Cherry v. Mayor & City Cncl. of Balt.

Robert F. Cherry, Jr., et al. v. Mayor and City Council of Baltimore City, No. 36, September Term, 2020. Opinion by Biran, J. MUNICIPAL CORPORATIONS – PENSIONS AND RETIREMENT BENEFITS – BREACH OF CONTRACT – Baltimore City maintains a Fire and Police Employees’ Retirement System (the “Plan”) to provide pension benefits to uniformed officers in the City’s police and fire departments. The statute governing the Plan, Article 22 of the Baltimore City Code, provides that a contractual relationship exists between Plan members and the City, and that the benefits provided under the Plan “shall not thereafter be in any way diminished or impaired.” Balt. City Code, art. 22, § 42 (2009).

The Court of Appeals held that the City did not breach its statutory contract with Plan members by allegedly “underfunding” retiree reserves. MUNICIPAL CORPORATIONS – PENSIONS AND RETIREMENT BENEFITS – BREACH OF CONTRACT – VESTED BENEFITS – RESERVED POWER – In June 2010, the City Council enacted Ordinance 10-306, which made several significant changes to the Plan’s terms and benefits. The Court of Appeals held that the City breached its contract with those Plan members who were retired as of June 30, 2010 (the “Retired Sub- class”), or eligible to retire but still working on June 30, 2010 (the “Retirement-Eligible Sub-class”). Ordinance 10-306 retrospectively divested benefits belonging to those Plan members by replacing a market-driven post-retirement cost-of-living adjustment feature (the “Variable Benefit”) with a tiered cost-of-living adjustment (“COLA”).

However, the City did not breach its contract with Plan members who were working as of June 30, 2010, and not yet eligible to retire as of that date (the “Active Sub-class”). A governmental employer has the reserved power to make reasonable and necessary prospective changes to its pension plan. The Court of Appeals affirmed the circuit court’s findings that, as to the Active Sub-class, whose benefits had not vested prior to the enactment of Ordinance 10-306, the City made reasonable and necessary prospective changes to the Plan. MUNICIPAL CORPORATIONS – PENSIONS AND RETIREMENT BENEFITS – BREACH OF CONTRACT – DAMAGES – The Court of Appeals held that the circuit court correctly calculated damages owed to the Retired and Retirement-Eligible Sub- classes.

The circuit court did not err in accepting the damages model provided by the City’s expert witness, and rejecting the competing model advanced by the Plan members’ expert witnesses. The City’s expert witness provided the circuit court with an accurate assessment of how the members of the Retired and Retirement-Eligible Sub-classes would have fared if, hypothetically, the City had retained the Variable Benefit for them but made the prospective changes to the Plan for other members that the City was permitted to make. Circuit Court for Baltimore City Case No.: 24-C-16-004670 Argued: February 4, 2021 IN THE COURT OF APPEALS OF MARYLAND No. 36 September Term, 2020 ROBERT F. CHERRY, JR., ET AL. v. MAYOR AND CITY COUNCIL OF BALTIMORE CITY Barbera, C.J. McDonald Watts Hotten Getty Booth Biran, JJ. Opinion by Biran, J. Filed: August 16, 2021 Pursuant to Maryland Uniform Electronic Legal Materials Act (§§ 10-1601 et seq. of the State Government Article) this document is authentic. 2021-08-16 11:03-04:00 Suzanne C. Johnson, Clerk Over the course of time, governing bodies of large cities face many challenges.

One such challenge that some cities and other local governments may confront is how to change a public pension plan that is actuarially unsound. Often, the public employees who participate in these plans are represented by unions that register legitimate objections to proposed modifications. Taking such action in the face of opposition by public employees can be difficult politically. The challenge is magnified when the city is in dire financial straits.

In such a situation, the city may have to choose between the lesser of two evils: change the plan without the consent, and to the consternation, of employees who have devoted their careers to public service; or keep the plan as is and put the city deeper into debt, perhaps even risking financial ruin. In 2010, Baltimore City faced this choice. Baltimore City maintains a Fire and Police Employees’ Retirement System (the “Plan”) to provide pension benefits to uniformed officers in the City’s police and fire departments. The statute governing the Plan provides that a contractual relationship exists between Plan members and the City, and that the benefits provided under the Plan “shall not thereafter be in any way diminished or impaired.” Balt.

City Code, art. 22, § 42 (2009). In June 2010, facing a perfect storm of financial challenges, the City enacted Ordinance 10-306 by which the City changed some of the key terms of the Plan to make it actuarially sound. Most notably, it replaced a variable post-retirement cost-of-living adjustment that was based entirely on the investment performance of Plan assets with a guaranteed, tiered cost-of-living adjustment that is not market-driven. On behalf of themselves and others similarly situated, several City police officers and firefighters filed a class action lawsuit against the Mayor and City Council of Baltimore in the United States District Court for the District of Maryland.

After the federal court directed the plaintiffs to refile their state law claims in state court, the plaintiffs commenced a class action lawsuit in the Circuit Court for Baltimore City, alleging claims for declaratory relief and breach of contract. Eventually, the circuit court (the Honorable Julie R. Rubin) certified a class of plaintiffs (the Appellants/Cross-Appellees here) and three sub-classes: Plan members who retired from service before the enactment of Ordinance 10- 306 (the “Retired Sub-class”); currently employed members who had reached eligibility to retire but who had not yet retired (the “Retirement-Eligible Sub-class”); and currently employed members who had not yet reached retirement eligibility (the “Active Sub-class”). After a bench trial, the circuit court ruled that the City breached its contract with the Retired and Retirement-Eligible Sub-classes, finding that Ordinance 10-306 retrospectively divested the members of those sub-classes of benefits they had earned. The court awarded more than $30 million in damages to members of the Retired and Retirement-Eligible Sub-classes.

However, the circuit court found no breach of the City’s contract with the Active Sub-class, ruling that, as to the Active members, Ordinance 10- 306 did not affect vested benefits, but rather made permissible prospective changes to the Plan. Finding no factual or legal errors in the circuit court’s rulings, we affirm its judgment in all respects. 2 I Background The City’s Fire and Police Employees’ Retirement System (The Plan)1 Article II, Section 26 of the Baltimore City Charter authorizes the City to “establish and maintain a system of pensions and retirement benefits” for officers and employees of the Baltimore Police and Fire Departments. Balt., Md., Charter art. II, § 26.

In 1962, the City established the current version of its pension plan for police officers and firefighters – the Plan – to be managed by a Board of Trustees (the “Board” or the “Trustees”). Balt. City Code, art. 22, §§ 29, 33(a) (2009). The Plan’s terms and benefits are set forth in Article 22 of the Baltimore City Code (“Article 22”).2 Changes to the Plan may only be made by legislation passed by the City Council and signed into law by the Mayor.

Section 42 of Article 22 provides that, upon becoming a member of the Plan, the member shall thereupon be deemed to have entered into a contract with the Mayor and City Council of Baltimore, the terms of which shall be the provisions of this Article 22, as they exist at the effective date of this ordinance, or at the time of becoming a member, whichever is later, and the benefits provided thereunder shall not thereafter be in any way diminished or impaired. 1 The facts set forth in this section of our opinion are largely drawn from the findings of fact contained in the circuit court’s Memorandum Opinion of May 13, 2019, and the parties’ Joint Statement of Stipulation of Fact and Other Matters, dated May 3, 2017. 2 Unless otherwise noted, we refer to Article 22 as set forth in the 2009 version of the Baltimore City Code. 3 The Plan covers all uniformed officers of the Baltimore Police and Fire Departments, as well as certain other public safety workers. Under the Plan, there are three categories of retirement benefits eligibility: Service Retirement, Non-Line-of-Duty Disability Retirement, and Line-of-Duty Disability Retirement. Participation in the Plan by covered workers is mandatory during their employment. Prior to July 1, 2003, Service Retirement eligibility required members to reach 50 years of age or accrue 20 years of service.

For membership beginning on or after July 1, 2003, members were eligible for Service Retirement when they reached 50 years of age with 10 years of service as a contributing member, or accrued 20 years of creditable service with 10 years of service as a contributing member. In the years just prior to the passage of Ordinance 10-306, Active members contributed 6% of their regular annual compensation to the Plan. Section 36 of Article 22 lists four funds that are used to hold Plan assets and from which basic benefits are paid: (i) the Annuity Savings Fund (“ASF”); (ii) the Annuity Reserve Fund (“ARF”); (iii) the Pension Accumulation Fund (“PAF”); and (iv) the Pension Reserve Fund (“PRF”). Id. § 36(a)(1).

The ASF, ARF, and PRF all are housed within the PAF. The ASF “consists of the assets for each member’s annuity portion of the member’s retirement benefit.” Id. § 36(b)(1). In other words, the ASF contains member contributions for Active members. Id. § 36(b)(2).

Under § 36(b)(4), the Board of Trustees transfers a 4 member’s accumulated contributions3 from the ASF to the ARF upon the member’s retirement. The ARF serves as the fund from which shall be paid all annuities4 and all benefits in lieu of annuities, payable as provided in § 36. In short, the ARF contains retired members’ contributions. Section 36(d) defines the PAF, including how it is funded and maintained: The Pension Accumulation Fund shall be the fund in which shall be accumulated all reserves for the payment of all pensions and other benefits payable from contributions made by the City of Baltimore and from which shall be paid all pensions and other benefits on account of members with prior service credit and lump sum death benefits for all members payable from the said contributions.

Id. § 36(d)(1). Under § 36(e), the PRF is “the fund from which the pension is paid to members not entitled to credit for prior service and benefits in lieu thereof.” When a member not entitled to credit for prior service5 retires, “an amount equal to that member’s pension reserve shall be transferred from the Pension Accumulation Fund to the Pension Reserve Fund.” Id. § 36(d)(7). 3 Section 30(10) defines “accumulated contribution” as “the sum of all the amount deducted from the compensation of a member and credited to his individual account in the Annuity Savings Fund together with regular interest thereon as provided in §§ 35 and 36[.]” 4 Section 30(12) defines “annuity” as “payments for life derived from the ‘accumulated contributions’ of a member.” 5 Section 30(7) defines “Prior Service” as “service rendered prior to January 1, 1926, for which credit is allowable[.]” 5 Section 36 requires that the City make annual contributions to the Plan. The City’s annual contribution to the Plan consists of two primary components: for the preceding fiscal year, (1) “a certain percentage of the earnable compensation of each member to be known as the ‘normal contribution,’” and (2) “an additional percentage of [the member’s] earnable compensation to be known as the ‘accrued liability contribution.’” Id. § 36(d)(2). Section 36(d)(5) describes the City’s annual contribution requirement with further reference to the two components: The required contribution by the City of Baltimore is the amount equal to the normal cost, plus the accrued liability contribution or less the amortization of the excess assets, as the case may be.

However, the aggregate payment by the City must be sufficient, when combined with the amount in the fund, to provide the pensions and other benefits payable out of the [PAF] during the then-current year. Id. § 36(d)(5). Section 37 provides that “[t]he creation and maintenance of reserves in the [PAF], the maintenance of annuity reserves and pension reserves as provided for, and regular interest creditable to the various funds as provided in § 35(b) of this subtitle and the payment of all pensions, annuities, retirement allowances, refunds and other benefits granted under the provisions of this subtitle and all expenses in connection with the administration and operation of this Retirement System are hereby made obligations of the City of Baltimore.” Section 33(m) requires an actuary, designated by the Board of Trustees, to serve as “the technical adviser of the Board of Trustees on matters regarding the operation of the funds” of the Plan. Responsibilities of the actuary include: conducting an actuarial 6 investigation at least once every five years to assess and value the Plan’s assets and liabilities and “certify” Plan member and City contribution rates and relevant tables going forward, id. § 33(n)-(o); recommending the Board formally adopt actuarial tables and rates of contribution based on the survey, id. § 33(n); and performing “an annual valuation of the assets and liabilities of the funds of the system” based on the adopted tables.

Id. § 33(p). Each year, the Plan actuary develops an Actuarial Valuation Report (“AVR”), which provides the actuary’s opinion and recommendation to the Board regarding the required annual contribution amount. Id. The AVR is based on, among other things, the interest rate set forth in § 30 of Article 22, and mortality and other statistical tables accepted by the Board.

Prior to the enactment of Ordinance 10-306, Article 22 required that the Plan’s actuary use two earnings assumptions in making its recommendations to the Board: an assumed rate of return of 8.25% on assets held for the pre-retirement period, and a rate of 6.8% on assets held for the post-retirement period.6 Following the Board’s approval of the assumptions and methods on which the AVR is based, as well as the Plan actuary’s recommendation and advice regarding the required contributions, the Board certifies the amount of the City’s annual Plan contribution, which is then incorporated into the City’s operating budget. Id. §§ 33(p), 36(f). The City is required to balance its budget. 6 Prior to the passage of Ordinance 10-306, those rates had been in place since Fiscal Year 1995. 7 The Variable Benefit Feature In 1983, a variable benefit feature (the “Variable Benefit”) was added to the Plan as § 36A of Article 22 to provide a post-retirement cost-of-living adjustment (“COLA”) for retirees and beneficiaries with more than two years of retirement. Before the Variable Benefit was instituted, the Plan had no provision for post-retirement benefit increases and members only received raises on an ad hoc basis after lobbying the City Council.

Payment of the Variable Benefit was contingent on the annual investment performance of Plan assets. Any and all earnings of the PRF and ARF between 7.5% and 10%, plus half the earnings in excess of 10%, were transferred from those funds to two different funds, the Paid-Up Benefit Fund and the Contingency Reserve Fund, which were established to hold Variable Benefit assets. The amount of earnings formed the basis to calculate the annual increase to the pension benefit to be paid for the expected life of each eligible member or beneficiary in accordance with the statutory rate. Variable Benefit payments were not guaranteed by the City.

Rather, once the retiree assets reached the defined performance threshold to trigger the Variable Benefit, those benefits would be paid as long as the Paid-Up Benefit and Contingency Reserve Funds permitted. Id. § 36A(e)(ii). Section 36A(e)(ii) further provided that, “§§ 37 and 42 to the contrary notwithstanding, any benefit increase provided under this section is not and does not become an obligation of the City of Baltimore. In the event of any conflict between this section and either or both of § 37 or § 42, this section prevails.” Id. 8 Investment performance for purposes of calculating the Variable Benefit stood alone for each year.

Therefore, performance below the 7.5% threshold was not carried forward and averaged with higher performing future years. The Impact of the Variable Benefit on the Plan and the City’s Finances Beginning in February 2002, the Plan’s actuary, Douglas Rowe, concerned about the negative impact of the Variable Benefit on the Plan’s assets, advised the City to consider alternatives to the Variable Benefit. The problem was that the Variable Benefit was drawing funds away from the assets required to pay basic retirement benefits, leading Mr. Rowe to be concerned that “[t]here wouldn’t be enough money to pay benefits over time.”7 In light of these concerns, beginning in 2003 and continuing through 2009, Mr. Rowe recommended reducing the post-retirement earnings assumption rate, which was then 6.8%, to 5%. Lowering that rate would require the City to increase its annual Plan contribution.

Despite Mr. Rowe’s repeated recommendations over several years, the Board did not approve a reduction in the post-retirement earnings assumption rate until 2009. The earnings assumption rate on post-retirement assets stayed at 6.8% until the Variable Benefit was removed altogether with the enactment of Ordinance 10-306. 7 As discussed below, before this case came to state court, Appellants filed a class action lawsuit in the United States District Court for the District of Maryland, asserting both federal constitutional claims and state law breach of contract claims. We are told that the presiding federal district court judge, the Honorable Marvin J. Garbis, referred to the Variable Benefit during a hearing in the case as “wacko,” “totally irrational,” and “extremely wacko.” 9 By 2005, the Plan had accumulated net losses amounting to $412.8 million, due in large part to the bursting of the dot.com/technology bubble in the early 2000s. Those losses were “smoothed”8 and then amortized over a period of 10 years beginning June 30, 2005.

In Fiscal Year (FY) 2009, the City closed a $68.5 million deficit that resulted from the Great Recession in 2008 and 2009 by making significant cuts to other programs. However, as of June 20, 2009, the City still faced a $120 million projected deficit for FY20109 as a result of the Great Recession. As of June 30, 2009, the balance in the PAF showed a deficit of $514,413,177 based on a 6.8% post-retirement earnings assumption rate. At a 5% assumption rate, that deficit would have been $799,133,666, yet an amount greater than all of the earnings attributed to active and retiree Plan member assets nevertheless would have to have been transferred to the Paid-Up Benefit Fund for a FY2010 Variable Benefit increase.

The City addressed the FY2010 crisis with additional cuts to core services, but unforeseen reductions in State aid and revenue shortfalls resulted in an additional, mid- year deficit of $60.2 million, which necessitated more cuts, including unpaid furloughs. The record snowfall in 2010 required still more cuts to City services and personnel, as well 8 “Smoothing” is not the same thing as amortization. Smoothing is a method of phasing in recognition of losses or gains for a given year for the purposes of actuarial value of Plan liabilities or assets to arrive at the City’s annual contribution obligation. Amortization is the gradual reduction of debt over a given period, which, in the context of the Plan, allows the City to gradually fund its unfunded pension liability. 9 The City operates on a July 1 fiscal year.

For example, FY2010 began on July 1, 2009, and ended on June 30, 2010. 10 as the use of $30 million of emergency reserves. As a result of these conditions, the City faced a $121 million budget deficit for FY2011. This was the City’s third consecutive year of declining revenues and multi-million-dollar budget deficits. As of June 2010, Plan assets totaled $1,295,823,326.

The liabilities owed to retired Plan members as of that date exceeded Plan assets by more than $200 million. The FY2011 recommended budget included a $101 million contribution for the Plan, but did not take into account the additional $64 million contribution that, in light of the stock market’s partial rebound, the City would be required to make if it retained the Variable Benefit and followed the Board’s recommendation to reduce the assumed investment-return rate. In an effort to secure the necessary funds to balance its budget, the City made still more cuts and raised $50 million in new taxes from its already depleted tax base. In the Spring of 2009, then-City Council President Stephanie Rawlings-Blake had sought advice from the Greater Baltimore Committee (the “GBC”) on how the Plan might be fixed.

In response, the GBC formed a Fire and Police Pension Task Force, which produced a report and recommendations regarding modifications to the Plan to rectify what it observed was an “urgent” crisis. The GBC report confirmed that “[t]he City of Baltimore is facing a serious fiscal challenge. Current contributions to fund the [Plan] are inadequate to fully cover the existing and anticipated liabilities required under the pension system.” The report further explained that the combination of “negative investment performance of 21.9%, the recognition of additional accumulated losses … used in previous years to provide benefit improvements to members and retirees, contribution reductions by the City, and costly post-retirement benefit increase provisions [(the Variable Benefit)], will drive 11 the employer contribution requirements to unsustainable new highs.” The GBC also noted the stark contrast between the Plan’s actuarial valuation, which indicated a funded ratio of 84%, and its market value of 58.2%. The GBC report further averred that a failure to fix the Plan might impair the City’s ability to attract new fire and police employees, as well as new businesses, and might increase the cost of borrowing – a consequence that could result in higher taxes or further budgetary pressures on the City.

The report also confirmed the existence of the City’s serious financial problems and the inadequacy of the current contributions to fully cover the existing and anticipated liabilities required under the system, as well as the threat to the City’s ability to provide basic public services and fulfill the commitment it made to retirees. The GBC recommended replacing the Variable Benefit with a COLA not to exceed three percent. The circuit court’s findings echo the GBC report’s conclusions. The court found that “[t]he Plan was unsustainable in its own right.

The design of the Variable Benefit was fundamentally flawed from the start – posing a potential independent annual financial obligation unafflicted by past years’ market performance and the impact such performance might have on the City’s ability to fund the basic benefit in any given year. That design made the Variable Benefit particularly ill-suited to operating the Plan in a volatile market.” The circuit court also found that the Plan’s financial problems, including the unsustainable Variable Benefit, “threatened to dismantle the City’s already weakened capacity to provide basic, core services to City residents” and “its ability to keep pace with its basic benefit Plan obligation.” 12 Following the GBC report, when it appeared inevitable that legislative changes would be made, police and firefighter union representatives acknowledged that the City could not afford to repair the funding level of the Plan by reducing the post-retirement assumed rate of return to five percent. The unions proposed eliminating the Variable Benefit entirely in favor of a plan that included a fixed 2% COLA and increasing employee contribution requirements from 6% to 9%, spread over an equal number of years. Ultimately, the unions amended their proposal in June 2010 to include extending the 20-year open, level dollar amortization period (then in place) to a 30-year open, level percent-of-pay amortization period; the unions proposed not only to extend the amortization period, but also to change the method in a way that would allow for smaller funding payments at the front end of the period, further exacerbating the City’s unfunded Plan liabilities.

The City found the unions’ proposal unappealing because it did not repair the problem but rather delayed it for another day and another administration. In October 2009, the Board voted to adopt the Plan actuary’s recommendation to reduce the post-retirement earnings assumption rate from 6.8% to 5%. Then Mayor Rawlings-Blake believed that, absent legislative modification of the Plan by the close of FY2010, the “financial health of the City” would be “changed” because of the City’s inability to meet its increased contribution obligation brought about by a drop in the post- retirement assets earnings assumption rate per the Board’s recommendation. Mayor Rawlings-Blake believed that other legislative changes to the Plan were necessary to put the City on the path of pension plan sustainability. 13 Ordinance 10-306 On June 7, 2010, Council Bill 10-0519 was introduced with proposed changes to the retirement benefits provided under the Plan.

At the June 2010 hearing on Bill 10-0519 before the Taxation, Finance and Economic Development Committee of the City Council, Appellant Robert F. Cherry, Jr. testified that the unions acknowledged well before that time that the Plan had systemic problems requiring change.10 Mr. Cherry noted that “[w]e did submit a proposal back in March 2009, so although we have been recently meeting to come up with an alternative, it was the Unions who first recognized that this Plan, or the problem with the Plan is a lot more systemic and going forward we recognize that we need to increase our contributions…. [E]liminating the Variable Benefit was something our retirees will be willing to do if, in turn, you’d give them a COLA that they can live with and their widows can live with.” The unions’ actuary, Thomas Lowman, presented the unions’ counterproposal at the June 2010 hearing.11 Mr. Lowman told the lawmakers: “We acknowledge the [P]lan is in trouble; we acknowledge that that trend line has to come down.” Mr. Lowman further acknowledged that the City was unable to fund the “true cost” of the Plan if the post- retirement investment assumption were dropped to five percent: “$165 million; that’s the true cost of the benefits if you don’t do anything. We know you can’t afford that.” 10 At the time that the legislation was being considered, Mr. Cherry was the President of Lodge 3, the City’s chapter of the Fraternal Order of the Police. 11 Eight years later, Mr. Lowman would testify as one of Appellants’ expert witnesses at trial. 14 On June 21, 2010, the City Council voted to adopt Bill 10-0519. Mayor Rawlings- Blake signed the bill into law as Ordinance 10-306 (hereinafter sometimes referred to as the “Ordinance” or “10-306”), effective June 30, 2010. Ordinance 10-306 modified the terms of the Plan in several important respects.

First, it replaced the fully market-driven Variable Benefit with a “0-1-2” age-based COLA. Under that tiered COLA, a retiree member (or beneficiary) age 54 or younger on June 30 receives no increase; a 1% increase is paid to those aged 55 to 64 years as of June 30; and a 2% increase is paid to those aged 65 and older as of June 30.12 Second, under the Ordinance, for the first time, the City became a guarantor of all COLAs and past Variable Benefit increases. Third, it amended Article 22 to include a $16,000 minimum annual benefit for spousal beneficiaries of pre-July 1, 1996 retirees who completed 20 or more years of service. Prior to the enactment of Ordinance 10-306, the Plan included no benefit floor for retiree members or their beneficiaries.

Fourth, it changed the Service Retirement eligibility requirements. Prior to the enactment of the Ordinance, Service Retirement eligibility depended on the date an employee became a Plan member. For those who became Plan members on or before June 12 After the City’s actuaries advised that the City could not afford a 2% COLA, as requested by the unions, Thomas Taneyhill (the Plan’s Executive Director) developed the 0-1-2 COLA in an effort to ensure retirees who are least likely to have other income streams receive a raise when most needed in their stage of life. According to Mr. Taneyhill, “if you’re trying to get to a place that’s affordable that we can sustain that tries to get the best benefit for the most people, that’s why that was picked.” 15 30, 2003, Service Retirement was available upon the earlier of reaching age 50 or completing 20 years of service.

For those who became Plan members on or after July 1, 2003, Service Retirement was available upon the earlier of reaching age 50 with at least 10 years of covered fire and police (“F&P”) service, or completing 20 years of service of which at least 10 years was covered F&P service. Following the effective date of Ordinance 10-306, Service Retirement eligibility was bifurcated into those who are grandfathered into pre-10-306 eligibility criteria and those who are not. Members who met pre-10-306 Service Retirement eligibility as of June 30, 2010, as well as members with 15 or more years of covered F&P service as of June 30, 2010, are grandfathered into pre-10-306 Service Retirement eligibility criteria. All other Active members are subject to 10-306 normal Service Retirement criteria, under which members become eligible for Service Retirement upon the earlier of completion of 25 years of continuous F&P service, or reaching age 55 with a minimum 15 years of continuous F&P service.

In addition, Ordinance 10-306 created a new early retirement benefit that enables non-grandfathered members to retire at their pre-10-306 Service Retirement eligibility date, or any date thereafter (but before their post-10-306 Service Retirement eligibility date), subject to a statutory benefit reduction formula. Fifth, Ordinance 10-306 changed the amounts that members must contribute to the Plan. Prior to 10-306, Plan members were required to contribute 6% of their regular pay toward the Plan. Ordinance 10-306 modified this to a 7% contribution, with a gradual increase to 10% by 2013: a) as of July 1, 2010, 7% of regular pay; b) as of July 1, 2011, 16 8% of regular pay; c) as of July 1, 2012, 9% of regular pay; and d) as of July l, 2013, 10% of regular pay.

Sixth, Ordinance 10-306 changed the investment earnings assumption. Prior to 10-306, the Plan operated under a two-tiered “Regular interest” investment earnings assumption for valuation purposes (which figured into the annual City contribution): 8.25% on pre-retirement assets and 6.8% on post-retirement assets. Ordinance 10-306 modified the investment earnings assumption to a straight 8% on all assets. Seventh, the Ordinance modified the Plan’s deferred retirement option, known as “DROP 2.” The original Deferred Retirement Option Plan (“DROP”) was instituted in 1996 to enable retirement-eligible members to continue in active service without sacrificing the pension benefits they would have received in retirement.

This system enabled those eligible for retirement with 20 or more years of service to remain in active duty and collect both their regular salaries plus the sum of what would have been their retirement benefit. Upon retirement, DROP funds were available to members for full withdrawal or as add-ons to monthly benefit payments. DROP was originally adopted on a five-year trial basis under the assumption that it would cost the City a one-time payment of $6 million. Upon review after the initial five years, it was clear that DROP was costing the City several million dollars per year.

The City renegotiated with Plan members and instituted DROP 2 in 2009. DROP 2 was available to Plan members with 20 or more years of service as of December 31, 2009, as well as to Plan members hired on or after January 1, 2010 upon completion of 20 years of continuous F&P service. 17 Under 10-306, DROP 2 eligibility was bifurcated. Members with 15 or more years of covered F&P service as of June 30, 2010, are grandfathered into pre-10-306 DROP 2 eligibility criteria upon completing 20 or more years of service. Members with fewer than 15 years of covered F&P service as of June 30, 2010, are not grandfathered in and attain DROP 2 eligibility upon completion of 25 or more years of covered F&P service.

Finally, Ordinance 10-306 modified the definition of Average Financial Compensation (“AFC”). AFC is used to determine the member’s retirement benefit amount. Prior to Ordinance 10-306, a member’s AFC was the average annual regular pay earnable by a member for the 18 consecutive months during which pay was highest. Following the effective date of Ordinance 10-306, a member’s AFC depended upon whether or not the member was grandfathered into the pre-10-306 AFC definition.

Members with 15 or more years of covered F&P service as of June 30, 2010, are grandfathered into the pre-10-306 AFC definition. Members with fewer than 15 years of covered F&P service as of June 30, 2010, are not grandfathered in. Under 10-306, AFC is the average annual regular pay earnable by a member for the 36 consecutive months during which pay was highest. The Federal Lawsuit Appellants, along with unions that represent them (collectively, the “Federal Plaintiffs”), filed a class action lawsuit against the City and the Board in the United States District Court for the District of Maryland in June 2010.

The Federal Plaintiffs asserted both federal and state law claims based on what they claimed was the City’s failure to fund the Plan and on the change in benefits and other modifications to the Plan effected by 18 Ordinance 10-306. Against the City, among other claims, they alleged a violation of the Takings Clause of the United States Constitution,13 contending that the City’s elimination of the Variable Benefit was a taking without just compensation. They also alleged that the City’s actions violated the Contract Clause of the Constitution,14 and brought a state law breach of contract claim against the City and the Board. After holding two hearings, the federal district court ruled that the substitution of the COLA for the Variable Benefit substantially impaired the contract rights of the groups we refer to here as the Retired and the Retirement-Eligible Sub-classes.

Cherry v. Mayor & City Council of Balt. City, No. CV MJG-10-1447, 2011 WL 11027560 , at ⁷-8, ¹⁴ (D. Md. Sept. 6, 2011). The district court found no Contract Clause violation as to the group we refer to as the Active Sub-class. Id. at ⁸, ¹⁴.

The district court invalidated the portion of the Ordinance eliminating the Variable Benefit and instituting the 0-1-2 COLA, finding an “unconstitutional impairment” of the rights of the Retired and the Retirement-Eligible Sub-classes. Cherry v. Mayor & City Council of Balt. City, No. CV MJG-10-1447, 2012 WL 4341446 , at ¹³ (D. Md. Sept. 20, 2012). The district court dismissed the plaintiffs’ 13 The Fifth Amendment to the United States Constitution provides, in pertinent part: “No person shall be … deprived of life, liberty, or property, without due process of law; nor shall private property be taken for public use, without just compensation.” U.S. Const. amend.

V. The Fourteenth Amendment incorporates the Takings Clause of the Fifth Amendment against the States. See Lingle v. Chevron U.S.A. Inc., 544 U.S. 528, 536 (2005). 14 The Contract Clause is included in Article I, Section 10 of the United States Constitution. It provides: “No State shall … pass any … Law impairing the Obligation of Contracts[.]” U.S. Const. art. I, § 10, cl. 1. 19 Takings Clause claim as moot, and granted the parties’ agreed motion for a voluntary dismissal without prejudice of the state law claims.

Both parties appealed to the United States Court of Appeals for the Fourth Circuit, which affirmed in part and vacated in part the district court’s judgment. Cherry v. Mayor & City Council of Balt. City, 762 F.3d 366 (4th Cir. 2014). The Fourth Circuit held that the Plan members’ rights under the Contract Clause were not impaired, because the members retained a state law remedy for breach of contract.

Id. at 371-74 . Thus, the court affirmed the district court’s judgment to the extent the lower court had held that the Federal Plaintiffs could not prevail under the Contract Clause, and vacated the judgment to the extent it had granted relief to the retired and retirement-eligible members with respect to the substitution of the COLA for the Variable Benefit. Given its holding concerning the Contract Clause claim, the Fourth Circuit vacated the district court’s order dismissing the Takings Clause claim as moot and remanded the case to the district court to decide that claim. Id. at 374 .

In a footnote, the Fourth Circuit stated: “The plaintiffs may attempt to refile in the district court their state law claims that were dismissed without prejudice, or they may initiate proceedings in state court alleging breach of contract under Maryland law. If the plaintiffs choose to pursue either of these two courses of action, the district court may wish to hold any proceedings regarding the Takings Clause claim in abeyance pending the resolution of related contractual issues.” Id. at 374 n.6. On remand, the district court found that the state law claims present novel and complex issues of state law, and that state law issues predominate; therefore, the court 20 declined to exercise supplemental jurisdiction over the state law claims. Cherry v. Mayor & City Council of Balt.

City, No. CV MJG-10-1447, 2016 WL 3955928 , at ³ (D. Md. July 22, 2016). On August 1, 2016, Judge Garbis stayed the remaining federal Takings claim and directed the parties to state court to resolve the state law claims. See id. State Court Proceedings On August 16, 2016, Appellants filed a Class Action Complaint against the City in the Circuit Court for Baltimore City.

On November 28, 2017, Appellants filed a First Amended Class Action Complaint. The putative class included all members and beneficiaries of the Plan as of June 30, 2010 (the date of enactment of Ordinance 10-306). The First Amended Complaint further alleged the existence of the three subclasses described above: (i) the Retired Sub-class, which includes all members and beneficiaries of the Plan who, as of June 30, 2010, were entitled to, and receiving, retirement benefits under the Plan; (ii) the Retirement-Eligible Sub-class, which includes all members of the Plan who, as of June 30, 2010, were eligible to retire but not entitled to receive benefits because they were continuing to work; and (iii) the Active Sub-class, which includes all members of the Plan who, as of June 30, 2010, were working and not yet eligible to retire. In Count One of the Amended Complaint, Appellants asserted a claim for a declaratory judgment, and specifically sought declarations on 14 points, including that “[t]he City, by adopting Ordinance 10-306, breached its contract with the members of the Plan.” In Counts Two, Three, and Four, the Retired Sub-class, the Retirement-Eligible Sub- class, and the Active Sub-class, respectively, claimed for breach of contract.

All three sub- classes alleged that the City breached its contract with them, first, by underfunding the Plan 21 and, second, by enacting Ordinance 10-306. All three sub-classes demanded monetary damages in an amount to be determined at trial, equitable relief, specific performance, attorneys’ fees, costs, and interest. On January 2, 2018, the circuit court, on cross-motions for summary judgment, ruled that the City breached its contract with the Retired Sub-class and Retirement-Eligible Sub-class members by removing the Variable Benefit feature of the Plan and replacing it with an age-tiered COLA, and that a trial was necessary to calculate the damages suffered by these Plan members. The circuit court based its ruling on its determination that members of the Retired and Retirement-Eligible Sub-classes, having satisfied all of the contractual conditions precedent to receipt of benefits under the Plan prior to the adoption of Ordinance 10-306, held vested rights to Plan benefits that the City could not lawfully unilaterally diminish or impair.

With respect to the Active Sub-class, the circuit court ruled that, under City of Frederick v. Quinn, 35 Md. App. 626 (1977), the City had the power to unilaterally modify the terms of the Plan, including the benefits provided, so long as (i) such modifications were prospective and not retrospective and (ii) reasonable. The court further concluded that, as to the Active Sub-class, the modifications were prospective because members of the Active Sub-class had not yet fulfilled the conditions precedent to be eligible to receive benefits under the pre-10-306 structure. Therefore, the Active members did not have a vested right to receive the Variable Benefit when they reached retirement eligibility. The circuit court concluded that a trial would be necessary to determine whether Ordinance 10- 306’s modifications, as to the Active Sub-class, were reasonable. 22 The circuit court conducted a bench trial to resolve the remaining issues beginning on October 29, 2018.

Several expert witnesses testified for both sides. Closing arguments occurred on January 4, 2019. On May 13, 2019, the circuit court entered a Declaratory Judgment and Order, accompanied by a 144-page Memorandum Opinion explaining the bases for its rulings. With respect to the Active Sub-class, the court concluded that Ordinance 10-306 was reasonably intended to preserve the pension system by enhancing its actuarial soundness; therefore, the City did not breach its contract with the Active Sub- class by enacting the Ordinance.

Additionally, the court concluded that the City did not breach its contract with any Plan members by underfunding the Plan. In reaching this conclusion, the court relied on the plain language of the Plan in which there was no intention or requirement for it to be fully funded. In terms of the proper remedy for the breach of the contract with the Retired and Retirement-Eligible Sub-classes, the court determined that returning to the Variable Benefit for those members would be unworkable and thus the court declined to award specific performance. Instead, the court stated that it would award damages in the amount that members of these sub-classes would have received, or been entitled to receive under the Variable Benefit system, from the date Ordinance 10-306 was passed through final judgment by the court.

To calculate this figure, the court accepted the findings of the City’s expert witness, concluding that his assumptions were sound and reflected historical reality. The court rejected the assumptions proffered by Appellants’ expert witnesses, finding that they would result in an improper windfall for the Retired and Retirement-Eligible Sub- 23 classes. The circuit court ultimately awarded more than $30 million in damages to specific members of the Retired and Retirement-Eligible Sub-classes. However, under the damages model proposed by the City’s expert and accepted by the circuit court, many members of those sub-classes received no damages because they were found to have received no less compensation under the 0-1-2 COLA than they would have received under the Variable Benefit.

Appellants noted an appeal of the circuit court’s judgment to the Court of Special Appeals. The City subsequently noted a cross-appeal. On September 8, 2020, before the parties had filed any briefs in the intermediate appellate court, Appellants filed a petition for certiorari in this Court. On November 10, 2020, we granted the petition.

Cherry v. Mayor & City Council of Balt. City, 471 Md. 262 (2020). We have condensed and rephrased the questions the parties have presented in their cross-appeals as follows: 1. Did the circuit court properly conclude that the City did not breach its contract with the members of the Plan by “underfunding” the Plan? 2.

Did the City breach its contract with any of the sub-classes by adopting Ordinance 10-306? 3. Did the circuit court err in its calculation of monetary damages owed to the Retired and Retirement-Eligible Sub-classes? II Standard of Review Maryland Rule 8-131(c) governs appellate review of a circuit court’s findings and judgment after a bench trial: (c) Action Tried Without a Jury. When an action has been tried without a jury, the appellate court will review the case on both the law and the 24 evidence.

It will not set aside the judgment of the trial court on the evidence unless clearly erroneous, and will give due regard to the opportunity of the trial court to judge the credibility of the witnesses. Under Maryland Rule 8-131(c), we “must consider the evidence in the light most favorable to the prevailing party and decide not whether the trial judge’s conclusions of fact were correct, but only whether they were supported by a preponderance of the evidence.” City of Bowie v. MIE Properties, Inc., 398 Md. 657, 676 (2007) (citations omitted); Urban Site Venture II Ltd. P’ship v. Levering Assocs. Ltd. P’ship, 340 Md. 223, 230 (1995); see also Leavy v. Am. Fed. Sav.

Bank, 136 Md. App. 181, 199-200 (2000) (an appellate court “may not reassess the credibility of [an] expert witness, or the weight of [their] testimony. That is quintessentially a job for the trial court sitting as a fact-finder in [the] bench trial. See Md. Rule 8-131(c). In deciding whether there is sufficient evidence to support the trial court’s factual finding, we assume the truth of all the evidence relied upon by the trial court, and of all favorable inferences fairly deducible from that evidence.”). “If there is any competent evidence to support the factual findings [of the trial court], those findings cannot be held to be clearly erroneous.” Della Ratta v. Dyas, 414 Md. 556, 565 (2010) (citation and internal quotation marks omitted); Solomon v. Solomon, 383 Md. 176, 202 (2004); see also Leavy, 136 Md. App. at 200 (“[I]f there is any competent, material evidence to support the factual findings below, the weight and value of such evidence must be left to the trier of facts, as it is not our function to determine the comparative weight of conflicting evidence.”) (alteration in original) (citation omitted).

We review the circuit court’s legal conclusions without deference. See, e.g., Plank v. Cherneski, 469 Md. 548, 569 (2020). 25 III Discussion The Alleged Breach of Contract by “Underfunding” Appellants argue that the City breached the contract by “underfunding” certain parts of the Plan. In the circuit court, as summarized by the court, Appellants based their claim on the following allegations: (1) failure of the City to adopt the Plan actuary’s recommendations to reduce the 6.8% post-retirement asset earnings assumption rate (which enabled the City to avoid the resultant increase in required contributions during the relevant period); (2) use of the actuarial technique of “double smoothing” the losses sustained following the technology bubble burst in 2001-02 (which delayed recognition of those losses and, therefore, depressed the City’s required contributions during the period at issue in this case); and (3) failure to recognize losses resulting from the 2008-09 Great Recession by adopting Ordinance 10-306 instead of fully funding the ARF and PRF as required by §§ 36 and 37 of Article 22. The circuit court rejected these contentions, holding that the sections of the Plan upon which Appellants relied, “read individually or as a cohesive unit, … do not create an obligation on the part of the City to fully fund the Plan.” The circuit court further found that “[i]n addition to the absence of an affirmative obligation to maintain the Plan in a fully funded state, provisions of the Plan at sections 33, 36 and 37 are fundamentally at odds with such an obligation.” According to the circuit court: If the legislature had intended the meaning Plaintiffs attribute, the Plan would require that at all times the Plan be “fully funded,” to use [Appellants’] language, or the equivalent.

Likewise, the legislature would not have 26 afforded the City entitlement to exercise discretion in consultation with industry professional advisors regarding, among other things, the proper methods of accounting for losses and gains. Thus, the circuit court concluded that Appellants’ argument lacked merit: The language of the Plan is plain and clear. It does not give rise to multiple meanings; nor is its meaning doubtful. Therefore, the court finds that the legislature did not intend to require that the City maintain the Plan in a “fully funded” state as Plaintiffs contend; and the Plan did not so require on the effective date of Ordinance 10-306 or at any time at issue in the Amended Complaint.

Specifically, Plaintiffs (Class members) have failed to satisfy their burden to demonstrate that the City breached its contractual duties to any of the three Sub-Classes by l) failing to lower the post-retirement earnings assumption rate from 6.8%; 2) double smoothing the tech bubble losses; or 3) legislatively modifying the Plan following the Great Recession (and not “fully funding” the ARF and the PRF). Before this Court, Appellants argue that the circuit court misunderstood their position regarding fully funding the Plan. Appellants explain that they do not claim the entire Plan must be fully funded – only that the “retiree reserves” (the ARF and the PRF) upon which Variable Benefits are determined must be fully funded at the beginning of each fiscal year to ensure optimal circumstances for Variable Benefit distributions in a given fiscal year. Failure to fully fund retiree reserves, Appellants contend, “reduce[s] the assets upon which a [Variable Benefit] would be calculated and so reduce[s] [Variable Benefit] increases, breaching the City’s promise not to diminish or impair benefits.” The City counters that the circuit court properly rejected Appellants’ argument because there is nothing in the statutory language of the Plan that requires the City to “fully fund” retiree reserves, and, to the contrary, Article 22 permits the City not to fully fund retiree reserves.

We agree with the City on this point. 27 To ascertain whether the City’s level of funding of the PRF15 breached the contract between the members of the Plan and the City, we must construe the relevant provisions of the Plan, as set forth in Article 22. As we have often stated, “[t]he cardinal rule of statutory interpretation is to ascertain and effectuate the actual intent of the [legislative body] in enacting the law under consideration.” Matter of Collins, 468 Md. 672, 689 (2020). “A court’s primary goal in interpreting statutory language is to discern the legislative purpose, the ends to be accomplished, or the evils to be remedied by the statutory provision under scrutiny.” Lockshin v. Semsker, 412 Md. 257, 274 (2010). If the statutory language “is unambiguous and clearly consistent with the statute’s apparent purpose, our inquiry as to legislative intent ends ordinarily and we apply the statute as written, without resort to other rules of construction.” Id. at 275 . “However, we do not analyze statutory language in a vacuum.” Collins, 468 Md. at 689-90 . “Rather, statutory language must be viewed within the context of the statutory scheme to which it belongs, considering the purpose, aim, or policy of the Legislature in enacting the statute.” Id. at 690 (internal quotation marks and citation omitted). We presume that the legislature “intends its enactments to work together as a consistent and harmonious body of law, and, thus, we seek to reconcile and harmonize the parts of a statute, to the extent possible consistent with the statute’s object and scope.” Id.

(internal quotation marks and citation omitted); see also 15 Although retiree reserves include both the ARF and the PRF, the City’s contributions end up in the PRF after a member retires. The ARF holds the member’s contributions. Thus, we focus here on the PRF, as have the parties, when discussing Appellants’ underfunding claim. 28 Whiting-Turner Contracting Co. v. Fitzpatrick, 366 Md. 295, 302-03 (2001) (“[W]hen interpreting any statute, the statute as a whole must be construed, interpreting each provision of the statute in the context of the entire statutory scheme.”). Where statutory language is ambiguous and thus subject to more than one reasonable interpretation, or where the language is unambiguous when read in isolation, but ambiguous when considered in the context of a larger statutory scheme, “a court must resolve the ambiguity by searching for legislative intent in other indicia, including the history of the legislation or other relevant sources intrinsic and extrinsic to the legislative process.

In resolving ambiguities, a court considers the structure of the statute, how it relates to other laws, its general purpose, and the relative rationality and legal effect of various competing constructions.” Lockshin, 412 Md. at 276 (citations omitted). We construe local ordinances and charters under the same canons of statutory construction as we apply to statutes. 120 W. Fayette St., LLLP v. Mayor & City Council of Balt. City, 413 Md. 309, 331 (2010). The plain language of the local ordinance is the primary source of legislative intent.

O’Connor v. Baltimore Cty., 382 Md. 102, 113 (2004). In determining the legislative intent of a local ordinance, we assign the words of the ordinance “their ordinary and natural meaning and avoid adding or deleting words to impose a meaning inconsistent with the plain language” of the measure. 120 W. Fayette St., 413 Md. at 331 (quoting O’Connor, 382 Md. at 113-14 ). Moreover, “a court must read the language of the charter or ordinance in context and in relation to all of its provisions[.]” Id. (quoting Howard Research Dev.

Corp. v. Concerned Citizens for the Columbia Concept, 297 Md. 357, 364 (1983)). 29 Initially, we observe that the circuit court, in fact, considered and rejected Appellants’ contention that the City breached the contract by not fully funding retiree reserves. In her Memorandum Opinion of May 13, 2019, Judge Rubin summed up her ruling against Appellants on this claim by stating (after explaining how the various pertinent parts of Article 22 work together): “Plaintiffs (Class members) have failed to satisfy their burden to demonstrate that the City breached its contractual duties to any of the three Sub-Classes by … not ‘fully funding’ the ARF and the PRF[.]” We agree with the circuit court’s analysis. Nothing in the plain language of Article 22 requires the City to “fully fund” retiree reserves. And § 36(d), which governs the calculation of the City’s annual contribution to the Fund, demonstrates that the City Council did not intend to require the City to maintain funds in the PRF at any given time that were sufficient to pay all pension benefits to which Plan members would be entitled over time.

As stated above, the City’s annual contribution to the Plan consists of a “normal contribution” and an “accrued liability contribution.” Art. 22, § 36(d)(2). Subsection 36(d)(3) provides further detail regarding the first of these two components: On the basis of regular interest and of such mortality and other tables as shall be adopted by the Board of Trustees, the actuary engaged by the Board shall make a valuation to determine the required contribution by the City … to the Pension Accumulation Fund. The actuary shall determine a normal cost for each employee which is equal to the amount of annual contribution which is necessary to provide his benefit if such contributions had been made annually from his date of employment to his date of retirement. The total of amounts so determined shall be known as “normal cost contribution”. 30 Subsection 36(d)(4) then provides further requirements concerning the second of the two components, the “accrued liability contribution”: (i) For each employee, the Board of Trustees shall calculate an accrued liability equal to the accumulation of the annual normal cost contribution described in paragraph (3) of this subsection from date of employment to the valuation date on the basis of the actuarial assumptions adopted by the Board of Trustees.

(ii) The accrued liability [thus] calculated … shall be added to the reserve for retirement benefits payable to retired members from the Pension Accumulation Fund to obtain the total accrued liability. (iii) The assets of the Pension Accumulation Fund shall be applied against the total accrued liability calculated for all participants to determine the amount of unfunded accrued liability. (iv) If the total accrued liability exceeds the assets in the Pension Accumulation Fund, an accrued liability contribution shall be determined as the amount that is sufficient to meet regular interest on the unfunded accrued liability and to amortize the principal of the unfunded accrued liability over the period determined by the Board of Trustees. (v) If the assets in the [PAF] exceed the total accrued liability, the excess assets shall be amortized over the period determined by the Board of Trustees to reduce the required contribution by the City of Baltimore.

(Emphasis added). Subsection 36(d)(5) then reiterates that these two components constitute the City’s required contribution (“The required contribution by the City … is the amount equal to the normal cost, plus the accrued liability contribution or less the amortization of the excess assets, as the case may be.”), but crucially provides that “the aggregate payment by the City must be sufficient, when combined with the amount in the fund, to provide the pensions and other benefits payable out of the fund during the then-current year.” 31 Thus, subsections 36(d)(2) through (5) provide the framework for determining the amount of the City’s contribution to the Plan: (i) a normal cost component related to the value of benefits earned in the year for each working employee; and (ii) an unfunded actuarial liability component related to the amount by which the Plan is underfunded, the sum of which must be at least the amount needed to pay the pensions and other benefits due to members in the “then-current year.” As the City observes, subsection 36(d)(4)(iv) “directs that unfunded liability is addressed like a mortgage – the City makes regular payments of interest and principal over a specified term and at a specified interest rate.” On the other hand, if the assets in the PAF exceed the total accrued liability, subsection 36(d)(4)(v) requires the amortization of the excess assets to reduce the City’s contribution. Thus, § 36(d) contemplates the possibility of either underfunding or overfunding of the Plan. This convinces us that Appellants are incorrect in contending that Article 22 prohibits underfunding of retiree reserves necessary to pay all benefits to which Plan members will be entitled over time.

To the contrary, Article 22 requires funding in any given year that is sufficient to pay the pensions and other benefits due to members in the “then-current year.” Id. § 36(d)(5). It is undisputed that the City never breached its obligation to pay all pensions and benefits due to members in any given year. Appellants attempt to avoid the import of § 36(d)’s various provisions by arguing that § 36(d) only governs the PAF, not the PRF. According to Appellants, § 36(d)’s contemplation of potential underfunding only applies to the amounts necessary to make direct payments from the PAF to those Plan members who retired with “Prior Service” 32 credit – i.e., Plan members who retired from service prior to January 1, 1926.

In support of this proposition, Appellants note that Plan members who retired from service after January 1, 1926, receive payments from the PRF (and the ARF), not the PAF. Appellants’ argument distinguishing between the PAF and the PRF lacks merit. Appellants do not point to any language in Article 22 that requires the City to fund the PRF at a greater rate than the PAF. Notably, § 36(d)(7) describes the transfer of funds from the PAF to PRF – “on the retirement of a member” in “an amount equal to the member’s pension reserve.” The plain language of this subsection does not impose an obligation to maintain the PRF in a fully funded state at all times or require additional contributions to remedy investment losses immediately when they occur.

Further, § 36(d)(5), not § 36(d)(7), operates to ensure compliance with the guaranty of § 37 by requiring the City’s contribution to be sufficient, accounting for the actuarial condition of the PAF, to remedy any deficiency in the funds to pay out pensions in the then-current year. In addition, the structure and content of § 36(d) as a whole does not support an interpretation that § 36(d)(5) only applies to benefits promised to public safety employees retired prior to January 1, 1926, especially given that the language contained in § 36(d) has remained in the Plan despite numerous amendments to Article 22 since 1962. It seems impossible that any currently living Plan members retired from service prior to January 1, 1926. The idea that the City Council would retain detailed explanations in § 36(d) concerning the interplay of “normal contributions” and “accrued liability contributions” that would have no practical effect on any living Plan member – even after amending 33 Article 22 as late as 200316 – is far-fetched.

It is much more likely that the City Council intended the provisions of §§ 36(d)(2) through (d)(5) to apply to all Plan members, regardless of when they retire from service. This conclusion is reinforced by § 36(d)(1), which defines the PAF as “the fund in which shall be accumulated all reserves for the payment of all pensions and other benefits payable from contributions made by the City[.]” (Emphasis added). The PRF is housed within the PAF. The fact that funds equal to a Plan member’s pension reserve are transferred from the PAF to the PRF when the member retires, see id. § 36(d)(7), does not demonstrate the City Council’s intent to apply a different set of funding rules for the PRF that the City Council has conspicuously not defined anywhere in Article 22.

We agree with the circuit court that, had the City Council intended to require full funding of the Plan (or specific funds within the Plan) at all times, then the plain language of the relevant provisions governing funding would demonstrate such an intent. See, e.g., In re Walker, No. 8, Sept. Term 2020, slip op. at 23 (Md. Mar. 30, 2021) (“If the General Assembly had intended for the MCLA to permit continuing liens, as an expedient mechanism for securing future condominium association costs and fees, it could have said so in the statute.”); Lillian C. Blentlinger, LLC v. Cleanwater Linganore, Inc., 456 Md. 272, 317 (2017) (“Presumably, had the General Assembly intended to include the requirement that a DRRA be supported by enhanced public benefits, the General Assembly 16 In 2003, the City Council modified § 36(d), making what appeared to be stylistic changes to subsection (d)(5). See Balt., Md., Ord. 03-576 (2003). 34 would have taken care to define the term ‘enhanced public benefit,’ or otherwise delineate what would constitute an enhanced public benefit. Absent any indication in the relevant statutory language or the legislative history that the General Assembly intended that a DRRA be supported by enhanced public benefits, we decline to construe the DRRA statute to reach such a strained result.”); Montgomery Cty. v. Phillips, 445 Md. 55, 76 (2015) (“Tellingly, the General Assembly could have, but did not, modify or otherwise raise the tax ceiling on the combined State agricultural land transfer tax and county agricultural land transfer tax that may be imposed.”).

Finally, we reject Appellants’ attempt to discern legislative intent to “fully fund” the PRF by arguing that the failure to do so “is to reduce the assets upon which a [Variable Benefit] would be calculated and so reduce [Variable Benefit] increases, breaching the City’s promise not to diminish or impair benefits.” The City was not required under Article 22 to contribute more than § 36(d) dictates in order to create a larger Variable Benefit in any given year. Indeed, under § 36(d)(4)(v), the City Council directs that, if assets in the PAF exceed the total accrued liability, the excess assets shall be amortized to reduce the required contribution by the City. In short, the City did not have an obligation to use excess assets to inflate the value of the PRF to maximize the amount of the Variable Benefit. For the above reasons, we affirm the circuit court’s ruling that the City did not breach its contract with the Plan members by underfunding the Plan.

The Alleged Breach of Contract Through Enactment of Ordinance 10-306 The circuit court ruled that, by enacting Ordinance 10-306, the City breached its contract with the Retired and Retirement-Eligible Sub-classes, but did not breach the 35 contract it had made with the members of the Active Sub-class. Appellants agree with the former ruling and disagree with the latter. Not surprisingly, the City agrees with the latter determination and disagrees with the former. As discussed below, we agree with the circuit court as to both conclusions. 1.

Maryland Caselaw Concerning a Government’s Power to Change a Pension Plan For almost 50 years, it has been settled that, under Maryland law, a “municipal corporation[] may make reasonable modifications of a pension plan at any time before the happening of the defined contingencies” in that plan. Saxton v. Bd. of Trs. of the Fire & Police Emps. Ret. Sys., 266 Md. 690, 694 (1972).

This Court’s decision in Saxton is generally cited for that proposition. See, e.g., Baker v. Baltimore Cty., 487 F. Supp. 461, 468 (D. Md. 1980); Quesenberry v. Washington Suburban Sanitary Comm’n, 311 Md. 417, 423 (1988); Bd. of Fire Comm’rs v. Potter, 268 Md. 285, 295 (1973); Davis v. City of Annapolis, 98 Md. App. 707, 719 (1994). The issue in Saxton was whether the deceased firefighter’s widow (Mrs. Saxton) was entitled to a special death benefit upon the death of her husband (Lieutenant Saxton). Lieutenant Saxton worked for the Baltimore City Fire Department from 1940 through 1969.

In May 1968, he suffered incapacitating injuries in the line of duty. 266 Md. at 691 . On May 7, 1969, he was involuntarily retired and was awarded a “special disability benefit” under the then-applicable provision of the Plan, Article 22, § 34(e) (1966). Id. On January 1, 1970, Lieutenant Saxton died as a result of his injuries.

Mrs. Saxton subsequently filed 36 an application with the Board of Trustees for a “special death benefit” under § 34(i). Id. at 692. The Plan’s “special death benefit” provision in effect at the time stated: Upon the receipt of proper proofs of the death of a member in service arising out of and in the course of the actual performance of duty ... there shall be paid: (1) [to his designated beneficiary, and if none, to his estate, his accumulated contributions and a pension of 100% of his current compensation] (2) To his widow to continue during her widowhood … Id. (quoting Art. 22, § 34(i) (1966) (emphasis and alterations by the Court)).

The Board denied Mrs. Saxton’s claim, and Mrs. Saxton then filed a mandamus action to require the Board to award the special death benefits to her. Id. at 691-92. On appeal to this Court, Mrs. Saxton noted that prior versions of what became § 34(i) (its “progenitors,” as the Court put it) did not “limit[] entitlement to death benefits in instances where death occurred in service, if it were occasioned by injuries sustained in the line of duty.” Id. at 693. Mrs. Saxton argued that “a pension law, being remedial legislation, should be liberally construed,” id. at 694, and therefore, notwithstanding the qualifying language in § 34(i), the Court should interpret § 34(i) in keeping with the City Council’s prior demonstrated intent not to withhold death benefits from spouses of decedents who retired from service but later died of injuries incurred in the line of duty.

See id. at 693-94. This Court affirmed the denial of mandamus, reasoning that there was no ambiguity in the language of the special death benefit provision in the 1966 version of the Code. Id. 37 at 694.17 We stated that “the right to a pension depends upon the controlling statutory provisions and the claimant must satisfactorily perform and meet all conditions precedent.” Id. Mrs. Saxton was not entitled to the special death benefit because Lieutenant Saxton did not fulfill the condition precedent set forth in § 34(i) – i.e., he was not a member in service at the time of his death.

Id. at 693-94. Pertinent to this case, the Saxton Court stated: “The ground rules here, to put it quite simply, were changed prior to the date when Lieut. Saxton sustained his injuries. In all states municipal corporations may make reasonable modifications of a pension plan at any time before the happening of the defined contingencies[.]” Id. at 694.

Saxton stands for the proposition that a