Atlanta leaders on Monday discussed several ideas -- including raising property taxes -- to pay for the city's most pressing challenge, its skyrocketing pension costs.

The idea, however, that was more popular among some Monday -- particularly union leaders -- is to create a special sales tax to help fund its three pension plans.

Those and other options were discussed during a two-hour presentation on pensions held at City Hall by a special panel created by Mayor Kasim Reed to look at pension reform.

Some compare the problem to the ongoing effort to fix the city's crumbling sewer system, which resulted in a series of rate increases on water users and a penny-per-dollar sales tax to help fund the ongoing $4 billion program.

"It is as weighty a challenge as the sewer infrastructure work," said City Council President Ceasar Mitchell.

More than 20 percent of city spending is devoted to pensions. The city is spending nearly as much money on pensions as it does for its police department. At its current pace, the mayor told reporters Monday, it will be tougher for the city to provide services such as fixing sidewalks and adding more parks and greenspace.

"Atlanta's [potential] greatness is really in the money we're spending on pensions," Reed said. "It's literally absorbing all of the dollars."

The mayor added: "I am not calling a false alarm."

The amount of money Atlanta spends on pensions has more than doubled since 2001. That year, the city spent $55 million; it is expected to spend about $125 million on pensions in the 12-month period that ends June 30. By 2015, the annual cost to the city is estimated at $160 million.

Figures and options were laid out in a report presented by panel chairman John Mellott, who is a former publisher of The Atlanta Journal-Constitution, is a certified public accountant and was treasurer of the AJC's parent company Cox Enterprises.

Atlanta's three pension plans covering police, firefighters and general employees have long been underfunded. In 2001 and 2005, the City Council approved several changes to increase retirement benefits. Those changes, however, were made without determining a way to pay for them.

Meanwhile, the three pension funds have not earned as much as anticipated. As a result, the plans are about 53 percent funded, Mellott reported. The recommended average is 80 percent, some experts say. The city has an unfunded liability of about $1.5 billion, officials said. In 2001, the unfunded liability was $321 million.

The city has agreed to fully fund its pensions in the next 30 years. Wall Street looks down on poorly-funded pension plans, which could force the city to pay higher interest rates to borrow money.

Mellott offered three options in his presentation to get back on track. They are to collect more money by raising taxes or creating a special sales tax; spend less by laying off more workers or forcing employees to take time off from their jobs without pay; or getting city workers to pay more money into their pensions.

"This is step one in a long and complex journey," Mellott said.

The presentation did not include estimates of how much money these options would generate or save.

The mayor told reporters he would not support a property tax increase. Mitchell said he would be reluctant to raise taxes to deal with the problem.

Police Lt. Scott Kreher, head of the city's largest police union, said he was intrigued by the prospect of a sales tax to help pay for pensions, an idea that must be approved by the state Legislature. Atlanta's school system received $94.1 million last year from a penny-per-dollar sales tax. City Hall officials say the annual return from a 1 percent sales tax should be between $115 million and $122 million.

Councilman Howard Shook pointed out the competition for new sales taxes. Local and state leaders are talking about a transportation plan that will allow local governments to create a sales tax to fund traffic improvements, one of metro Atlanta's biggest problems. The City Council earlier this month passed legislation asking the Legislature to approve a referendum for a sales tax to pay for public safety equipment and to improve its roads, bridges and sidewalks.

Fire Rescue Lt. Jim Daws, head of the city's largest firefighter union, said he'd support a sales tax for pensions over one for infrastructure.

"This ballooning unfunded obligation is the most pressing issue I see," said Daws, who is a member of the pension panel.

Shook, also on the panel, said he is more supportive of possibilities in the third option, such as creating a new pension plan for city workers and exploring joining the Social Security system. The mayor said Monday he's interested in the Social Security idea, but added it is a "long-term" solution to the city's pension problems.

Visiting Georgia State University professor Carter Doyle, who specializes in pensions, said increasing the amount of money city workers pay into their pensions is the best scenario of the three funding options presented Monday. Doyle, a former SunTrust Bank economist, also suggested the city consider pension obligation bonds.

"The interest rate [on the bonds] is 3 or 4 percent. It's at an all-time low," Doyle said. "If you can get a good rate of return, you are filling in the gap that way."

The panel is expected to submit its final report to the mayor next month. Reed will then make recommendations to the City Council.

The panel

Atlanta’s Pension Reform Panel, named by Mayor Kasim Reed in December, is performing the service at no cost to the city.

In addition to John Mellott, the panel includes: Jim Wells, SunTrust Bank; Ed Heys, Deloitte; Ben Johnson, Alston and Bird; Richard Anderson, Delta Air Lines; Carol Tome, Home Depot; Dan Kolber, Baker Donelson; Howard Shook, City Council member; Calvin Vismale, city council appointee; Jim Daws and Scott Kreher, city employees; and  Rod Edmond, Jeanette Lebrecht and Jon Calloway, city appointees.