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HomeMy WebLinkAbout2006 11 16 Handout Given For Agenda Item 300 Date: November 16, 2006 The attached document was distributed to the City Commission by Staff at the November 16, 2006 City Commission Workshop, during the discussion of Regular Agenda Item "300." A STUDY TO DETERMINE THE FEASIBILITY AND DESIRABILITY OF APPROVING CHANGES TO THE CITY'S CURRENT UNIFIED CITYWIDE DEFINED BENEFIT PENSION PLAN PHASE B PRELIMINARY FEASIBILITY AND DESIRABILITY STUDY November 16, 2006 INTRODUCTION This Report is being provided pursuant to City Commission Resolution 2006-52 fulfilling the Phase B Preliminary Feasibility and Desirability Analysis Section of the Pension Plan Study. HISTORICAL FRAMEWORK In the Phase A meeting, the City provided an historical review of the evolution of the City's pension plan program. That report clearly laid out that the City went through a lengthy analysis of pension plan options several years ago in order to determine the direction the City wanted to move in with its pension plan. It was further revealed that elected officials at that time decided that Chapter 175/185 plans and State Retirement Plans did not fit the conservative business philosophy of the City which embodied the following seven core values. 1. Unique to Winter Springs' Based Upon Need. 2. Equal Benefits for all Employees. 3. Simple and Understandable. 4. Control Vested in Local Elected Officials. 5. Affordable and Fiscally Sound. 6. Maximum Advisory Input from Taxpayers Advising the Elected Officials on Benefit Levels the Community would Support. 7. Maximum Advisory Input from Employees to Stay Informed and to Provide Input. In that report it was noted that elected officials were highly biased in favor of defined contribution plans, and highly biased against defined benefit plans due to the following: 1. Escalating Benefits and Benefit Cost of Defined Benefit Plans. 2. Disability Scams. 3. Loss of Control. 4. Distance from Employees. These core values resulted in a unique floor offset plan that encompassed all of these values and making Winter Springs a leader in pension innovation in Florida. Even though the Commission subsequently agreed to approve a defined benefit plan voted on by City employees, the Commission made it clear that they did not desire to follow the herd, and that the structure of the defined benefit plan would comply with their core values. The defmed benefit plan was indeed structured to embody those core values which have endured until today as follows: 1. It was unique to our needs. 2. Treats all employees equally. 3. Simple in structure. 4. Commission retains full control. 5. It is very efficient and very sound fiscally. Phase B: Preliminary Feasibility and Desirability Study Page 1 - 6. Taxpayer Advisory Board ensures maximum taxpayer input. 7. Employees are encouraged to attend Advisory Board meetings and provide input. CURRENT FRAMEWORK - WANT VS. NEED Even though it appears that some elected officials and pension advisory board members may have an interest in changes, their interest in those core values is still strong. In fact, there is a strong feeling among some that the State Chapter Plans are broken due to their inherent lack of checks and balances, checks and balances which embraces full accountability in independent boards rather than elected officials who will ultimately be held accountable for the performance of these pension plans over which they have little control, and that exposes local taxpayers to legislative meddling in local affairs and unfunded legislative mandates. A review of the attached recent New York Times Investigative Report provides a mirror image of concerns that are being expressed in Winter Springs, and statewide regarding Chapter 175/185, State Retirement, and Municipal Retirement plans. Nothing could be more reflective of these concerns than the rationale advanced by advocates of Chapter 175/185 plans which hold: There is all this insurance premium money out there that is being left on the table. We are paying those taxes, why shouldn't we spend them? Indeed this paradigm is the foundation of the problem with public pension plans. A prominent author sums it up this way: "Times of plenty catapult us so far into our wants that we cease to recognize our needs. " This focus upon what may appear to be un utilized revenues simply asked the wrong question. The appropriate question is not how much can we spend? The appropriate question is how much is enough? Specifically, what level of pension benefits should the taxpayers of Winter Springs be asked to spend in order to provide its employees with a reasonable retirement plan for their loyal service to them? There are two answers to this question as follows: 1. The first and easiest answer is: that level of pension benefits which is needed as part of a compensation plan to attract and retain competent employees. In staffs opinion the City's current plan already satisfies that test. 2. The second answer is more difficult and requires a definition of a sound but not excessive plan that meets the needs of employees in their retirement years. There are many renderings on this issue. One of the traditional models, demonstrated below, is instructive. Phase B: Preliminary Feasibility and Desirability Study Page 2 Maintenance of Income at Retirement Employer Based Retirement Benefits Social Security Benefits Personal Savings 50% 25% 25% 100% Assuming that employees served 30 years in the City and would save sufficient funds to provide an income stream equal to 25% of their retirement income the City's current plan would far exceed the above model as follows: Maintenance of Income at Retirement Employer Based Retirement Income Social Security Personal Savings 90% 25% 25% 140% In a perfect world this would be a great plan. However, in reality this would rarely happen. First, employees do not, on average, save enough to provide an income stream equal to 25% of their retirement income. Second, employees are forced to leave their jobs due to reasons beyond there control, voluntarily choose to leave their jobs due to their desire to change occupations, are disabled by illness or injury and on and on. However, it is a difficult case to make that the City's current pension plan is not sufficient to meet employee needs. CURRENTFRAMEWORK-THEE~ONMENTALSCAN As demonstrated in the Economic Analysis section of this report, revenues generated by insurance premium taxes are not sufficient to offset the cost of adoption of Chapter 175/185 plans in Winter Springs. Awareness of the lay of the land is important in making public policy decisions. As demonstrated by the recent voter rejection of the County referendum on land conservation it would be difficult to find a less opportune time for a public discussion of any form of increased spending on what would appear to be unnecessary public expenditures, and in particular, enhancing retirement benefits for any governmental employees. Florida is on the verge of a tax revolt resulting from a combination of factors including high energy prices, unprecedented increases in property insurance, escalating commercial property taxes caused by the "save our homes" initiative, loss of middle and lower level income jobs caused by foreign competition, and the evaporation of private sector pension benefits caused from the rapid conversion of defined benefit plans to deferred contribution plans and corporate failure. These public concerns are further exasperated by concerns about the war and massive federal debt. A new Governor has been elected on a platform of doubling the homestead exemption, a measure which if enacted by the legislature, will cause local governments to either increase taxes to replace these lost revenues, or make deep cuts in services. Phase B: Preliminary Feasibility and Desirability Study Page 3 FINAL PERSPECTIVES The legal, economic, desirability and environmental scan factors discussed in this report highly suggest that this may not be the right time for any changes in the City's pension plan. A more productive discussion may include the following strategies: 1. Maintaining the current plan. 2. An exploration of ways in which the current plan could be rebalanced and be incrementally improved to include increases in disability protection coordinated with the benefits of the normal retirement age and increased personal savings. This approach mirrors the original floor offset plan and the Chapter 175/185 Share Plan. The benefits of this approach are as follows: 1. It maintains the core conservative business values and checks and balances embodied in the current plan. 2. Encourages savings which would be the full property of the employee. 3. Provides greater income protection from bona fide disabilities. 4. Encourages keeping employees in their jobs rather than retire before the time that they can no longer carry out the duties of their respective occupation. Phase B: Preliminary Feasibility and Desirability Study Page 4 Retirees Get Albany Attention, And New York City Gets the Bill By Michael Cooper, New York Times August 22, 2006 It began with a simple plea for equity, for the same deal that other unions had. It ended with thousands more former New York City employees getting expensive Christmas presents: bonus checks in each year of retirement that would eventually reach $12,000, all paid for by taxpayers. The road to a new pension benefit that will eventually cost New York City an estimated $100 million a year began in 1995, when the city's correction officers decided that on top of their regular pensions, they deserved the "Christmas bonuses." Retired police officers and firefighters already received such checks, and the correction officers reasoned that they should, too. When the union asked for the money during contract negotiations, the city said no, saying it could not afford such largess. But the matter did not end there. The union turned to Albany. It endorsed Gov. George E. Pataki's 1998 re-election bid and gave state lawmakers and political parties $79,000 in campaign donations in 1999. Then, after more lobbying and contributions, it persuaded the City Council to ask the state to pass the bill. That year a bill establishing the annual bonuses sailed through the Legislature. The Giuliani administration, disturbed about the city's being stuck with the cost, howled in protest, and both the city and state comptrollers and the governor's own budget division recommended a veto. But the governor signed the bill. Over the last six years, those checks have cost the city $60 million - during a period when big budget gaps forced the city to layoff workers, close firehouses and raise taxes to balance its budget. The bill was hardly an aberration. At a time when many businesses are reducing or eliminating pension plans, Governor Pataki and the Legislature have approved billions of dollars in new pension benefits for government workers after lobbying from politically connected unions, an analysis by The New York Times of pension bills and campaign contributions shows. In recent years, the state decided to let city auto mechanics retire at age 50 with full pensions. It allowed the city's 911 operators and urban park rangers to retire after 25 years of service, even if they are still in their 40's. It passed laws decreeing that heart disease be considered a job-related Phase B: Preliminary Feasibility and Desirability Study Page 5 - ailment for correction officers, emergency medical technicians and sanitation workers, qualifying more workers for lucrative disability pensions equal to three-quarters of their salary, all exempt from state and local taxes. The state also gave death benefits to people who had quit their city jobs before retirement age, enabling survivors of people who left the city work force to collect payments, often in the tens of thousands of dollars, when their spouses die. Some city workers are entitled by state law to pensions that are too big even to be allowed under federal Internal Revenue Service regulations. So in 2004, citing "the numerous new plans and benefit improvements" that allowed city workers to retire earlier with bigger pensions, the state passed a law allowing the city to set up a special fund to pay those workers the difference between what the federal government allows for their pensions and what the state says they are owed. The enhancements come even as some calculations by the city suggest that its pension funds, which officially appear to be nearly fully funded, may in fact have a combined shortfall of as much as $49 billion. Many of these expensive pension promises were made over the strong objections of the city. Albany's power to dictate pension costs that the city must pay infuriates mayors and puzzles pension experts. "In any structure when the people who are making those decisions are not financially accountable for the impact of those decisions, by definition it will not be prudent," said John Por, the president of Cortex Applied Research, a firm that advises both public and private pension plans. Mayors have complained about the system for decades. "It's outrageous," said Edward I. Koch, who was forced by the state to spend millions more on pensions when he was mayor. "The municipal unions own the State Legislature." Mayor Michael R. Bloomberg said on Monday that the city's official method for calculating the value of its pensions, which shows that they are close to fully funded, and an alternate method that shows a shortfall of $49 billion, both seem "very rational methods" to him. And he said that while the city is careful to fund its pensions, the enhanced benefits awarded by the state all involve trade-offs. "If we enhance the pension system, then we can't afford to pay as much in salaries," the mayor said. "If we enhance the pension system and salaries, we can't afford to have as many employees or to provide as many services. And that's what everybody is unwilling to face." The move towards more expensive pension benefits is not a partisan one. Governor Pataki, a Republican who ran for office in 1994 on a conservative platform of cutting government spending, approved many of the enhancements, and in the process won the support of labor unions, which helped him get re-elected twice even though New York is an overwhelmingly Democratic state. In the Legislature, the bills are championed not only by the Democratic-led Assembly, but also by the Republicans who lead the State Senate, who increasingly rely on campaign contributions of labor unions to help them retain their slim majority. Aides to Governor Pataki said that he made the decision to improve certain pension plans on the merits, and that he had not been influenced by campaign contributions, endorsements or political Phase B: Preliminary Feasibility and Desirability Study Page 6 considerations. And they noted that he has vetoed nearly 200 pension bills since 1995. "Since taking office, Governor Pataki has consistently protected taxpayers and vetoed nearly 95 percent of the more than 200 broad pension bills that the Legislature has sent to his desk," said Michael Marr, a Pataki spokesman. "In those isolated instances when the governor did sign a particular pension bill, he did so after carefully weighing both the bill's merits and its fiscal impact. " Turning to Albany In the past, unions frequently sought improved pension benefits during contract negotiations with the city. Ifthey reached an agreement, both sides sought state legislation setting the agreed-on benefits. It still works that way, sometimes. But increasingly, in cases where unions fail to get what they want during negotiations with the city, they are doing what is known in Albany as an end run around the city, lobbying state officials to win richer pensions. Some unions are so big that they represent voting blocs unto themselves. Smaller unions have established their power in other ways: by endorsing candidates, by providing ground troops during campaign season and, especially, by donating large sums to state officials and their political parties. Take the recent proliferation of "heart bills." The city's police and firefighters have long had the bills, which declare that heart disease should be presumed a job-related disability, enabling workers with heart disease to get tax-free accidental disability pensions worth three-quarters of their final salaries. (High-ranking chiefs have been known to retire with disability pensions for heart disease and then go on to earn six-figure salaries elsewhere.) In I 998, the politically connected correction officers won their own "heart bill." Again, it was over the objections of Mayor Rudolph W. Giuliani. "There is no valid medical study that has confirmed that a police, fire or a correction officer's heart disease is a direct result of performance of duty," his office wrote. There were more heart bills to come. In 2002, after the economy soured and the attack on the World Trade Center left the city facing large deficits, the union representing the city's emergency medical technicians sought one. The union contributed more than $70,000 to state officials. It endorsed Governor Pataki, who was running for re-election, and gave him $32,000. The bill passed, and the governor approved it over the protests of the city, which warned that more unions would demand the benefit. Sure enough, heart disease was declared ajob-related condition for the city's sanitation workers two years later. Again, the city objected, complaining that the change would cost it $1 million a year. But unions representing sanitation workers gave more than $50,000 to state officials that year, including one check for $500 that was sent to the Senate Republican Campaign Committee on the day the Republican-controlled Senate sent the bill to the governor for his signature. Heart disease is not the only ailment that is increasingly presumed to be job-related for pension purposes. In 1997 the state passed a law declaring that hepatitis, H.LV. and tuberculosis should all be considered a line-of-duty disability for correction officers. The city warned that the police and firefighters would also want the benefit. Phase B: Preliminary Feasibility and Desirability Study Page 7 They were right again. The state made the ailments job-related disabilities for police officers and firefighters in 1999. The city complained that shifting the burden of proof from government workers, who previously had to prove that their ailments were contracted in the course of official duty, to the city, which would now have to prove that they were not, would make disproving such claims nearly impossible. "The employee has only to prove that he or she may have been exposed to the bodily fluid of a person under the care of the employee," the city wrote in its objection. "It will be virtually impossible for the city of New York to disprove the presumption and assert that the condition was not contracted in the line of duty. This is particularly true in the case of H.LY., where it would be illegal for the city to test tor the presence of the disease prior to hiring a police officer or firefighter. " Patrick Lynch, the president of the Patrolmen's Benevolent Association, wrote to the governor urging him to sign the bill. "Since police officers are required to pass a physical examination upon entry into service, and to follow lifestyles that would preclude their contracting H.LY., tuberculosis or hepatitis, it is reasonable to presume that by far the most likely cause of contracting one of these diseases would be coming into contact with an infected individual in the course of performance of duties," he wrote. An Expensive Year By far the biggest increases in pension benefits came at the end of the stock market boom in the late 1990's. The city's pension funds are heavily invested in the stock market, and the boom sent the funds soaring, which emboldened unions to seek better pension benefits and state and city officials to grant them. The most expensive year was 2000, when Albany, even as the dot-com bubble was already bursting, approved billions in benefit enhancements, citing the soundness of the city's pension investments. It provided automatic annual cost-of-living adjustments for retirees, which are extremely rare in private business. It eliminated or reduced the contributions many employees had made to their pension funds, at a cost of $269 million a year for the city. That measure was supported by Mayor Giuliani, who seized on the recent stock market gains to drastically reduce the city's investment in its pension funds. The cost-of-living adjustments had long been championed by H. Carl McCall, the Democratic state comptroller, who was preparing to run for governor. Governor Pataki, the Republican incumbent, was preparing to run for a third term in 2002. He agreed to the idea, one of many union-pleasing actions that helped him win much of the labor support that Democrats typically counted on. The bill called for raising pensions as much as $540 a year, depending on the rate of inflation. But altogether, the long-term cost to the city was pegged at $8.4 billion. The Giuliani administration won an agreement to phase in its increased contribution to the pension plans over five years. Governor Pataki's budget division insisted that the annual cost-of-living adjustment, known as the COLA, was affordable. "The COLA is affordable due to the excellent financial condition of Phase B: Preliminary Feasibility and Desirability Study Page 8 the retirement systems and reasonable limitations included in the benefit design," the budget division wrote in support of the bill. Then the stock market plummeted, the World Trade Center was attacked and the city's pension fund investments lost billions. The Bloomberg administration won permission to take another five years to phase in the payment for the increases. The governor's budget division, which had called the program "affordable" in 2000, noted just two years later that "the city's fiscal situation has changed" and cited "downward trends in the stock market and increases in pension benefits." (This year the city agreed to end the phase-in, and begin paying what it owes for the increases.) The Bonuses Grow It was the city's desire to invest more heavily in stocks in the late 1960's that first led to the annual bonus checks it sends to retired police officers and firefighters and, now, correction officers. Although pension benefits are guaranteed by the State Constitution - which means that taxpayers must pay them even if their funds are wiped out in the markets - the police and fire unions argued that their members should be rewarded for allowing the city to invest their pension funds in riskier, but potentially more lucrative, stocks. The unions got the city to agree to use its stock earnings above a certain amount to pay extra benefits to retirees. Initially, the payouts depended on how well the investments did. But the bonuses became fixed annual payments in the 1980's, increasing by $500 each year, after the unions agreed to let the city use some of the money to close its budget gap. The bonus payments - soon to reach $12,000 a year - had an unintended consequence after Sept. II, 200 I. Many police officers worked a great deal of overtime that year, pushing up the base from which their pensions would be calculated. On top of that, each year they worked was a year they would not get the bonus payments, which were then $9,000 a year. Many police officers felt they could not afford not to retire. I So, to try to retain veteran officers at a crucial period, the state took action: it allowed officers eligible for retirement to bank their bonus payments while continuing to work, and to collect them after they retired. The solution cost an estimated $40 million a year. The correction officers, though, do not now have the same guarantees that they be paid each year. (Their guarantees do not start until 2019.) So retirees get paid only if the stocks perform well enough to keep their fund - known in Albany as the skim fund - flush. There was enough to pay the first six years of benefits, but with around $34 million left in their fund, there is not quite enough to pay retirees the $11,500 they were expecting this December. There are, however, bills pending in Albany that could help them. One would simply guarantee the next payment, while the other would allow the next payment to be less than the scheduled $11,500. So far, the City Council has not asked Albany to take action, and neither bill has passed the Legislature. But it could always resurface when lawmakers return to Albany this fall. All 212 seats in the Legislature are up for election in November. Phase B: Preliminary Feasibility and Desirability Study Page 9 EXECUTIVE SUMMARY LEGAL FEASmILITY The City's Code of Ordinances would require amendments to adopt Chapter 175/185 or other types of changes to the City's pension plan. A discrepancy between the Florida Division of Retirement's Interpretation and the Statutory Definition requires the City to assess its financial exposure to Chapter 175/185 pension plans under both scenarios. Since future litigation could expose the city to the higher cost associated with the Statutory Definition scenario, it would be prudent for the city to assess economic feasibility on the basis of cost associated with the Statutory Definition. ECONOMIC FEASIBILITY Utilizing studies performed by the City's Actuaries, Retirement Plan Specialists, economIC feasibility is provided in two scenarios as follows: a. Adopting Chapter 175/185 Chapter plans and maintaining parity of benefits for all employees. b. Adopting Chapter 175/185 Chapter Plans and enhancing benefits for police and fire only. Each scenario provides the projected costs under the Florida Division of Retirement Interpretation of the law and the Statutory Definition of the law. Scenario I. Adopting Chapter 175/185 pension plans and maintaining parity of benefits for all City employees. As shown below, significant increases in payroll contributions over and beyond estimated revenues from insurance premium taxes are required to fund this scenario under both the Florida Division of Retirement Interpretation and the Statutory Definition of the law. Division of Retirement Statutory Definition Shortfall in Dollars Shortfall in Payroll Contributions Shortfall in Equivalent Ad Valorem Taxes 623,719 5.9% 0.31 mills 943,928 8.9% 0.4 7 mills Scenario ll. Adopting Chapter 175/185 pension plans adding enhanced benefits to police and fire only. As shown on the following page, significant increases in payroll contributions over and beyond estimated revenues from insurance premium taxes are required to fund this scenario under both the Florida Division of Retirement Interpretation and the Statutory Definition of the law. Phase B: Preliminary Feasibility and Desirability Study Page 10 ----~ Division of Retirement Statutory Definition Shortfall in Dollars Shortfall in Payroll Contributions Shortfall in Equivalent Ad Valorem Taxes 353,586 3.3% O. I 8 mills 673,795 6.3% 0.34 mills Utilizing a pure definition of feasibility one would conclude that it is not economically feasible to adopt Chapter 175/1 85 plans. However, policy makers would need to go to the next step and determine if it is desirable to incur these additional costs in order to change the current plan. DESIRABILITY It is common place for elected officials to be faced with policy alternatives that are legally and economically feasible and at the same time highly undesirable. In this study policymakers are being asked to review each of the desirability factors involved in changing the city's pension plan to include Chapter 175/185 required components in the context of two questions as follows: 1. Understanding that the Commission will ultimately be held accountable to the taxpayers for the performance of the pension plans; does the Commission support the change? 2. Second, if fully informed, would the taxpayers approve this change in a referendum? When the complicated layers of economic and accountability factors are pealed away and examined independently in the full light of day on their merits, it is indeed difficult to imagine how the City Commission, or the electorate would desire to give up its control of its simple, efficient, and effective pension plan in favor of the more complicated, less efficient structure of Chapter 175/185 plans, their history of ever increasing costs, their unfortunate record of abuses, and their exposure to never ending legislative mandates. This is especially difficult realizing that in the end the Commission will be held accountable to the taxpayers for the performance of a pension plan system that is largely outside its control. It is staff s opinion that it is not in the best interest of the taxpayers for the Commission to approve these radical changes to the City's pension plan. It is staffs further opinion that the voters of Winter Springs, when fully informed would also have a difficult time supporting these radical changes in the City's pension plan. Phase B: Preliminary Feasibility and Desirability Study Page 11 - LEGAL FEASIBILITY I. FINDINGS: A. City Charter The City Charter is silent on the subject of pension plans. B. City Code The City Code provides for a unified pension plan for all employees, and one Pension Board of Trustees to administer the plan. The City Code would need to be amended to provide for adoption of Chapter 175/185 retirement plans. C. State Law l. Chapter 175/185 plans are established by ordinance in accordance with Chapters 175 and 185, Florida Statutes. Chapter 175 pertains to firefighter pension plans, and Chapter 185 pertains to police pension plans. 2. Chapters 175 and 185 provide a revenue sharing process whereby a participating city can receive a rebate of the state tax on property and casualty insurance premiums collected on policies covering property within the city. In order to receive the premium tax rebate, a city must comply with the minimum benefits and standards in Chapters 175 and 185. A city that creates a new Chapter 175/185 pension plan must pay the full cost of providing the statutory minimum benefits, and cannot use premium tax revenues for this purpose. 3. The existing city pension plan does not meet all of the minimum benefits required by Chapters 175 and 185. Specifically, the following Chapter 175/185 minimum benefits are not currently provided, and would have to be adopted if a Chapter 175/185 plan is established: a. Normal form of retirement - life annuity and 10 years certain (city plan: life annuity). b. Normal retirement date - age 55 with 10 years service or age 52 with 25 years of service (city plan: age 55 with 10 years service). c. Early retirement date - age 50 with 10 years service (city plan: prior to age 55 with 25 years service) d. Early retirement benefit - normal benefit reduced by 3% for each year prior to normal retirement (city plan: benefit reduced to actuarial equivalent of pension commencing at age 55). e. Disability benefits - duty-related and non-duty disability pension benefits are mandated by Chapters 175/185. The city plan does not provide for disability pension benefits. The city does provide disability insurance coverage for all employees. Phase B: Preliminary Feasibility and Desirability Study Page 12 - 4. The City Commission may lawfully act as the pension board of trustees for the existing city pension plan, and assume fiduciary responsibility for the plan. However, the City Commission cannot act as the pension board for a Chapter 175/185 plan. 5. Chapters 175 and 185 require that a separate pension board be created to administer the Chapter 175/185 pension plan. By law, 2 of the board members must be a police officer and firefighter elected by plan members, 2 board members are city residents appointed by the City Commission, and a fifth member is selected by the other 4 board members. The Chapter 175/185 pension board is an independent legal entity that can hire attorneys, actuaries and other consultants, and bring and defend lawsuits in the board's name. The pension board also makes the final decision on disability pensions. The City has no direct control over the pension board's actions or the administrative costs incurred by the board. 6. The City is required by law to fund the Chapter 175/185 pension plan on a sound actuarial basis, as determined by the plan actuary selected by the pension board. The City is also ultimately responsible for the liabilities of the Chapter 175/185 pension plan. 7. Once a city establishes a Chapter 175/185 pension plan that meets the minimum benefit requirements of Chapters 175 and 185, it is eligible to receive premium tax revenues which must be used for "extra benefits" for firefighters and police officers. 8. As pointed out by the City's pension attorney, Chapters 175 and 185 define "extra benefits" as: "benefits in addition to or greater than those provided to general employees of the municipality and in addition to those in existence for firefighters and police officers on March 12, 1999." See sections l75.351(l)(b) and 185.35(l)(b), Florida Statutes. . 9. However, the Florida Division of Retirement has interpreted the statute to define "extra benefits" as benefits that are greater than the statutory minimum benefits, without regard to the benefits provided to general employees. 10. The difference between the statutory definition of "extra benefits" and the Division of Retirement's interpretation is important for cities like Winter Springs which have uniform pension benefits for all employees. Under the statutory definition, the city could not use premium tax monies to pay for ANY existing benefits. All premium tax monies would have to be used to provide benefits for police officers and firefighters that are greater than the benefits provided to general employees. 11. However, under the Division of Retirement's interpretation, premium tax monies could be used to pay for police and fire pension benefits that are greater than the statutory minimums. This would mean, for example, that premium tax money could be used to pay for the difference between a 2% benefit (the 175/185 minimum) and the 2.5% benefit currently provided by the city pension plan (the city benefit will increase to 2.75% on 10/1/07 and 3% on 10/1/08). Phase B: Preliminary Feasibility and Desirability Study Page 13 - 12. Therefore, in evaluating the feasibility of establishing Chapter 175/185 pension plans, the city must assess its projected costs based on two important considerations: a. the city will be required to pay the full cost of meeting the Chapter 175/185 minimum benefits, and cannot use premium tax monies for this purpose; and b. the conflict between the statutory definition of "extra benefits" and the interpretation of the Division of Retirement. Because of this conflict, staff is presenting the Commission with the cost impacts of both methods. II. CONCLUSIONS: A. City Charter. There does not appear to be any reason for amending the City Charter to address pension plans since pension plans do not involve basic governance issues which are the issues of Charters. B. City Code. The City Code must be amended to provide for adoption of Chapter 175/185 pension plans. C. State Law. Chapter 175/185 pension plans must meet the minimum benefits and standards of Chapters 175 and 185, Florida Statutes. The City must pay the full cost of meeting the minimum benefit requirements of Chapters 175/185 before it is eligible to receive any premium tax revenues. The city must establish a separate pension plan administered by a separate pension board for firefighters and police officers. Once the statutory minimum benefits are in place, the city may use premium tax revenues to provide "extra benefits" for firefighters and police officers. However, there is a conflict between the statutory definition of "extra benefits" and the interpretation of the Division of Retirement, which has a significant impact on the city's projected costs. In view of this conflict, the City Commission must evaluate the economic risk of establishing Chapter 175/185 pension plans based on both the more costly statutory definition, as well as the less costly interpretation of the Division of Retirement. Phase B: Preliminary Feasibility and Desirability Study Page 14 ECONOMIC FEASIBILITY IMPLEMENTING CHAPTER 175/185 PENSION PLANS MAINTAINING PARITY AMONG ALL CITY EMPLOYEES I. FINDINGS: A. The City's current pension plan meets some but not all of the requirements of Chapter 175/185 pension plans. The Chapter 175/185 minimum benefits that the city's current pension plan does not provide are: 1. Normal form of retirement - life annuity and 10 years certain (city plan: life annuity). 2. Normal retirement date - age 55 with 10 years service or age 52 with 25 years of service (city plan: age 55 with 10 years service). 3. Early retirement date - age 50 with 10 years service (city plan: prior to age 55 with 25 years service) 4. Early retirement benefit - normal benefit reduced by 3% for each year prior to normal retirement (city plan: benefit reduced to actuarial equivalent of pension commencing at age 55). 5. Disability benefits - duty-related and non-duty disability pension benefits are mandated by Chapters 175/185. The city plan does not provide for disability pension benefits. The city does provide disability insurance coverage for all employees. B. The City must pay the full cost of meeting the minimum benefit requirements of Chapters 175/185 in order to become eligible to receive premium tax revenues. Once the statutory minimum benefits are in place, the city may use premium tax revenues to provide "extra benefits" for firefighters and police officers. C. The amount of insurance premium taxes that may be used to defray the cost of "extra benefits" are a frozen dollar amount based on the first year cost of the benefits. The frozen amount of premium tax revenues does not grow as the city's payroll grows. Thus, each year the city must pay an increasing share of the cost of the extra benefits that is not covered by the premium taxes. D. The amount of available insurance premium taxes is not known until after the adoption of the plan. As a result, determinations of feasibility must be based on projected revenues, which are difficult to project due to the nature of the tax. E. Chapters 175 and 185 require that a separate pension board be created to administer the 175/185 pension plan. The City has no direct control over the pension board's actions or the administrative costs incurred by the board. However, the city is required to pay the administrative costs of the 175/185 pension board. Phase B: Preliminary Feasibility and Desirability Study Page 15 - F. The City is required by law to fund the 175/185 pension plan on a sound actuarial basis, as determined by the plan actuary selected by the pension board. The City is also ultimately responsible for the liabilities of the 175/185 pension plan. G. Using Premium Taxes for "Extra Benefits" I. Division of Retirement Interpretation a. Under the Division of Retirement's interpretation, premium tax monies could be used to pay for police and fire pension benefits that are greater than the statutory minimums, without regard to the benefits provided to general employees. Under this interpretation, the total additional cost to provide the Chapter 175/185 minimum benefits for all city employees is estimated to be $943,928 per year over the current cost of the city's present unified pension plan for all employees. b. If the city provides the minimum benefits required by Chapters 175 and 185, it will be eligible able for state premium tax monies. The premium tax monies must be used to provide "extra benefits" for firefighters and police officers. Based on a "rule of thumb" calculation of estimated premium tax monies, 6% of payroll, verified for reasonableness to an average of premium taxes received by cities in Seminole County, a very rough estimate of the insurance premium taxes that the City of Winter Springs can expect to receive is $320,209 per year. However, it may take several years after the 175/185 plan is adopted before the city receives this amount of premium taxes. During this start-up period, the City will be required to make up any deficits in the 175/185 plan. c. Even assuming the city receives the full estimated amount of premium taxes in the first year of the 175/185 - which is not likely - the city would still be required to make up the estimated $623,719 annual shortfall with city funds. This would require a 5.9% increase in the city's payroll contribution equal to 0.31 mills of ad valorem property taxes. 2. Statutory Definition a. Applying the Chapter 175/185 definition of "extra benefits," premium tax revenues could only be used to provide benefits that are greater than the benefits provided to general employees. Under this approach, the cost for the City to fund the enhancements to the City's Current plan necessary to comply with Chapter 175/185 minimum benefits for all employees, thus maintaining the City's current policy of providing equal benefits to all employees, is an estimated $943,928 per year over the current cost of the City's unified pension plan for all employees. b. The estimated insurance premium taxes available to defray the cost of these enhancements under this method is $0 - since none of the benefit enhancements would be greater than the benefits provided to general employees. Phase B: Preliminary Feasibility and Desirability Study Page 16 c. The $943,928 annual shortfall in revenue would require an 8.9% increase in payroll contributions equal to 0.47 mills of ad valorem property taxes. II. CONCLUSIONS: A. As shown in Table I-A enclosed, in order for Chapter 175/185 plans to be implemented the City must be prepared to increase annual payroll contributions as follows: 1. Div. of Retirement Interpretation: 2. Statutory Definition: $623,719 (5.9%, equal to 0.31 mills) $943,928 (8.9%, equal to 0.47 mills) B. The City must be prepared to pay 100% of the annual cost increase without the assistance of insurance premium taxes, because it may take several years before the city receives its full premium tax allocation. C. The City would be required to pay 100% of the increased cost for general employees to match the increased cost of any new benefits that may be added to the minimum standards of police and fire benefits paid by insurance premium taxes. D. The City would be required to pay 100% of the cost of new legislative mandates for all employees if these mandates did not provide for additional insurance premium taxes. Phase B: Preliminary Feasibility and Desirability Study Page 17 - ECONOMIC FEASIBILITY IMPLEMENTING CHAPTER 175/185 PENSION PLANS ENHANCED BENEFITS FOR POLICE AND FIRE ONLY I. FINDINGS: A. The City's current pension plan meets some but not all of the requirements of Chapter 175/185 pension plans. The Chapter 175/185 minimum benefits that the city's current pension plan does not provide are: 1. Normal form of retirement - life annuity and 10 years certain (city plan: life annuity). 2. Normal retirement date - age 55 with 10 years service or age 52 with 25 years of service (city plan: age 55 with 10 years service). 3. Early retirement date - age 50 with 10 years service (city plan: prior to age 55 with 25 years service) 4. Early retirement benefit - normal benefit reduced by 3% for each year prior to normal retirement (city plan: benefit reduced to actuarial equivalent of pension commencing at age 55). 5. Disability benefits - duty-related and non-duty disability pension benefits are mandated by Chapters 175/185. The city plan does not provide for disability pension benefits. The city does provide disability insurance coverage for all employees. B. The City must pay the full cost of meeting the minimum benefit requirements of Chapters 175/185 in order to become eligible to receive premium tax revenues. Once the statutory minimum benefits are in place, the city may use premium tax revenues to provide "extra benefits" for firefighters and police officers. C. The amount of insurance premium taxes that may be used to defray the cost of "extra benefits" are a frozen dollar amount based on the first year cost of the benefits. The frozen amount of premium tax revenues does not grow as the city's payroll grows. Thus, each year the city must pay an increasing share of the cost of the extra benefits that is not covered by the premium taxes. D. The amount of available insurance premium taxes is not known until after the adoption of the plan. As a result, determinations of feasibility must be based on projected revenues, which are difficult to project due to the nature of the tax. E. Chapters 175 and 185 require that a separate pension board be created to administer the 175/185 pension plan. The City has no direct control over the pension board's actions or the administrative costs incurred by the board. However, the city is required to pay the administrative costs of the 175/185 pension board. Phase B: Preliminary Feasibility and Desirability Study Page 18 - F. The City is required by law to fund the 1751185 pension plan on a sound actuarial basis, as determined by the plan actuary selected by the pension board. The City is also ultimately responsible for the liabilities of the 1751185 pension plan. G. Using Premium Taxes for "Extra Benefits" 1. Division of Retirement Interpretation a. Under the Division of Retirement's interpretation, premium tax monies could be used to pay for police and fire pension benefits that are greater than the statutory minimums, without regard to the benefits provided to general employees. Under this interpretation, the total additional cost to provide the Chapter 1751185 minimum benefits FOR FIREFIGHTERS AND POLICE OFFICERS ONLY (thus changing the city's current policy of providing the same level of benefits to all employees) is estimated to be $673,795 per year over the current cost of the city's present unified pension plan for all employees. b. If the city provides the minimum benefits required by Chapters 175 and 185, it will be eligible able for state premium tax monies. The premium tax monies must be used to provide "extra benefits" for firefighters and police officers. Based on a "rule of thumb" calculation of estimated premium tax monies, 6% of payroll, verified for reasonableness to an average of premium taxes received by cities in Seminole County, a very rough estimate of the insurance premium taxes that the City of Winter Springs can expect to receive is $320,209 per year. However, it may take several years after the 1751185 plan is adopted before the city receives this amount of premium taxes. During this start-up period, the City will be required to make up any deficits in the 1751185 plan. c. Even assuming the city receives the full estimated amount of premium taxes in the first year of the 175/185 - which is not likely - the city would still be required to make up the estimated $353,586 annual shortfall with city funds. This would require a 3.3% increase in the city's payroll contribution, equal to 0.18 mills of ad valorem property taxes. 2. Statutory Definition a. Applying the Chapter 1751185 definition of "extra benefits," premium tax revenues could only be used to provide benefits that are greater than the benefits provided to general employees. Under this interpretation, the total additional cost to provide the Chapter 175/185 minimum benefits FOR FIREFIGHTERS AND POLICE OFFICERS ONLY (thus changing the city's current policy of providing the same level of benefits to all employees) is estimated to be $673,795 per year over the current cost of the city's present unified pension plan for all employees. b. The estimated insurance premium taxes available to defray the cost of these enhancements under this method is $0 - since none of the benefit enhancements would be greater than the benefits provided to general employees. Phase B: Preliminary Feasibility and Desirability Study Page 19 - c. The $673,795 annual shortfall in revenue would require a 6.3% increase in payroll contributions equal to .34 mills of ad valorem property taxes. II. CONCLUSIONS: A. As shown in Table I-B enclosed, in order for Chapter 175/185 plans to be implemented the City must be prepared to increase payroll annual contributions as follows: 1. Div. of Retirement Interpretation: 2. Statutory Definition: $353,586 (3.3%, equal to 0.18 mills) $673,795 (6.3%, equal to 0.34 mills) B. The City must be prepared to pay 100% of the annual cost increase without the assistance of insurance premium taxes, because it may take several years before the city receives its full premium tax allocation. C. The City would be required to pay 100% of the increased cost for general employees to match the increased cost of any new benefits that may be added to the minimum standards of police and fire benefits paid by insurance premium taxes - if the City maintains its long-standing policy of providing uniform benefits to all employees. D. The City would be required to pay 100% of the cost of new legislative mandates for all employees if these mandates did not provide for additional insurance premium taxes. Phase B: Preliminary Feasibility and Desirability Study Page 20 - TABLE I-A CITY OF WINTER SPRINGS RETIREMENT PLAN COMPARISON OF TOTAL PLAN COST CURRENT PLAN TO CHAPTER 175/185 PLAN MAINTAINING PARITY AMONG ALL CITY EMPLOYEES CURRENT CITY PLAN General Police Fire Total Percent Funding Payroll $872,657 $350,823 $294,480 $1 ,517,960 14.3% $138,000 $ I ,655,960 15.6% Administration Total CHAPTER 175/185 PLAN 1. DIVISION OF RETIREMENT INTERPRET A TION General Police Fire Administration Total Percent Funding Payroll $1,142,790 $638,934 $584,164 $2.365,888 22.2% $234,000 $2,599,888 24.5% $943,928 $320,209 $623,719 5.9% Total Total Year 1 Cost Increase over Current Plan Estimated State Monies Available for Police/Fire Shortfall 2. STATUTORY DEFINITION General Police Fire Administration Total Percent Funding Payroll $1,142,790 $638,934 $584,164 $2.365,888 22.2% $234,000 $2,599,888 24.5% $943,928 $0 $943,928 8.9% Total Total Year 1 Cost Increase over Current Plan Estimated State Monies Available for PolicelFire Shortfall Phase B: Preliminary Feasibility and Desirability Study Page 21 - TABLE I-B CITY OF WINTER SPRINGS RETIREMENT PLAN COMPARISON OF TOTAL PLAN COST CURRENT CITY PLAN TO CHAPTER 175/185 PLAN ENHANCED BENEFITS FOR POLICE AND FIRE ONLY CURRENT CITY PLAN Total Percent Funding Payroll General $872,657 Police $350,823 Fire $294,480 $1,517,960 14.3% Administration $138,000 Total Annual Cost $1,655,960 15.6% CHAPTER 175/185 PLAN 1. DIVISION OF RETIREMENT INTERPRET A TION Total Percent Funding Payroll General $872,657 Police $638,934 Fire $584,164 $2,095,755 19.7% Administration $234,000 Total $2,329,755 21.9% Total Year 1 Cost Increase over Current Plan $673,795 Estimated State Monies Available for PolicelFire $320,209 Shortfall $353,586 3.3% 2. STATUTORY DEFINITION Total Percent Funding Payroll General $872,657 Police $638,934 Fire $584,164 $2,095,755 19.7% Administration $234,000 Total $2,329,755 21.9% Total Year 1 Cost Increase over Current Plan $673,795 Estimated State Monies Available for PolicelFire $0 Shortfall $673,795 6.3% I Phase B: Preliminary Feasibility and Desirability Study Page 22 DESIRABILITY 1. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to increase ad valorem taxes, or withhold funding from other municipal services and programs, in order to pay for the increase in payroll contributions necessary to fund the adoption of Chapter 175/185 pension plans in the City, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The Economic Analysis section of this report indicated the need to increase payroll contributions to fund the benefits required under Ch. 175/185 pension plans. Conclusion In order to fund the benefits required under Ch. 175/185 pension plans in the City, the Commission would need to raise additional revenues or reduce other municipal services and programs in order to create the additional funding to pay for the increase in payroll contributions necessary to fund the adoption of Chapter 175/185 plans in the City. 2. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to empower a pension board with decision making authority that is independent of the review and approval of City Commission, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The City's current pension plan provides for a single pension board, per Code Section 14- 52, to administer the provisions of the City's citywide unified pension plan as adopted by the City Commission. Chapters 175 and 185 require an additional, separate pension board be created to administer the 175/185 pension plan(s). The City Commission would have no direct control over this pension board's actions. Conclusion The creation of an independent pension board required by Ch. 175/185 would remove control over the actions of the pension board from the City Commission and/or their appointed City Manager. This separation and loss of control could result in expenditure of funds, hiring of consultants, etc. by the pension board independent of the oversight and approval of the City Commission. Further, it is not uncommon for this separation of control to result in disputes between the City Commission and pension board, resulting in litigation between the independent pension board and the City to resolve those disputes. 3. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to implement a pension plan that replaces the current taxpayer advisory board that has no administrative powers with a independent board consisting of employees and taxpayers with full administrative authority, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Phase B: Preliminary Feasibility and Desirability Study Page 23 Considerations In the current pension plan the City adopted a simple set of checks and balances in which the Commission retained all decision making authority, retained fiduciary responsibility, retained all accountability directly to the taxpayers that elected them, vested administration in the City Manager hired by and responsible to the Commission and appointed a taxpayer advisory board with no administrative authority or final decision making authority to advise the Commission on policies and levels of funding the taxpayers of the City would support. This arrangement has consistently functioned to control costs, provide a program of continuous improvements acceptable to taxpayers of the City, and a harmonious cooperative relationship between all City employees. The adoption of Ch. 175/185 plans represents a wholesale deviation from that set of checks and balances, vesting policy and administrative authority and fiduciary accountability in a board of employees and citizens accountable only to its members as opposed to the taxpayers or elected officials. Additionally, this deviation provides the independent board with the authority to sue the Commission to enforce its independent rights regardless of the economic impacts on the taxpayers of the City, and subjects the City and taxpayers to unfunded mandates of the legislature regardless of the economic impacts of those decisions on the taxpayers. The effect of this radical deviation in checks and balances has resulted in a continuous increase in benefit cost as high as 10 I % of payroll cost, the consumption of funds needed for other important municipal services and programs, and a continuous stream of legislative mandates increasing employee benefits and the powers of independent boards. Conclusion Like other municipal advisory boards, the taxpayer pension board operates in conjunction with the City Commission and City Manager, providing an effective, low-cost manner of managing the City's pension plan. The replacement of the taxpayer pension advisory board provides a graphic representation of the radical degree of the changes in checks and balances. It is difficult to understand a justification for giving up a set of checks and balances that have proven effective in making the Winter Springs pension plan one, if not the more cost effective pension programs in the State and potentially directing the City's pension plan down the slippery slope of problems and issues not uncommon to cities across the State with Ch. 175/185 programs. 4. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to relinquish its authority to a separate independent Pension Board that would have the power to sue, including the potential to sue the City, and be sued, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The current pension board is an advisory board to the City Commission and thus has no independent or fmal decision making authority. Chapters 175 and 185 require that an additional, separate pension board be created to administer the 175/185 pension plan(s). The City Commission would have no direct control over this pension board's actions. By law, the 175/185 pension board would have "sole and exclusive" administrative authority over the pension fund. The pension board is a legal entity that is expressly Phase B: Preliminary Feasibility and Desirability Study Page 24 authorized to "bring and defend lawsuits of every kind, nature and description." The Division of Retirement has interpreted the powers of 175/185 pension boards very broadly, and this has resulted in additional costs to cities in a number of instances. For example: a. The City of Pompano Beach police and firefighter pension board re-interpreted two provisions of the city pension ordinance in a manner that resulted in significant benefit increases to plan members, producing an additional cost of more than $500,000 per year. The city was forced to file a lawsuit to block the pension board's action. The lawsuit is still pending. b. After the Town of Lake Park contracted with Palm Beach County to provide fire services to the Town, all Lake Park firefighters became county employees. The Town's firefighter pension board then decided to distribute the assets of the pension plan in the form of lump sum payments to each member, which resulted in a $600,000 deficit in the pension fund. The pension board, based on an opinion from the Division of Retirement, demanded that the Town make up the deficit. The Town was forced to file a lawsuit, and the trial court ruled in the Town's favor. The pension board has appealed the trial court's ruling. c. The police/fire pension board of the City of Delray Beach recently adopted a new, expanded definition of "compensation" for the purpose of recalculating the benefits of employees who retired over the past 15 years. The board's action was directly contrary to a decision of the City Commission, and will increase the cost of the plan by more than $35,000 per year. The City has been forced to file a lawsuit to clock the pension board's action. The lawsuit is still pending. Conclusion The creation of an independent pension board as required by Ch. 175/185 often results in disputes between cities and the pension boards, resulting in litigation to resolve those disputes. And, because the city is responsible for paying the pension board's administrative costs (including attorney's fees), the city must ultimately pay the attorney's fees for BOTH SIDES of the case. 5. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to implement a pension plan with a board structure that allows the Commission to appoint only 2 of the 5 board members, as opposed to 5 of 5 currently, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The City's current pension plan provides for a single pension board, per Code Section 14- 52, to administer the provisions of the City's citywide unified pension plan as adopted by the City Commission. The current board consists of five members who are appointed by the City Commission. Board members are residents and taxpayers of the City. Ch. 175/185 plans require membership consisting of five (5) members, two (2) of whom shall be legal residents of the municipality appointed by the City Commission, two (2) of whom shall be full-time police officers/firefighters elected by a majority of the members of the plan, and a fifth member selected by a majority of the other four members. It is Phase B: Preliminary Feasibility and Desirability Study Page 25 not uncommon for the resulting board make-up to be comprised entirely of police officers/firefighters. Conclusion The City's current pension plan allows for appointment of 100% of the board membership by the City Commission. The board is comprised entirely of City taxpayers who are accountable directly to the City Commission. Chapter 175/185 requirements regarding pension board composition would allow for the City Commission to appoint only 2 or 5 pension board members. The 175/185 pension board would be independent of the control of and unaccountable to the City Commission. 6. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to fund the additional expenses of two or three separate pension boards as opposed to one pension board, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The City's current pension plan provides for a single pension board, per Code Section 14- 52, to administer the provisions of the plan as adopted by the City Commission. The current plan bears administrative costs such as actuarial expenses, legal expenses, investment monitoring expenses, custodial bank expenses and investment manager expenses for this single plan only. The adoption of Ch. 175/185 plans would require the creation of additional pension boards to administer the 175/185 pension plans(s). The creation of additional boards would necessitate an increase in the current level of administrative costs due to the resulting need for 2 or 3 separate actuarial reports, 2 or 3 sets of financial statements, 2 or 3 separate funds to the be audited, 2 or 3 attorneys" additional investment monitoring expenses, etc. Conclusion The addition of pension boards necessitated by adoption of 175/185 plans would increase the level of administrative costs over the amount currently paid by the City. The current annual administrative cost of the plan is approximately $138,000. The cost of three separate boards is expected to be approximately $234,000. A single plan for all City employees is thus more cost-efficient from an administrative cost standpoint. 7. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to relinquish its control over other types of administrative costs (e.g., travel expenditures) to the various Pension Boards, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The current pension board is an advisory board to the City Commission and thus has no independent or final decision making authority. Administrative costs related to the City's current pension plan are approved by the City Commission via the annual budget process. The day to day oversight of these administrative costs is delegated to the City Manager who is hired by and responsible to the City Commission. Phase B: Preliminary Feasibility and Desirability Study Page 26 Under Chapters 175/185, the additional pension boards required to be created in order to meet minimum statutory requirements would be vested with the full authority to establish and adopt rules and procedures for administration of their respective pension plans, including approval of administrative costs such as travel. Expenditure of taxpayer funds for travel-related purposes is an area that necessitates a high level of monitoring as it has become increasingly scrutinized in recent times as evidenced by abuse reported in the Orlando Sentinel regarding travel expenses of the Orange County Expressway Authority and the Central Florida Regional Transportation Authority (Lynx). The City would not have the ability to control or limit the travel expenses of the 175/185 pension board(s)- as long as the pension boards themselves approved the expenses. Conclusion The creation of an independent pension board required by Ch. 175/185 would remove Commission and City Manager, acting on behalf of the Commission, control over administrative expenditures by those boards. This separation of control could result in expenditure of travel-related funds by the 175/185 pension boards, and potential abuse of such, independent of the oversight and approval of the City Commission, which would still be perceived a responsibility of the Commission by its taxpayers. 8. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to relinquish its authority to decide which consultants are employed by the City's pension board and what fees they are paid for their services, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The current pension board is an advisory board to the City Commission and thus has no independent or final decision making authority. Final award of contracts and the fees paid for such services to pension consultants is currently approved by the City Commission via the RFP process. The day to day oversight of these contracts/consultants is delegated to the City Manager who is hired by and responsible to the City Commission. Under Chapters 175/185, the additional pension board(s) required to be created in order to meet minimum statutory requirements would be vested with the full authority to establish and adopt rules and procedures for administration of their respective pension plans, including hiring and negotiating contracts for pension consultants such as attorneys, investment advisors, auditors, actuaries, investment managers, etc. The 175/185 pension boards could choose to utilize the current City Attorney as their pension attorney, but this would be at their sole discretion and must be under terms and conditions acceptable to the pension board, regardless of the current contractual arrangement the City has with its Attorney. Conclusion A result of the creation of independent pension boards required by Ch. 175/185 would be the removal of control over the selection of pension consultants employed by those boards from the City Commission and/or their appointed City Manager, in favor of the independent pension board. Hiring authority would be vested in the respective 175/185 pension boards and would be independent of the oversight and approval of the City Commission, which would still be perceived a responsibility of the Commission by its taxpayers. This separation of control could result in the board's hiring of a consultant Phase B: Preliminary Feasibility and Desirability Study Page 27 that is unacceptable to the City Commission, and could further result in conflict between the board's consultants, attorneys, etc and the City Commission's consultants, attorneys, etc., potentially leading to litigation, which is not uncommon, in order to resolve the conflict. 9. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to commit to a fiscal program in which, prior to its implementation, it is not possible to determine the level of future revenues from State insurance premium taxes, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations Per Chapters 175/185, a city is not eligible to receive state premium taxes unless the components of its pension plan meet the minimum requirements of Chapters 175/185. Once the city's pension plan meets those minimum requirements and the city levies the tax via ordinance, the plan is eligible for receipt of state premium taxes, which may be utilized to defer some allowable portion of the cost of funding the plan. However, until such time as the city adopts said ordinance, the amount of state insurance taxes it will receive is unknown and unavailable. Moreover, the State will not provide estimates of the amount of premium taxes expected to be received. According to the State, the reason for this is that although insurance companies do pay these taxes on policies existing in cities that are not currently participating in 175/185 plans (such as Winter Springs), they are not required by the State to report policy information specific to those cities until such time as that city adopts a 175/185 plan and provides proof of such adoption to the State Division of Retirement. Even though the amount of premium tax revenues cannot be projected with confidence, several facts about how premium taxes may be used to defray the cost of a 175/185 pension plan are known: a. In order to receive premium tax revenues, the City must adopt a pension plan that complies with the minimum benefits and standards in Chapters 175 and 185. b. A city that creates a new 175/185 pension plan must pay the full cost of providing the statutory minimum benefits, and cannot use premium tax revenues for this purpose. c. Once a city establishes a Chapter 175/185 pension plan that meets the minimum benefit requirements of Chapters 175 and 185, it is eligible to receive premium tax revenues which must be used for "extra benefits" for firefighters and police officers. d. According to the Division of Retirement's interpretation, the amount of premium taxes that may be used is a frozen dollar amount equal to the first year cost ofthe extra benefit(s). As the city's payroll grows, the dollar cost of the extra benefit(s) also grows. However, the amount of premium taxes that can be used for the extra benefit(s) is frozen at the first year dollar amount. This means that every year the city will be required to pay an increasing share of the cost of the extra benefit(s). Phase B: Preliminary Feasibility and Desirability Study Page 28 e. There is disagreement about the meaning of "extra benefits." As pointed out by the City's pension attorney, Chapters 175 and 185 define "extra benefits" as: "benefits in addition to or greater than those provided to general employees of the municipality and in addition to those in existence for firefighters and police officers on March 12, 1999." See sections 175.351(1)(b) and 185.35(1)(b), Florida Statutes. However, the Florida Division of Retirement has interpreted the statute to define "extra benefits" as benefits that are greater than the statutory minimum benefits, without regard to the benefits provided to general employees. The difference between the statutory definition of "extra benefits" and the Division of Retirement's interpretation is important for cities like Winter Springs, which have uniform pension benefits for all employees. Under the statutory definition, the city could not use premium tax monies to pay for ANY existing benefits. All premium tax monies would have to be used to provide benefits for police officers and firefighters that are greater than the benefits provided to general employees. However, under the Division of Retirement's interpretation, premium tax monies could be used to pay for police and fire pension benefits that are greater than the statutory minimums. Conclusion The lack of substantiated revenue estimates for insurance premium taxes makes it difficult to make an informed financial decision on the feasibility of implementing such a program, as any financial decision absent this data violates proper and professional financial practice. Any estimates created are obviously subject to significant error. Any error could have a significant impact on the level of funding required by the City, placing further burden the City's General Fund budget and consuming funds needed for other important services and programs in the City. 10. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to commit to the Chapter 175/185 revenue sharing program in which the use of premium tax revenues is limited, and when there is a significant disagreement over the meaning of "extra benefits", a condition that could have a dramatic impact on the City's ability to use premium tax monies to pay for existing benefits, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations The use of premium tax revenues received by the City is strictly limited by law and by the Division of Retirement. There is also disagreement over the meaning of "extra benefits" which could have a significant impact on the amount of premium tax monies that can be used to pay for existing pension benefits. The following facts about how premium taxes may be used to defray the cost of a 175/185 pension plan are known: a. In order to receive premium tax revenues, the City must adopt a pension plan that complies with the minimum benefits and standards in Chapters 175 and 185. b. A city that creates a new 175/185 pension plan must pay the full cost of providing the statutory minimum benefits, and cannot use premium tax revenues for this purpose. Phase B: Preliminary Feasibility and Desirability Study Page 29 c. Once a city establishes a Chapter 175/185 pension plan that meets the minimum benefit requirements of Chapters 175 and 185, it is eligible to receive premium tax revenues which must be used for "extra benefits" for firefighters and police officers. d. According to the Division of Retirement's interpretation, the amount of premium taxes that may be used is a frozen dollar amount equal to the first year cost of the extra benefit(s). As the city's payroll grows, the dollar cost of the extra benefit(s) also grows. However, the amount of premium taxes that can be used for the extra benefit(s) is frozen at the first year dollar amount. This means that every year the city will be required to pay an increasing share of the cost of the extra benefit(s). e. There is disagreement about the meaning of "extra benefits." As pointed out by the City's pension attorney, Chapters 175 and 185 define "extra benefits" as: "benefits in addition to or greater than those provided to general employees of the municipality and in addition to those in existence for firefighters and police officers on March 12, 1999." See sections 175.351(1)(b) and 185.35(1)(b), Florida Statutes. However, the Florida Division of Retirement has interpreted the statute to define "extra benefits" as benefits that are greater than the statutory minimum benefits, without regard to the benefits provided to general employees. The difference between the statutory definition of "extra benefits" and the Division of Retirement's interpretation is important for cities like Winter Springs, which have uniform pension benefits for all employees. Under the statutory definition, the city could not use premium tax monies to pay for ANY existing benefits. All premium tax monies would have to be used to provide benefits for police officers and firefighters that are greater than the benefits provided to general employees. However, under the Division of Retirement's interpretation, premium tax monies could be used to pay for police and fire pension benefits that are greater than the statutory minimums. Conclusions By law the premium tax monies that the City receives may only be used to provide "extra benefits" for firefighters and police officers. The amount of premium that may be used is a frozen dollar amount equal to the first year cost of the extra benefit(s). This means that every year the city will be required to pay an increasing share of the cost of the extra benefit(s). Moreover, under the statutory definition of "extra benefits," the City may not be able to use any premium tax monies to pay for existing pension benefits, since the benefits are the same for all employees and thus are not "greater than the benefits provided to general employees." 11. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to risk the cohesive spirit of cooperation we currently enjoy with our single citywide pension plan in favor of the inherent divisive nature of separate pension plans, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations In the past, the policy of the City Commission in regards to employee benefits has been to treat all employees equally, thus maintaining parity among all City employee groups. Phase B: Preliminary Feasibility and Desirability Study Page 30 The policy of providing parity has served the City well and has helped to bond employees towards a common goal, create a team atmosphere, and provide a cooperative environment among employees as well as among management and labor that has received recognition from private citizens and other City officials. This spirit of cooperation was evidenced in 1998 when City employees voted in the majority to pool together all of their individual retirement accounts existing in their defined contribution plans in order to help fund the newly created and current citywide unified defined benefit pension plan. This action was taken under the belief that the new defined benefit pension plan would continue to operate as a unified plan in perpetuity. Conversely, it is not uncommon for cities that possess separate plans for general employees, police officers, firefighters and/or other classes of employees to experience discord, both spoken and not spoken, amongst those different groups of employees. Put simply, this becomes a situation of the "haves" and "have-nots." This discord often becomes more problematic in hampering the effective operation of City services and creating unnecessary problems that take the focus off issues that are more important to taxpayers such as delivery of cost-effective services. Conclusion Implementation of a Chapter 175/185 plan represents a major deviation from the successful and effective past practice of providing parity in employee benefits among all groups of employees. The City would need to access the damage done to its credibility in the eyes of general employees based upon the City's change in commitment to provide all City employees with equal benefits. The City would also need to assess the potential damage to its ability to provide and focus on the delivery of services to taxpayers. 12. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to implement a pension plan in which it will be increasingly subject to mandates of the State Legislature resulting in an unfavorable financial impact on the City, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations Chapters 175 and 185 were adopted by the Florida Legislature in 1939 and 1953, respectively. Since that time, the legislature has made numerous changes to the original laws that govern those plans, often as a result of pressures by those affected employee groups. For example, in 1986 minimum benefit levels were raised. In 1988, the premium tax percentages were lowered. In 1998, the powers of the pension boards were increased. In 1999, the use of state premium taxes was restricted. In 2004, the use of state premium taxes was again addressed and restricted. Also, shortly after the presumption bill was passed, worker's compensation premiums experienced substantial increased costs that had to be born by the City. These changes ultimately have a significant financial effect on a City's required funding levels for those plans. Police and firefighter unions continue to lobby the legislature for changes to Chapters 175/185 that will benefit their members. These changes could have a significant effect on Chapter 175/185 pension plans and on the pension costs incurred by cities that sponsor such plans. Phase B: Preliminary Feasibility and Desirability Study Page 31 Conclusion The policies and procedures of the City's current pension plan are effected and approved by the City Commission of the City of Winter Springs. Decisions on benefits, investments, eligible participants, etc. are made solely by the City Commission. A change to a 175/185 pension plan would subject the City of Winter Springs and its taxpayers to mandates of the State legislature, and any changes the legislature may adopt, irrespective of the wishes of the City Commission. 13. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to lower the current normal retirement age below 55, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations In today's world economy where every dollar counts, and in which the vast majority of the public has their retirement programs frozen and even eliminated, there has to be some rational criteria upon which retirement benefit decisions for public employees are made. The chosen retirement age is one of if not the most cost sensitive elements of a retirement plan. Small increments of change can result in dramatic cost increases. Fire and police interest groups have for many years exalted the need for costly early retirement due to health reasons. Facts do not support a rationale for the need of normal retirement dates different from those of many other employees. Actual workmen's compensation tables place police and fire in a lower risk category than employees in construction and manual labor jobs, according to the U.S. Department of Labor, Bureau of Labor Statistics. Clearly, if such a need exists the reduced normal retirement ages, it should be applied to all high risk employees, not just police and fire. The public's intolerance for excessive public employee retirement benefits is growing. For example, following 911 the National Fire Association advised their locals to capitalize on the sentiments of 911 to maximize benefits. This was not a wise decision. As in Winter Springs, there was a nationwide backlash resulting in local governments saying "NO". As one New York City Fireman interviewed on national television said, the Union allowed itself to become intoxicated on its own public relations. The City currently has an age 55 normal retirement age benefit. Currently there are two proposals being discussed to reduce the normal retirement age as follows: 1. The minimum Chapter 175/185 normal retirement age of 52 with 25 years service, and 2. No minimum age with 30 years of service. Except in individual medical situations, at a time in which the years of able work have been expanded by improved medical care, and diet and exercise programs, it is difficult to justify the cost in reducing the City's current normal retirement benefit from 55 years of age and 10 years service to 52 years of age and 25 years service, as required in Chapter 1751185, which would result in an annual plan cost to the City of $2.3 million dollars, or 21.4% of payroll. It would also be difficult to justify the costs of the 30 years of age and Phase B: Preliminary Feasibility and Desirability Study Page 32 out regardless of age recommendation, which would result in an annual plan cost to the City of $2.1 million dollars, or 19.5% of payroll. A better option would be to maintain the current 55 year normal retirement age and provide for an enhanced disability benefit for employees determined medically unable to perform their duties from private sources equal to that provided by Ch. 175/185 plans. Conclusion The costs for reducing the normal retirement age below 55 are dramatic. In the alternative the City should explore the cost of increasing disability benefits for employees in the case of a bona fide medical disability from private sources equal to that provided by Ch. 175/185 plans. Thus, a decision to lower the retirement age must be decided on the basis of "need" as opposed to "want." 14. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to add additional boards and thus additional board members resulting in an increase of the number of individuals with fiduciary responsibilities and liability and bear the increased costs of fiduciary insurance and required training for those board members, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations Ch. 112 F.S. mandates that certain officials of city pension plans are charged with fiduciary duties and the associated liability. A plan may purchase insurance for its named fiduciaries to cover liability or losses incurred by the acts of the fiduciary. Board members of a pension plan are fiduciaries by definition. Ch. 112 also mandates annual training for those individuals with fiduciary responsibilities. Conclusion The addition of separate pension plans as mandated by Chapters 175/185 would significantly increase the number of board members and thus the number fiduciaries with associated liability under the plans. This increase in the number of individuals with fiduciary liability would also serve to increase the potential for fiduciary error and omissions and increase cost required for training purposes. 15 . Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to increase the oversight of its pension plan by the State Division of Retirement, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations Ch. 175/185, sections 175.341 and 185.23 provide that the Division of Retirement shall be responsible for the daily oversight and monitoring of the actuarial soundness of plans, determining compliance with Ch. 175/185 provisions, and for holding and distributing premium taxes. Within the Division of Retirement, this authority has been delegated to the Municipal Police Officers and Firefighters Retirement Trust Funds Office. This office has authority to determine a plan's compliance with the provision of Ch. 175/185 and eligibility for receipt of premium tax monies. Phase B: Preliminary Feasibility and Desirability Study Page 33 In making such determinations, this office has made decisions on whether a plan's actuary has properly utilized the premium tax monies. This has resulted in a legally substantiated opinion that some plans are utilizing premium tax monies inconsistent with Statutes and are thus, subject to legal challenge. Conclusion Adoption of a Ch. 175/185 plan would subject the City to dramatically increased oversight of the State Division of Retirement while dramatically reducing the Commission oversight. The Division has full authority to make determinations of a plan's compliance with the provision of Ch. 175/185 and full authority to determine eligibility for distribution of premium tax monies. 16. Understanding that the Commission will be ultimately held accountable for the performance of its pension plan, does the Commission believe it is desirable to implement a pension plan in which the power to adjudicate a member's entitlement to disability benefits is fully vested in the independent Pension Board, and does it believe that a fully informed public would support this change in a referendum based upon these conditions? Considerations Ch. 175/185 minimum requirements include a disability retirement component with the specific definitions and terms of eligibility dictated in the statutes. These terms and benefits are more advantageous to 175/185 participating members than those of traditional disability insurance policies available to private and other public employees. For example, Ch. 175/185 disability provisions deem a firefighter to be "permanently and totally disabled" if, in the opinion of the pension board, he or she is wholly prevented from rendering "useful and efficient service" as a firefighter/police officer. This final decision as to eligibility for benefits is made by the independent pension board, comprised in part and potentially in whole, by members of the pension plan, independent of the City Commission. This is in contrast to normal disability insurance policies that attempt to assist the affected employee in returning to work, even if in another occupation. An example of a commonly expressed concern with this law is in a case where a police officer has an inoperable injury to his/her trigger finger, yet is fully capable of performing useful and effective service in all other areas of police service or any other job he or she may now or in the future be qualified for. Although this individual cannot perform service as a police officer, he or she could perform service in a police administrative or training function. Further, this individual could perform useful service in any other area he or she may be qualified for or may become qualified for. Regardless, this individual is still eligible under Chapters 175/185 for a disability pension of not less than 42% of his or her average monthly salary for life (or ten years certain to the employee and/or his or her beneficiary). Furthermore, it is not uncommon for cities to experience abuse of this Ch. 175/185 disability component. This abuse was documented in a 1996 St. Petersburg Times investigative report entitled To Serve and Collect, enclosed herein. According to The Times report: a. the average age of a disability retiree under the Florida Retirement System (including special risk categories) was 50 compared to 39 under the 175/185 Tampa Fire & Police Pension Fund, 42 under the 175/185 St. Pete Police Pension Phase B: Preliminary Feasibility and Desirability Study Page 34 Fund and Fire Pension Fund, 39 under the 175/185 Largo Fire and Police Pension Fund. b. The average monthly disability pension as a percent of salary was 42% under FRS and 60% - 75% under the aforementioned 175/185 pension plans. c. One in three Police Officers and Firefighters retires on a disability pension in the City of Tampa, one in eight in St. Petersburg, and more than one in three in Clearwater, all 175/185 pension plans. By comparison, fewer than one in one hundred sheriffs deputies, covered by FRS, collect a disability pension. d. Chapter 175/185 disability pensions in Clearwater, Tampa, Largo and St. Petersburg are far more liberal than the private sector where most employees are encouraged to go back to work. Police officers and firefighters who go out on disability are rarely called back to work, even if they recover 100%. Police and firefighter unions have negotiated contracts that make it difficult if not impossible to call employees back to work, even if they're fully recovered. e. The list of medical conditions, including heart disease and tuberculosis, presumed to be job-related and thus eligible for a disability pension is growing all the time. Theoretically, a police officer who has smoked a pack of cigarettes a day since age 15, engages in promiscuous sexual behavior and is grossly overweight still could be awarded a disability pension. f. Most police and fire pension boards are composed primarily of police officers and firefighters, some of whom may be seeking their own disability pension in the future or voting on friend and colleagues. Not surprisingly, well over half of the applications submitted in the past 15 years (report date May 1996) have been approved: 62% in Tampa, 65% in Largo, 73% in St. Petersburg and 96% in Clearwater, all 175/185 pension plans. g. In the past two years (report date May 1996), state records show 31 police and fire political actions committees gave nearly $3 million to Florida elected officials. h. It is not uncommon for a police officer or firefighter to retire on a disability retirement and then return to work in the same city in another job capacity. 11 such cases exist in Tampa alone. Conclusion Implementation of a 175/185 pension plan requires the inclusion of a disability component as part of the pension plan. This disability component must comply with the terms and benefits of Chapters 175/185. These requirements make the disability retirement component, under 175/185, ripe for abuse and also vest the adjudication of eligibility for these disability benefits in the hands of the independent pension board. City employees currently enjoy a generous 100% city-paid disability insurance policy that provides income to an employee should he or she becomes disabled. This practice has served the City well over the years and provides appropriate balance in providing benefits to employees vs. taxpayer funds expended for this benefit. Phase B: Preliminary Feasibility and Desirability Study Page 35 to serve and collect QUALITY I CITIES I Volume 69 Number 11 . Executive Director's Introduction To Serve & Collect-A St. Petersburg Times' Investigation Departments 35 Sunday. March 31, 1996: To Serve & Collect ................................. 6 Smooth sailing for pensioner.................]) 'r [oHowed the letter of their law' .......... 12 'r feel like r can do the job' .....................13 Lobbyist knows pensions firsthand .......14 Monday. April L 1996: Pension fund run by good 01' boys? .......17 Golf. ajob - and disability pay ..............21 Trustees enjoy travel perks ...................24 Tuesday, April 2. 1996: Sick of the boss? Retire on disability... 25 Reprimand, then depression .................28 Officer depressed by 'public ridicule' ..... 29 Case set trend for pensions ...................29 Crash led to psychological pension .......30 FCCMA Celebrates 50th Anniversary 34 34 38 43 46 48 Quality Floridian Ad Index Opinions of the Commission on Ethics Report from City Hall Professional Services Directory News Briefs QUALITY crTIES - M~:: 1996 3 From the Executive Director Ten years ago, Florida's localgovernmentsJaced legislation that drastically altered the composition oj pension boards and their procedures. Direct representation on these boards by councilmembers was prohibited. This erosion oj Home Rule authority and loss oj direct representation has led. in the League's opinion. to many of the personnel problems cities face today. Strong union lobbying has resulted in a split between the entity that pays the benefits to the employee and those who make the judgment call as to the need Jar the benf(.fit. In a 1986 article in the Florida Municipal Reporter (then the League's magazine) about this legislation. this was written: "The League views such a separation qI authority Jrom responsibility as ill-conceived and potentially costly for city ta'Payers. A municipality would remain fIScally responsiblefor the ultimatefunding oj any deficits arising in the pension plan, yet under (this bill), the city could have little or no control over the actual operation oj the plan. The independent ability oj the pension boards to hire their own counsel. collect attorneys 'Jees. and set their own budget without review by the city is disturbing because unchecked. the cost oj such actions could escalate disproportionately to actual need. " Now. a decade later, these words came to mind as I read this series q{ articles in the St. Petersburg Times titled "To Serve &. Collect. ~ You may think of examples closer to home. The issue oj eliminating the independence oj these pension boards will continue to create problems Jor cities and tCLx:payers - absent state legislative action-and will continue to be an expensive way to provide benefits to employees. We appreciate being given permission to reprint this series. SUNDAY, MARCH 31, 1996 FIRST IN A SERIES. WHAT THE TIMES INVESTIGATION FOUND: . In some of Tampa Bay's biggest cities, I in every ~~ police officers and firefighters retires on a disability pen- sion. . Police officers and Ilrefighters who go out on disability are rarely called ba<:k to work - even if they recover. . Disability pensions for public safety employees often are more lucrative than regular pensions - and the money is totally tax-free. . HepaUtis, heart attacks, emphy- sema - the list of diseases presumed to be job-related is gro'\Jing all the time. A TIMES' INVESTIGATION TO SERVE AND COLLECT BY BRAD GOLDSTEIN, THOMAS C. TOBIN AND KATHERINE SHAVER Times Staff Writers D ,bocah J. Donn. a Tampa police officer, hurt her right thumb arresting a suspect and said she could no longer se- curely hold a gun. In 1989. Dunn retired on a taxpayer-supported disabllity pension. What's she doing now? She's riding the North Carolina quarter-horse circuit. \\Tinning tJrst place in barrel and pole racing events. John Holsapple. a Clearwater firefighter. injured his back as he tried to Uft a heavy object out of a fire truck. A city advisory committee expressed skepticism about the extent of his injury. but still awarded him a disability pension. Holsapple now sells antiques and has been observed lugg:lng furniture into a store in Dunedin. Daniel Fries, a St. Petersburg fire lieutenant.. was hurt in an accident while driving a city car home from work. He said he suf- fered such severe back, neck and shoulder pain it prevented him from working as a firefighter. Despite conflicting medical evidence. Fries was awarded a disability retirement that now pays $2:020 a month. In addi- tion to his St. Petersburg pen- sion. he earns 84.905 a month- as chief of the Largo Fire Depart- ment. More than 500 police officers and firefighters in the Tampa Bay area have left their jobs and retired on disability pensions. Some or them are true heroes. seriously ai'ld permanently in- jured while trying to protect the public. For them and their fami- ---.------~-,~~.__._--_.~-------~_._---------_._----_. FLORIDA LEAGUE OF CITIES 6 lies. a disability pension provides a measure of financial security when they are no longer able to work. But in lour of Tampa Bay's biggest cities-Tampa, St. Pe- tersburg, Cleaxwater and Largo - disability plans have become so generous and tempt- Ing that some employees have used them as shortcuts to their golden years. They retire on pen- sions that sometimes rival their regular salaries. ihen go on to even more physically demanding occupations and avocations. In St. Petersburg, one in every eight retired police officers and firefighters is collecting a disabil- ity pension. In Tampa and Largo, !l's ] in every 3; in Clearwater. more than ] in 3. By comparison. fewer than I in 100 sheriffs deputies and other employees covered by the state of Florida retirement sys- tem collect a disability pension- even though the state system itself is considered one of the most generous in the naUon. -[hese (local) pensIon pro- grams are administered bv the people who benefit from them." said Raymond Sittig. former president of the Florida League of Cities. "You have firefighters sitting there determining if firefighters can go out on disabil- ity_ If there's a shortfall in ben- efits. they send the bill to the taxpayer. . . . It's really a theft of the public purse." A Times' investigation found: . Disability pension plans in Clearwater. Tampa, Largo and St. Petersburg are I~lr more lib- eral than lJlOse in the private f ~ <:. ?!. . sector, where most employees are forced to go back to work. Moreover, disability pensions are more lucrative than regular re- tirement pensions because they are tax-free. An officer nearing retirement age is usually better off going out on disability than on a regular pension - for one St. Petersburg police officer. It meant a difference of more than $3.600 a month. . Police and firefighter unions have negotiated contracts that make it. difficult if not im- possible to call employees back to work even if they've fully recovered. All four cities rely heavily on the retirees them- selves to say if they're able to return to work. Few do: Tampa has recalled one and Clearwater not a single person. . The list of medical concli- lions presumed t.o be Job-related -and thus eligible for a disabil- ity pension-is grov..ing all the time. La.st year, state lawmakers added meningococal meningitis and all strains of hepatitis to a list that included heart attacks. hyl)Crtension. angina and all TO SERVE & COLLECT fonns of non-cancerous lung disease. Theoretically. a police officer who has smoked a pack of cigarettes a day since age 15, engages in promiscuous sexual behavior and is grossly over- weight still could be awarded a disability pension. . Most police and fire pension boards are composed primarily of police officers and tlrefighters, some of whom may be seeking their own disability pensions in the future or voting on those of friends and colleagues. Not sur- prisingly. well over half of the applications submitted in the past 15 years have been ap- proved: In Tampa, 62 percent; in Largo. 65 percent: in St. Peters- burg, 7.3 percent and in Clear- water, 96 percent. Local pension plans are funded by taxpayers, payroll contributions from active police and firefighters and a Iittle- knO\vn tax on car and home- owner's insurance. If you pay property taxes or own a house or car. you are helping finance someonc's dis- ability retirement. Times Photo- FRED VICTORIN TOO HURT TO WORK? Former Clearwater firefighter John Holsapple, right, hurt his back, refused another job with the city and now collects $1,305 a month in disability benefits. He's shown here lifting a walnut dresser in January. "I think It's a real concern," said Hon Forbes, former l'inellas Park police chief and city man- ager. "Ifs not a the money is there and it's not hurting anyone' is- sue. 111e reality is taxpayers fund the pension plans. . . . I think voters today are exasper- ated with the idea that govern- ment keeps asking for more money and putting it into waste- ful (programs). n Police and fireflght.er unions. which negotiat.e the disability retirement contracts with each city. say they're only trying to protect members who dally put their lives on the line. "Most people in the private sector aren't exposed t.o the same haz- ards as a police officer (or) a fire- fighter," said Ed Hoffman. former deputy Ilre chief in West Palm Beach and now a lobbyist for the Police Benevolent Association. '" am not going to go out there and be a police officer with the ele- ment we have out. there. . . . Those vocations are above ancl beyond what anyone in the pri- vate sector is exposed to." QUALITY CITIES - !\tIAY 1996 7 A TIMES' INVESTIGATION '-:d pension fu:~ trustees. I who decide whetJler to grant I disability pensIons, say they are I merely enforcing long-standing I contracts. One reason for the I high number of pensions, some i say, Is a d""indllng work ethic. I "Let's say you didn't get a pro- I motion or you didn't get a par- i Ocular assignment -.it just be- . comes convenIent to go out on a disability pensIon," said Indian Shores Pollee Chief Earl Wlll- iams. a former Tampa police officer who spent nine years on Tampa's pension board. "I saw that frequently. It's like any other business. someone is al- ways looking for the easy way out." At least one of Deborah Dunn's Sup(~IVIsors thought the Tampa pollee officer was less than committed to her job. Dunn had worked as a horse trainer and competed on the professional jumping circuit be- fore joining the Tampa Police Department in 198~~. In 1984. Dunn was com- mended for helping to subdue a man armed with a shotgun. The following year. she was ap- pointed to the mounted patrol unit. But then her marriage ended in divorce, and her work started to suffer. Dunn was cited for I~liling to clean her cruiser, abusing sick time. becoming ovenveight and displaying a negative attitude I that was affecting her horse's i safety as well as her own. II "She has exhibited an attitude that t.his profession and this department owe her something and she should not have to ap- I ply herself to receive it." wrote I one of her superiors. I Dunn denied t.he charges. ! Three mont.hs and two more I disciplinary letters later, she injured her right thumb trying to restrain a suspect in the police booking room, In 1988 -just days after an- other negative job review-she told her physician she was un- able to fire her sef\ice revolver. A panel of three doctors agreed, saying her inability to fire her gun meant she could no longer work as a pollee officer. When she came before the city's pension board, t.he trustees asked about her horse-jumping competitions and whether she could hold the reins \'lith her right hand. "I can't," she repUed. "1 can't do it.. 1 can't use my thumb." The trustees voted unani- mously to grant her a disability retirement. Even if she could hold the reins, they argued, she couldn't grip her gun and should be rdired. Since leaving the force in 1989, Dunn, 36, has never been rceaUed to Tampa for an inde- pendent medical exam. She now lives In Hubert:, N.C., near Camp LeJeune. and has collected more than $130.000 In disabilltv ben- efit.s. . Dunn's injury has not. inter- fered with her riding. L,,1.st June, she entered two events at t.he annual quarter- horse show on the grounds of the Lake Waccamaw Boys Home. The llrst event, barrel racing. requires a rider to maneuver a horse around a series of rodeo barrels and cross the finish line at breakneck speed. In the sec- ond event, pole racing, the horse gallops to the end of a sand-filled arena and returns, zig-zagging as fast as possible between tlve poles. Holding the reins firmly in both hands, other competit.ors said, Dunn circled the first bar- rel. then the second, and finally the third, before crossing the finish line In 16 seconds. She won both events. Dunn did not respond to a written request for an interview. 'Just a travesty' Although public safety retire- ment plans In Tampa. Clear- water, SI:. Petersburg and Largo have evolved in their own ways. they started out in the same fashion. Most municipal workers col- lected up to 50 percent of their highest salary upon regular re- tirement. When they died. a por. FLORIDA LEAGUE OF CITIES 8 tion was given to their spouses and minor children. But shortlv before World War II. many cUiis began offering public safety employees more generous benefits than other workers if tJley agreed to forego the Social Security program. The plans saved cities tens of thou- sands of dollars in weekly contri- butions. The plans also were a boon to pollee and fireflghters who be- came disabled on the Job, If an employee had enough medical evidence to persuade a majority of pension board mem- bers he was disabled. he could collect from 60 to 75 percent of his salary, depending on the plan. 'The emotional appeal is to our sense of fair play in America," said Forbes, the former Plnellas Park police chief. "That If someone puts their life on the line for us. they're deserv- Ing of whatever they get. So we tend to be more lenient and un- derstanding. But is that good business and the right thing to do? If you look at. occupational hazards, you'll find police orne. crs and firefighters way down the line." According to the National In- stitute for Occupational Safety and Health in Atlanta, loggers, fishermen, maritime employees and structural steel workers far exceed police officers and firefighters in rhe rate of on-the- .lob deaths per thousand. Police came in 27th; firefighters 41st. Nevertheless. Florida lawmak- ers thought It was good business to reward public safety officers. In 1953, the Legislature ap- proved a premitim tax on all car and homeowners insurance to help fund local pollee and fire pensIon plans. The tax has meant a total of $81-milHon for the plans in St. Petersburg. Tampa, Clearwater and Largo, An expert in labor relations says strong lobbying by public safety unions is responsible for the premium tax and lucrative contracts, "Where (unions) are more politically involved their benefits are higher." said TO SERVE & COLLECT Charles Hall, assistant director of the Center for Labor Research Studies at Florida International University. The power of the public safety unions is clearly evident in the fine print of contracts in the four bay area cities. Each city's re- tirement plan is far more liberal than the state's, especially in the area of disability pensions. Un- der the state system, if a law enforcement officer or firefighter can no longer patrol a beat -or climb a ladder. another position 'kill be found to accommodate the limitations. In Tampa and Largo, a public safety employee who can no longer arrest a person or scramble up a ladder is eligible for a disability pension even If he could do another, less physically demanding city job. The same was true until recently In St. Petersburg and Clearwater. In addition to the pension, employ- ees in all four cities can collect benefits from workers' compen- sation, which pays 66 percent of their salaries for two years. "I don't think the public un- derstands that a person (used to be able to) go out and collect compensation and disability and get 150 percent of their salary," said Andrew Houston, St. Peters- burg's employee relations direc- tor. "Now the law has changed and you can only collect 100 percent. But that's not taxable income. So actually. there is a financial incentive to go out." Nowhere is that. more appar- ent than in Clearwater. Until this year. police officers and firefighters injured on t.he job were entitled to a pension of 75 percent of their average sal- ary over the past five years, plus 15 percent for every minor child. They were also entitled to a lump-sum payment funded through the tax on car and homeowners insurance. That has meant a one-time average payout of nearly $28,000 per person. One fire lieutenant who first injured his ankle sliding down the firehouse pole got $108,418. "It was just a travesty as far as I was concenled and many others in city management as to what was happening, ~ said Clearwater Police Chief Sid Klein. "You don't have to be a rocket scientist to figure It ouL..there clearly were abuses." To get a disability pension in Clearwater, an employee applies to the Pension Advisory Commit- tee. The applicant must supply two medical reports supporting his claim. In cases where the committee has doubts, it can get. a third, Independent opinion. In 1985, the committee con- sidered the case of John Hols- apple. a firefighter who said he had injured his back while lifting a heavy object out of a truck compartment. Committee members were bothered by conflicting state- ments from three doctors. One said the injury was permanent. Another said Holsapple had shown 25 percent improvement in t.he three months since his injury. A third said he was "rehabilitatable. " When the committee sug- gest.ed an independent medical examination, Holsapple refused. Instead, he went back to the doctor who had said he was im- proving. The doctor drafted a new letter calling the injury a "permanent Impairment." When Holsapple appeared before tile pension board the following month, one member asked if he was interested in another job with the city. Holsapple, who by then had two opinions supporting his disabil- ity claim, said no. He got the pension, but two committee members continued to have qualms. According to minutes ofa 1985 meeting, t.hey weren't In favor of the pension "but the way the law reads, they had no choice but to grant" it. Today, Holsapple collects $1,305 a month in disability benefits. In January, two report- ers and a photographer watched as he towed a trailer filled 'kith furniture from his home to an antique store in Dunedin. With another man's help, he then lifted two antique bureaus and other bulky items from the trailer with no apparent trouble. Holsapple, 49, lives in a 4,000-square-foot home near the waterfront in Ozona-a home on which. records show, he served as contractor. He declined to comment for this story. Holsapple doesn't need to worry about being recalled. Clearwater tightened its pen- sion contract last fall when it eliminated the bonus for depen- dent.s and reduced the disabiltty benefit from 75 to 66 2/3 per- cent of the employee's average salary over the past five years. It also established provisions for recalling pensioners who have recovered from their disabilities. But the city agreed to a grand- father clause that makes It im- possible to recall any of the 80 public safety employees now collecting disability pensions- including the police and fire union presidents. Holsapple and others like him \\iU receive their pensions for life. Never to return Over the years, courts have ruled that a police officer or fire- fighter is entitled to a disability pension even if he's only 5 per- cent disabled - as long as that 5 percent affects hi~ ability to do his job. "Take a police officer who hurts his trigger Unger, it's locked and he can't use his gun," said Jon Ellis, administrator for Largo's police and fire pension plan. "They can no longer be a police officer. But they can turn around and be a judge, an attor- ney. or an insurance fraud in- vestigator. It does lead lay people to look at the process and say, "Mv Lord, I don't know how this pe;son Is qualified to be dIsabled when .t:e's doing a full job over there. Mindful of appearances, Largo, St. Petersburg and Tampa have provisions allo'king them. like Clearw'ater, to recall pen- sioners who have recovered from their disabilities. So far, few have returned. gUALI1Y CITIES - MAY 1996 Each year Tampa randomly selects 20 pt:nsioners under age 46 for re-examinations but has recalled only one. St. Petersburg has recalled two employees. No one has been recalled in either Clearwater or Largo, but Ellis notes that at least his city's rules are clear: "We don't need authorization if we find someone working in the capacity of a police officer or firefighter--we automatically terminate their pension," Ellis saId. But. Daniel Fries, 59. presents an interesting problem. Before his arrival at the Largo Fire De- partment, Fries worked as a fire lieutenant in SL Petersburg. In 1972, Fries was driving home Irom work in a Si. Pet.ers- burg city car when it was struck from the rear. Although he suf- fered a sprained back' and neck. "he has reached the point where he could n~turn to his usual type of employrnent and extracurricu- lar activities without restdc- Uons," a doctor wrote in 1973. "No further treatment is neces- sary." After that report. Fries went to two other doctors. They agreed \\-ith him that the car accident had caused a partial disability. Fries received a disability pen- sion, saying that continued pain prevented him from working as a fire lieutenant. Two years later, in 1976, Fries went to work as a fire inspector in Largo. Ellis says Fries would not have been eligible to con- tinue receiving a disability pen- sion under the eity of Largo's contract. "If we were St. Petersburg, we would have terminated him." Ellis said. "TIle problem is on t.he St. Pete side. ,. St. Petersbur,g officials say a fire lieutenant still needs to pull a fire hose and work a fire. ac- tivities that Fries is incapable of performing. In Largo. Fries rose through the ranks. becoming a lire mar- shal. then deputy ni.c chief. In 1987. he was driving a city car when a 70'year old woman made an improper U-turn in A TIMES' INVESTIGATION DUNN: When the pension board asked her if she could hold the reins of her horse in her injured hand, Officer Dunn said, "I can't do it." front of him. Fries was unable to stop in time to avoid hitting her. He sued the other driver, claiming the accident caused pain and suffering and loss of consortium. In 1992, the woman's insurance company settled, agreeing to pay Fries $15.500. That year, he was named Largo fire chief earning $56,596 per year. Fries' total income. from his Largo salary and his tax-free SL Petersburg disability pension, Is $83.104. He says his disability doesn't interfere with his job as fIre chief. "I can do my job as fire chief fine." he said. "I couldn't pull a fire hose for any length of time, or climb a ladder." With almost 20 years on the job in Largo. Fries soon will be eligible for a retirement pension from that city as well. A tax-free retirement In Tampa, St. Petersburg, Clearwater and Largo. police officers and firefight.ers can col- lect more from disabilit.y pen- sions than from regular retire- ments. It's not surprising. then, that a majority of the disability pen- sions granted in the four cities have gone to public safet.y em- ployees with more than 15 years on the job. One in three was within a year or two of reaching the 20-year minimum for regular retirement. Consider the case of Troy Hitchcox. He was a 19-year vet- eran of the St. Petersburg Pollee Department when he injured his knee in 1985 trying t.o subdue a dnmken driver. FLORIDA LEAGUE OF CITIES 10 Under terms of his contract. Hitchcox was eligible to receive a disability pension worth 60 per- cent of his salary, compared with 50 percent for a normal retire- ment. That meant $1.900 a month tax-free instead of $1,600 before taxes. Hitchcox undenvent arthro- scopi,c surgery and applied for a disability pension. During his recovery, he opened his own bail bonds and private detective agency. 1\vo orthopedic surgeons felt Hitchcox could return to duty after rehabilitation. But one of the doctors told the city that Hitchcox "was more concenled with long-term disability than \"....ith rehabilitation." Hitchcox attributed the com- ments to a personality conHict with the doctor. He got a third opinion, which called for a total knee replacement in t.he future. Trustees of St. Petersburg's pension board questioned whether his work as a bail bondsman or private eye re- quired the same amount of labor as a police officer. No. Hitchcox told them. "It's not-you lmow, I'm not to go out and arrest someone," he said. The board denied the pension. Hitchcox sued and ajudge or- dered a new hearing. City offi- cials declined to appeal and granted Hitchcox his pension and $12,725 in back pay. If the pension board had checked with the state insurance department, it would have learned bail bondsmen have stronger arrest powers than local police officers. "They're bounty hunters." said Sally Burt. who oversees all bail bondsmen in the state of Florida. Those are the exact words Hitchcox reportedly used to in- troduce himself last summer when he appeared at Doris Hill's St. Petersburg home to arrest a Juvenile wanted lor strong-arme~ robbery. "He was supposed to be an ex-police oITicer." recalled Hill. whose grandson was friendly with the youth. "\\ollen the TO SERVE & COLLECT Smooth sailing for I Times Staff Writer I T LARGO wo years ago, Largo police of- ficer David Paulsen skippered a five-man crew In a race against the elements. Paulsen had entered hiS 33-foot sailboat Solar Wind in the annual Clearwater to Key West regatta, a grueling 48-hour contest. At the time. he was on his second year of light duty and collecting workers' compensation because of a car accident. He was also four months shy of applying for a lifetime disability pen- sion. "1 never did anything on that boat that I had claimed I could not do," said Paulsen, 29. who acknowledges tying ropes and sailing through squall-force winds during the course of the race. . In 1992, Paulsen was driving home from a training class when hIS car was struck from behind. He was taken to the emergency room where. records show. a doctor found a lower-back strain but no disc damage. Since then, Paulsen has complained of vertigo, dizzy spells and black-outs as well as chronic back and shoulder pain. He said his inju- ries prevented him from sitting longer than 15 minutes, working as a police officer or raising his hands above shoulder level \vithout severe pain. But he did buy the 33-foot Morgan that he entered In the 1994 Clearwater-Key West regatta. It was Windy t.hroughout the race. said Jeff Shearer. a Largo detec- tive who was on the Solar Wind's crew, but "the boat we were on is a very heavy boat. very steady. So the ride was very smooth." But Biil Wilhelm, a Clearwater lawyer who finished flrst in the same boat class, described the trip as anything but smooth. "Just south of Egmont a squall blew in and broke a couple of booms," he said. ". . .Thursday night. was nowhere you wanted to be if you had anything wrong \vith you." Soon after the race. Paulsen filed for a disability pension. Today he collects $1.370 a month and is studying criminology at the University of South Florida. Times photo FRED VICTOR1N DAVID PAULSEN, Largo police: Paulsen commanded a crew on the Solar Wind, above, in the Clearwater-Key West regatta, but four months later said he was unable to do his job. bounty hunter went to put the cutfs on him, he resisted." Hitchcox chased the boy around the house. according to HUrs grandson, William Patty. When Hitchcox reached for the youth, Hill's dog became excited and t.urned on Hitchcox. "It was a little cut on the el- bow and a hole on his pants." Patty said. "He was smiling and laughing. We just put a Band-Aid on his elbow and he walked out fine." Hitchcox, 53, declined com- ment on his case. "Suffice to say I am on a disability pension," he said. "It was a court-ordered pension. That's about all I want to say." With cost-of-living adjust- ments. Hitchcox now collects $2,310 in monthly disability benefits. He does private detec- tive work for defense la1Nyers. an insurance company and his fornIer employer-the city of St. Petersburg. @Copyright 1996, 8t. Petersburg Times. All rights reserved. @Copyright 1996, St. Petersburg Times. All rights reserved. QUALITY CITIES - MAY 1996 11 A TIMES' INVESTIGATION I followed I the letter of thei r law' BY KATHERINE SHAVER TIMES STAFF WRITER TAMPA he house that the city built.'. That"s the nickname some of Bobby Moody's former col- leagues at: the Tampa Police De- partment gave his 13-room house modeled after an 1890 Princess Anne Victorian. Moody and his former wife. Debra Moody Richards, say tbey built the two-story, 4,000- square-foot Parade of Homes \\,inner with money each earned from a city disability pension and workers' compensation. Bobbv Moodv retired in 1985 after he"hurt his leg when he crashed a motorcycle he wasn't supposed to ride. He got a repri- mand. He also has received more than $240,000 from his pension and another $100.000 from workers' compensation. All of it was tax - free. Two veal'S after Moodv retired. his wif'C at the time. Debra, re- tired as a Tampa firefighter. She said she felt knee pain when she stepped off a fire engine while trying to direct it into the station. In the past. nine years, she has collected $] 3 I ,000 from her dis- ability pension and another $67,500 from workers' compen- sation. It. too, was tax-free. Times Photo-VICTOR JUNCO Bobby Moody, Tampa Pollee, Debra Moody Richards, Tampa Fire Department: The couple, then still married, built this house in Hitlsborough County partly with their disability benefits. Together, a cop and firefighter built ~l dream home. With its one-acre piece of land. the house is now appraised for tax pur- poses at $146.800. "If you get more money," Bobby Moody said, "you'll live a better lifestyle. That's obvi- ous. . . . r would have built that house with a pension or not. The pension just helped it come along a little quicker." The house wasn't the only thing that bothered some T~unpa police and firefighters, who help taxpayers bankroll the pension fund with their paycheck deduc- tions. Some questioned the coin- cidence of a city-supported "dis- abled couple." "People said it was a scam." Bobby Moody said. ". . . They acted like we planned this. We didn't plan this. It happened. It's odd it happened this w'ay." As an instructor at the Tampa police academy. Moody was sup- posed to supervise new recruits. But. one afternoon in 1985. he asked to take a spin on another instructor's three-wheel. all- terrain motorcycle. Though Moody had never rid- den a three-wheel motorcycle. an instructor gave him a helmet and some pointers and told him to stay on the flat. grassy area nearby. Two minutes later. Moody was seen riding off into the woods. according to police re- ports. Atter missing a turn. Moody crashed into a small tree and impaled his right. leg on a branch. A supenrisor wrote that while Moody had been an "outstanding" oH1cer for eight years. the motor- cycle incident showed a "lapse of sanity." He received a \\Titien reprimand. The damage, however, was already done. After three opera- tions, doctors determined Moody could never again run at top speed or climb quickly. One pension board trustee. police Lt. Robert Pennington, said he objected to someone riding a motorcycle "and playing on i( and then becoming disabled and us having to retire him and pay three-quarters of a million dollars in benefits over his lifetime." But another argument won out. As one tmstee put it, "hors- ing around" was "an accepted practice" at t.he police academy_ Moody's motorcycle crash. there- fore, left him with a bonafide line- of-duty injury. Bobby Moody. 42. now \\forks as a sales representative for a FLORIDA LEAGUE OF CITIES 12 TO SERVE & COLLECT . After William Hamner was iryured, Tampa didn't want him. Now he gets a pension and works as a cop in Alabama. 'I feel like I can do the job' BY KATHERINE SHAVER Times Staff Writer O TAMPA n a Saturday night 17 years ago, Tampa pollee Officer William Hamner answered a family argument call and found himself at the end of an irate husband's shotgun. The blast sprayed pellets into Hamner's chest and left arm. He underwent several operations, but his ann never fully recov- ered. Considered too injured for street patrol. Hamner retired and was awarded a disability pension to take care of him the rest of his life. But in 1989, word reached Tampa police that Hamner also was taking care of himself - by working as a detective sergeant for the police department in Selma, Ala. Today, Hamner is a Selma police lieutenant. He carries a gun. He has arrested murder suspects and bank robbers, some of whom he had to "'-'restle into submission. If Hamner gets paid $30.000 annually to work as a cop in Alabama, how can he also collect $22,750 every year tax-tree as a "disabled" police officer in Tampa? Blame it on a system that sometimes discourages people from returning to work even when (hey want (0. As of 1990. when the Tampa fire and pollee pension board had Hamner re-examined, he still couldn't rotate his left arm to get his palm face-up. His arm was crooked, Hamner told the board, but strong, and he wanted to return t.o the Tampa Police Department. "I feelllke I can do the job," he said, accord- ing to a tape recording of the meeting. The pension board's doctor agreed that Hamner's arnl had recovered enough that he could return to street patrol. But there was one technicality: The limited motion in one ann was enough local pager company. Debra Moody Richards, 41, is a travel agent in Tampa. The couple divorced in 1991. He still lives in the house. Bobby Moody says parts of his right leg are still paralyzed. He can't run or climb quickly and says he withstands the pain only by swallo\\oing 800 milligrams of Motrin daily. Debra Moody Richards said that even after several knee operations she still wears a knee brace sometimes. "r worked damn hard to get to where I got. and it was devastating to me when r got hurt," she says. ". . . You give up part of your body. and you go through pain every day." Both say they have nothing to apologize for. "I followed the letter of t.heir law and followed their (pension) con- tract. and I retired," Bobby Moody said. ". . . If they think it (the con- tract) is too lenient. which ob"iously it is, then they should change it."j"% OCopyright 1996, St. Petersburg Times. All rights reserved. hoto AP WILLIAM HAMNER, Tampa police: A shotgun blast sprayed pellets into his chest and arm. to make Hamner fail the physical exam given to new Tampa police recruits. It didn't matter that Hamner had strengthened his arm and grip by lifting weights and squeezing tennis balls. Or that he had passed the Selma Police Department's physical agility test. The only thing he couldn't do, he said, was use a pump shotgun, so the Selma depart- ment bought him an automatic. "As far as doing the job. " Hamner told the board, "every- thing they've ever told me to do I've been able to do." But rules were rules. "My only concern as a trustee was could he come back',''' said Tampa po- lice Lt. Robert Pennington. a pension board trustee. "Would we hire him if he came to us? . . . The doctors said no, we wouldn;{ hire him." Hamner. 45, said he never hid the fact that he intended to con- tinue In police work, a job he loved. The same day he got his disability pension in Tampa, he started work as a sheriffs deputy in Manatee County. "rm not trying to do anything improper," he said. 'Tampa PD knows what my abilities and disabilities are, and they prefer to pay me to not work there." OCopyright 1996, Sf. PeterSburg Times. QUALITY CITIES - MAY 1996 13 A TIMES' INVESTIGATION LAWRENCE "LARRY" PULKRABEK, St. Petersburg police: For more than 10 years, Pulkrabek, left, has worked the sea, landing stone and blue crabs from the Gulf of Mexico. He also has been receiving $2,310-a-month disability checks from the St. Petersburg Police Pension Fund. He said a 1974 car accident caused lower back pain that prevented him from sitting or standing for long periods of time. In 1978, he won a disability pension. In 1983, he was re-examined by a city doctor who blamed his lower back pain on his 52-inch waistline. Pulkrabek, 52, said he was unaware of the doctor's report. He said he has always relied on partners to halllllp his traps. This photo Was taken in Venice, Fla.. in January. Lobbyist knows . pensions firsthand L TALLAHASSEE awrence "Ed" Hoffman, a former West Palm Beach deputy fire chief, retired on a disabilitv pension because of angina and severe a nxietv. But HofTm~lT1 is still hard at work-lobbying the FIOIida leg- islature to grant. even more ben- eHts to public safety employees. "I'm more knowledgeable than most of the people up there. . . on the Florida Retirement SyS- tem-I helped write it in 1969," says Hoffman. lobbyist for the state's 31 ,OOO-member Police Benevolent ASSOciation. 'Tve lobbied very strenuously, espe- cially for (fire and police)," Hoffman, 75. calls himself "dean of the lobbying corps." the . A man who lobbies legislators about disability benefits for police and firetlghters collects a pension himself. BY BRAD GOLDSTEIN Times Staff Writer FLORlDA LEAGUE OF CITIES 14 title given him In a state proda- malion extolling his work on behalf of public safety employees covered by the state retirement system. With more than 30 years of lobbying experience and tlrst- hand knowledge of the disability system. Hoffman has helped make retirement benefits for Florida law enforcement officers am.ong the most generous in the nation. Last year. he and Robert Spiegel. then lobbyist for the Fraternal Order of Police. helped persuade the Legislature to add meningococcal meningitis, a contagious bacterial Infection, and all strains of hepatitis to a gro..ving list of diseases pre- sumed to be Job-related. "The only thing they had us t.ake out was AIDS." says Spiegel, a disabled Hialeah po- lice officer who recently went to work for the state labo;' depart- ment. "They thought. we could contract that disease in other areas. . . . I am sorry that was taken out. That's something we face on a dallv basis." Some criii(~s say the police unions have gone overboard. that they arc appealing to the Legislature or the state Division of Retirement whenever they are unable to obtain benefits through the local bargaining process. 'The legislators, who don't really pay the bills. have no rea- son at all not to be sympathetic to the public safety unions." said Andrew Houston, SL Peters- burg's employee relations direc- tor. ~I don't know what their PAC cont.ributions are. but they must be significant." In the past two years, state records show, 31 police and fire political action committees gave nearly $3-million to Florida elected officials. HolTman claims credit for helping win legislative approval of 32 laws that have increased benefits for firefighters and po- lice officers. He says his angina has been known to surface when he is in the midst of a heat.ed discussion. MWhen 1 get upset. I still get it." he says. ~I get the damnedest pains in the world." Retired from the West Palm Beach Fire Department in 1970, Hoffman receives $787 a month from his disability pension. He won't say how much he is paid to lobby. Hoffman thinks he has a good chance of persuading lawmakers to pass a bill that would provide family health insurance to any police officer or firefighter who gets a disability pension after Jan. 1. 1996. At present. some cities. like Hialeah. oller health insurance while others. includ- ing Tampa. 51.. Petersburg. Clearwater and Largo. do not. Charles Hall. assistant direc- tor of the Center for Labor Re- search Studies at Florida Int.er- national University, estimates the bill would cost taxpayers an extra $H,OOO a year for each familv covered. H;ffman also is working to make it easier for police officers and firefighters to obtain disabil- ity pensions from the st.ate re- tirement system_ HOFFMAN: He was a firefighter in West Palm Beach. Now he's a lobbyist in Tallahassee. Now, he savs. "It's t.oo damn hard. " - @Copyright 1996, St. Petersburg Times. All rights reserved. HOW WE DID IT In preparing Ihis series. the Times examined thousands of pages of personnel records, workers' compensation flies, pension board minut.es and other records pertaining to the disability retirement. claims of hundreds of police officers and tlrefighters in Tampa. 51. Pet.ers- burg. Clearwater and Largo. In November. the Times' par- ent company, Times Publishing Co.. sued the city of Largo for fall1ng to release records that the newspaper believes are open to the public because they deal with matters involving taxpaycrs' money. The lawsuit also alleged that a Largo City administrator violated Florida's Public Records Law by refusing to state in writing why the records were being denied. Pinellas-Pasco Circuit Judge Fred Bryson appointed two spe- cial masters to delete identifiable Q{jALl'iY CITIES - MAY 1996 15 information from medical records. which he thcn turned over to the Times. The news- paper's lawyers have filed excep- tions to the special masters' work, contendIng they deleted more information than the court ordered them to. The city of Largo was repre- sented by attorney James B. Loper, who also is the attorney for the Tampa police and firefighters pension board. Working with data in person- nel and medical records from the four cities, the Times used a computer to determine the types of injuries most likely to lead to disability retirements as well as the average amount of workers' compensation paid for each type of injury. The computer work was done by computer-assisted reporting editor Brad Goldstein and computer-assisted reporting specialist Connie Humburg. What's an injury worth? In addition to a disability pension, injured police and firefighters can collect worllefS' compensation for up 10 two yeam. ThIs illustration &I1ows how much a specifIC injury is worth on average In worllers' compensation in the Tampa Bay area. ShouIder-related InjurIeS average compensation cosls: $96,071 Hand-related injuries average compensalion costs: 578,627 average compensation ! costs: $59.849 j : Heart-related ............1! Injurles average compensation ! costs: $57.831 Knee-related injuries average compensation costs: $84,167 leg-related injuries average compensation costs: $106,363 Foot-related injuries average <:ompensa~i0n costs: 580743 Psychological Injurles average compensation costs: 529,720 A comparison of disability retirement plans for police and firefighters Pension fund FlorkIa ReHremE'!nt System Tampa Fin.> and PoHce Pension Fund Sf. Petersb-wg Po!ice Pension Fl:r.d St Petersburg Fi!efighters Pension FUnd Cieareatet Ge;",~r.a~ Empicyees Fund Largo F!re a"d Fo!iCf:- Pens:cr. F~)fid Assets of fund Average age of a disability retiree 50 39 42 Total number Total number Most common of retirees on disability disability 789 31 c-ack 976 302 bad<' 341 37 back 307 45 back 217 80 back 52 19 bact Average monthly disability pension $1.440 $1.791 51.828 Percent of salary 42".< 6SS-;.. 50c,~ S5j.bi!liOi1 St3&-n;i:!icn $f24-miik-r; S6J..mimCfl 42 $1.845 50% $221.mm.", 4! ".874 51.320 'I;~~ . $37 -mil!icr. 39 TImes art - TERESANNE COSSETT.lI FLORIDA LEAGUE OF CITIES 16 SECOND IN A SERIES. Pension fund run by good 01' boys? TO SERVE & COLLECT BY KATHERINE SHAVER Times Staff Writer . The police and fire disability retirement system in the bay area's largest city is lucrative for both employees and pension fund insiders. By most measures. the Tampa Firefighters and Police Officers Pension Fund has been '1 great success. In the past year its assets grew by $109-million, to a total of $636-million. For Tampa's 2.400 current and former public safet.y employ- ees, that huge pot of money means a secure retirement or a good income should they become disabled on the job. But money from the fund doesn't go solely to police and firefighters. The flush pension fund has meant pay dirt. for oth- ers as well: . A North Carolina real estat.e broker has been paid more than $1.4-million to oversee the pen- sion fund's investment in an industrial park near Raleigh. Over the years the fund has spent $ 19-mlllion on the indus- trial park, but. thc investment has yet to turn a profit. The bro- ker was a college friend of the pension fund's investment coun- selor. . $852.000 is being spent on new offices for the trustees in Tampa. Furnishings include a $6.400 wood-inlai conference t.able and chairs costing $720 a piece. The new building was de- signed by an architectural firm whose vice president is the brother of the pension fund's attorney. . That attorney has been paid more than $840,000 by the fund since 1988. That includes $150 an hour to represent the Jimd in dealings w1th the Florida Legislature. However, the attor- ney didn't register as a lobbyist until ] 2 days ago - two months after a reporter first questioned him on the matter. . More than $42,000 has gone for trustees' trips to semi- nars in such locales as Las Ve- gas and Palm Springs. One trustee attended a conference on a type of investment the pension fund Isn't even allowed to make. "There is so much money," said Tampa Fire CapL Jack Ballinger, the newest pcnsion fund trustee, "Who wouldn't want a piece of this pic?" The pension fund is controlled by nine trustees - three police officers, three firefighters and three city officials. The money they oversee comes from several sources: state and local taxpay- ers, payroll deductions from ac- tive police and firefighters, and income from stocks and other investments. 17 MONDAY, APRIL 1, 1996 Even some trustees question certain expenditures and what they fear could be perceived as cronyism and conflict.s of inter- cst. "I think we're missing the pub- lic scrutiny," said Ron Ibarra, the city's chief accountant and a pension board trustee. Ibarra said the fund's size speaks for t.he trustees' business success. But. he added, "I think the pub- lic is critical of coziness in gov- ernment at any leveL" 'The best man for the job' How Tampa's pension fund came to buy 1,650 acres of pines and cow pastures in the middle of North Carolina illust.rates the sometimes close relationships between those handling the fund's money and those benefitting from it. Since paying $4-million for the Carolina farmland in 1992, the fund has spent another 14 vears and $] 5-million trying to h.i:rn it into lucrative real estate. It paid for new roads. It paid for new sewers. It paid for three new buildings. The result: one of North Carolina's largest indus- trial office parks, where 2,500 people now work. But some in Tampa question when or if their real estate deal 500 miles from home \\111 blos- som into the profits tllCY were promised. A TIMES' INVESTIGATION Times photo -JIM STEM PENSION FUND HEADQUARTERS: The board spent $852,000 on this new building, including $50,000 on furnishings. "I don't care how much money is in that (pension) fund. We should be accountable for every dollar. It's not a kitty for building things you think will look nice." says Fire Inspector Carlos L1erandi, who became a pension fund trustee after the building was approved. The new headquarters is at 3001 North Boulvard. "I can't believe that invest- ment ,"vas so great that we had to go to North Carolina," said Tampa Fire Inspector Carlos L1erandi. who became a pension fund trustee after the purchase. When Tampa's pension board decided to invest in land, its investment counselor. Harold Bowen, turned to North Ctu'o- Iina, where he once lived and still had a branch office. Land there was far cheaper than in Tampa Bay. he said. and ripe for development. Bowen called Mike Hendren. a Greensboro real estate developer \vhom Bowen had known since both were students at the Uni- versity of North Carolina. Hendren Ic.mnd the property along a major interstate and brokered the sale. He declined to say how much the sellers paid him in real estate commissions. "I'm sure people out there might think I brought Mike Hendren into it as a fiiend." Bowen said. ~Nothing could be further JI-om the truth. . . . I thought he was the best man for the job. and I trusted him. ~ Hendren told the pension board that a large, empty indus- tl;al building. a ~model home" of Salis, would lure businesses into the park. The pension fund built three - at costs ranging from $1.4.miIlion to $3.2-miJIion. So far. the fund has recouped $18 --million from the sale of about 400 acres and the three buildings. But the park is still S 1.3-million short of making an overall profit. The North Carolina property was never intended to produce quick cash, Bowen said, but rather to be a long-term venture. Another 1,300 acres is ready for sale at prices averaging eight times the original cost. "This has already paid for itself, and there's a lot more land that can be sold,~ said Sharon Fox, a city tax auditor and pen- sion board trllstee. "I don't see how they can lose." J-Jendren himself has made at least $1.4-mlllion in manage- ment fees and sales commis- sions, records show. Sometimes he makes more money off the property than the pension fund does. Consider the recent sale of the third building. The pension fund made a profit of $180.500 -- Hendren's commission was $214.600. Hendren's position has never been put out for bid. thou~h three trustees have publiely criticized the idea of paying someone so much money v.-ith. FLORIDA LEAGUE OF CITIES 18 out exploring other options. Trustees who support Hendren say it would be impossible to replace his expertise in bandllng their North Carolina property. Last fall, at Bowen's sugg{~S- lion and over the protests 'of the three trustees. the pension board renewed Hendren's con- tract for another three years, That guarantees him $72,000 a year in management fees and 8 perc.ent of all land and building sales in the park. "The man is doing a good Job," said police Lt. Robert Penning- ton. the fund's chairman. "The invest.ment manager said they were working well together. and he needed to do more. I felt com. fortable with that:." t Nice, but necessary? Tampa police officers say their 35-year-old station downtown literally makes them sick. Thev blame 'chronic colds and hackin.~ coughs on everything from rat - droppings in their eotIee cups to a black goo caked onto the air- conditioning vents. A mile t.o the north. the nine trustees responsible for handling t.heir pension money will meet ill tO SERVE & COLLECT Photo - AP NORTH CAROLINA REAL ESTATE: The Tampa Firefighters and Police Officers Pension Fund bought 1,650 acres of land between Greensboro and Raleigh and turned it into one of the state's largest industrial office parks. But the investment is still $1.3-million shy of producing profits for the pension fund. a pristine new building that cost $852,000, #1 don't see the purpose," said Ibarra, the city's chief accountant and pension board trustee. "I like it.. It's done, But if I were on the board (when the new building was proposed). I'd say. 'Do we really need this?' .. Pennington, the board's chair. man, said the fund had outgrown its rent-free but dingy offlces in a 45-year-old city building beneath a noisy overpass of Interstate 275. #We were a multimillion (dollar) corporation working out of a rat- infested shack, ~ he said. Three architectural firms bid for the job, Including Fleischman Garcia, a Tampa flml whose vice president. Stan Loper, put to- gether its bid. Stan Loper is the younger brother of James B. BALLINGER: The pension fund is sun by nine trustees- three police officers, three firefighters and three city officials. Fire Capt. Jack Ballinger is the newest trustee. Loper, the pension board's attor- ney. Stan Loper estimated his firm could design the building for about 7 percent of the construc- tion costs, a proposal in line with those of the other bidders. The trustees hired Fleischman Garcia on a unanimous vote. Tampa police Lt. Scott. Cunning- ham, a former trustee who over- saw the selection process, said he was most impressed with the firm's presentation and other buildings it had designed. Cunningham said that when he recommended Stan Loper's firm to the full board, "It was made perfectly clear these t.wo arc brothers but there's nothing there. . . . The fact that St.an Loper was ,Jim Loper's brother became irrelevant.. It was never a part of the decision making," A tape recording of the Nov. 13, 1990. meeting included a 90- second mention of the relation- ship before Stan Loper was hired. Four of the nine trustees were absent. "I didn't know about it and when I did, it was too late," said Fire Capt. Jesse Wright, who had left the meeting early. "I don't know if it was improper. but it appeared improper." Jim Loper said he had nothing to do wiih his brother's hiring. gUALD.2:._crnES - MAY 1996 19 Stan Loper. whose firm has made $32,500 off the project:, refused 'm interview but responded to INritten questions, He said Fleischman Garcia learned of the project from it.s former marketing director. Pension board attorneys are not subject to state anti-nepotism laws, according to the Florida Commission on Ethics in Talla- hassee. "It doesn't look right. I'll admit that," Pennington said. "But I feel comfOliable v.ith it.. . . . We knew we'd be criticIzed, but it comes down to getting the job done right, on time and on budget, and that's what we got." Mter all, in a $636-milIion pen- sIon fund, a $852,000 buildIng looks IJke peanuts. Still, some say, that's not the point. "[ don't care how much money is in that fund," LlerandL the fire inspector. said. "We should be accountable for every dollar. It's not a kitty for building things you think \...ill look nice." Not a lobbyist? When Tampa's firefighters and police pension board wanted to hire an attorney, it didn't have far to look. - Jim Loper already knew many of the trustees, not only as the A TIMES' INVESTIGATION attorney for the local firefighters union but also from representing employees who applied to the board for disability pensions. When several trustees sued the city in 1977 over how much Tampa should contribute to the pension fund, they turned to Jim Loper. Eleven years later, the trustees hired Loper as their oiTicial attor- ney. His price: $100 an hour. He beat out eight other lawyers, some with comparable or cheaper bids, after several trustees said no one knew more about the in- tricate workings of their fund than Loper. Since 1988, Loper has been paid $846,800. He now charges $150 an hour. When the trustees considered hiring a lobbyist last year t.o deal with t.he Florida Legislature, Loper, 47, told them that. wasn't necessary - he said he could use his personal ties to several law- makers. He had gone to law school in Tallahassee, worked as a legislative aide, and knew state Sen. John Grant, a Tampa Re- publican. from church. "Jim has a good working rap- port with the local (legislative) delegation," said Pennington, the PENNINGTON: Police Lt. Robert Pennington doesn't apologize for the new headquarters. "We were a multimillion (dollar) corporation working out of a rat-infested shack. " FOX: City tax auditor and trustee Sharon Fox says the board's purchase of land in North Carolina was a good deal. "I don't see how they can lose," she says. board's chainnan. ~I-Ie knows a lot of them. It was really cheaper to do it that way." In the past 3 1/2 years, Loper has charged the pension board for drafting several bills, making at least 33 phone calls to legisla- tive offices and writing 16 letters to lawmakers. Under state law, lobbying I.s defined as trying to Influence legislation "through oral or writ- ten communication." The law requires that anyone paid to lobby, even part time, register with the Legislature to preserve the "integrity" of the lawmaking process. In a January interview with the Times. Loper acknowledged that some of his duties "are the same things. . . that lobbyists do." However, he said he never registered as a lobbyist because he didn't consider himself one. He said last week that he stilI doesn't. But state records show that on March 20. two months after a report.er first asked him about the matter, he officially registered as a lobbyist for the Tampa firefighters and police pension fund. "I was going to Tallahassee" to speak before a House committee about pending legislation, Loper said Friday. "Someone may con- sider that lobbytng." thing you know, someone's cheating on the other." Such talk makes other trust- ees bristle. If they haven't done a good job. they ask, why do Tampa's police and firefighters have the second-richest munici- pal retirement fund in Florida, exceeded only by MiamI's? Pennington, the pension board's longest-Sitting trustee, said he sees no reason not to reward those who have worked for the fund if he is satisfied with their work and prices. Sure, he has come to know some of them well after 18 years. But. "doesn't everyone in busi- ness do business with someone they know or went to school wit.h and trust and know to do a good jobT Pennington said. "I'd raiher pick a plumber I've known to be a good plumber for 25 years than pick someone out of the phone book. The bottom line is they're do- ing a good job. . . . This is not Billy Bob and friends," the chair- man said. "This fund is making money." ~ @Copyright 1996, St. Petersburg Times. AU rights reserved. I BOWEN: The board's investment counselor Harold Bowen set up the land deal in North Carolina with a real estate developer he has known since their college days. 'Doesn't everyone?' Wright, the fire captain and former trustee. used to jokingly refer to himself as "the Ralph Nader of the pension board." In his six years on the board. Wright said. he often found him- self alone in wanting public bids to see who offered the lowest price or best proposal. He said he didn't like to simply reward those with longstanding ties to the pen- sian fund. "It's just the way you do busi- ness to keep tbem honest." Wright said. "My god, people get married and fall in love with people, and they staI1. taking each other for granted. Next I JAMES LOPER: The pension board's attorney has been paid more than $840,000 in the past seven years. FLORIDA LEAGUE OF CITIES TO SERVE & COLLECT BY KATHERINE SHAVER Times Staff Writer . Several Tampa police officers are collecting disability pensions but still work for the Police Department. Golf, a job - and disability pay W TAMPA hen Officer James Lucas slipped and fell while in- vestigating a burglary in 1989, he hurt hIs back so badly, he said, he was left totally and per- manently dIsabled. Tampa's pension board dis- agreed 'lNith Lucas and two doc- tors. Instead it believed a third doctor who found no medical proof of Lucas' injury. Lucas took his case to court and per- suaded ajudge he deserved to retire due to his "tremendous back pain" and "restriction of physical acU\oity." Today, Lucas is back at work at the Tampa Police Department - and sUB collecting his $28,000-a-year disability pen- sion. He's also back on the police golf circuit. Though Lucas says he still takes pain pills, a bad back didn't stop him from win- ning second place In last year's local Pollee Benevolent Associa- tion tournament. Nor did it keep SWOPE: Trustee says double. dippers are perceived to be "taking advantage of the system." him from a second-place finish in the 1994 state Police Olym- pics. With his new deskjob and his tax-free disability pension, Lucas now makes $47,600 a year. That's $10,000 more than he made as a street officer. How can someone collect a city pension for being totally disabled and, at the same time, earn a cIty salary for continuing to work? Easily. Critics call it "double dipping." It's forbidden in several Florida cities because of the financial drain it can put on a city's pen- sion fund. With Tampa police, however. it's not only allowed. It's encouraged. "If that was the rule here at the time, I wouldn't have come back," said Lucas, 51. "I would have found a Job somewhere else. But after 21 1/2 years (as a police officer), I don't feel I'm double dipping. I did my time." Tampa police SgL John Swope and other t.rustees of the city's firefighters and police pension fund say officers hurt in the line of duty should be allowed to work second, less physically demanding jobs in the police department. Still, Swope said, "The percep- tion is they're taking advantage of the system." In private business. injured employees find their benefits reduced, and often cut off. when they get other jobs. Insurance companies reason that they are physically able to work and no gUALIlY CITIES -__MAY 1996 21 longer in need of financial sup- port. Faced with the mounting costs of disabilities, the state of Florida and cities including St. Peters- burg and Clearwater have curbed expenses by forbidding paid re- tirements for injured employees who can do other state or city jobs. "I think the whole phllosophy is to reduce the probability of disabilities by not making'it so attractive," said Mike Laursen, Cleanvater's human resources director. In Tampa, though. 11 fonner police ofllcers are each collecting a city disability pension and a city salary. Thev fall UJ1der a sYS- tem that has evolved into one of the most liberal in the state. Those who support double dipping cite the case of Dennis Duggan, who gave up hopes of becoming a narcotics detective seven years ago after a Jeep hit his police motorcycle. Duggan's lower left leg was amputated. Though he got a dis- ability pension, he said it wouldn't have been enough to payoff his house and save for his son's college education. So he returned to work at the Tampa Police Department. "That's what J knew," Duggan said. "It was home." - , Duggan now collects $27,000 a I year tax-free from his dlsabillty I pension and $24,800 a year fo-r i running errands and overseeing I the maintenance of the narcotics I detectives' cars. Total: $51,800, i or almost $20.000 more than he made as an oflker. And he col- lected another $93,600 in work- ers' compensation benefits. Times photo-DAN MCDUFFIE JAMES LUCAS, Tampa police: With disability pension benefits and salary. he now makes $47,600 a year Photo AP CONNECTIONS: Mike Hendren, a real estate developer an friend of Harold Bowen, the pension fund's investment counselor, tours the office park. He has made at least $1 A-million from the property. StilL "it's a humbling experi- enee," said Duggan, 38. "Before I felt like I was going up the lad- der. Then you're holding the lad- der for people who climb by you. . . . If I go to any other police de- partment, it's not double dipping. Why should I be penalized be- cause I got hurt on the job?" Like Duggan, Tampa police who can't perform full street- patrol duUes - such as \\Testling an unnlly suspect or sitting in a police car on a 12-hour shift - are considered disabled. It doesn't matter if an officer is capable of doing other pollee work, such as interviewing vic- tims. The officer is fired after a doctor detemlines he can never return to street patrol. The ol1ker then can apply for a disability pension that could pay him 65 percent of his salary, tax-free. for the rest of his life. He can also apply for a police desk job. City officials say double dip- ping is good business. It might sound cruel to lire injured officers. but it's too ex- pensive and unfair to the public to keep highly paid police off the st.reet and behind desks, said Kirby Rainsberger, the Police Department's attorney. In rehiring t.he offker for a civilian job, such as giving lie- detector tests. the city pays him perhaps half the salary of a vet- eran patrol officer. The city then turns around and hires a rookie at a cheaper salary to fill [he vet- eran officer's street slot. Rainsberger insists the deci- sions have more to do with mall- power than money. "We welcome police offkers (on disability pen- sions) ,..1th open arms" for civil- ian jobs, Rainsberger said. "They have experience and training. We know their employment history. I think we've taken remarkable advantage of those people when- ever we can." Whatever the motivation, few object to the appealing results. The Police Department keeps a full force of healthy officers on the street. The city saves money on salaries. With ~l tax-free perl- sion and an additional paycheck, the injured officer now earns more than ever. Everyone benefits - except: the pension fund, which bears a new financial liability of up to FLORIDA LEAGUE OF CITIES 22 TO SERVE & COLLECT $1.2-million for each retired of- flcer. HWhat you have to be careful \\-1th." said Swope. the police sergeant and pension board trustee. His the city using that as a way to cut costs." Take the case of Mildred Grant. She collects a $30.800-a- year disability pension for an injury to her right knee that she suffered In a pollee training class. After she was injured. but before she was fired. Grant was temporarily assigned to light duty taking assault reports by phone. After getting her disability pension, Grant returned to the assaults desk. But the cltv nmv pays her $21.650 a year. Instead of her $44.500 officer's salary. Grant, 41. did not respond to requests for comment. They were triple dipping The police, firefighters and ctty officials who drafted Tampa's pension contract 26 years ago didn.t intend for anyone to collect both a disability pension and city salary, according to tape record- ings of their meetings. To be sure, a consultant warned that the new contract was "opening the door" to esca- lating disablUty costs by making the definition of disabilitv so lib- eral. To keep costs dO\l\.'Tl: the consultant said. trustees might want to reduce disabllity benefits for people who could take other city jobs. The trustees. however. dis- missed the wanIing and left out a double-dipping prohibition. One trustee called the issue Hir- relevanC because it already was forbidden by city rules. But seven years later. the is- sue resurfaced. Rules changed. History was forgotten. A retired firefighter who re- turned to work for tlIe city hired a lawyer to argue that the pen- sion board owed him benefits n,;thheld after he took his new city job. THE REPORTERS Brad Goldstein. 34, graduated from Univer- sity of Massachusetts. Amherst. in 1985 with a degree in Spanish literature. He joined the Times as the computer-assisted reporting editor after completing a 1995 Nieman fellowship at Harvard University. He pre\oiously worked at the Lawrence Eagle-Tribune. Boston Magazine and the Middlesex News. Katherine Shaver, 26. graduated from Princeton University in 1991 with a major in political science. She has covered police and fire departments in Hillsborough and Pasco coun ties since joining the Times in 1993. Pre\oi- ously. she covered Congress for States News Ser- vice in Washington, D.C, Thomas C. Tobin, 37. graduated in 1981 from St. Louis Universiiy. where he majored in English and political journalism. Be- fore joining the Times in 1988, he was a reporter for the Tampa Tribune. the St Louis Globe.Demo- crat and the Belleville (Ill.) News-Democrat. He has covered the city of Clearwater since 1994. Also contributing to this project were re- searchers Kitty Bennett and Barbara HiJck and computer-assisted reporting specialist Connie Humburg, The project was designed by Gage Church and edited by Deputy Managing Editor Susan Taylor Martin. Then former police Chief Rob- ert Smith. who had taken a regular retirement after 20 years. was appointed the city's public safety administrator in 1985. This time lawyers weren't necessary. 'Ibe city simply changed its rules to let Smith and o"ther retired police and firefighters take other city jobs. Meanwhile. the pension con- tract still had no ban on paying retirement benefits to those earning a second city income. Smith's hiring sparked contro- versy - and drew pollee and firefighters' attention. -rhat opened the door," said Carlos Llerandi. a Tampa fire inspector and pension board trustee. "People said. 'Jf he (Smith) can do it. so can L' " Word spread -. and for good reason. In addition to collecting 66 percent of his salary from " workers' compensation for a limited period. an employee could get 65 percent of his salary from his disability pension. The result: A disabled employee could make more than his origI- nal salary, tax-free, ,..ithout working. Or he could return to another city Job for a third source of Income. Steve Barbas, a Tampa lawyer and part-time assistant city at- torney, said he grew frustrated as the number of disability cases soared. "'Ibere was absolutelv no in- centive to go back to work and every incentive to bow out of work," he said. .....111at didn't make any sense. They weren't only double dipping, they were tripJe dippIng." OCopyright1996. Sf. Petersburg Times. All rights reserved. QUALITY 9TIE:S - MAY 1996 23 A TIMES' INVESTIGATION . Nine trustees have spent $42,000 on air fare, hotel rooms, meals and rental cars in the past three years. W TAMPA atching over Tampa's $636-milJion firefighters and police pension fund often means slogging through stacks of finan- cial report.s and making tough decisions about colleagues' re- tirements. The Job of a pension fund trustee doesn't pay. But It does have its perks. In the past three years, the pension fund has picked up the tab for at least 53 trips. Using their personal pension board credit cards, the nine trustees spent at least $42.000 on air fare, rental cars, dining, hotel rooms and other expenses, ac- cording to travel records. Destinations included Las Vegas, Palm Springs, Calif.. and Key West. Credit card charges ranged from $ I 75-per-night rooms in Washington, D.C.'s Grand Hotel to a $320 rental of a town car with baby seat. It's all part of doing business, trustees say. Travel usually means going to educational seminars, many of which happen to be held at five-star hotels and first .class beach and golf resorts. Trustees also made a total of 15 trips to see the pension fund's l,650-acre Industrial park in North Carolina. "We encourage people to edu- cate themselves," said David Keene, Tampa's assistant fire chief who served 14 years as a trustee. During his last three years on the board, Keene took eight trips for which receipts are available. He said he also spent five days in a Palm Springs spa for a semi- nar about retirement benefits and flew to Vancouver, BrlUsh Columbia. for a conference on Improving communication skills. Keene noted that conference locations are decided by confer- ence planners, not the trustees. ~No one is going to hold a semi- nar in the middle of the desert In a small town with a cold drink machine and a gas station," he said. But when asked about the board's travel, Tampa police Lt. Robert Pennington, the current chairman, said he plans to sug- gest a new rule limiting each trustee to two conferences a year. ~You're subject to being criti- cized," said Pennington. who has taken nine trips in the past three years at a total cost of at least $9,800. "People see them as jun- kets." It's not all wining and dining, trustees say. Before the golf toumaments and wine-and- cheese receptions, days are scheduled with classes on such topics as "Tactical Asset Alloca- tion" and "What To Do If the IRS Audits Your Plan." "Sitting all day in a seminar is not my way of deSCribing a jun- ket." said Tampa fire Capt. Kurt Edwards, a trustee who has at- tended five conferences In Florida and two at resorts in Las Vegas and Tucson, Ariz.. in the past two years, But Edwards also attended a conference at the Sonesta Beach Resort in Key Biscayne two years BY KATHERINE SHAVER Times Staff Writer in a row. The seminars focused on investing in international markets, even though Tampa's pension fund is prohibited from doing so by state law. "I wanted to get some Informa- tion and educate myself." Edwards said, "so in case the legislation (to 11ft. the ban) passed, we'd have some informa- tion on emerging markets." When a conference brochure arrives in the mail, Tampa's pen- sion board almost always votes unanimously to pay for any trustee who wants to go. Other public retirement funds in Florida I1mit trustees to one out- of-state and one in-state confer- ence each year "to keep people from going all over the place," said Ray Edmondson, a retired Fort Lauderdale police officer who now works for the Florida Public Pension Trustees Associa- tion in Tallahassee. Still. Edmondson says, the conferences can be valuable. ~lt's a whole new language, a whole new Industry," he said. "What is a bond? What is a stock? This is the type of talk that Investment people lise, and you're a policeman or fireman and you don't know what the hell they're talking about. You have to get educated." ~ @Copyright 1996, St. Petersburg Times. All rights reserved, i Trustees enjoy travel perks FLORIDA LEAGUE OF CITIES 24 TO SERVE & COLLECT TUESDAY, APRIL 2,1996 LAST IN A SERIES. Sick of the boss? Retire on disability BY THOMAS C, TOBIN Times Staff Writer . For some police officers, a disability pension can solve an unpleasant problem at work. Imagine that you< Job Inn" sour. You've been reprimanded more than once. You don't get along with your bosses. Depres- sion sets in. If you're like most people in the American workforce. there are two realistic options: Tough it out and try to mend your ca- reer, or change jobs. There Is a third way out, but only if you work in a system that sometJmes rewards problem em- ployees \\1lh disablJity pensions at taxpayers' and colleagues' expense. Such a system flour- ishes in some of Tampa Bay's largest cities. Depending on the city, the pension can range from 60 to 75 percent of the employee's salary tax-free. And that doesn't In- clude thousands of dollars in workers' compensation benefits that can come ~ith such claims. Usually the recipient Is a po- lice officer. Some examples: . Clearwater police Sgt. Jo- seph R. De Santis. fired for using excessive force. won his job back after a four-year legal battle. But he returned to work feeling os- tracized by other officers and bitter about his fight for rein- statement and back pay. Two psychiatrists and a psy- chologist said De Santis was depressed and unfit for police work. The pension board con- cluded his job caused the de- pression and granted him a life- time disability pension at age 41. . James N. Grocholski. ac- cording to records. showed signs of ~depression and nervousness" before he was hired as a St. Pe- tersburg police officer. StilI. the pension board decided nine years later that his city job caused a mental disability and gave him, at age 33. a pension, One psychiatrist said Grochol- ski was pot.entially dangerous and couldn't function in another city job. Another said he was not depressed at all and "Is some- what committed t6 wanting to get out on a retirement." . John E, Bruschi, a Kg po- lice officer in Tampa, was given a stinging job evaluation. A lieu- tenant called him uncooperative. antagonistic. tactless and In need of constant supervision. One day Bruschi left his .38 cali- ber revolver and K9 equipment on his front lawn. called the de- partment to pick them up and left his house. A supervisor noted that a child or a criminal could have taken the gun, leaving the city liable, Bruschi was told to see a profeSSional for stress and per- sonal problems and to complete a course on "attitude development." In the following months he was diagnosed with headaches and depresSion caused by stress. Two and a half years later. on his sec- ond try. Bruschi got a disability pension at age 32. Doctors said his bad evalua- tion was the cause of his disabil- Ity. 'At some point it can build up' In Tampa and SL Petersburg. I Clearwater and Largo, the stories I' appear similar. An employee with a checkered work history comes before a pcn- , sion board with a lawyer, psychi- atIic evaluations, the backing of i a union and t.he protection of a I civil ser\1ce system that can stall I or revoke a firing. i Pension boards, often domi- )1 natcd by union members, do some squirming but ultimately I decide the employee Is disabled because of job-related mental II stress. The business of analyzing i someonc's psyche and motives is I fraught with doubt and subjectiv- I ity. Is the person before the pen- sion board a faker who is crying JAMES GROCHOLSKI: One doctor said the St. Petersburg officer could be dangerous. Another said he just wanted to get out of his job. QUALITY c:.!!IES -- MAY 1996 25 A TIMES' INVESTIGATION ~victlm" and can't t~-lce up to his own faults? Or Is It someone who was truly harmed while doing a thankless and dangerous job for the public? Few would question that po- lice work and other emergency service Jobs can cause stress and lead to psychological problems. But not everyone agrees it should lead to a pension. ~If you ore going to drive fire trucks or police cars, you expect vou'lI be in bad accidents or have to use your gun or run into a buming building," said David Keene, Tampa's assistant fire chief and a former pension board trustee. "These are the things you're paid for and trained for. . . . I have a hard time understanding how someone can claim post- traumatic stress disorder from doing a job they were hired to do." Others see a clear need for psychological disability pen- sions. Murder victims, battered children, dead babies - han- dling such cases can take a cu- mulative toll, said Tampa police Sgt. John Swope, a Tampa pen- sion board trustee. ~You get officers who see a lifetime of that and at some point it can build up," he said. But in several cases examined by the Times, officers said their mental problems came not from trauma suffered on the street but from in-house troubles with their supervisors. Consider the case of De SanUs, the Clearwater police sergeant who was fired in 1985 for several alleged cases of exces- sive force. In one instance it was alleged he stuck his revolver in a suspect's mouth. In another, he was acclIsed of pointing his gun at an unarmed suspect. De Santis was cleared in all bu t one case and got his job back. But in 1989, suffering from depression, he applied for a disability pension, According to a psychologist. De San tis linked his mental state to "his battle over the last five years to clear his name. be rein- stated in the department and resume his career." De Santis. who was given a desk job, also told the psycholo- gist he didn't think he could ever draw his gun in self-defense for fear of "making a mistake and them jumping on me." No one doubted that De Santts was emotionally depressed. But there was considerable debate over what caused it. According to minutes of his pension case from 1990, one pen- sion b0<'1rd member felt De Santis' problems were "self-initiated" and "not necessarily brought on by thejob." Another accused De Santis of staging his disability and said he felt De Santis was "robbing my pension." But despite those harsh words, both board members eventually concluded that the disability was job-related. The pension board voted 3-0 to approve De Santis' pension, which amounts to nearly $30,000 a year, tax-free. He also received a lump sum payment of more than $24,000 from a police supplemental pension financed by a tax on car insurance premi- ums in Clearwater. ''I'm real comfortable the guy got a pension," said Cleaf\lIfater lawyer Lou KwalI. who repr:e- sented De Santis. Kwall said the complaint that remained on De Santls' record warranted only a five-day sus- pension. Then, when he returned to work. he was not allowed to carry a gun, was made to wear a rookie's uniform, given a desk job and never received back pay, Kwall said. "This is a little different than just being treated shabbily," he said. "This is more than just one or two days. We're talking about years. . . . His whole psyche was devastated by these allegations." Before the complaints, Kwall said, De San tis had a good record, "and then they destroyed him." The decision by the pension board could have gone either way. -"Unfortunately," a lawyer for the city said later, "one legitimate JOSEPH DE SANTIS: The Clearwater police sergeant was accused of using excessive force, then fired. He was cleared of most of the charges, but the damage was done, reading of the experts' reports is that the current mental state of Mr. De Santis came about as 11 result of on-the~job acthdties." Super cop or victim? The waming was loud and clear. A city memo from Deputy Chief George Salkeld in April 1975 signaled that James N. Grocholski, a police applicant in St. Petersburg. cou.ld be a bad hire. "Grocholski's nervousness and depression have already resulted in one ulcer and pro- longed medication," the memo read. It said Grocholski. then 24, had been turned down by the military. It predicted he would retire \Ivithin a few years. It esti- mated he would cost the city an extra $250,000 and it recom- mended Ulat he not be hired. Nevertheless. Grocholski was hired less than three weeks la ter. His career started well. A high IQ and a fearless attitude made him one of the top recruits in his police academy class and. once on tJle streets. he eamed the nickname "super cop." Before long, however, Gro- cholski started collecting battle wounds. The first was a frac- t.ured eye socket and cheek bone. Grocholskl was trying to break up a fight when a specta- tor threw a piece of concrete at his face. Later, he dislocated his shoul- der, bruised his ribs. bruised a knee and strained his lower FLORIDA LEAGUE OF' CITIES 26 back. By 1981. Grocholski was complaining of constant pain in his neck. shoulder and back. He was placed on light-duty jobs but, according to one psycho- logist's report. complained It was "menial. gofer work." Under St. Pet.ersburg employ- ment rules. he could continue working light-duty assignment.s in the Police Department. trans- fer t.o a civilian job \\1th the city or quit. Grocholsld chose a fourth and more lucrative option. He applied for a disability retirement, saying he was depressed about his job. One psychologist's evaluation descIibed him as "moderat.ely depressed" and concluded: "The patient feels bitter. seeing himself as a victim. mistreated and feel- ing trapped in his current sit.ua- tion." At his 1982 hearing before the pension board. a doctor hired by Grocholski's attorney said It was possible Grocholski could harm himself or others If he continued to work In any capacity for the city. The doctor also said Grocholski might even attack members of the pension board if they denied his retirement. A psychlatIist hired by the city concluded that Grocholsld was not dangerous. could do other Jobs for the city and seemed bent on getting a pension. The pens.ion board den.ied Grocholski's l-equest, but granted a rehearing 19 months later. An- other psychiatr.ist testified that since Grocholski had threatened supervisors in the Police Depart- ment, he might be expected to do the same in another city job. He also said Grocholski's prob- lems stemmed from his physical injuries. But there was doubt about those as well. The staff at a vocational reha- biIitaUon center said Grocholski complained about pain in inter- "iews. But they also saw him do push-ups and sit-ups and ride his motorcycle with no problem. In 1984, the pension board voted 3-2 to give Grocholski his pension. which comes to $ 10,777 a year. TO SERVE & COLLECT In an Inten-1ew. Grocholski said he was forced out of the department by supervisors who dldn't.llke him and thought he was exaggerating his physical injuries. Grocholski believes he sacri- ficed his body for the Pollce De- partment. "They get rid of you if you don't fit their mold." he said. He said he would have pre- ferred a retirement based on his physical injuries. but said the city pushed the psychological aspects of his case. Records show. however, that Grocholski's attomey concen- t.rated on those aspects as well in arguing for the pension. Now \\<1th a Wisconsin radio station, Grocholsld. who has changed his name. says he was bitter about leaving but has good memories of h.is career. "r was a damn good cop." he said. "I enjoyed it... 'Homicidal and suicidal' Bruschi, the young Tampa police officer who left his gun on the lawn, also kept appearing before the pension board until he succeeded. Shortly after receiving a poor evaluation in 1985. Bruschi wenl on medical leave complain- ing of headaches and depres- sion. The following year Bruschi tried to convince the pension board that his symptoms were disabling and caused by his job. Just a month earlier. however, he had n~ce1ved a good evalua- tion that said his work had im- proved and his symptoms were subsiding, Pension board members con- cluded that Bruschi's symptoms were due to "interpersonal" prob- lems of his o\...-n making. They denied his request. In 1987. while working on light duty. he got another good evaluation. But that was followed by a letter from the police chief. ft said Bruschi's light-duty job would expire in a couple of QUALITY CITIES - !'vIAl' 1996 27 months and it laid out his op- tIons: get well fast and return to full duty; go on unpaid leave; or apply for a disability pension. Bruschi chose the latter. This time, the pension board was more understanding and the doctors more \-1\,id. According to pension board minutes, a panel of doctors that included two psy- chiatrists and a psychologist said Bruschi "has homicidal and suicidal tendencies and the ca- pacily for both Impulsive vio- lence and organized violence. ,. They blamed all this on "the job-related activity of his nega- tive pertormance evaluation and the repercussions aris.ing from iL" Bruschi got a pension now worth $26.238 a year. In an interview. he agreed that his bad evaluation \vas what led to his pension. Bruschi said it started when he complained about two fellow employees who were shirldng their duties. When that backfired on h1m, he said. "I became hard to work \\1lh" and the depart- ment began efforts to force him out. He said he thought about quitting but said his wife pushed for the disability pension and handled the details of applying for it. Even so, he puts the onus on the department: "They're the ones who gave me a pension lor the rest of my life. Not me." Bruschi said he misses police work and would "go back today" if the city would let him. The pension could have been pre- vented, he sa1d. if top-ranking officers had mediated his dis- putes with supen-isors. "There were a lot of things they d.id wrong and there were a lot of things r d.id \"Tong," he said. "The easiest thing to do was to let me go:' Todav. Bmschi works in an. other jo"b that isn't exactly stress-free. He's a repo man in Hillsborough County. OCopyright1996. 51. Petersburg Times. All rights reserved. Times photo RICARDO FERRO Former Clearwater pOlice Capt. Barry Glover and his wife bought this house in north Pinellas County for $212,000 in 1992, the year he retired with an annual dispension of $37,174. He now is an associate professor of criminology at Saint Leo College. Reprimand, then depression In 1991, as a Wgh1y cated cap~ tain with 22 years at the Clear- water Police Department. Barl}' Glover was severely reprimanded by Chief Sid Klein when it was leamed he had been using city supplies and staff time to do his second job as a college instruc- tor. Klein said he was "appalled" and said Glover had embarrased the department. Seven months later Glover applied for a disability pension, complaining of depression that was aggravating his diabetes and other ailments. According to a psychiatrist, Glover "doesn't trust the other co-workers, feels that the job is ovenvhelming for him and he cannot handle the stress which he has faced." The psychiatrist said Glover suffered from headaches, crying spells, passing thoughts of sui- cide and sleep loss. Glover also felt hopeless and worthless. the BY THOMAS C. TOBIN Times Staff Writer psychiatrist said, but those feel- ings disappeared when he wasn.t working. Glover told doctors he didn't want to leave his job but one of them said. "He will be dead in a short period of time" if he doesn't. In a recent interview with the TImes, Glover said he had wanted to apply for a longevity pension. but his \Vife persuaded him to seek a disability pension. which typically is more lucrative. Giover said he had been hav- ing numerous health problems related to stress that pre-dated the reprimand, which he called a minor incident. As commander of the investi- gations unit, he said. he also handled several other responsi- bilities. "1 just became obsessed with tl}1ng to solve everyt.hing that came across my desk. " - Glover said. "I just woke up one day and I was just going down BARRY GLOVER-Clearwater Police Department "Ijust woke up one day and [ was just going down the tubes. .. the tubes." He said he also won- dered "if anybody really cared." Today, Glover. 48. is an asso- ciate professor of criminology at Saint. Leo College and an adjunct professor at the University of South Florida. His annual pen- sion is $37,174. He also received a one-time payment of $68.211 from a supplemental pension financed by car insurance premi- ums in Clearwater. According to records. Glover and his wife own a Palm Harbor home they bought for $212.000 in 1992. the year he retired. They also OW11 a 1979 convertible MG FWRlDA LEAGUE OF CITIES 28 TO SERVE & COLLECT Officer depressed by 'public ridicule' BY THOMAS C. TOBIN I Times Staff Writer n 14 years as a St. Petersburg police officer. Linwood Scott w<l.S reprimanded 14 times. The last time was in January 1986. when an emergency room doctor confronted him lor treating an Injured suspect too roughly. There was a scuffle and Scott arrested the doctor. Scott's supervisors suspended him and pemlanently assigned him to desk work. Three months later. Scott applied for a disability pension citing severe depression brought on by his punishment and by the "pubIlc ridicule and "complete emasculation" that followed the highly publicized LINWOOD SCOTT -St. incident. He complained of Petersburg Police hea?aches, overwhelming anxiety and other symptoms. Department But between the time he A psychiatrist said applied and the time of his Scott shouldn't cany hearing, the basis for his a gun but he holds a pension changed. When Scott ,. . ' went before the police pen- state conceale~- sion board the follo\Ving year. weapons pennlt. he blamed his problems on the emotional toll of three shootlngs - two of them fatal - he had been involved In several years earlier. The emergency room Incident became "the breaking point," his lawyer argued. In 1987. the board approved his pension. The city, meanwhile, balked at paying Scott's psychiatrist blIIs, say- Ing he was merely upset about his job transfer. One psy- chiatrist said Scott shouldn't have a gun. but Scott said he "carries his weapon. . . at all Urnes. on and off duty." Today, Scott, 45, has a state concealed-weapons permit. work", as a commercial fisherman and receives an annual pension of $13.750. He did not respond to a certified letter seeking comment. @Copyright 1996, Sf. Petersburg Times. All rights reserved. Reprimand continued and a 12-cylinder ,Jaguar XJS in addition to a 1985 Honda Accord and a 1994 Honda motorcycle. The disability pension "was there and it was set up for that purpose," Glover said. "I don't feel guilty at all about gOing out. . . . I really wish I was stiU there but it was just one of those things that couldn't be helped." @Copyright 1996, Sf. Petersburg Times. All rights reserved. Case set trend for pensions BY THOMAS C. TOBIN Times Staff Writer The case of Montv Krysko threw Clear- water for a loop. It \vas the first time someone tried to retire on a psychological disability. and some otllcials didn't think a lifetime pen- sion was the right solution. The case also led to a 1985 court ruling that took away the City Commission's power to deny pensions and gave the final say to a union-dominated pension board. In 1983. Krysko complained of depression caused by an accumulation of events dur- ing a career that began in 1968. There was lingering guilt from a 1977 shoot- out and from the time he accidentally ran over and killed a man sleeping on an embankment. Krysko told doctors he also was haunted by his investigatlons of a baby's drowning and by an auto accident with three deaths. Two doctors said he was permanently dis- abled and should be hospitalized. Krysko's record included numerous re- ports of odd behavior such as prowling, bit.- ing fellow otllcers and playing Russian rou- lette With his service revolver. TIle pension I board approved his disability retirement but the City Commission concluded his problems wercn'tjob-related and awarded a less lucra- I tive disability pension. The city lost the rc- i sulting court fight. I Krysko, 55, became an over-the-road truck : drfver, according to city records. He receives I $15,885 a yt~ar in disability benefits and got, i.1 a deferred annuity for an unspecified amount financed by car insurance premiums in , Clearwater. He did not respond to requests I. for com men t. MONTY KRYSKO- Clearwater Police Department His record included reports of biting other ojft.cers and playing Russion roulette with his revolver. @Copyright 1996, 51. Petersburg Times. All rights reserved. QUALllY CITIES - MAY 1996 29 Crash led to psychological pension N;ne yea" ago. Martha Funkhouser's police cruiser was struck from behind and ca- reened into a canal. She was left hanging upside down by her seat belt. Funkhouser, 36, was taken to Largo Medical Center where she was treated for bruises to her hips and shoulder. That night she Joined her fiance and two sisters for dinner. according to a deposition she later gave as part of a lawsuit against the other driver. Four days after the accident, Funkhouser complained of back and neck pain. After tw-o doctors recommended by the city failed to relieve her pain to her satis- faction, Funkhouser chose a chiropractor. Her back and neck pain evolved into a psychological A TIMES' INVESTIGATION BY BRAD GOLDSTEIN Times StaN Writer Times tiles (1987) STEVE HASEL Firefighters work to free Largo police Officer Martha Funkhouser, who was trapped upside down for half an hour. Funkhouser says the injuries she received in the 1987 accident led to what psychiatrists called post- traumatic stress syndrome. MARATHA FUNKHOUSER, Largo Police Department "[ became real nasty. And I was afraid that [was going to be fired because [ would be mde to one too many people. .. problem, she said in her deposi- tion. I became a royal bitch be- cause I didn't feel good. - she said. '" became real nasty. And I was afraid that I was going to be fired because I would be nlde to olle too many people or some- thing. " Four psychiatrists agreed Funkhouser suffered from post- traumatic stress syndrome and could no longer work as a police officer. In 1990. the Largo Fire and Police Pension board granted her the first psychologi- cal disability pension ever re- ceived by a Largo firefighter or police offker. Funkhouser gets $ 13.503 annually. She also collected $31.49 I in ta'(-[ree workers' compensation benefits and an- other $45,576 from an insurance settlement related to her acci- dent. Funkhouser did not respond to a certified letter seeking com- ment. @Copyright 1996. S1. Petersburg Times. All rights reserved. FLORIDA LEAGUE OF CITIES 30 . A resistance to change and the desire of unions not to give up any current ben~flts stand in the way offixing some of the most blatant problems with the pension system. But change is still possible. TO SERVE & COLLECT BY THOMAS C. TOBIN Times Staff Writer The rou;-alann fj<e al Tampa General Hospital found Steve Skinner In a room so thick ~ith smoke he could barely see. While he was working near a window, a pile of smoldering debris collapsed under his feet. "Out I went," said Skinner, a veteran firefighter who was wear- Ing full gear and an air tank. He landed on a hospital roof three floors below, a fall that broke several bones in his shoulder, caused a concussion, cut his face and left him severely bruised and swollen. ''The whole right side of my body was three times (the size) it normally is," he said. After six months of rehabilita- tion in I 994, Skinner was fight- ing fires again. Today, he wo'rks with a rod in his upper arm and pins in his shoulder. He also works \'I<ith pain but said It's "not.hing that can't be tolerated." Skinner easily might have qualified lor a disability pension that. would pay him most of his firefighter's salary for life while he doubled his money by pursu- ing another career. But disability pensions are a last resort and a benefit that shouldn't. be abused, he said. "I never really considered it as an option." To others in public-safety ca- reers, however. a disability pen- sion is a ticket to an earlier. more comfortable retirement and a perk to be used at the first indication of pain. Skinner's case and others like it are striking because they show how widely attitudes can vary. They help make the point that any pension plan, no matter how faithfully monitored, is only as solid as the work ethic of its members. Compare Slanner's story to those of some of his peers, now retired on disability pensions: . The Clearwater police re- I cruit who injured the web be- tween her forefinger and t.humb while pmch,jog at the fj,'og , range. thl en later said it caused,. Ii other ai ments that made her unable to handle a desk job. . The St. Petersburg fire- fighter who said flling papers i and using a copy machine aggra - I vated soreness in his joints. ,.,.!. . The three veteran Clear- water police ofl'icers permanently I disabled in minor mishaps. One strained his shoulder while servo ing as a pall bearer. One hit his elbow on a met.aI door frame. Another twist.ed a knee at his desk. . The St. Petersburg police officer whose career-ending inju- ries included back problems from f~llling against computer equipment and tVoice fal/ing out of chairs. Once he reported a blister from walking his beat. "People used to look on inju- ries as a weakness." said Da\id Keene, Tampa's assistant fire Change must overcome poor work ethic, union resistance QUALllY CITIES - MAY 1996 31 A TIMES' INVESTIGATION chief and a former pension board trustee. -rhe attitude of the old- timers was, 'I can hang in there, I can take this: "I hate to say 'macho,' but maybe that's the word for it. It was looked on as a defeat if you left here with a disability." . Blaming a declining work ethic on generational differences might bt' a stretch. Skinner is evidence of that. At 27. he's hardly an 'old-tJmer." Ron Forbes, a former police officer, police chief and city man- ager in Pinellas Park, blames police and firefighter unions. He was a member ofthe city's pen- sion board in the early 1970s, when, he says, disabillty pen- sions weren't the problem they are now. "One thing unions do is they basically sit dO'wn and school their membership in how to take advantage of their benefits, in- cluding (workers') compensation and pension benefits," Forbes said. -rhey help their members work the system." But part of the problem is that elected officials agree to systems that leave themselves wide open to being "worked." In Clearwater, city commis- sioners, pension board members and city managers complained for years about a benefits plan that acted as a magnet for dis- ability pensions. Until this year, the city offered disabled retirees 75 percent of their average salary for the previ- ous five years - a generous pen- sion by most standards. Disabled pensioners also re- I ceived an extra 15 percent for each dependent chlld under 18. 1/ The tax-free pensions were awarded by a three-member panel of fellow employees, whiGh I grew more powerful after a 1985 I court order took away the City Commission's final say over pen- I sions. 'I According to records dating , back 20 years, the pension board took little action to root out possible fraud. And, as in Largo and Tampa, a disabled police officer or fire- fighter couldn't be forced to take a light-duty Job elsewhere in city government. With disability pensions start- ing to spin out of control in the 1980s, Clearwater's pension board suggest.ed annual physi- cals to prevent fraud. But when pensioners and the unions com- plained, the board quickly backed dO\\;TI and deemed the Idea too problematic. Despite the official hand- ~Tinglng, Clearwater took years to correct. the problems, prima- rily because any changes needed approval from three unions and city voters. 'Rule No.1: Protect the plan' The solution came when the unions ~finaIJy opened their eyes to the potential abuses that had occurred and stepped up to the plate." said police Chief Sid Klein. Ed Hooper, a faroler union official who recently was elected to tbe Clearwater City Commis- sion, had a hand in convincing other union members that a change was needed. Of certain provisions in the old plan, he said: "Maybe they were a little too lucrative." Some changes upset many union members, but the new plan Is fairer. he said. "Rule No. I is, above all, protect the plan." As of Jan, I, disability pen- sions went from 75 percent of pay to 66 2/3. The extra 15 per- cent for dependents was dropped. The pension board is larger and more accountable to the public, and would-be pen- sioners can be forced to take other city jobs if tbey arc able to do them. Regular pensions were im- proved to encourage employees to stay longer. But the incentive is sUll there for a disability retirement. For example, a pollee officer with 20 years on the job at a salary of $40.000 still will earn nearly SID KLEIN: The unions "finally opened their eyes to potential abuses," Clearwater's police chief says. ROBERT PENNINGTON: The chairman of the Tampa pension board says asking unions to give up any benefits for their members "would be a tough sell." $400 more a month on disabil- ity. And, unlike regular pensions. the disability pension is tax-free. Clearwater also has a new fraud-prevention provision that allows pensioners to be called back to work if their injuries heal. The only problem: The 80 employees who got pensions under the old system won't ever be subject to recall. even if they do heal. For other cities, the solutions to out-of-control pension plans might also lie in their recall sys- tems. Times reporters found in- stances in St. Petersburg, Tampa and Largo where tips about dis- ability pensioners working physically demanding jobs never were pursued. Most cities detect fraud through random tips and from skimming routine forms filled out by the pensioners. In Tampa. for example, a city computer picks 20 pensioners at random each year to fill out such forms, whicli mayor may not be com- pleted truthfully. FLORIDA LEAGUE OF CITIES 32 Officer saw discipline as harassment f: vea... John Welch was a zealous enforcer of traffic and parking laws in Clearwater. But there was a downside. Welch also was J.mown for being rude to citizens. In October 1985, police Chief Sid Klein took awav Welch's summons book and said he couldn't write any more tick- et.s, citing Welch's "lack of judg- mental ability." WeIch became depressed and. t.hree months later, spent about. 10 days in a psychiatric hospi- tal. Five months later. he applied for a disability pension. The pen- sion board first said Welch's problems weren't job-related but agreed to reconsider. When Klein brought to light Welch's disci- plinary record, the city asked for a full hearing. Instead, the pen- sion board acted with the Infor- TO SERVE & COLLECT BY THOMAS C, TOBIN Times Staff Writer mation it had and awarded Welch a full disability retirement in 1988. In a stern letter to the city manager. Klein attempted to head off the pension. He said Welch's medical reports were based on Welch's "perception he had been harassed" by the city. He also said Welch's record was "marked by frequent altercations with citizens and violation of departmental policies and proce- dures." When an officer Is ac- cused of misconduct. Klein said. "It Is not: harassment to Investi- gate such claims." In an interview. Welch, 61, said he still takes medication t.o treat depression that was brought on by the city. "As far as I was concerned, I was being JOHN WELCH-Clearwater Police Department "As far as I was concerned, I was being abused by the people at work. .. abused by the people at work," he said. Welch. who works a minimum- wage Job at a Clearwater Instru- ment plant, receives a city pen- sion of$17,712 a year. He also got a onc- time payment: of $23.148 from a supplemental pension financed by car Insur- ance premiums in Clearwater. @Copyrlght 1996, St. Petersburg Times. All rights reserved. Change continued Also in Tampa. offkials are pondering changes that would correct another problem. Right now, someone who hurts a thumb gets the same disability benefits as the employee who loses a leg on the job. One way to make the system fairer would be to a\\-"ard benefits based on the severity of the ir~jury. said Tampa police Lt. Robert Pennington. chairman of the Tampa pension board and a irustee for 18 years. An employee who injured a hand might get 10 percent of his salary while someone with complications from being shot might get 70 percent. But making any changes probably would prove an uphill battle. Pennington said. Because Tampa police and firefighters sign their O\\ln contracts with the city when they are hired, anyex- Isting contracts would have to be renegotiated individually - a task considered next to Impossible. Any hope for change rests on rewriting the contract for all new hires. But.. even then, asking the police and firefighter unions to give up any benefits for their members "would be a tough sell." Pennington said. l<;ven if there were agreement, any changes t.o Tampa's contract would have to be approved by the legisla- ture. Lou Kwall, a veteran Clearwater lawyer, suggested one change that no one else mentioned: Why not staff pension boards with medical professionals instead of employees? In his only case before a pension board, Kwall secured a disabilIty pension for a Clearwater police sergeant but noticed that there were few rules for presenting evidence and that the process appeared tainted by office politics and board members who seemed unsure about technical medical testimony. ~How can we expect. these people to be able to judge medical situations?" Kwall said. 'They're not lm,;yers. t.hey're not doctors. They're just people doing the best job they can. " @Copyright 1996, St. Petersburg Times. All rights reserved. QUAJ,rIY CITIES - MAY 1996 33