensation.” (Doc. 49, p. 45) (citing doc. 47-5, p. 25).

The defendants correctly argue that this fact statement, based upon the nearly identical language in Scott’s deposition, is speculative, an inadmissible opinion, and a conclusion. Scott cannot testify as to how someone else views the pension system.

z. “The RSA’s involvement in the legislative process largely focused on calculating the savings to the state of various proposals evaluated by the Legislature and other State agencies.” (Doc. 49, p. 49) (citing doc. 52 (documentary evidence)).

The support for this assertion is a general citation to 219 pages of exhibits. Such general references do not suffice to support facts, as the court’s scheduling order requires that “[a]ll statements of fact must be supported by specific reference to evidentiary submissions.” Further, the statement is not a “fact,” it is a conclusion,

aa. “The records produced show no legislative purpose other than to reduce the state’s pension costs for its employees.” (Doc. 49, p. 49) (citing doc. 52).

The support for this assertion is a general citation to 219 pages of exhibits. Such general references do not suffice to support facts, as the court’s scheduling order required that “[a]ll statements of fact must be supported by specific reference to evidentiary submissions.” Further, the statement is not a “fact,” it is a conclusion

C. The Motions for Summary Judgment

1. Facts

a. The PFRF and the ERS

The Policemen’s and Firemen’s Retirement Fund of the City of Gadsden (“PFRF”), was a pension plan that was originally created in 1939 by the Alabama Legislature. Both the City and the participant’s costs of contributing to the PFRF were high. Under the PFRF, police and firefighters were paying eleven 11% of their base salary into the system, and the City was paying 26%. The system no longer exists.

At the same time that some Gadsden employees participated in the PFRF, other Gadsden city employees participated in the Employees’ Retirement System of Alabama (“ERS”), a part of the Retirement Systems of Alabama (“RSA”). The ERS system was established in 1945, and provides both disability and service retirement benefits to members and survivors. In addition to the State of Alabama, localities, like the City of Gadsden, can choose to come under the plan. In fact, the majority of ERS participants are employed by some local jurisdiction rather than by the State of Alabama. The system is mandatory in that, if an employer is part of the ERS, all full time employees of that employer must participate.

The ERS is a “defined benefit plan,” meaning that monies are collected and invested with the intent of providing certain defined benefits under the terms of the retirement plan statutes. Increased employee contributions are recorded on each employee’s annuity benefit account. If an employee were to withdraw from the systern early, those contributions can be withdrawn.

ERS participants with over ten years of creditable service have vested rights in the system. An employee with 10 years of creditable service has vested rights to a pension at age 60. An employee with 25 years of creditable service has vested pension benefits regardless of age.

In contrast to the PFRF, under the ERS employees are required to contribute a percentage of all compensation, rather than just base pay. In Gadsden in 2002, police and fire employees (collectively “hazardous duty employees”), who did not participate in the PFRF, contributed 6% of their salary to the ERS.

b. The Named Plaintiffs

Joe Taylor has been employed by the City of Gadsden for 18 years. Taylor was a participant in the PFRF, and, in the late 1990s, was instrumental in identifying the problems with the PFRF and opening communications with the RSA. He has 20 years of creditable time in the pension system, and was vested in 2011 when the City raised contribution rates. Taylor pays additional contributions for his already vested pension but receives no additional benefits.

Jeffrey Mayben, except for a brief layoff period in 1986, has been employed by the Gadsden Fire Department since December 1985. Mayben was a participant in the PFRF for 17 years. Mayben has about 30 years of creditable service in the pension system. He had already vested in his pension when the City increased his eontribution rate. Mayben was eligible to retire and begin receiving his pension before the contribution rate was increased.

Lecil Harrelson is an employee of the Gadsden Fire Department. He was hired in 1985 and has been employed by the Gadsden Fire Department for 27 years. Harrelson was a participant in the PFRF until it was merged with the ERS in 2002. After the PFRF was merged into the ERS, Harrelson paid the 5% supplemental contribution for 3 years. Before the City’s election to increase pension contributions in 2011, Harrelson was fully vested in his pension. He testified that the City’s decision did not change his benefits at all. Harrelson believes the City Council “stole my money” by increasing pension contributions.

Jeff Morris has been employed by the Gadsden Fire Department for 21 years. Morris was a vested participant in the PFRF System from 1991 until it merged with the ERS. Morris supported the merger with the ERS. At the time of the merger, Morris became vested in the ERS. Morris has contributed an additional 2.25% of his salary to his pension for the first year, and an additional 2.5% since October 1, 2012. The additional pension contributions have resulted in a reduction of Morris’s take-home pay. Every other member of the Fire Department has been similarly treated.

John A. Calvert was hired by the City of Gadsden as a firefighter in October 2004. As soon as he was employed, Calvert began participating in the ERS. He contributed six percent of his salary to the ERS. He was never a member of the old fund. (Doc. 50-13, p. 8.)

William David Putman has been employed by the Gadsden Fire Department since October 2004. Putman paid the 6% to the ERS and 5% to the City supplemental fund for about 11 months when he was first employed. Putman was told when he was hired that the supplemental contribution would end after the 3 year term and he would contribute 6% to the ERS based on state law. He was also President of the Firefighters Union when the contribution change occurred.

Derrick Sherrill is a named plaintiff and has been employed by the Gadsden Fire Department for 19 years since 1993. Sherrill has over 20 years of creditable pension service and is fully vested in his pension. Sherrill was fully vested in his pension when the City increased the pension contribution rate by 2.25%. When rates were increased, there was no change in his benefits.

c. Pre-Merger Discussions

In the late 1990s, actuarial reports showed that the PFRF lacked the resources to meet its long-term obligations. The PFRF was paying out benefits as fast as the current employees made contributions, and the parties agree that the system was “going broke.”

Steve Means served as Mayor of Gadsden from the mid-1970s until 2006. Means knew of the problems of the PFRF and believed that the ERS was “solid as a rock.” (Doc. 47-2, p. 9.) Means sought to develop, with representatives of the police and fire department, an acceptable plan to resolve their pension issue. He wrote a letter to the firefighters union on March 31, 2000, urging an agreement to merge the PFRF pension system into the ERS. He then participated in negotiations with the employees on the details of merging the systems. It is undisputed that any such merger required approvals from the Mayor, the City Council, the employees, and the ERS.

One of the problems with a merger was that Gadsden would have to accept what the parties call the PFRF’s “unfunded liability.” The parties recognize that the PFRF had a liability of about $40 million. (Doc. 47-5, p. 110.) Accordingly, the parties to the merger needed to address whether employees coming from the PFRF should contribute more than those already in the ERS in an attempt to offset some of the liability.

Means requested that Fire Department employees appoint a committee to discuss pension transition issues. The firefighters elected Assistant Fire Chief Randy Smith, Assistant Fire Chief Jimmy Matlock, and an employee named Mickey Lee. Smith served on the PFRF board in the late 1990s, and he testified that he understood at the time of the merger that the conversion was going to require an input of additional money. (Doc. 47-8, pp. 12-13.) Matlock began working for the Gadsden Fire Department in October 1980. Mat-lock participated in the PFRF until it merged with the ERS in 2002. The committee’s work included meetings with the Mayor and City financial personnel.

Jerry L. Gladden, the personnel director for the City of Gadsden, Finance Department employee Susan Abraham, Carroll, Matlock, and City Attorney Roger Kirby, met with ERS officials to discuss the merger. The record does not reflect exactly what occurred at these meetings. It is undisputed, however, that employee contribution rates were discussed in the course of evaluating the merger.

The employees evaluated the issue over a period of time and, eventually, an agreement was reached and approved by all parties. The solution was that the PFRF would be merged with the ERS, and the firefighters, after they became part of the ERS, would continue to contribute 11% of their compensation for three years, just as they had under the PFRF. Six percent of their contribution would go towards the ERS, the same as other hazardous duty employees already part of the ERS. The additional 5% contribution would go to a “supplemental fund” to offset the unfunded liability of the PFRF. After 3 years, the additional 5% contribution would end, and the firefighters would pay the same as other hazardous duty employees.

Former Mayor Means testified as follows regarding why the additional contribution was needed:

Q. Okay. We have spoken and the term has been used in depositions quite a bit about an agreement between the City and the firefighters. And I want to make sure Pm exploring this correctly.

Why was it necessary for the firefighters and police officers to pay additional monies into a supplemental fund as part of getting them in the State retirement system?

A. Best I remember, is was tremendous expense to the City, the portion we were going to put in. And at the time we were just looking for any additional funding source we could get to ease the burden somewhat.

Q. Right. And was there a point that the City would have considered it to be cost prohibitive if they had not had those additional contributions from the police officers and the firefighters?

A. I suspect that the council wouldn’t have passed it to begin with without that supplemental contribution. So I don’t know.

Q. All right. And without the council passing and approving any deal like this, then the status quo simply would have remained the status quo, right?

A. Correct.

(Doc. 47-3, pp. 39-40.) Means has no recollection of any agreement with the firefighters whereby they would be exeepted from any increase in contribution rates in the future.

It seems that whether the rate could ever be increased was not discussed at all. Smith testified that there was never a discussion about a rate increase. (Doc. 47-8, p. 24.) Matlock testified that he does not remember whether an increase in the future contribution rate was actually ever discussed by either City officials or ERS officials. Harrelson was also involved in several merger meetings with Mayor Means. He states that there was never any representation, at the meetings he attended, that the ERS employee contribution rate would, or would not, increase. Taylor says that during the discussions in which he participated, there was no discussion, nor contemplation by anyone, that the ERS employee contribution rate would change. Morris remembers discussions about merging the old fund into the ERS, but does not remember any discussion of whether the base contribution rate would change.

d. The Merger

Ala. Act number 2001-498 (approved by the Governor on May 17, 2001) authorized the City of Gadsden and the Board of Trustees of the PFRF of the City of Gadsden to “elect by resolution to have the employees of the police and fire departments of Gadsden participate as a local unit in the Employee’s Retirement System and to transfer to that system all assets and liabilities of the fund and any other funding required by the Employees’ Retirement System for such participation pursuant to Section 36-27-6, Code of Alabama 1975.” Act 2001-498, section 1.

On October 8, 2002, the Gadsden City Council adopted Resolution No. R-360-02, which authorized members of its PFRF to become members of the ERS. (Doc. 50-3, p. 17.) Said resolution recited that “a majority of the members of the Policemen’s and Firemen’s Retirement Fund have indicated a desire to participate in the [ERS].” (Doc. 50-3, p. 18.) The resolution further stated:

3. The City of Gadsden agrees to make all prior service contributions at the rate as determined by the Actuary of the Employees’ Retirement System with State prior service rate to be applicable until such determination of prior rate is made.

4. The City of Gadsden agrees to make contributions at the normal rate for current service, which is the same as the State normal rate.

5. The City of Gadsden agrees to pay for the initial cost of a preliminary evaluation by the Actuary to determine the accrued liability on account of prior service and to pay any other cost for Special Services of the Actuary plus the regular administrative costs of operation of the System.

(Doc. 50-3, pp. 18-19.)

Also on October 8, 2002, the Gadsden City Council adopted Resolution No. R-364-02 to amend the Management Handbook governing personnel rules and benefits to provide for participation by fire fighters in the ERS with employee contributions of 6% of compensation. (Doc. 50-3, p. 24.) That same date, the Gadsden City Council passed Resolution No. R-359-02 authorizing the Mayor to execute all agreements necessary for then-current and retired “members of the Policemen’s and Firemen’s Retirement Fund of the City of Gadsden to become participants in the [ERS].”

On October 17, 2002, Gadsden Ordinance No. 0-58-02 was approved. (Doc. 50-3, p. 10. ) The ordinance created a “Supplemental Fund” to be “used exclusively for the costs of participation in the ERS for employees who immediately prior to November 1, 2002, were members of the Policemen’s and Firemen’s Retirement Fund of the City of Gadsden.” (Doc. 50-3, pp. 10-11. ) The ordinance further provided that employee contributions to the fund (including “all employees beginning work on or after November 1, 2002”) would be

an amount equal to five percent (5%) of their compensation, on the same basis as employee and employer contributions to the [ERS] are calculated. This withholding shall apply for work from November 1, 2002, through September 30, 2005.

(Doc. 50-3, p. 11.)

Also, on October 17, 2002, the City adopted Ordinance No. 0-59-02, amending the City ordinance providing for retirement of fire fighters and police officers to provide that the City administrators “shall withhold the sum of six percent (6%) from the compensation paid to all police officers and fire fighter city employees who are eligible participants in the [ERS] and remit the withheld funds to the [ERS].” (Doc. 50-3, p. 15.) The ordinance further provided that the “finance director shall pay an additional amount to the [ERS] as required by its regulations as the employer contribution cost on behalf of each participant.” (Doc. 50-3, p. 15.)

In 2002, the merger was completed and $9,293,200 (the assets of the PFRF) was transferred from that fund to the City’s ERS account. While this reduced the unfunded liability of the PFRF, at least $30 million remained. Firefighters continued to make 11% payments until 2005. In that year, as scheduled, the City stopped administering the supplemental fund. The record is unclear as to how much of the unfunded liability remained at that time,

e. The City’s Portion of the Pension Fund Costs

The parties agree that the City’s contribution rate to its ERS account is based on what the ERS actuaries determine is necessary to keep the fund in good financial condition. Before the merger, the City’s portion of the ERS (its “account”) had no unfunded liability. Gadsden’s ERS fund was 100% funded. Afterward, it was 56.2% funded, and most recently is 54% funded. The City’s contribution rate, as required by the ERS, was 1.81% in 2001, 1.24% in 2002, and 1.85% in 2003. After the merger, the City’s ERS contribution rate substantially increased to 21.49% because the ERS had to address the liabilities of the PFRF. Gadsden’s employer contribution rate for the years 2007-2011 hovered at 24.54% (for 2009 it was slightly higher, 25.08%).

As the current Finance Director for the City of Gadsden, Lisa Rosser has been the chief administrative financial officer of the City, subject to the Mayor and Council, since 2003. She testified that, at the time of her deposition, “as far as [she knew],” Gadsden had the second highest “retirement rate” in the state of Alabama. (Doc. 50-2, pp. 5-6.) She also said “[w]e’re going to continue to have the second highest retirement rate in the state of Alabama.” (Doc. 50-2, pp. 5-6.)

While the City has not conducted any studies or analyses to determine the extent or the cause of its increasing pension costs during the years following the merger into the ERS, there were a number of discretionary cost-of-living increases in benefits for retirees that the City authorized. Former Mayor Means testified that the rate went from around 21% to over 24% of payroll because of these adjustments. (Doc. 47-3, pp. 31-32.) Rosser stated that “the only things that have impacted the contribution to the RSA in the last 10 years have been either COLA increases to retirees, adding police and fire to the Pension Fund, or the [Deferred Retirement Option Plan (‘DROP’) ].” (Doc, 47-1, pp. 74; see also doc. 47-1, pp. 85-86.) Rosser also testified that the City’s rate went to over 25% as a result of the City approving an additional lump-sum payment to retirees. (Doc. 47-1, p. 85.) She stated:

And that 25 percent was driven by a host of factors, not just police and fire being put on the retirement system. I’ll agree to that. There’s no doubt about it. Sure, retirees had been given how many raises, and was I in favor of any of those raises? Go back and ask the council how many of those raises I supported.

(Doe. 47-1, pp. 103-104.)

Investment income is one of three revenue streams to fund the ERS, the other two being employer contributions and employee contributions. Scott testified that “as of the end of 2011, we had the worst performance of the stock market in a rolling 10 years in 175 years. So investment income is down. It’s down for every pension fund across the United States, period.” (Doc. 47-5, p. 34.)

f. Gadsden’s Finances in 2010 and 2011

In 2010, when the City refinanced $29 million of general obligation debt, a review of the City’s bond rating by Moody’s resulted in a downgrade from the City’s prior AAA bond ratings. Rosser agreed that, even though the rating has been downgraded from AAA, it was still at a very high level. (Doc. 47-1, p. 111.) She testified as to the downgrade that she “was pleased ... it was better than what I thought we would get.” (Doc. 50-2, p. 29.)

On March 7, 2011, Rosser reported to the Mayor and Council that revenues in FY 2011 were trending up from 2010, employment in the City was consistent, and the City’s expenses were under budget for the year by 4.4%. She also stated that overall revenues were still down $130,655.00 from 2009, and stated that “Even though revenues are up from last year, as long as revenues continue to be under budget then it is important that we continue to monitor and control expenses!.]” (Doc. 55-1, p. 1.)

On April 11, 2011, Rosser told the May- or and Council that all four major sources of revenue to the City were up in FY 2011. (Doc. 55-1, p. 2.) She also stated that expenses had increased by 1.8%. (Doc. 55-1, p. 2.) On April 11, 2011, Rosser told the Mayor and Council that “the city of Gadsden is very fortunate to be in the financial condition that we are considering t