We go to City Council meetings so you don't have to.
Naming something "DROP" is just asking for it to be hated. We've all read the headline "Drop DROP" ad nauseum, and in today's Council meeting, Councilman Brian O'Neill kept referring to the program as a "DROP in the bucket" in regards to the pension fund problem as a whole. "The pension fund issue is getting lost in the DROP in the bucket issue," he says. "Our pension fund is underfunded by each administration. â¦ I would ask for â¦ Council for the first time to take a more active role" in addressing the larger pension problems.
O'Neill brought this up in light of a resolution Council passed today regarding DROP (more cumbersomely known as the Deferred Retirement Option Plan, which CP's Ralph Cipriano found is costing the city $1 billion). Apparently, when Mayor Nutter announced his plan this August to repeal DROP, enrollment skyrocketed: From the beginning of August to Oct. 12, 2010, 1,888 people have submitted their preliminary applications for DROP. Comparatively, in August of last year, only 82 workers did so. This resolution encouraged workers to re-think their enrollment, assuring them that "in the event Council enacts legislation revising or curtailing [DROP], any such legislation will provide all city employees who are eligible to enroll in the DROP â¦ with a 'window of opportunity' to enroll before any changes affecting their eligibility take effect."
In other news:
- The bill transferring the now-defunct Clerk of Quarter Sessions' $4.5 million budget to the First Judicial District passed unanimously. Read up on why this is disappointing in my article about reform of the Clerk's office falling flat.
- Councilman W. Wilson Goode, Jr. introduced a bill that would allow "a [tax] credit for contributions to community development corporations to add certain nonprofit intermediaries as eligible recipients of contributions." Read the actual bill here.
- And lastly, all Councilpersons were in attendance. Philadelphia, we can fight truancy!
We go to City Council meetings so you don't have to.
Attention City Council: Last night's excellent, excellent Phillies game is not an excuse to make bad jokes.
"Welcome to Philadelphia, where every day is a Halladay," Councilman Bill Green told two visiting Ohio politicians, who were apparently bused in as props. Councilman Curtis Jones Jr. took a jab at 'em, too, saying his guests have surely "enjoyed our hospitality â¦ except for on the ball field." Hardy, har. Councilman Jones then introduced a resolution to make Oct. 6-13 "Beat the Reds Week," and by golly, it passed not without the Ohioans saying "Nay," of course.
Am I being no fun? Probably. Look, I'm stoked about the game, and seeing everyone so cheerful was cool in a we're-all-in-it-together way. But sitting in on today's Council meeting was like listening to a vacation's worth of Dad jokes.
Eventually, Council did some lawmaking (sans Councilwoman Joan Krajewski and Councilman Frank DiCiccio, who were not in attendance):
- Councilman Jim Kenney introduced a resolution, which was adopted, regarding the longstanding labor dispute between paramedics on the scene at fires and the Pennsylvania Labor Relations Board (PLRB). The paramedics and Council want them to belong in the same collective bargaining unit as firefighters; the PLRB and Mayor Nutter don't. Council passed a bill in May giving them this privilege and though it was vetoed by Nutter, for reasons outlined here, Council overrode it. The PLRB, however, ruled that they are not firefighters under the law, and thus cannot join firefighters' union IAFF Local 22 which means they can now strike and may have their pension and health benefits reduced. Kenney's resolution both asks Nutter to let them back into the union, and gives Council the power to hire legal help for the union.
- Now that the Clerk of Quarter Sessions has been abolished, Krajewski's bill that would transfer all of CQS' funds for 2011 to the First Judicial District is up for a vote next session. Good-gov groups have long argued that one reason we should abolish the CQS (and all row offices) is that it will save the city money however, this bill ensures that it won't save much. For the past year, the CQS budget has been $4.9 million, and the bill would give $4.5 million to the First Judicial District to perform CQS' duties. The idea is that the First Judicial District will be better able to track down the $1 billion of forfeited bail than CQS did and hopefully that's true, though even President Judge Pamela Dembe said we'd be lucky to get back just 10 percent of that.
We go to City Council meetings so you don't have to.
As far as Council meetings go, this was a fairly enthralling one, so let's just cut to the chase, shall we? But first, our weekly attendance record: Councilwoman Joan Krajewski wasn't at the meeting. Everyone else was. Moving right along â¦
- The bill abolishing the Office of the Clerk of Quarter Sessions and transferring all of its duties to the First Judicial District passed unanimously. Congrats, Committee of Seventy. Now just three more row offices to go, y'all.
- Councilwoman Maria QuiÃ±ones-SÃ¡nchez introduced a bill that would reform the city's long-criticized business privilege tax: It would raise the gross receipts tax and eventually kill the net income tax. (It would also add a tax credit to fresh food retailers to "address the problem of 'fresh food' deserts," says SÃ¡nchez in a press release.) According to co-sponsor Councilman Bill Green, this will remove the "disincentive for businesses" especially small businesses "to locate to Philadelphia." This, of course, differs from Mayor Nutter's plan kill the gross receipts tax and lower the net income tax by 6 percent. Should make for an interesting showdown. You can check out a copy of the bill here. (For an easier though longer read, here's a PowerPoint on the bill from SÃ¡nchez and Green's offices.)
- Also, in Nutter/Council showdown news, the deeds bill that aims to prevent property theft passed, with everyone voting in favor except for Councilman Brian O'Neill, who abstained from the vote.
- And finally, Council passed a resolution to call on the Delaware River Basin Commission to enact a three-year moratorium on Marcellus Shale drilling and create a Marcellus Shale Study Commission to assess its environmental impact. If elected, gubernatorial candidate Tom Corbett vows to place a moratorium on all such moratoriums.
We go to City Council meetings so you don't have to.
Guess what a Philadelphia chromosome is?
One that's entirely screwed up, of course! More specifically, according to wisegeek.com, it's "a chromosomal abnormality which can lead to leukemia" which was discovered at the University of Pennsylvania in 1960, thus paving for the way for new and unprecedented treatment of leukemia.
What does this have to do with City Council, you're wondering? It passed a resolution this morning to make September 28 "Philadelphia Chromosome Day." Cute, right?
But onto more important stuff (which, for the record, took place after both Councilpersons Brian O'Neill and Bill Green peaced out, for what O'Neill called "urgent city business"):
Council passed a resolution objecting to the expansion of the Forum Theater, a place where you can watch porno flicks (with friends!) on 22nd and Market streets. The idea, said Councilman Darrell Clarke, is that a bigger sleaze theater kind of messes with the planned betterment of that neighborhood.
Bill 100360, which would (finally) abolish the Office of the Clerk of Quarter Sessions, is moving right along. It was placed on the calendar for second reading and final passage next Thursday.
Remember the Promoters Bill 100267-A we told you about earlier this year? (Which was pretty terrible at first, but then admittedly got better?) Because of a few minor issues that needed to be cleared up, it's been sitting on Mayor Nutter's desk for a signature since June 17. Council passed a resolution asking Nutter to take a second look at it, pretty please, and Councilman Bill Greenlee says he has "no reason to believe" Nutter won't now sign it into law.
Caught this piece from the local CBS affiliate on the unions' somewhat predictable reticence to eliminating the city's money-sucking Deferred Retirement Option Plan. Key quote:
But the matter came up today at the regular meeting of the city's pension board, raised by Carol Stukes, one of the four union representatives on the board.
She called Nutter's study âa cut-and-paste jobâ and she joined in the call for a new actuarial study of DROP:
âI don't feel comfortable with the documentation that is used for this report. I firmly do support the union and I represent District Council 47 getting another study done.â
Of course, in situations like this, "conduct another study" is nine times out of 10 code for "delay until everyone isn't so pissed, then continue business as usual." Which is what this is.
On the other hand, calling Boston College's study, which you can download here, a cut and paste job isn't necessarily wrong. After all, the city only paid $80,000 for it, which, in the actuary world, isn't a whole hell of a lot. And Boston College was forced to rely on data provided by the city, so there's that, too. As Joe Boyle, the actuary who analyzed the program for our investigation, told us last week: Since it costs at least $300,000 to do an annual audit of the city pension plan, "I don't think Boston College is going to tell us anything we didn't already know. I question why the city had to do this in the first place."
Indeed, the report did tell us what we already know: DROP wastes a bunch of money. But how much? Boston College said about $22 million a year; Boyle came up with a significantly higher figure. The difference in their methodologies: For starters, their report didn't include the 48 VIPs who have "retired" or will soon "retire" under DROP, cash their six-figure bonuses, then un-retire and come back to work the next day (including Council President Anna Verna, whose DROP bonuses alone will cost taxpayers half a million smackers).
Since they were also looking to see if the program had any benefit the city started the program purportedly to entice high-valued workers into staying on the job longer they apparently edited out of their dataset thousands of employees for whom city data was incomplete (see p. 10). Anyway, this is how BC researchers calculated costs:
The cost of the DROP program equals the sum of the following: 1) the annual amounts payable by the pension plan to DROP participants, minus the amounts that the pension plan would have paid had the employee retired at his counterfactual retirement age, discounted by a rate of interest and annual survival probabilities, and 2) the expected present value of the employee pension contributions from the date of entry to the program to the counterfactual retirement date.
Later in the paper, they go into more detail:
How much does the DROP program cost the employer? We first illustrate the calculation by reference to a hypothetical employee, and then present our estimates of average and total cost of the DROP program. The employee is a firefighter, born in June 1940, who commenced service in October 1960. He entered the DROP program in June 2001, when he was 61, and left exactly four years later in June 2005. At the time he entered the DROP program, his salary was $40,000 a year. He is a member of the pre-1988 pension plan and is therefore entitled to the maximum pension of 100 percent of salary. He therefore received a lump sum of $174,946 in June 2005, and a monthly pension of $3,333 thereafter.
Using our econometric model, we calculate that in the absence of the DROP, this employee would have retired in December 2003; the DROP program delayed his retirement by 18 months. Assuming 2.5 percent inflation and 1.1 percent real wage growth, he would by then have been earning $42,955, and at the same 100 percent pension, would have been entitled to a pension of $3,580 a month. The effect of the employee's participation in the DROP program is to reduce the pension plan's expenditure by $3,580 a month for the 18-month period from December 2003 to June 2005. The pension plan suffers a one-time outflow of $174,946 in June 2005. From July 2005 onward, the plan's outgoings are reduced by the difference in pension benefits of $247 a month.
In other words, they calculated how much the pension plan might save over the employee's lifetime by having them freeze in their lifelong annual pensions four years before retirement. Because they would get smaller annual pension checks, the report reasons, the long-term costs to the city go down. Boyle, for us, took a more straightforward tact: Since the program's inception, the city has paid out $725 million in DROP bonuses already, and is scheduled to shell out $338 million more in coming years. Basic math tells us that's more than $1 billion. That's not counting the interest on the loans the city has taken out to float its DROP payments.
I'm not an actuary or an economist, or skilled at next-level math. I've e-mailed Boyle for his take on the city report; if he responds, I will post it here.
Meanwhile, let's stop to consider what the city got for it's $258 million (or $1 billion, depending on whom you believe):
âWe find that on average, municipal workers delay retirement by over 1.25 years.â
|Does he dream of BRT data sheep?|
A new and likely-doomed blog series, in which I fuss about the city budget. Oh yeah.
What, exactly does Budget Director Stephen Agostini do? The budget, of course as evidenced by the hours and hours he spends sitting in on Council's budget hearings, ever-ready with reams of numbers and answers to obscure fiscal questions.
But what else does he do, eh?
The answer, apparently, is: a lot.
A recent visit to Mr. Agostini's office confirms that the man is not only in charge of the budget, but also of overseeing stimulus spending and, the great glorious crown of municipal drudgery: fixing the lousy Board of Revision of Taxes data.
Quietly, and even amid the budget hearings, Agostini is leading a small group of people who meet every week, for "about 4 or 5 hours" to discuss the latest in efforts to repair what appears to be a city-wide data crisis.
According to Agostini, the problem has grown far beyond the BRT, since various city departments among them Water Revenue, Streets, Revenue, Records, L&I, and the Water Department have been relying on (bad) BRT figures, thereby creating even more sets of useless data. (As one source deep in the bureaucracy put it, "It's so bad.")
He estimates it'll take a year to 18 months to get it all fixed.
Why has such a task fallen on a man ostensibly busy with the budget?
"Why this fell to me is because I started working on it a year ago," he told me, shrugging.
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