Legality of boosting Phoenix police pensions in question
From this article it sounds like the Phoenix City Council has sold out
to the special interest groups in the Phoenix police and fire departments.
They are giving them boatloads of money that are illegal under Arizona law.
In return for all this cash the members of the Phoenix city council
get the votes of the 3,000 Phoenix police officers and
1,600 Phoenix firemen.
the cops get a boat load of cash, and the taxpayers get screwed.
Those 4,600 votes may not sounds like much, but in a typical city elections
where a measly 5 percent of the registered voters show up and vote, those
4,600 police votes can easily throw the election.
Source
Legality of boosting Phoenix pensions in question
By Craig Harris and Beth Duckett The Republic | azcentral.com Wed May 8, 2013 12:02 AM
A Phoenix policy that lets police and firefighters cash in unused sick leave, vacation and deferred compensation has allowed some to spike their pay and pension benefits so much that they became millionaires shortly after retiring, records obtained by The Arizona Republic show.
The pay spiking, which appears to violate state law, in at least a dozen instances allowed veteran Phoenix public-safety workers to add at least $100,000 each to their salary in their last few years of employment, a key component in determining pension benefits.
Five of them added more than $200,000 to their paychecks, with one getting more than a quarter-million dollars primarily by cashing in $187,854 in unused sick leave.
Ten retirees significantly increased their lump-sum retirement benefits to more than $700,000 through the Deferred Retirement Option Plan. All also receive annual pensions greater than $114,000 a year.
State law prohibits public employees from using “unused sick leave, payment in lieu of vacation, payment for unused compensatory time or payment for any fringe benefit” to “spike” the final compensation on which retirement benefits are calculated.
Yet Phoenix interprets the law differently. It allows police and firefighters through their city contracts to receive monthly pay in lieu of accrued sick or vacation leave. City officials have said the policy does not violate the law. The city declined to provide any legal opinion to support its policy.
Mayor Greg Stanton, a former deputy state attorney general, wouldn’t say whether he supports ending the practice, which is popular with one of his key constituencies: police and firefighters. He said in a written statement Tuesday that to do so would “require a change to the personnel rules, which cannot be done by a simple vote of the City Council.”
Taxpayers bear the cost of pay spiking allowed by several Arizona cities, Phoenix and Tucson among them, because it increases city payments to the state’s Public Safety Personnel Retirement System. Phoenix taxpayers already pay a food tax enacted in 2010 in part to protect public-safety jobs and balance the city budget.
Officials disagree and point fingers over responsibility for ending pay spiking.
Jim Hacking, public-safety pension-system administrator, said the Arizona Legislature should crack down on cities that violate the anti-spiking law. Hacking said the law is clear, yet cities like Phoenix willfully ignore it.
“If they are doing something to inflate their pay, it adds to their (city pension) liabilities,” Hacking said. “There’s nothing we can do about it.”
Stanton disagrees, saying, “The legal issues are up to the state pension board.”
State Sen. Steve Yarbrough, R-Chandler, who continues to push pension reforms at the Legislature, said lawmakers may need to take up the issue. Yarbrough said that he does not believe it is a widespread practice but that it dramatically benefits a few individuals.
Pay spiking has been heavily debated by the Phoenix City Council, but there are not enough votes to end the practice, Councilman Sal DiCiccio said.
“There are a few of us on the council who think this is disrespectful to the taxpayers,” DiCiccio said. “But the mayor has not fought against this — or other council members. Until you get five (votes), none of this goes away.”
Stanton, a former councilman who became mayor in 2012, indicated in a memo to DiCiccio on Tuesday that he would not deal with the issue until this fall. In a prior interview, Stanton said he saw reason to act immediately.
“We have to make sure the abuses in the system are not allowed in the future, and that is what we will deliver,” he said. “To the extreme cases where people have taken advantage of the system, we have to stop that.”
Stanton said he will direct City Manager David Cavazos to “find additional ways to save money for the people of the city,” such as curbing overtime.
DiCiccio said Stanton should schedule a vote to force the council to confront spiking. In Tuesday’s memo, Stanton said the City Council could provide input on the issue this fall, prior to beginning employee-contract negotiations.
‘I played by the rules’
Stanton, Cavazos and other assistant city managers who craft the budget have been aware for years of the spiking issue, but there has been no official action to prevent public-safety workers from doing it. Former City Manager Frank Fairbanks spiked his pension when he retired several years ago, making more in retirement than he did when he worked for Phoenix.
After The Republic reported on the windfall, the city eventually ended pay spiking for all employees except public-safety employees.
One ex-firefighter who took home more than $1 million in retirement incentives and pension benefits said the spiking policy should end because the city can’t afford it. But, he added, he would have been foolish to not make use of a policy available to prospective pensioners.
“It’s not sustainable,” said Decker Williams, a former deputy fire chief who retired in 2011. “But I played by the rules.”
Williams said it is bad public policy, comparing it to using public funds to build sports stadiums for millionaire owners.
There are approximately 2,400 Phoenix retirees receiving benefits from the Public Safety Personnel Retirement System, and union leaders say most rank-and-file employees are not retiring with six-figure pensions. Those with large retirement benefits typically are top-level managers with higher salaries who spent more than a quarter-century working for the city.
Those taking home more than $1 million in total benefits are mostly former upper-level managers. But there also are 153 Phoenix public-safety retirees who currently receive pensions greater than $88,000 — more than two times the average income in Arizona. And 650 retired police officers and firefighters who receive pensions also each received lump-sum retirement payments in excess of $250,000 from the Deferred Retirement Option Plan, The Republic found.
A need for more funding
As pension benefits have increased, Phoenix, like many Arizona communities, has seen the costs to fund its retirement plans skyrocket over the past decade.
Phoenix budgeted $109 million this fiscal year for public-safety pension costs. In fiscal 2003, the city paid $7.2 million.
The primary reasons for the cost increase are investment losses by the Public Safety Personnel Retirement System, of which Phoenix is the largest member. But pension spiking contributes to the need for additional tax dollars, according to Hacking.
Phoenix plans to spend an additional $7.9 million on deferred-compensation retirement benefits for firefighters and $866,314 for police officers this fiscal year. Those retirement benefits can be cashed in to increase their annual pension benefit.
As retirement costs grew, the workforce in Phoenix’s Police and Fire departments got smaller. As of mid-February, there were 305 unfilled police-officer positions and 90 unfilled firefighter positions.
The city in fiscal 2012 had 3,021 police officers and 1,578 firefighters. Four years earlier, Phoenix had 3,375 police officers and 1,671 firefighters.
Cavazos said Phoenix has been forced to cut public-safety positions primarily because of the 2008 recession, but he acknowledged that rising pension costs have contributed to the cuts.
Effect of the food tax
The debate over pay spiking could become enmeshed in the council debate over Phoenix’s controversial 2 percent tax on food. During his mayoral campaign, Stanton promised to end the tax by last month.
The mayor pulled back from that commitment, saying the tax is needed to help fund a city budget that has been besieged by higher pension costs, particularly public-safety pension costs. He has said if the sales tax ends, it will result in the layoffs of 99 additional police officers and about 300 other employees.
Any money saved by curbing pension costs could be reallocated in the city budget, thereby lowering its reliance on the food tax.
The City Council on May 1 voted to prepare for an early repeal of half of the city’s sales tax and directed Cavazos to prepare for its repeal. Another vote on the repeal plan is expected later this year.
DiCiccio said the city can do without the $50 million generated annually by the food tax if the city reduces its more than $100 million in public-safety pension costs.
“These monies could be going for after-school programs for kids, senior programs, library hours, parks and more police on the streets,” DiCiccio said.
Some residents who oppose the food tax say they were surprised by The Republic’s findings on public-safety pension benefits.
“It’s just not fair,” said Regina Saucedo, a 48-year-old south Phoenix resident. “They shouldn’t be getting so much money. It shouldn’t be happening.”
But others say they understand the need for the tax. Tina Sweeney, for example, said she does not necessarily like it but supports it because she does not want city workers to lose their jobs.
Stanton said he would like to eliminate the tax but cannot justify ending it because the city has a “barely balanced budget.”
Enticement to stay on the job
The average public-safety pension for a Phoenix retiree is $59,341, about $10,000 more than the statewide average, according to pension-system records. The average pension for Phoenix’s non-law-enforcement employees, who are part of the city’s pension system, is $29,256.
The Republic, through the Arizona Public Records Law, obtained financial documents from the city and the pension system regarding Phoenix’s public-safety pension costs and retirees receiving the benefits.
At the top of the benefits list were those who received large deferred-retirement payments. The Legislature created the Deferred Retirement Option Plan, and it began in 2001 as a five-year test. Lawmakers made it permanent in 2002.
It was designed to entice veteran police officers and firefighters to stay on the job for up to five additional years. The plan allowed a person to “retire” but keep working for up to 60 months. During this time, the person would receive a regular paycheck and have the pension placed into a Public Safety Personnel Retirement System savings account with a guaranteed interest rate. The person was then given a lump-sum Deferred Retirement Option Plan check upon leaving employment.
The guaranteed interest rate for the Deferred Retirement Option Plan the past few years had been 8 percent or higher, regardless of how investments had done for the Public Safety Personnel Retirement System. The 2011 Legislature, recognizing the high cost to taxpayers, made the plan less enticing, and the guaranteed interest rate is now 4.4 percent. In addition, those hired on or after Jan. 1, 2012, are not eligible for the plan.
The Legislature changed the Deferred Retirement Option Plan and made other pension reforms following a series of stories in The Republic in November 2010 that documented the soaring financial burden on taxpayers and questionable practices, such as pension spiking, in public-pension systems across Arizona.
Williams, the former deputy chief, said he understands that large pension benefits can upset the public. Williams currently is a volunteer with the Phoenix Fire Department, where he spent decades as a firefighter. His current annual pension is $116,712, roughly what he made when he left the city.
“I’m not going to sit here and say I earned every nickel,” Williams said. “But was I going to say, ‘No, I don’t want it’?”
Republic reporter Dustin Gardiner contributed to this article.
Phoenix to phase out food tax....maybe
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Phoenix to phase out food tax....maybe
Posted on May 7, 2013 5:00 pm by Laurie Roberts
Phoenix to phase out food tax….maybe
The Phoenix City Council has voted to phase out the food tax …
… Maybe.
… Or possibly not.
OK, it depends.
If you’ve followed the ever evolving saga of the city’s emergency food tax, I suspect that like me you’re nursing a painful case of whiplash.
From the mayor’s pre-election pledge to get rid of the tax to the mayor’s post-election pledge to break his pre-election pledge.
From the city manager’s sky is falling no-food-tax forecast in March to his assurances last week that he could cut the tax in half by January, no sweat.
From plans by a bare majority of the council to vote last week to halve the tax in January to last Wednesday’s actual 8-1 vote, to put off a decision until October.
Giving the city’s employee groups five months to pick off one vote in order to keep the tax intact and the revenues flowing forth — at least until 2015, when the emergency five-year tax will expire…
Presumably.
The 2 percent food tax – hastily enacted in 2010 as the city faced financial freefall — vaulted into public view this spring as the time approached for fulfillment of Mayor Greg Stanton’s campaign pledge to repeal the tax by April 2013. Because the council was deadlocked 4-4, all eyes were on Stanton who did as many suspected all along.
He changed his mind. Citing the no-food-tax budget put together by City Manager David Cavazos – the one that required laying off 100 police officers, closing recreation centers and slashing library hours – Stanton said in March that good leadership required him to support the continued collection of the most regressive tax around.
Imagine Stanton’s surprise in April, when one of the food tax supporters, Councilman Michael Nowakowski, called for a phase-out of the tax. Nowakowski told me he’d been assured by Cavazos that the tax could be cut in half in January without cutting public safety or city services.
He and Councilwoman Thelda Williams called for a May 1 vote.
By last week, however, the plan to vote on the tax cut had softened to a vote to take up the issue on Oct. 1, giving Cavazos until then to factor in the $12 million loss of food-tax funds from next year’s budget.
Understandably, city employee groups oppose the move.