Agenda 01-10-11
FINANCIAL ADVISORY COMMITTEE
MONDAY, JANUARY 10, 2011 @ 6:00 P.M.
LIBRARY CONFERENCE ROOM “A”
BOYNTON BEACH, FLORIDA 33435
AGENDA
1. Approval of Minutes – (Copies attached)
(Attach copies to circulated Agenda. I think these are the ones that haven’t been
approved. Catherine was checking the minutes to see if they were approved)
October 4
November 15
November 29
(Not completed)
December 13
2. Review, discuss and approve final draft questions for Citizen Survey along with distribution and
timing – (See “Survey” copy attached)
(I’ve attached the copy to this email for you to attach copy to circulated Agenda)
3. 10 – 20 minute Presentation and Status of Member Research on one of their selected projects
(See attached “FAC Work Area Matrix as of 11-15-2010”)
(I’ve attached the copy to this email for you to attach to circulated the Agenda)
Members
George Feldman – #11-Golf course revenue options
Michael Madalena – #25 & #26-City pension costs
David Madigan – #33-Merge CRA functions / #32-Selling of City Assets / #31-Hiring
Freeze / #40-Voluntary Separation Program & Early Out
Don Scantlan – #24-Paperless billing / #52-City services survey
William Shulman – #39-HOA contributions to programs / #10-Increases in City Revenues
Merline Pamplona – #18-Forestry/Grounds (Cost Benefit) / #17-Parks/Recreation
(Cost/Benefit)
Alternate
Terry Lonergan – #27-Shopper Hopper (Cost/Benefit)
4. Discussion of FY 2011-12 Budget Schedule for the City and Timing of FAC Recommendations.
5. Other Business
1/5/2011 2:23 PM
jmp
S:\CC\WP\Board Agendas\Financial Advisory Committee\2011\01-10-11.doc
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FINANCIAL ADVISORY COMMITTEE
MONDAY, JANUARY 10, 2011 @ 6:00 P.M.
LIBRARY CONFERENCE ROOM "A"
BOYNTON BEACH, FLORIDA 33435
AGENDA
1. Approval of Minutes - (Copies attached)
. October 4
. November 15
. November 29
2. Review, discuss and approve final draft questions for Citizen Survey along with distribution and
timing - (See "Survey" copy attached)
3. 10 - 20 minute Presentation and Status of Member Research on one of their selected projects
(See attached "FAC Work Area Matrix as of 11-15-2010")
Members
. George Feldman - #11-Golf course revenue options
. Michael Madalena - #25 & #26-City pension costs
. David Madigan - #33-Merge CRA functions / #32-Selling of City Assets / #31-Hiring
Freeze / #40-Voluntary Separation Program & Early Out
. Don Scantlan - #24-Paperless billing / #52-City services survey
. William Shulman - #39-HOA contributions to programs / #1 O-Increases in City Revenues
. Merline Pamplona - #18-Forestry/Grounds (Cost Benefit) / #17 -Parks/Recreation
(Cost/Benefit)
Alternate
. Terry Lonergan - #27-Shopper Hopper (Cost/Benefit)
4. Discussion of FY 2011-12 Budget Schedule for the City and Timing of FAC Recommendations.
5. Other Business
1/5/2011 2:23 PM
jmp
S:\CC\WP\Board Agendas\Financial Advisory Committee\2011 \01-10-11.doc
Florida~
TaxWat..
106 N, Bronough Street 0 Tallahassee, FL 32301" www.FloridaTaxWatch.org 0 Phone: (850) 222-5052 c' Fax: (S5G) 222-7476
Government Cost Savings Task Force
Chapter 1 : Pension Reform
Report............................................................................. ................... .p. 2-18
Recolnmendations ........... .... ................. ..... ....................................... .....p. 19
1. Eliminate or reduce defined benefit (DB) plan and increase use of defined contribution
(DC) plan
A. Eliminate defined benefit (DB) plan and switch all FRS members to defined
contribution (DC) plan
B. Reduce defined benefit contribution and offer optional matching defined
contribution supplement
2. Require FRS members to contribute to their retirement plans
3. Consolidate employee retirement classes into two classes
4. Limit Special Risk class membership within law enforcement, firefighters, and
corrections officers
5. Increase vesting period for FRS Pension Plan from six to 10 years
6. Reform the methodology used in calculating average final compensation (AFC)
A. Use only base salary earnings when calculating the AFC
B. Place a cap on the AFC so that the five highest earning years do not exceed a certain
limit to avoid abuse of the system
C. Increase the number of years used to calculate AFC or use lifetime average salary
7. Increase the normal retirement age (and minimum required years of service
accordingly) for "regular" and "special risk administrative support" employee classes
A. Regular, Senior Management Services, Elected Officers Class Members
B. Special Risk, Special Risk Administrative Support Class members
8. Tie automatic COLA increase for public pension recipients to inflation
with a 3% ceiling
9. Eliminate Health Insurance Subsidy (HIS) for FRS members
10. Reform or eliminate the Deferred Retirement Option Program (DROP)
A. Reduce annual guaranteed rate of return for DROP participants from 6.5% to 3.0%
B. Require Governor's approval to rehire individuals who have completed DROP
C. Eliminate HIS for DROP participants and retiree who resume active employment
with FRS employer
D. Eliminate DROP
Improving taxpayer value, citizen understanding, and government accountability
Introduction
These trying economic and fiscal times demand the highest scrutiny of government expenses and
extraordinary efforts to find cost efficiencies, yet Florida has overlooked one area that is ripe for
reform: the Florida Retirement System (FRS). In its current form, the system is unsustainable
and presents a growing fiscal burden on state and local governments. Over the past decade, the
state has spent more than $5 billion to maintain the existing retirement system. During this
uniquely challenging fiscal time, the need to make significant improvements to the FRS cannot
be ignored.
While the provIsIOn of retirement, disability, or death benefits is important to maintain
competitiveness as an employer, benefits offered by the FRS are more generous than those
offered by non-public sector employers (e.g. the private and non-profit sectors). Generally,
compared with the private sector, state and local government employees are able to retire at an
earlier age and with no required contribution towards their pensions. These benefits are provided
in addition to Social Security retirement payments, which most state and local government
employees are eligible to collect because of contributions made by the public employer on their
behalf (in the form of federal payroll taxes).l Florida state government employees are also not
required to contribute toward their retirement and many do not share in the risk if the system
experiences low investment returns (if the employee chooses to participate in the defined benefit
plan).
In order to successfully provide core programs and services to Floridians, state and local
governments cannot continue to utilize the current mechanism to determine and fund employee
retirement benefits. This section thoroughly examines the FRS, analyzes areas in need of
modernization, discusses successful refonn efforts around the country, and recommends cost-
saving reform options to create a more efficient and competitive retirement system for state and
local government in Florida.
Defined Benefits Drive the Cost of Public Retirement in Florida
At present, state and local government employees have the option to participate in either of two
retirement programs offered through the FRS: the defined benefit (DB) plan or the defined
contribution (DC) plan.2 The receivable benefits earned through DC plans (e.g. 401 (k) or 403(b)
plans) are based on the fixed annual dollar contributions placed into each participant's
personalized investment portfolio and the associated investment returns.3 DB plans, however,
I Many public employers in other states do not participate in Social Security and therefore the employees are
ineligible; however, Florida participates.
2 The DB plan is officially referred to as the Pension Plan and the DC plan is officially called the Public Employee
Optional Retirement Plan (PEORP) by the FRS. Additionally, FRS employees have the ability to do a one-time shift
from DB to DC or vice versa.
3 26 U .S.c. 414(i) defines DC plans as the following: ". ..plan which provides for an individual account for each
participant and for benefits based solely on the amount contributed to the participant's account, and any income,
2
statutorily obligate employers to pay specified benefits based on annually revised employer
contributions. The high cost of public employee retirement in Florida is driven by the DB plan,
which places the responsibility of paying set pensions on state and local government employers,
regardless of investment performance.
In order to meet their long-term benefit obligations, state and local governments must make
significant contributions on behalf of each DB plan member. Employees are not required to
match any portion of the contributions made towards their retirement, placing the entire cost of
funding the FRS on employers, and ultimately taxpayers.
According to the Bureau of Labor Statistics (BLS) National Survey, as of March 2009, 78% of
all state and local governments required their employees to contribute to their DB plans and of
those that have DC plans, 58% required employee contributions. This places Florida's state and
local government employers among a minority that do not require any employee contribution.4
Although the state incurs the cost of associated contributions, the DC plan alleviates the fiscal
impact of the costly DB plan as it removes the state's obligation for paying future retirement
benefits for those employees that select DC membership. Figure 1 shows that the majority of
FRS employees, however, opt for DB plan membership.
Figure 1: A Majority of Active FRS Members Opt for DB Membership (As of June 30, 2009)
Defined Benefit
Defined Contribution
Source: Data provided by the Florida Division of Retirement
All retirement contributions made by employers on behalf of DB and DC plan members are
initially pooled into a common savings account called the Florida Retirement System Clearing
Trust Fund. The contributions made on behalf of DB plan members are then forwarded for
deposit into the Florida Retirement System Trust Fund whose assets are aggregately invested and
managed by an oversight panel called the State Board of Administration. While benefit payments
are not directly linked to the market performance of the Trust Fund, as will be subsequently
explained, investment returns playa vital role in the assets available to pay owed benefits.
After initially being placed into the FRS Clearing Trust Fund, DC plan contributions are
removed and placed into an individual account where they are managed with input from the
recipient. Figure 2 chronicles the total contributions made by employers into the FRS Trust
Fund for both DB and DC members as of the end of each fiscal year between 2000 and 2007.
expenses, gains and losses, and any forfeitures of accounts of other participants which may be allocated to such
participant's account."
4 U.S. Bureau of Labor Statistics, National Compensation Survey (NCS), available at www.bls.\!ov/ncs/home.html.
.,
-'
Figure 2: Total Employer Contributions Are Rising
(FY 2000 - FY 2009 Inflation Adjusted)
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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
Fiscal Year (As of June 30)
o State Employers E:lNon-State Employers
Source: Florida Division of Retirement Annual Reports
Employers aggregately spend billions of dollars each year to maintain the FRS defined benefit
plan. During the final seven years of the observation period, the real value5 of employer
contributions into the FRS Trust Fund continuously increased, although there was a slight
decline in the real value of the state's contribution between 2007 and 2008.6 Even as Florida's
General Revenue collections declined by 22% during the last four years of observation and the
number of active FRS members shrank by 2.25% during the final year, the state's retirement
contributions increased by 26%.7
Annual contributions made towards the FRS Trust Fund are actuarially determined for each
fiscal year. To establish annual contributions, actuaries use several factors to estimate total future
benefit obligations, including: employees' life expectancies, payroll growth, and the assumed
rate of return on investments. Once the amount of total contributions needed to meet all projected
future benefits is determined, this figure is disaggregated for employers as a specified percentage
of each of their respective employees' monthly salaries to form contribution rates. 8
The contribution rates are only necessary to cover the long-term obligations of the DB plan;
however, DC plan contribution rates are set to be reflective of the established DB rates so that
5 Using Consumer Price Index provided by the Bureau of Labor Statistics
6 Nominally, total contributions have continuously increased during the period of observation.
71n 2009, the state contributed approximately $679 million to the FRS, while non-state sources (i.e. local
governments and school districts) contributed a combined $2.6 billion. The disparity in contributions between state
and non-state employers is because non-state members constitute a much larger portion of the FRS. As of June 30,
2009, there were 668,416 total employees participating in the FRS, of which ] ]6,00] (17.4%) were state employees.
8 Florida Division of Retirement Bureau of Enrollment and Contributions
4
the decision of employees to join one plan over the other is not influenced by disparities in
contribution. Hence, the DC plan would be cheaper if its contributions were not tied to the DB
plan. At the end of this section, Florida Tax Watch offers ideas for decoupling the contributions
of the two plans.
Contribution rates vary by employee class designation. Figure 3 disaggregates the blended
contribution rates for both retirement plans by employee class. The featured contribution rates
include a 1.11 % rate made from each employee's salary towards a health insurance subsidy
(HIS) which retired members are also provided; these contributions are placed into the HIS Trust
Fund.
Figure 3: Blended Contribution Rates by Class and Retirement Plan Type for Both
Retirement Plans (As of July 1,2010)9
Rc ular 10.77 87.17 $39,297.23
S ecial Risk Admin. Su ort 13.24 0.01 $44,973.76
14.57 1.16 $81,203.98
GovernorlLt.
Gov .ICabinetlLegisla to rs/S ta te
Attorne s/Public Defenders 16.34 0.03 $48,612.08
Elected County/City/Special
District Officers 18.64 0.19 $44,548.42
Judicial 21.79 0.13 $138,887.98
S ecial Risk 23.25 11.32 $53,894.94
Source: Florida Division of Retirement
As the table shows, employee classes with higher average salaries receive a greater contribution
towards retirement making the current system regressive, especially in the case of DC plan
membership where contributions are directly linked to future retirement benefits.
Considering that the average cost of retirement to private employers is only about 5% of an
employee's wage,1O even the lowest contribution rate is more than double that of the private
9 Florida Division of Retirement: https://-www.rol.frs.state.tlus/forms/irI0-142 rates onlv.IJdf. These rates include a
1.11 % Health Insurance Fee, and a .03% administrative fee.
10 Data provided by National Compensation Survey (NCS) of the U.S. Department of Labor Bureau of Labor
Statistics.
5
sector average. Additionally, other state and local government systems that allow their members
to collect Social Security only offer a median 8% employer contribution. ) J
Figure 4 further illustrates that the average real value of state and local government contribution
per working employee in the FRS grew continuously during the previous seven years. 12
Figure 4: Average Employer Contribution per Worker (Inflation Adjusted)
$5,500.00 l
$5,000.00 I
I
.-.. $4,500.00 I
'"
100 $4,000.00
..:s I
Q $3,500.00
Q I
a-. $3,000.00 I
= I
=
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'-"'
~
$2,000.00
$1,500.00
$1,000.00
2003
2004
2005
2006
2007
2008
2009
Fiscal Year (As of June 30)
Source: Florida Division of Retirement Annual Reports
In every aspect, Florida state and local government employers contribute too much towards
retirement.
The assumptions used by actuaries to keep the FRS Trust Fund functional and solvent are a
crucial part in determining the amount of assets available to pay benefits and how much should
be contributed each year. Additionally, contribution rates must be approved by the state
legislature. Legislators may choose to enact contribution rates that are below those actuarially
determined to cover the normal costl30f the DB plan. Unrealistic assumptions and the
implementation of contribution rates that are below what is actuarially recommended can result
in assets that are insufficient to fund actual benefits owed, adding to the future costs of the
system.
11 Munnel, Alicia; Golub-Sass, Alex; Haverstick, Kelly; and Wiles, Gregory. "Why Have Some States Introduced
Defined Contribution Plans?" Center for Retirement Research at Boston College. January 3, 2008.
12The per employee contribution was established by dividing the total contributions made to the FRS Trust Fund
during a given fiscal year with the number of active employees in the system as of June 30 of that respective year.
While this number for employees only offers a snapshot of the total employees in the system in a given year, Figure
3 is intended to serve as a benchmark for the increase in employer contributions.
13 Cost of fully funding all future benefits owed to current members in the FRS.
6
In FY 2008-09, the FRS Pension Plan's total liabilities passed total assets for the first time in
more than 10 years. As of July 2010, the FRS Pension Plan was estimated to be 87% funded.
Even though the unfunded liability in the FRS only recently appeared, the assets-to-liabilities-
ratio (also known as the funded ratio) has experienced a steady decline during the past decade.
Figure 5: The Decline in the Funded Ratio (As of June 30th of each year)
r---- ~~~:~:~: ----
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"*,,,,,'''<1 Funded Ratio
-Total Contributions as % of Payroll
I
I
___I
Source: Department of Management Services
Figure 5 shows that the funded ratio declined during the previous decade, while contributions as
a percentage of the total payroll rose after 2003. The recent economic downturn pushed the FRS
Trust Fund into a hole as investments cumulatively lost 13% ($27 billion) in fair value between
FY 2007-08 and FY 2008-09; 14 however, the steady decline in the funded ratio of the FRS Trust
Fund over the past decade has been fueled by several factors.
During the early 2000s, the legislature kept contribution rates below the actuarially determined
rates because the FRS Trust Fund was experiencing a surplus and positive investment returns. In
2001, the legislature also voted to increase benefit payments by 12% for certain members of the
"Special Risk" class. 15
The decision to underfund the FRS Trust Fund during more sound economic times has resulted
in the need for more taxpayer dollars to be expended during a period of poorer financial health
for the state in order to prevent the unfunded liability of the FRS Trust Fund from widening.
These growing costs need to be reined in or the FRS could become an even greater fiscal burden
for the state.
14 Florida Department of Management Services, Division of Retirement. The Florida Retirement System Pension
Plan and Other State-Administered Systems Annual Report July I, 2008- June 302009, available at
www.rol.frs.state.fi.us/forms/2008-09 Annual Report.pdf
15 Ibid.
7
If all of the assets in the FRS Trust Fund disappeared due to poor investment decisions and
flawed assumptions, the responsibility of paying owed retirement benefits would still remain
with employers. This means that without proper adjustments and adequate long-term recovery in
investment losses, closing the gap in the FRS Trust Fund will fall on backs of taxpayers. Further
deterioration in the market could deplete the assets of the FRS forcing lawmakers to raise taxes
on the rest of Florida's labor force to fund the DB plans of government retirees.
Most importantly, paying outstanding benefit obligations takes statutory precedent over the
funding of any other government function in the budgetary process. This means that prior to
allocating tax revenue dollars to any other public services; state and local governments are
required by law to meet their pension benefit, even if that leaves no money for other important
programs.
The bottom line is that the expensive contributions needed to maintain the FRS Trust Fund are a
direct function of the benefits promised to FRS members. The following segment expounds the
benefits side of the FRS to provide a better idea of how tax dollars placed into the system are
distributed.
Generous Benefits Make the
System Expensive
The high cost necessary to sustain
the Florida Retirement System is a
function of a combination of
features that make the FRS
expensive for employers, including:
a generous annual benefit formula,
a relatively low retirement age, and
high annual cost of living
adjustments. In extreme cases, state
and local retirees have been able to
collect in excess of $400,000 in
lump sum pension benefit in
addition to annual benefit payments
of more than $100,000.16 Reducing
the fiscal burden on state and local
governments could be
accomplished by adjusting
elements factored into final
benefits. Simply modifying
Focus: Private versus Public Sector Com ensation
Defined benefit plans have become less frequent in the private sector as
they are generally very costly and have forced many businesses to go
bankrupt. According the Pension Benefit Guaranty Corporation (PBGC),
which insures private sector pension plans, approximately 4,000 companies
since 1974 have filed for "distressed" tennination of their defined benefit
plans because they could no longer stay in business and fund their pension
obligations. Additionally. approximately 172,000 companies during the
same period discontinued defined benefit pension plans through "standard"
termination to cut operating expenses. In 1980, 84% of private sector
employees wcre covered by defined benefit pension plans. By 2009,
however. only 2 I % of private industry workers had access to defined
benefit pension plans. Despite this fact, 84% of state and local government
employees, including those in Florida. still have access to defined benefit
plans according to the Bureau of Labor Statistics (BLS).
Historically. state and local governments have provided more generous
benefit packages than the private sector. A fi'cquent validation for higher
benefits received by public employees generally centers around the
perception that state and local government wages are on average lower
than those paid to private workers, and that providing greater benefits
cnsures that statc and local governments arc able to competc with the
private market for high-quality employees. This argumcnt falls apart at the
root, however, whcn examining data provided by the Bureau of Labor
Statistics (BLS).
{Continued OIII/exl page ...J
'6http://articles.orlandosenti nel.com/2009-11-1 8/news/os-sem i no le-colle!!e-rncgee-ret ires- for-month-
11 1809 I retirement-benefits-lull1lJ-sum-ll1c!!ee
8
contributions without adjusting
benefit calculations will only
widen the gap between assets and
liabilities in the FRS Trust Fund.
Breaking Down the Annual
Benefit Formula
The annual pension benefit
received by a vested member, an
employee who has served the
minimum time necessary to retain
benefits at retirement, is calculated
retrospectively and is based on that
member's years of service, average
final compensation (AFe), and
accrual rate. Figure 6 shows how
these variables are used to
calculate annual benefits:
Figure 6:
Annual Benefit Formula
Yearly Retirement Benefit =
Accrual Rate * Years of
Service*AFC
The accrual rate is a multiplier
used to determine each member's
total benefits and varies between
1.60% and 3.33% depending on
employee classification and years
of service at retirement. Member
classes with higher average
salaries tend to have higher
multipliers. For example, the
Regular class members with an
average salary of $41,804 have an
accrual rate of 1.60% to 1.68%,
while Judges with an average
9
salary of $138,826 are given a flat accrual rate of 3.33%.17 Thus the system IS especially
generous to those with the highest salaries.
The AFC is the average of the five highest earning fiscal years (also referred to as the "High
Five" years) which tend to be during a member's final years of service and include over time and
any unused annual leave accrued (not to exceed 480 hours). 18 As a result, giving the most senior
employees overtime and saving unused leave during the final years have been identified as
common methods to inflate the AFC.19 This practice is especially common among local
government "Special Risk" employees. Thus, including these certain non-state employees in the
FRS inflates the contributions that must be made to keep the system afloat; effectively draining
taxpayer dollars.
The final component of the benefits formula is the years of service. To attain full benefits, vested
Regular, SMS, Elected, and Judges' class members must have 30 years of service, while Special
Risk and Special Risk Administrative Support members need 25 years (or reach their respective
minimum retirement ages). Additionally, Regular and Special Risk Administrative Support class
participants receive a .03% increase in their accrual rates for every year that they serve beyond
the minimum, although this increase in the acciUal value for each additional year is capped at
three years past the normal retirement date. Aside from reaching the minimum years of service
necessary to attain full pension benefits, vested members can also fully retire if they reach the
relatively low retirement age.
Low Minimum Retirement Age
The current system allows most individuals to retire normally at age 62 (or with 30 years of
service), and, in the case of certain "special risk" employees, as early as age 55 (or with 25 years
of service) with unreduced benefits. The "normal" retirement age, the age at which an individual
is able to receive social security benefits in the U.S., was originally set at 65; however, in 1983,
the normal retirement age was increased incrementally for persons born after 1938 through 1960
until it reaches 67. The original retirement age of 65 was set during a period when life
expectancies were lower, yet the state still currently allows its employees to retire at the age of
62 (or age 55) with full benefits. This also applies to the minimum years of service required to
obtain full retirement benefits. As of June 30, 2009 the average time of service worked by
beneficiaries in the FRS was approximately 21 years. As the average life expectancy increases,
the average work life should be adjusted accordingly.
17 Based on data provided by the Florida Division of Retirement
18 Section 121.021 (24), FI. Stat.
19 Pew Center for the States, "The Trillion Dollar Gap," The Pew Charitable Trusts - Non Profit Organization
Serving the Public, February 18, 20 10; available at
http:// down loads. pewcenteronthestates.org/The T ri 11 ion Do I] ar Gap fi na I.pd f.
10
Ungrounded Cost of Living Adjustments
Along with the components of the annual benefit formula, an additional cost-raising determinant
is factored into annual benefits received by annuitants. Each year the FRS adds a Cost of Living
Adjustment (COLA) to compensate for inflation. In 1980, the automatic increase in the annual
COLA provided to all beneficiaries in the FRS was limited to 3% of current benefits, but not
more than the annual increase in the Consumer Price Index (CPI). In 1987, the COLA was
established at 3%, regardless of the CPI.
Unlike Florida, most public pension plans tie post-retirement Increases In benefits to CPI. 20
Likewise, Federal Social Security is based on CPI-W-Urban Wage Earners and Clerical
Workers. For the period August 2008 - August 2009, the national CPI was -1.9 percent and the
CPI- W for Miami-Ft. Lauderdale was -2.5 percent. Additionally, the national inflation rate
during the previous 10 years was only 2.7%.21 Capping the automatic annual cost of living
adjustment (COLA) increase to the lesser of CPI or 3% would produce significant long-term
savings while bringing Florida in line with other state pension plans and public benefits. The
purpose of COLAs is to keep pace with inflation, not to exceed it.
Other Post-Employment Benefits
The largest post-employment benefit provided to all FRS members, aside from pensions, is the
Health Insurance Subsidy (HIS). FRS employers spent an additional $308 million on health
insurance subsidies for retirees in Fiscal Year 2009-10. Retirees receive $5 per month for each
year of service with a cap of $150 per month in total health benefits. State retirees are already
given the option to buy-in to the state's health insurance plan at a rate set by the state, a figure
that is significantly lower than these individuals would find in the private market. In FY 2009-
10, Florida aggregately charged $67 million less to FRS retirees in health premiums than the cost
of services provided to the state. Additionally, those retirees who are above the age of 65 also
receive Medicare payments. Tacking on HIS contributions to this already generous implicit
subsidy is superfluous and constitutes even greater costs for the state. Furthermore, most private
sector employers (approximately 85%) do not offer post-retirement health benefits beyond what
is statutorily mandated by COBRA, let alone similar subsidies.22
20 Based on the results of a Public Funds Survey of 102 public retirement systems that administer pension and other
benefits for 12.8 million active public employees and 5.9 million retirees and other annuitants, and that hold more
than $2.1 trillion in trust for these participants and represent more than 85% of the nation's total public retirement
system community. The survey is sponsored by the National Association of State Retirement Administrators and the
National Council on Teacher Retirement.
21 Data provided by the U.S. Department of Labor Bureau of Labor Statistics.
22 Department of Labor Bureau of Labor Statistics National Compensation Survey of health-related benefits,
conducted March 2010.
http://wV\.\v.b]s.gov/llcs/ebs/benefits/2010/ownership/private/table393.htm
11
The Deferred Retirement Option Pr02ram Increases the Cost of the FRS
Originally intended as an early retirement incentive to bring employment costs down, the
Deferred Retirement Option Program (DROP) actually costs millions of taxpayer dollars
annually to sustain. The program allows FRS members to officially "retire," but continue to work
as an active employee while accumulating pension benefits in an escrow account for up to an
additional five to eight years. DROP participants receive a brazen 6.5% guaranteed annual
interest rate return on their deferred pension payments in addition to the COLAs that all DB
annuitants are provided. Even if the FRS Trust Fund experiences a decline in investment
earnings, as it has during the recent recession, the FRS is statutorily obligated to pay this rate of
return. Furthermore, the FRS provides additional retirement contributions on behalf of DROP
participants during their enrollment in the program.
Together, these features make DROP an extremely expensive program. Figure 7 breaks down
the added cost of funding DROP by employee class.
Figure 7: DROP Costs FRS Employers More to Fund23
$385,263.60 $741,541.24 -$356,277.64
$1,145,062.36 $2,484,106.39 -$1,339,044.03
$299,974,931.85 $179,506,673.22 $120,468,258.63
$10,601,438.63 $12,698,484.54 -$2,097,045.91
$79,413.45 $123,809.00 -$44,395.56
$36,084,329.71 $53,344,397.73 -$17,260,068.02
$351,653,063.47 $254,459,189.60 $97,193,873.88
Retirement contributions made on a member's behalf once he or she enters DROP are reset at a
new standard rate regardless of previous employee classification. In 2010, the contribution rate
for DROP participants was set at 12.25% of an employee's salary.24 FRS employers paid $97
23 Calculations based on data provided by the Florida Division of Retirement and from the following DMS actuarial
memo dated 1/15/1 0: Study to Revise Florida Retirement System (FRS) Funding Valuation to Incorporate Deferred
Retirement Option Program (DROP) Participation in Each Membership Class in Developing the Contribution Rates
for the Various Classes of Membership
24 Benefits for DROP members are calculated using the same formula as for other members and use the assigned
accrual rate of their last class designation as an active member.
12
million in FY 2008-09 to fund DROP including the normal cost (as previously mentioned, the
cost necessary to pay future owed benefits) and the unfunded liability cost, the additional
contribution needed to cover any unfunded liability in the system. The state's portion of the
added cost was more than $10 million.
Additionally, many of these individuals return to the system as active employees after having
completed DROP. This entitles them to directly receive regular pension benefits, access to the
deferred benefits accrued while enrolled in DROP, and additional retirement contributions as
percentages of their salaries. The phenomenon of state retirees receiving pension benefit payouts
while actively working is called "double-dipping". These individuals also collect HIS payments
in conjunction to receiving regular employee health benefits. As of June, 2010, there were 9,669
double-dippers in Florida of which a notable portion were previously enrolled in DROP. The
practice of double-dipping makes the cost of maintaining DROP even higher. In 2007, the cost
double-dippers to the FRS was over $300 million.25
While retaining a talented and experienced workforce is important to ensure the transfer of
knowledge needed to perform fundamental functions of government, the cost of DROP is too
high for the state to afford.
Reforms in Other States
The recent economic downturn has exposed the vulnerability of state and local government
defined benefit plans across the U.S. According to the Center for State and Local Government
Excellence, the aggregate funded ratio of 126 sample state and local government retirement plans
fell from 84% to 78% between 2008 and 2009. The mounting strain on state budgets,
exacerbated by the recession, has prompted many states to enact cost-savings legislation of their
pension plans.
During the previous three years, a successive number of states have implemented reforms of
their retirement systems. The pension reforms instituted in other states highlight possible
avenues for reform in Florida's own retirement system. Prior to introducing cost-savings
recommendations for the FRS, this report presents some of the most relevant and timely reforms
in other states.
Figure 8 highlights states that have implemented any relevant cost savings measures during the
past three years. The counted cost-savings include: raising retirement age to 65 years or above,
increasing the vesting period to 10 years,26 requiring employees to contribute to their retirement
where they were previously not required/ increasing the employee contribution of existing
contributory systems, or adjusting factors in the benefit calculation formula to make benefits
more competitive (including capping or reducing COLAs). Additionally, some states have
25 http://wVvW . nap I eS11ews. co Inl news/2 00 81 mar/29/hu11 d red s-sc h 00 I-state - work ers -d ra w- pe 11S i on- top-sa II
26 Some states increased the minimum retirement age andlor vesting periods, but these new thresholds are still below
65 years and] 0 years, respectively; thus, such reforms were excluded in this analysis.
13
multiple retirement systems; as long as an applicable reform was implemented in at least one of
such a state's systems then it was included in the analysis.
Figure 8: Cost-savings Pension Reforms Implemented by States between 2008 and 201027
The darkest shade indicates states that implemented all four of the relevant reforms, while the lightest shade
indicates states that implemented at least one of the reforms. The two shades in between the latter two
indicate states that implemented three and two of the counted reforms, respectively. The color white indicates
that none of the applicable reforms was executed during the observed three-year period.
Altogether, six states increased the retirement age in at least one of their systems to 65 years and
at least eight increased the vesting period in one system to 10 years. At least 21 states made
previously non-contributory systems contributory or increased contributions in already
contributory systems, and another 20 states made some adjustments to benefits or the benefit
formula to make pensions more competitive with the private sector. 28
Highlight of Relevant Reforms in Other States
27 Assembled from annual pension legislation updates provided by the NCSL and state retirement system reports
28 In certain cases an increase in employee contributions was accompanied by a concurrent increase in employer
contributions or benefits.
14
Arkansas: In 2009, Arkansas capped the AFC used in the pension benefit formula in the state's
Teachers Retirement System at the largest of either 120% of the next highest earning year or an
additional $5,000.29
Colorado: In 2010, Colorado reduced the COLA used by the Public Employees' Retirement
Association (PERA) to the lesser of 2% or inflation. Inflation will be calculated using 2009 as a
base. As a result of this reform, the COLA in 2010 was zero percent. During the same year, the
employee contribution will also be increased by 2.5% of annual salary. 30
Georgia: In 2009, Georgia implemented a hybrid pension system by offering a defined
contribution plan for the first time. Under this plan, new employees (hired after January 1, 2009)
in the Georgia Employee Retirement System are automatically enrolled in defined benefit plans
that reduce retirement benefits by half, but they have the option to simultaneously enroll in a
defined contribution plan. For those individuals who choose to participate in the defined
contribution plan, the state provides a 100% match for the first 1 % that an employee puts into the
plan of his or her own salary. The state provides an additional 50% match for each additional
match that an employee decides to place into the defined contribution plan. The total state match
is 3% of salary, based on an employee contribution of 5%. Concurrently, this new pension plan
reduces the defined benefit accrual rate from I % to 2%. Additionally, Georgia eliminated post-
retirement benefit increases for new employees participating in the defined benefit plan. 31
Illinois: In 2010, Illinois raised the normal retirement age and vesting period for new state
employees in the Illinois State Retirement Systems (SRS) from age 60 with eight years of service
to age 67 with 10 years of service. The state also replaced automatic 3% COLA increases with
adjustments that are half of annual increases in the CPI with a cap of 3%. Further, the state
increased the AFC from the highest four of the last 10 years with the highest eight of the last ten
years.32
Iowa: Iowa has made several changes to the Iowa Public Employees' Retirement System
(IPERS) during previous years. In 2010, the state increased the normal retirement age for
individuals not vested by July 1, 2012 in the IPERS from 55 to 65 years. Concurrently, the state
doubled the early retirement penalty from three to 6% of annual benefits for each year prior to
reaching normal retirement eligibility. Additionally, the vesting period was increased from four
to seven years. In 2010, Iowa increased the number of years used to calculate the AFC from
three to five years for employees in the Iowa Public Employees' Retirement System (IPERS) for
29 Snell, Robert. "2009 Enacted Pension Legislation." Nationa/ Conference of State Legislatures, August 17,2009;
available at www.ncsl.org/default.aspx?tabid=17594.
30 Colorado Public Employees Retirement System. Senate Bill 10-00 I; available at
www.copera.org/peralabout/legislation/SBIO-OO l.stm
31 ERSGA - GSEPS Home - Employees' Retirement System o.fCeorgia,
www.ers.ga. gov!p lans/ers/ gseps! gsepsmain.aspx
32 Ibid.
15
all employees not vested as of July 1,2012. In 2007, the state placed a cap on the AFC, where its
calculated value could not exceed 121 % of the fourth highest earning year. A control year
outside of the five used to calculate the AFC will continue to be used to maintain a cap. 33
Kansas: All members of the Kansas Public Employees Retirement System hired after July I,
2009 will contribute 6% of their annual salaries towards retirement as opposed to the 4%
contribution made by employees who were hired prior to that date. 34
Kentucky: In 2008, Kentucky legislators reduced benefits and increased contributions in their
own and judges' retirement plans. The retirement contribution required by legislators increased
from 5% to 6% and the COLA cap was reduced from 5% to 1.5%. For personnel in the state's
category equivalent to the FRS's "Special Risk" class, the annual accrual rate was reduced from
a flat 2.5% to a rate that fluctuates from 1.3% to 2.5% depending on years of service. Similar
accrual rates reductions and contribution increases were made in retirement plans for teachers
and university professors.35
Louisiana: In 2010, legislation was passed increasing the contribution rates for new state police
officers by 1 %, new school employees by .5%, and judges and some "special risk" members by
1.5%. Additionally, the accrual rates and AFC for certain employees were increased by the new
legislation.36
Minnesota: In 1989, Minnesota increased its retirement age from 65 to 66 in its three retirement
systems, saving approximately $650 million during the subsequent 20 years. 37 In 2010,
Minnesota passed legislation that increased the vesting period for members of the Correctional
plan from three to 10 years, with 50% vesting after five years. The state also passed legislation in
2006 that increased employee and employer contribution in its three systems gradually over a
four year period (.25% to 1% annual employer increase, .25% to .70% annual employee
increase), with the final increase made on July 1, 2010. As a result of legislation in 2010, the
employee contribution rate in the State Patrol Plan will jump by 2% after July I, 2011.
Additionally, 2010 legislation reduced the accrual rate for Correctional Plan members from 2.4
to 2.2%.38
33 Ibid.
34 Kansas Public Employees Retirement System Membership Handbook;
available at htto://www.koers.org/membershioguidekpers.pdf
35 Snell, Robert. "2008 Enacted Pension Legislation." National Conference of State Legislatures, July 31, 2008;
available at http://www.ncsl.org/default.asox?tabid=13313
36 Snell, Robert. "2010 Pension and Retirement Enacted Legislation," National Conference of States Legislatures,
July 19,2010; available at www.ncsl.org/?tabid=20836.
37 Pew Center for the States, "The Trillion Dollar Gap," The Pew Charitable Trusts - Non Profit Organization
Serving the Public, February 18, 20 I 0; available at
htto://downloads.pewcenteronthestates.orglThe Trill ion Dollar Gap tlnal.pdf.
38 Ibid.
16
Missouri: In July 2010, Missouri's governor signed a pension reform bill that is expected to save
the state approximately $662 million during the next 10 years. The new law will impact all
employees who enter the Missouri Employees' Retirement System (MOSERS) on or after
January 1, 2011. Among the most significant provisions of the bill is a required 4% contribution
from employees; the plan for current employees is non-contributory. Additionally, the vesting
period for new employees is raised from five to ten years. Lastly, the law increases the normal
retirement eligibility for an individual to receive unreduced benefits to age 67 or to at least 55 if
the sum of the retiree's age and credited years of service equal 90. This is a significant increase
from the comparable requirements of CUlTent employees, as the normal retirement age for those
individuals hired after July 1, 2000 is 62 or at least 48 if the retiree's age and years of credited
years of service sum to 80.39
Michigan: In 2010, the state required members of Michigan Public School Employees'
Retirement System (MPSERS) to contribute 3% of their annual compensation towards retirement
and automatically enrolls public school employees' in hybrid DB/DC pension plan. These
changes are expected to save MPSERS employers $3.1 billion over a 10-year period (including
upfront costs of an early retirement incentive package).
Nevada: In 2009, Nevada legislators made some crucial adjustments to benefits provided to new
members of the state's Public Employees Retirement System as of January 1, 20 10. The accrual
rate, which is uniform for all classes, was reduced from 2.67% to 2.5%. Additionally, the
retirement age for employees who have vested 10 years increased from 60 to 62. 40
New Hampshire: As of June 30, 2009, the employee contribution rate for members of the New
Hampshire Retirement System was raised from 5% to 7%. In 2008, the state also placed a cap of
$120,000 on annual retirement benefits.
New Jersey: In 2010, the New Jersey Legislature passed reforms of its numerous retirement
systems, including reducing the accrual rate for new members of the Teachers' Pension and
Annuity Fund and Public Employees' Retirement System from 1.82% to 1.67%.
New Mexico: In 2009, the state increased the employee contribution rate by 1.5% of salary for
members of the Public Employees Retirement System and increased the normal retirement
eligibility to age 67 or 30 years of service.
Texas: In 2009, Texas instituted several cost-savings reforms of it numerous retirement systems.
Perhaps most significantly, the state instituted an employee contribution rate of .5% of salary for
law enforcement officers, a group that was previously not required to make their own
39 Hook, Brian R., "New state workers to start paying into pension system next year." Missouri IYatchdog. July] 9,
2010; available at http://missouri. watchdo2:.org/8 86/new-state-workers-to-staIt-pavin g-i nto-pension-system - next-
vear! .
40 Pew Center for the States, "The Trillion Dollar Gap - The Pew Charitable Trusts," The Pew Charitable Trusts _
Non Profit Organization Serving the Public. February 18,2010; available at
http://downloads.pewcenteronthestates.org/The Trillion Dollar Gap final.pdf.
17
contributions. For the Employee Retirement System, the employee contribution rate was
increased from 6.00% to 6.45% of salary. Finally, the state also increased its normal retirement
eligibility to age 65 with 10 years of vested service; up from age 60 with 5 years of vesting.
Utah: The state will close the defined benefit plan to Utah State Retirement System members
hired after July 1, 2011. Instead, new employees entering the SRS will choose whether to
participate in a defined contribution plan or a hybrid retirement plan. The hybrid plan will consist
of both defined benefit and defined contribution elements. Employers will contribute up to 10%
of a member's compensation into the defined benefit portion. The current defined benefit plan is
non-contributory with an employer contribution rate of 14.22% in 2010. The new hybrid plan
will require employees to contribute the remaining portion of the actuarially required amount.
Additionally, employers will contribute up to 10% (minus the % contribution made towards the
defined benefit portion) to each member's defined contribution plan. Participants of the hybrid
plan will be eligible for unreduced benefits upon either reaching the age of 65 with four years of
service or at any age upon reaching 35 years of service. Members will have full control of their
investments in the defined contribution plan after four years. Annual COLA increases for defined
benefit payments will be tied to CPI with a cap of2.5%.41
Vermont: In 2010, the employee contribution in the Teachers Retirement System was raised by
nearly 1.5% and by .5% for certain members of the Municipal Retirement System. Additionally
the minimum retirement age in the Teachers Retirement System was raised from 62 to 65 or
where the sum of age and years of service equals at least 90.
Virginia: In 2010, legislation was passed requiring state employees in the Virginia Retirement
System to contribute 5% of "creditable compensation" towards retirement. 42
Wyoming: Effective September 1, 2010, the employee contribution rate for all current and
future employees in the state retirement plan was increased from 5.57% to 7% of salary.
Conclusion
The escalating costs of the Florida Retirement System necessitate consideration of significant
reforms. Momentum for reform of public retirement systems is taking hold in an increasing
number of states and cities across the country, all of which serve as a blueprint for potential
initiatives and measures that could be implemented to improve and modernize Florida's
retirement system. Providing an overly generous public employee benefits funded by taxpayers
is a practice that Florida can no longer afford. Based on research and analysis of these state and
local initiatives and reforms, Florida Tax Watch offers twelve cost-savings recommendations
based on practices that have been successfully implemented to achieve cost savings in other
states and would well be suited to Florida.
41 Snell, Robert. "20 I 0 Pension and Retirement Enacted Legislation," National Conference of States Legislatures,
July 19, 2010; available at www.ncsl.org/'nabid=20836.
42 Ibid.
18
Pension Reform Recommendations
1. Eliminate or Reduce DB Plan and Concurrently Increase Utilization of DC Plan
A. Eliminate defined benefit (DB) plan and switch all FRS members to defined
contribution (DC) plan
Florida's defined contribution plan is currently an option for state and local government
employees in the FRS and removes the state's obligation from paying predetermined retirement
benefits. Switching all FRS members to a defined contribution plan and eliminating the defined
benefit plan would save the state significant funds as contributions would no longer be
determined by the necessary amount needed to cover future pension payments. Most private
companies now only offer defined contribution retirement option and two states, Alaska and
Michigan, have mandatory inclusion in DC plans for their public employees, although no state
has currently eliminated their DB plans.43
It should be acknowledged that two states, Nebraska and West Virginia, completely abandoned
their defined contribution plans because they produced lower returns than their defined benefit
plans; however, DC plans can also produce higher returns and thus higher benefits than DB
I 44
pans.
Studies have found that the median rates of return between DB and 401(k) plans in the U.S.
private sector from 1988 to 2004, DB plans aggregately earned only 1 % more on investment
during the observed period.45
Research has also found that DC plans increase administrative costs for employers, as more
control by plan holders entails the need for increased education and guidance on how to allocate
investments.46 Further, the problem and costs of keeping the FRS Trust Fund fully funded would
be completely eliminated from the termination of the FRS DB plan.
Using FY 2008-09 data, if all active members were switched to DC plans and state
contributions were standardized at 5% for all employees the FRS could have saved $1.8
43 Munnel, Alicia; Golub-Sass, Alex; Haverstick, Kelly; and Wiles, Gregory. "Why Have Some States Introduced
Defined Contribution Plans?" Center for Retirement Research at Boston College. January 3, 2008.
44 Madden, Ed and Vaughn, Linda. "FRS Defined Contribution Plan Costs Are Typically More Predictable; the
Fiscal Impact of Requiring New Employees to Enroll in the Plan Is Influenced by Many Factors." The Florida
Legislature's Office of Program Policy Analysis and Government Accountability. Report 10-29. March 2010.
A vailable at www.oppaga.state.fl.us/MonitorDocs/Reports/pdf/1 029rpLpdf.
45 Munnel, Alicia; Golub-Sass, Alex; Haverstick, Kelly; and Wiles, Gregory. "Why Have Some States Introduced
Defined Contribution Plans?" Center for Retirement Research at Boston College. January 3, 2008.
46 Madden, Ed and Vaughn, Linda. "FRS Defined Contribution Plan Costs Are Typically More Predictable; the
Fiscal Impact of Requiring New Employees to Enroll in the Plan Is Influenced by Many Factors." The Florida
Legislature's Office of Program Policy A nalysis and Government A ccountability. Report 10-29. March 2010.
A vailable at www.oppaga.state.fl.us/MonitorDocs/Reports/pdt! 1 029rpLpdf.
19
billion, of which the state's portion would have been $337 million (savings calculations do
not include costs associated with transferring all members to DC plans).
Recommendation: The legislature should close the DB plan for all active members of the FRS
and switch them to a DC plan.
B. Reduce defined benefit contribution and offer optional matchinf! defined
contribution supplement
Currently the risk associated with investment loss in the defined benefit plan is borne by the
state. Florida could implement a hybrid pension system where current contributions made by the
employer into the defined benefit plan are reduced by half. Employees are then required to make
contribution into a separate defined contribution plan (example: 401(k)). This reduction in the
employers' contribution should be accompanied by an appropriate reduction in annual defined
benefits; however the portion contributed by the employee into a separate plan can make up
some of the difference. Additionally the state could match employee contributions as was done
in the recently implemented "hybrid pension" model in Georgia. Using FY 2008-09 figures, a
25% percent reduction in FRS contributions towards retirement as a result of
implementing such a program could have saved the state $169.75 million.
Recommendation: The legislature should implement a "hybrid pension" plan for all active
members in which current defined benefits for active members are reduced by half; however,
the option to concurrently join a matching DC plan is offered.
2. Require FRS members to contribute to their retirement plans
Modifying the FRS pension fund to require newly hired employees contribute to their DB or DC
plans would dramatically reduce state and local government contribution requirements.
Most other state-sponsored defined benefit programs require an employee match, with the
average amount being 5% of the employee's average salary.47 Using FY 2008-09 contribution
figures, if employees were required to make an equivalent match on their respective
employers' retirement contributions, the system could have saved as much as $1.59 billion,
of which the state's savings would have been approximately $281 million.
For both plans, employee contributions would be reimbursed upon termination if the employee
does not meet the associated vesting requirements.
Recommendation: The legislature should require that all active FRS members contribute at
least of half of their employers current contributions to their respective retirement plans.
47 Based on the results of a Public Funds Survey of 102 public retirement systems that administer pension and other
benefits for 12.8 million active public employees and 5.9 million retirees and other annuitants, and that hold more
than $2.1 trillion in trust for these participants and represent more than 85% of the nation's total public retirement
system community. The survey is sponsored by the National Association of State Retirement Administrators and the
National Council on Teacher Retirement.
20
3. Consolidate emplovee retirement classes into two classes
As previously mentioned, "Regular" and "Special Risk Administrative Support" class members
have accrual rates of 1.6%, which are incrementally increased by .03% for each additional year
of service over the respective minimum retirement age or minimum years of service.48 The
accrual rate, however, cannot exceed 1.68%. "Senior Management Service" class members
receive a flat accrual rate of 2.00%. Judges currently have a higher accrual rate than other
members of the "Elected Officers'" class. The accrual rate for judges is 3.33%, while other
elected officials have accrual rates of 3.00%. Additionally, the accrual rate for "Special Risk"
class members is currently 3.00% and 2.00% for service prior to September 30, 1974,
A cost-savings recommendation made in OPPAGA's January 2010 report49, proposes a
consolidation of state employees into two categories. Employees who are currently members of
the regular, elected officers, and SMS classes would compose the first category. Employees who
are currently in the special risk class and certain members of special risk support services classes
would be in the second category. This recommendation would return to the employee class
structure that was present during the formation of the FRS. The accrual rates could be
standardized at 1.60% and 2.00% for class 1 and class 2, respectively.
OPPAGA estimates that implementing a similar measure could save the state and local
governments a combined $359 million, annually.
Recommendation: The legislature should consolidate employee classes into two classes based
on the model that was present during the creation of the FRS.
4. Limit Special Risk class membership within law enforcement, firefi2hters, and
corrections officers
In the Report and Final Recommendations of the Florida TaxWatch Government Cost Savings
Task Force to Save More Than $3 Billion, one of the key recommendations was to reevaluate
who is considered "special risk" for pension benefits. OPPAGA made its own cost-savings
recommendation in January 2010, to limit participation in the special risk class to only law
enforcement, firefighters, and corrections officers. According to the study released by
OPPAGA50, these three groups comprised the original membership of the special risk class
during the creation of the FRS in 1970. Current Florida statutes (151.051; Fla. St.) allow for
other individuals who may not be exposed to the same level of risk to be included in this
classification (e.g. crime lab technicians, public health nutrition consultants). According to both
48 Age 62 or 30 years of service for "Regular" class members; Age 55 or 25 years of service for "Special Risk
Admin. Support" class members
49 Madden, Ed and Vaughn, Linda. "Several Options Are Available for Modifying the Florida Retirement System's
Class Structure to Reduce System Costs. ." The Florida Legislature's Office of Program Policy Analysis and
Government Accountability. Report 10-15. January 2010. Available at
www.oppaga.statc.fl.us/MonitorDocs/RcpOJis/pdf/1029rpt . pd f.
50 Ibid.
21
Florida TaxWatch and OPPAGA research, a 10% reclassification of special risk class
members to regular class could save more than $40 million of which approximately $8
million would be realized by the state.
.
Recommendation: The legislature should amend 151.051; Fla. St. to redefine positions that
are considered "Special Risk. "
5. Increase vestine period for FRS Pension Plan from six to 10 years
As of June 30, 2008 there were 476,031 vested FRS members (nearly 70% of total employees
with FRS membership) entitled to benefits upon termination. 51 If the vesting period was
increased from six to 10 years, significant savings could be realized by the state of Florida. Many
other states, such as Georgia 52 and Alabama,53 have 10-year vesting periods, thus increasing this
period to 10 years would not be out of line with already existing policies in neighboring states.
In FY 2008-09, approximately 5,322 vested employees were terminated from state employment
alone. Of these terminated employees, approximately 1,315 employees would not have been
eligible to keep their FRS retirement benefits had the vesting period been at least 10 years.
Assuming these figures are applicable for FY 2010-11 and beyond, the state would save an
estimated $16 million annually from increasing the vesting period for members. The
Legislature should amend current statutes to increase the length of the vesting period for current
members of the FRS Pension Plan from six to 10 years.
Recommendation: The legislature should increase the vesting periodfrom six to 10 years.
6. Reform the methodolol!V used in calculatine averaee final compensation (AFC)
The AFC is a key component of the formula used to calculate average benefits owed and making
adjustments to how it is calculated could mean significant cost savings for the state. A 1 %
reduction in the average AFC at retirement of current beneficiaries would have reduced
the FRS's benefit obligation by nearly $50 million for FY 2008-09.54 The following options
can be used to reform how the average final compensation is calculated:
A. Use onlv base salarv earninf!s when calculatinf! the AFC
The AFC (average of the five highest earning fiscal years) used to determine the final benefit
currently includes overtime and up to 500 hours of accrued annual leave in the calculation.
51 Department of Management Services, Division of Retirement Services, "The Florida Retirement System Pension
Plan and Other State-Administered Systems Annual Report," Fiscal Year 2007-08.
52 "Explanation of Benefits", Employees Retirement System of Georgia, 2009;
www.ers.ga.gov/plans/ers/formspubs/ERS Handbook 06302009.pdf
53 Employee Retirement System, State of Alabama, 2008; www.rsa-al.gov/ERS/Active%20MemberslVesting.pdf
54 Calculated from data provided by the Florida Division of Retirement. The Florida Retirement System Pension
Plan and Other State-Administered Systems Annual Report July 1, 2008- June 30 2009, available at
www.ral.frs.state.fl.lIs/forms/2008-09 Annual Report.pdf.
22
Removing all non-base salary earnings [rom the final benefit calculation could result in
significant cost-savings for the state. A similar measure was undertaken in Iowa prior to the
onslaught of the Great Recession. Iowa, with a more than 80% funded retirement system,
removed bonuses and certain expense allowances from the final salary calculation.
B. Place a cap on the AFC so that the five hiJ!hest earninJ! vears do not exceed a
certain limit to avoid abuse of the svstem
The AFC is the average of the five highest earning fiscal years for each retired member of the
FRS and is a key component of the final benefit calculation. In Iowa, the average final salary is
computed from the three highest earning fiscal years, but this calculation is not allowed to be
greater than 121 % of the fourth highest earning fiscal year. Likewise, Legislation passed in
Arkansas limited the AFC from 120% of the next highest earning year. Placing a similar cap on
the AFC in for Florida retirees could represent significant savings in Florida.
C. Increase the number ofvears used to calculate AFC or use lifetime averaJ!e salarv
Increasing the number of years used in calculating the AFC or simply using the lifetime average
salary in calculating the final benefits is an additional measure that can save taxpayer dollars.
Most private pensions use lifetime average salaries when calculating payable pension benefits.
Recommendation: The legislature should make one or more of the following modifications to
the A verage Final Compensation formula: use only base salary in calculation, institute a cap
that the AFC cannot exceed, and/or increase the number of years used in the calculation or
use lifetime average salary.
7. Increase the normal retirement al!:e (and mIDlmum required years of service
accordinl!:ly) for "rel!:ular" and "special risk administrative support" employee classes
As previously presented, many states have raised retirement ages in recent years to achieve cost
savings. For example, Minnesota increased the public employee retirement age in ] 989 from 65
to 66 years, saving approximately $650 million during the subsequent 20 years. Significant
savings could be achieved for Florida by increasing the normal retirement age at accordingly for
each of the following employee classes:
A. ReJ!ular. Senior ManaJ!ement Services. Elected Officers Class Members
Currently, fully vested Regular, Senior Management Services and Elected Officers class
members can retire with unreduced benefits at the age of 62 or with 30 years of credited service.
The state could increase the normal retirement age for regular class members from 62 to 65; and
increase the minimum years of service required for receiving full retirement benefits from 30 to
33 years.
23
B. Special Risk. Special Risk Administrative Support Class members
Currently, fully vested Special Risk and Special Risk Administrative Support class members can
retire with unreduced benefits at the age of 55 or with 25 years of credited service. The state
could increase the normal retirement age for special risk administrative support class members
from 55 to 58; and increase the minimum years of service required for full retirement benefits
from 25 to 28 years.
Recommendation: The legislature should increase the retirement age (and required years of
service) by three years for all employee classes in the FRS.
8. Tie automatic COLA increase for public pension recipients to inflation with a 3%
ceilin!!
Modifying the pension benefit COLA formula to the methodology used prior to 1987, where
COLA increases were tied to inflation but were not allowed to exceed 3% would reduce the
amount of benefits paid to retirees by state and local governments by $135 million in FY
2011-12. A reduction in the present value of future benefits calculations would allow state and
local governments to reduce future contributions to the pension plan.
It may, however, not be possible to modify the COLA formula for current annuitants because of
contract laws, which would reduce the immediate savings estimation. Similarly, it might not be
possible to modify the formula for state employees whose retirement benefits have already
vested, which would have less effect on immediate savings. On the other hand, it is possible to
modify the formula for employees whose benefits have not yet vested, and certainly possible to
modify it for new employees not yet hired, which will have some effect on the actuarial
valuation ofthe immediate contribution and will provide savings for taxpayers.
Recommendation: The Legislature should seek an expert legal opinion on the possibility of
modifYing Chapter 121, Fl. Statutes, to limit automatic annual COLA formula to the lower of
3% or CPI, and should modifY the law according to the opinion.
9. Eliminate Health Insurance Subsidy (HIS) for FRS members
As mentioned, the FRS provides an annual contribution of 1.11 % of each active employee's
salary to cover HIS for future beneficiaries. In some cases HIS is provided to retirees who
reenter the system as full-time employees and thus receive health care coverage.
Since state retiree health insurance, Medicare and various private options are already available to
cover health costs for FRS beneficiaries, eliminating the HIS should be considered as a viable
option to create cost-savings in the system; at a minimum it should removed for those employees
who were formerly retired but have reentered the system and receive health insurance coverage.
Eliminating HIS would result in an additional $308 million saving for FRS employers, of
which the state's share would be nearly $50 million.
24
Recommendation: The legislature should eliminate the Health Insurance Subsidy provided to
retired FRS members; at a minimum for those employees who return to employment after
retirement.
10. Reform or eliminate the Deferred Retirement Option Pro2ram (DROP)
DROP is currently an expensive program to maintain for the state with no tangible evidence of
added value. Most states do not have such a program and some states have even eliminated their
DROP program. The Arizona Legislature eradicated a DROP program in 200655 after an impact
study revealed it significantly increases the contributions needed to maintain it, 56 although the
state does still maintain a DROP for its Public Safety Personnel Retirement System. The
following recommendations could be implemented to achieve cost savings in the administration
of DROP:
A. Reduce annual f!uaranteed rate of return for DROP participants from 6.5% to
3.0%
As previously mentioned, DROP participants are currently guaranteed an annual rate of return of
6.5% on contributions made by employers on their behalf. This guaranteed return is offered on
top of the COLA already received by DB beneficiaries, including DROP participants. Limiting
this guaranteed interest earning to 3.0% will provide significant cost savings and reduce the
liability faced by FRS employers. As a comparison, Oklahoma only provides a 2% guaranteed
rate of return to DROP participants in its state retirement system.
Recommendation: The legislature should reduce the annual guaranteed rate of return for
DROP participants from 6.5% to 3.0%
B. Require Governor's approval to rehire individuals who have completed DROP
Although only a limited portion of DROP participants and retirees do so, those individuals who
have completed the program currently have the ability to resume full or part-time employment
with any employer. This creates the problem of "double-dipping", a practice whereby rehired
employees receive both retirement contributions as a percentage of salary and owed retirement
benefits, simultaneously. Limiting the ability of retirees to return to an FRS employer as an
active member to only those individuals who provide a defined justification and approval from
the Governor and/or the respective employer would reduce this problem. In 2009, the state
legislature passed a bill that increased the waiting period from one to six months before retirees
can resume employment (including DROP) for an FRS employer. Although this is a step in the
right direction, ensuring that retirees return to the system only under the most permissible
55 56th Comprehensive Annual Financial Report of the Arizona State Retirement System
www.azasrs.gov/content/pdfifinancials/2009 C AFR. pdf
56 Pew Center for the States, "The Trillion Dollar Gap," The Pew Charitable Trusts - Non Profit Organization
Serving the Public, February 18, 20 I 0; available at
http://downloads.pewcenteronthestates.org/The Trillion Dollar Gap final.pdf.
25
circumstances is the most effective way to mitigate the costs of double-dipping, while ensuring
that irreplaceable knowledge is available to perform needed functions.
Recommendation: The legislature should prohibit the rehiring of individuals who have
completed DROP unless granted approval by the Governor.
C. Eliminate HIS for DROP participants and retirees who resume active emplovment
with an FRS emplover
Currently, retirees and former DROP participants who return to the FRS as active employees
receive both HIS payouts and active employee healthcare coverage. Eliminating redundant HIS
payouts for these individuals who are already covered by state health insurance through their
respective employers would save the state considerable funds. For every 1 % reduction in HIS
contributions the state could save $500,000.
Recommendation: The legislature should eliminate HIS for DROP participants and retirees
who resume active employment with an FRS employer.
D. Eliminate DROP
In FY 2008-09, state and local government employers contributed approximately $97 million to
fund DROP retirement plans, of which approximately $10 million was spent by the state. If the
program was completely eliminated and current DROP participants were provided contributions
at rates of their respective employee classes these extra costs would be removed. Eliminating
DROP would have saved the state $10 million in FY 2008-09.
Recommendation: The legislature should eliminate the DROP program.
26
Delray, other S. Fla. cities begin trinuning pension costs
Page 1 of2
The Palm B,each Post
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Delray, other S. Fla. cities begin trimming pension costs
By JENNIFER GOLLAN
Sun-Sentinel Staff Writer
Updated: 10:22 a.m. Friday, June 25, 2010
Posted: 8:37 a.m. Friday, June 25, 2010
Once they were considered a sacred perk for public sector employees.
But pensions have morphed into an albatross for many municipalities, compounded by shrinking tax revenues,
investment losses and longer life spans. Now cities such as Fort Lauderdale and Delray Beach are reining in costs for
future retirees, with others ready to follow suit.
"Pensions are the hardest to go after because of the bargaining with the unions, but we have to take them on," said
Hallandale Beach Interim City Manager Mark Antonio. "Taxpayers who are unemployed are not getting these pensions,
and they are questioning why police and others are getting guaranteed pensions."
Recent money-saving measures range from Sunrise raising the retirement age from 58 to 62 for new general employees
to Hollywood requiring greater pension contributions (9 percent, up from 7) from their general employees. Other cities,
including Pembroke Pines, Fort Lauderdale and possibly Hallandale Beach, are shifting new hires to 401 (k)-type plans,
which are subject to fluctuations in the market.
An informal survey shows that while retirement plans can vary widely, pensions account for roughly 10 percent or more
of municipal budgets. Benefits typically include health-care payments plus a guaranteed income, based on salary, age,
service and other factors. When investments fall short, the difference is borne by taxpayers.
Municipalities with the largest payrolls are beset with heavy pension shortfalls. They include Fort Lauderdale ($306.8
million shortfall), Hollywood ($353.3 million) and Pembroke Pines ($201.4 million) in Broward County and Delray Beach
($51 million) and West Palm Beach ($90 million) in Palm Beach County.
Retirement contributions for Fort Lauderdale firefighters and police, for example, will rise from 8 to 8.25 percent of their
base pay in October 2011. New hires already contribute 8.5 percent.
In Pembroke Pines, general employees hired after July 1 will shift to a 401 (k)-type plan, in which employees contribute a
percentage of their salary, a portion of which is usually matched by their employer. Pensions will remain intact for current
workers, although the city will contribute less each year. New officers and firefighters hired after May 1 won't receive
longevity pay, while current employees will have their longevity pay frozen at the current rate.
Union officials say switching to 401 (k)-type plans could prove disastrous. Employees will flock to other places with
pension benefits, said Scott McGuire, local president of the Police Benevolent Association, which represents the
approximately 125 officers and sergeants in Delray Beach.
Also, a wholesale switch to 401 (k)-type plans could diminish pensions for current employees, who often depend on
contributions from new hires to help fund their retirement benefits, he said. If these funds fall short, taxpayers could be
forced to cover the difference.
Over the past decade, many South Florida municipalities used extra cash from the housing boom to boost employee
pensions. They pumped up payouts, lowered the age to qualify or granted annual cost of living increases, a 2008 Sun-
Sentinel investigation found.
"Local governments, as they grew, the pay wasn't great so they gave great benefits. It was OK then, but now we can't
afford it anymore," said Pembroke Pines Mayor Frank Ortis. "We have to take a new direction otherwise cities will be
broke."
http://www.palmbeachpost.com/news/state/delray-other-s-fla-cities-begin-trimming-pension-768466.html?...1 /3/2011
Delray. other S. Fla. cities begin trimming pension costs Page 2 of2
Cities are legally prohibited from revoking contracted pension benefits for current employees without consent from the
unions. With the weak economy imperiling the overall health of pension funds, however, union leaders are more willing
to control costs.
"A lot of the cities are not funding the plans appropriately," said Scott Dayne, president of the Fort Lauderdale
Professional Firefighters union, which represents about 375 firefighters. "We don't want to lose our pensions altogether.
Because of the economy and the payroll, we realize something has to be done.'
Fort Lauderdale's tax base this year slipped more than 10 percent, blowing a $17.3 million hole in next year's budget.
Investment returns for the firefighters and officers' pension plan plummeted 22 percent in 2008, according to the city's
most recent actuarial report.
Not all local governments will be forced to prune pensions this year. Those whose benefits are administered by the
Florida Retirement System will not see any changes. The system covers more than 650,000 current state, school district
and municipal workers.
Some cities, such as Boca Raton, are still weighing their options.
Still, a growing number of cities that fund their own benefits will likely slice pensions to cope.
"Property values are down and investments are down. Pensions have to be analyzed and put into perspective," said
Joseph Safford, Delray Beach's finance director.
Pension costs will gobble about $10 million, or 10 percent of the city's budget beginning Oct. 1. To cope, the city hired an
actuary to identify some cuts, with a report due this summer. To the north, West Palm Beach commissioners on Monday
will consider doing the same.
"When you sign up to become a police officer, one of the things you look at is pension," McGuire said. "Late in the game,
to say we are going to cut something, I think it's unfair."
City officials say there's little choice.
"It is increasingly difficult for taxpayers to continue to fund government at the same level,' said Sunrise City Manager
Bruce Moeller. 'The unions understand that the costs are going up. They have an interest in making sure their pension
fund is viable for employees."
jgollan@sunsentinel.com
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Miami Passes $499 Million 2011 Budget With New Fees, Employee-Cost Cuts - Bloomberg
Page I of2
Bloomberg
Miami Passes $499 Million 2011 Budget With New Fees,
Employee-Cost Cuts
HI Sil1Jon~ Ilartbl'au - SCf1 28. 201(1
Miami commissioners passed a $499 million general-fund budget for fiscal 2011 after closing a $115 million
deficit with new fees and payroll and pension cuts.
The commission unanimously passed the plan today for the year beginning Oct. 1. The budget spends 3 percent
less than the current one and includes about $18.6 million of additional fees, such as fines anticipated from new
cameras monitoring traffic violations.
Miami, Florida's second-largest city after Jacksonville, imposed more than $75 million of wage, pension and
health-care cuts on police and firefighter unions on Aug. 31. The city, whose pensions will consume almost one-
fifth of its budget this year, declared a state of "financial urgency" in April that allowed it to rewrite contracts with
four unions without their agreement.
"We would have brought the services in the city of Miami in all different areas way below the typical levels" if the
city had not modified the contracts, Carlos MiggY_<1, city manager, told the commission after presenting his deficit
estimate.
The 2011 budget also includes a $10-4 million transfer from the city's redevelopment agency and saves $9.7
million in police, fire and other equipment costs. Operating cuts across departments will save $13 million more,
said Mirtha Dziedzic, budget director.
The police union has filed two lawsuits to stop the city from rewriting its contract and is planning a third within
two days, said Armando Aguilar, president of the Miami Fraternal Order of Police.
Union Lawsuits
The firefighters have two suits seeking to restore their contract, said Robert Suarez, the union's president. The
general and sanitation employees are also affected by the cuts.
"It's a very risky move to base your budget on," Suarez said in an interview. "We're asking them to reinstate and
reverse what they did."
The city doesn't have a plan to amend its budget if the courts force it to restore back pay, Migoya said during a
break in the commission meeting.
http://www.bloomberg.com/news/print/2010-09-28/miami-passes-499-million-budget-with-new-fees-3-red...1 /3/20 11
Miami Passes $499 Million 2011 Budget With New Fees, Employee-Cost Cuts - Bloomberg
"We believe we're in the right," he said.
Page 2 of2
Pension costs in fiscal 2011 will be reduced by about $43 million; salaries will fall $27 million, including more
than $1.5 million less for non-union employees, and contributions toward health care will drop $7 million,
according to the budget document provided by the city.
Miami will spend almost 75 percent of its current $514 million budget on employee costs, including about 18
percent on pension contributions, according its annual budget book.
Ratings Cut
Standard & Poor's and Moody's Investors Service cited pension costs when they cut Miami's general-obligation
bond ratings earlier this year. Moody's lowered Miami's rating one level on July 1 to A1, its fifth-highest rank.
S&P reduced the city's rating on June 16 by two levels to A-, its seventh- highest score.
The 2011 budget won't require further dipping into reserve funds, which will contain $16 million to $17 million
when the current fiscal year ends on Sept. 30, Dziedzic said. The city expects to tap about $23 million of reserves
in the current year, she said.
Miami's finances were approved four days after Miami-Dade County, Florida's largest municipal-bond issuer,
passed a $7.4 billion budget that plugged a $444 million deficit with job cuts, expense reductions and higher
property taxes to compensate for falling housing values.
The tax increase prompted Norman Braman, a local car- dealership owner, to announce a petition drive to recall
Miami- Dade Mayor Carlos Alvarez.
To contact the reporter on this story: Simone Baribeau in Miami at sbaribeau@bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(uJbloomberg.net.
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
http://www.bloomberg.com/news/print/2010-09-28/miami-passes-499-million-budget-with-new-fees-3-red...1 /3/20 11
Vallejo's Bankruptcy 'Failure' Scares Cities Into Cutting Costs - Bloomberg
Page 1 of 4
Blioomberg
Vallejo's Bankruptcy 'Failure' Scares Cities Into Cutting
Costs
!lI :\l1son Vckshin and Martin Z Flraun- Dl:c 1-1.,2010
When Valleio, California, filed for bankruptcy in 2008 after failing to win union pay cuts, Councilwoman
Stephanie Gomes said officials around the U.S. would have their eyes trained on the city of 120,000.
She was right. The lesson they've taken from the two-year- old case, which has cost Vallejo $9.5 million in legal
fees and made it a nationwide symbol for distressed municipal finances, is that out-of-court negotiations yield
better results.
"They spent a lot of money with very little outcome," said Jay Goldstone, San Diego's chief operating officer.
Faced with an $82 million deficit in his city's 2010 budget, Goldstone negotiated pay cuts and higher benefit
contributions from unions in 2009 that will save as much as $40 million annually, he said.
Bankruptcy has become less attractive even as U.S. municipal borrowers coped with what the National League Qf
Cities said was the biggest decline in general-fund revenue since 1986 last fiscal year. The mention of Vallejo, the
biggest California city and second-largest local government after Orange County to file for bankruptcy, can spook
investors and raise interest costs, said Bill Lockver, the state's treasurer.
"Declaring bankruptcy is a huge admission of failure on the part of elected officials and their local managers,"
Lockyer said in a Dec. 3 telephone interview. Vallejo's filing "sent a chill through the markets." Valleio, a one-time
Navy town 32 miles (51 kilometers) north of San Francisco, entered Chapter q bankruptcy protection in May
2008. The filing, after employee unions refused to accept salary cuts and the recession eroded tax revenue, allows
municipalities to reorganize debt rather than liquidate.
Exit Plan
A five-year budget blueprint approved by the City Council on Nov. 30 spells out how Vallejo will meet $195
million of unfunded pension obligations, its largest liability. It also delays payments to bondholders, trims
employee benefits, creates a rainy-day fund and allocates $5 million for unsecured creditors. The city must
submit a bankruptcy-exit plan that includes the blueprint to a Sacramento court by Jan. 18.
Vallejo shows that negotiated settlements of budget problems may be better than the distractions of court
deadlines and paying millions in legal fees, said Paul Rosenstiel, California's deputy treasurer from 2007 to 2009.
http://www.bloomberg.com/news/print/2010-12-14/vallejo-s-california-bankruptcy-failure-scares-cities-int...l /3/20 11
Vallejo's Bankruptcy 'Failure' Scares Cities Into Cutting Costs - Bloomberg Page 2 of 4
"A lot of cities looked at Vallejo and concluded that painful as it might be, there must be a better solution," said
Rosenstiel, a principal with municipal-bond underwriter De La Rosa & Co. in San Francisco.
Felt in Tracy
The Vallejo bankruptcy resonates in Tracy, a city of about 82,000 residents 60 miles east of San Francisco, said
Zane ,Johnston, the finance director.
In the face of a $7.5 million budget gap, the police union agreed this year to cancel remaining raises and boost the
retirement age to 55 from 50 for new hires even though its contract wasn't up for renewal, Johnston said in a Dec.
6 telephone interview.
"At the bargaining table," he said, "Vallejo is the example that everybody knows about that doesn't have to be
mentioned because it can scare the living daylights out of some people."
The ability of U.S. cities to file bankruptcy is limited. They must be authorized by state law to file under Chapter 9
ofthe U.S. bankruptcy code. Twenty-five states lack such statutes.
While cities from Detroit to Harrisburg, Pennsylvania, have publicly raised the prospect, the number of filings has
declined. Five municipal entities sought protection this year compared with 10 in 2009, according to data
compiled by James Spiotto, head of the bankruptcy practice at Chapman & Cutler, a Chicago law firm. The
biggest this year was a South Carolina toll road with more than $300 million in debt, he said.
Company Contrast
Since 1937, 619 local government bodies, mostly small utility or sewer districts, have filed for bankruptcy,
according to Spiotto. In contrast, there were more than 11,000 Chapter 11 filings, used by companies to
reorganize debt, in 2009 alone.
Local-government bankruptcies will "be minimal and isolated to mismanaged or weak credits," BlackRock Inc.,
the world's largest money manager, told clients on Dec. 7. States such as Pennsylvania and Rhode Island have
become increasingly active in helping prevent them, it said.
When Harrisburg, the state capital, was weighing a Chapter 9 filing because it couldn't make $282 million of
payments on bonds it guaranteed for a trash incinerator, Governor Ed Rendell stepped in. Warning that a default
by the city of 47,000 could raise borrowing costs elsewhere, Rendell advanced $3.3 million to Harrisburg for a
general-obligation debt payment on Sept. 13.
"We couldn't stand by and let the city default on these bonds," Rendell said at the time.
State Program
Pennsylvania is considering Harrisburg's application to the state's distressed municipalities program, under
which it would get help with a recovery plan that finds ways to raise revenue and streamline operations.
http://www.bloomberg.comJnews/print/2010-12-14/vallejo-s-california-bankruptcy-failure-scares-cities-int...1/3/20 11
Vallejo's Bankruptcy 'Failure' Scares Cities Into Cutting Costs - Bloomberg
Page 3 of 4
BlackRock cited new legislation in Rhode Island prohibiting Chapter 9 filings after the city of Central Falls
suggested that path. The town of about 18,000 faced a fiscal 2010 deficit of $3 million, or 17 percent of revenue.
States "will quickly put procedures in place geared toward preventing Chapter 9 filings," it said in its report.
State oversight boards were created for New York City in the mid-1970s and Philadelphia in 1991. They can bring
cities back to an "adult state," said Spiotto, by requiring balanced budgets, reviewing labor contracts and
negotiating debt restructurings.
"We've had all sorts of municipalities with problems that were addressed outside of bankruptcy," said Spiotto.
Bondholder Action
If states don't act, bondholders will. In September, Bank of New York Mellon Corp. got a judge to appoint a
receiver to manage the Jefferson County, Alabama, sewer system after a $3.2 billion debt refinancing collapsed
and drove the municipality toward insolvency. Local officials, who are negotiating with bondholders, say a
bankruptcy is still possible.
Vallejo made its filing as labor costs, its largest expense, were projected to be about $79-4 million in the 2008-
2009 fiscal year, outpacing estimated net general-fund revenue of about $77.9 million, according to court
documents.
"Vallejo's problem was that they could make no further cuts without breaking legal contracts," Michael Coleman,
a fiscal policy adviser at the League of California Cities, said in a telephone interview Dec. 6. "That's unique to
virtually any other city in California."
Vallejo had no other options, Marc Levinson, a partner with the Sacramento-based law firm Orrick, Herrington &
Sutcliffe LLP who is drafting Vallejo's bankruptcy-exit plan, said in a Dec. 3 telephone interview.
Lack of Concessions
"Negotiations broke down and we couldn't get the concessions from the unions and from the bondholders that
would keep us out of bankruptcy," Levinson said.
The city has reached agreements with administrative and police unions that yielded $6 million in savings through
June 2010, its website says. The firefighters union agreed to a new contract that was approved by the council in
March.
Vallejo still has to sort out more than 1,000 creditor claims as part of its exit plan. And funding of $5 million for
unsecured creditors won't be completed until the 2012-2013 fiscal year.
The bankruptcy process could take another six months, further distracting local officials, said Christopher Mier,
chief strategist with Loop Capital Markets LLC in Chicago.
http://www.bloomberg.com/news/print/20 1 0-12-14/vallejo-s-califomia-bankruptcy- failure-scares-cities-int... 1/3/2011
Vallejo's Bankruptcy 'Failure' Scares Cities Into Cutting Costs - Bloomberg
Page 4 of4
Meanwhile, city residents will have 159 fewer fire and police personnel than seven years ago, road maintenance at
10 percent of recommended levels and no grants for arts and cultural programs.
"Bankruptcy hasn't been a panacea for the city or the unions," said Ron Gliner, a partner at Duane Morris LLP in
San Francisco who represents Vallejo's police union. .
Gomes, the council member, said the city learned a lesson.
"It's best to negotiate your way out of the fiscal problem," she said, ''before you go into bankruptcy."
The case is In re City of Vallejo, 08-26813, U.S. Bankruptcy Court, Eastern District of California (Sacramento).
To contact the reporters on this story: Alison Vekshin in San Francisco at avekshin(a)bloomberg.net; Martin Z.
Braun in New York at mbraun6(a)bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(a)bloomberg.net.
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
http://www.bloomberg.comlnews/print/20 1 0-12-14/vallejo-s-california-bankruptcy- failure-scares-cities-int... 1/3/2011
'How Dare You Take My Pension' Heard as Cutbacks Loom (Correct) - Bloomberg
Page 1 of 5
Bloomberg
'How Dare You Take My Pension' Heard as Cutbacks Loom
(Correct)
lh Ben Elgin and Chad Terhune - Oct 20, 2010
If anyone fits the profile of a San Francisco Democrat, it's Jeff Adachi. In 2004, the elected public defender
volunteered to officiate at ceremonies for same- sex couples during the city's short-lived attempt to legalize gay
marrIage.
This year, though Adachi is running unopposed, he is drawing the scorn of fellow Democrats for embracing a new
controversy: He spearheaded a November ballot proposition that would force city workers to pay more of their
rising pension and health-care costs.
"How dare you!" Leland Yee, a Democratic state senator from San Francisco, thundered into the microphone as
about 100 workers rallied Oct. 5 against the measure in California's fourth-largest city. "How dare you take it off
the backs of city workers!"
As public-pension costs soar -- U.S. taxpayers face as much as $3 trillion in unfunded state retirement liabilities,
according to a study by the University of Rochester and Northwestern University -- they're igniting political fights
across the country. In California alone, voters in nine cities and counties will decide next month whether to curb
benefits for current or retired police officers, firefighters, librarians and janitors.
Beyond November, the question of government pensions threatens to become a defining policy issue of the
coming decade, Bloomberg Businessweek reports in its Oct. 18 issue.
Social Contract
As politicians seek to reduce state and local budgets, civil servants are trying to protect what they consider a
social contract with taxpayers whose retirement benefits are often far less generous. State and local governments
paid $3.04 per hour toward each employee's retirement as of 2007, according to U.S. Labor Department data.
Private employers paid 92 cents per hour.
More than 80 percent of the nation's 27 million state and local government workers and retirees are covered by
public pensions. The median state pension plan had enough money to pay just 76 percent of its obligations as of
Aug. 20, according to data compiled by Bloomberg.
http://www.bloomberg.com/news/print/201 0-1 0-14/-how-dare-you-take-my-pension-becomes-refrain-as-v... 1/3/2011
'How Dare You Take My Pension' Heard as Cutbacks Loom (Correct) - Bloomberg
Page 2 of5
Pension plans covering some public workers in six cities -- Philadelphia, Boston, Chicago, Cincinnati,
Jacksonville, Florida, and St. Paul, Minnesota -- will run out of pension money from existing assets by 2020,
according to the Rochester and Northwestern study published Oct. 12.
Four of the 77 funds in the study are sponsored by entities separate from the city, Rauh said. These four are the
Chicago teachers and transit authority retirement plans, the Chicago area water district's plan, and the St. Paul
school district's teachers retirement plan, according to Rauh.
"This is something that definitely wasn't on voters' minds a decade ago," said Patrick Murray, director of the
Monmouth University Polling Institute in West Long Branch, New Jersey. "But the bills that weren't paid a
decade ago are coming due."
Unions Slam 'Deadbeats'
Organized labor is battling back. The Service Employees International Union is dispatching members to town hall
meetings and handing out campaign literature that says seven out of 10 retired public employees receive less than
$30,000 a year in pension benefits. The American Federation of State, County and Municipal Employees is
lashing out at politicians as "deadbeats" for wanting to walk away from promised pensions.
"This is deferred compensation that is owed to workers," said Steven Kreisberg, director of collective bargaining
for the 1.6 million-member AFSCME, based in Washington. "Some ofthe politicians demagoguing on this issue
are losing sight of their moral and legal responsibility."
The unions' biggest ally could be the courts. Retirement benefits in most states are protected by constitutional
provisions or state common law, so it's difficult to reduce the size of the payouts to current or retired workers.
Pensioner Lawsuits
Pensioners filed lawsuits this year against Colorado, Minnesota and South Dakota when the three states passed
legislation to cut annual cost-of-living increases for retired workers, some of whom aren't covered by Social
Security. If unions win their argument that states must confine pension rollbacks to future hires, it will severely
limit any savings.
Unions expect more governments to pursue hybrid plans that incorporate a 401(k)-style account alongside the
traditional pension, said AFSCME's Kreisberg. Many public-sector employees can't strike and have their benefits
set through legislation rather than at the bargaining table, he said.
While unions once counted on Democrats for support, some prominent party nominees such as gubernatorial
candidates Jerry Brown in California and Andrew Cuomo in New York are vO'wing to get tough on pensions.
The fight has turned nasty in California, where Brown's opponent, Republican Meg Whitman, is proposing to
exempt public- safety workers from her proposal to convert state employees to 401(k)-style retirement plans.
http://www.bloomberg.com/news/print/2010-10-14/-how-dare-you-take-my-pension-becomes-refrain-as-v...l /3/20 11
'How Dare You Take My Pension' Heard as Cutbacks Loom (Correct) - Bloomberg
Page 3 of 5
That prompted a Brown associate, who suspected Whitman of cutting a backroom deal with a police union for an
endorsement, to call her a "whore" in a recording posted online Oct. 7 by the Los Angeles Times.
Police Endorsement
Darrel Ng, a spokesman for Whitman, said her pension- overhaul proposal had been announced five months
before she won the endorsement of the Los Angeles Police Protective League and that her plan would do more
than Brown's to curb costs. Brown apologized to Whitman in a televised debate Oct. 12.
Already this year, lawmakers in 16 states increased individual contributions for government employees or cut
benefits for new hires. Nine states raised the number of years that new hires must work to earn full retirement,
including Missouri and Illinois, which boosted to 67 the age at which they can draw maximum benefits.
California's new budget, signed by Governor Arnold Schwarzenegger on Oct. 8, requires current state workers to
pay more toward their retirement funds and rolls back pension benefits for new hires to pre-1999 levels.
YouTube Sensation
In Nev,T Jersey, where first-term Republican Governor Chris Christie has become a YouTube sensation with his
campaign to reduce benefits for teachers and other public employees, there is no statewide race this fall. Instead,
unions have thrown their money behind the campaign of Democratic State Assemblywoman Linda Greenstein.
She is trying next month to unseat Republican Senator Tom Goodwin, whom Christie is backing in the district
that includes suburbs of the state capital of Trenton and thousands of state workers.
"I think it's an indication of the importance of public employee unions in this election," said Brigid Harrison, a
political analyst from Montclair State University.
Representative Darrell Issa, the California Republican who will chair the House oversight committee if his party
regains control in November, is drafting a report about underfunded state and local pension plans. Issa is
concerned "that calls for a federal bailout to avert a fiscal disaster for state and local governments may be just
over the horizon if the situation is not addressed," said Kurt Bardella, a spokesman.
Federal Target
Issa's fellow congressional Republican, House Minority Whip Eric Cantor, has proposed reducing federal pension
payouts to reflect private-sector practices and eliminating early retirement benefits before age 62. Cantor touted
the ideas in July in an online contest dubbed YouCut, which House Republicans created to let people vote on
government spending they'd like to see eliminated.
Fueled by reports of annual retirement payouts exceeding $100,000, public sentiment is hostile to government
workers' benefits. Seventy-six percent of Californians polled in June said public pension spending was a big
problem or "somewhat of a problem," according to the Pew Center on the States and the Public Policy Institute of
California. In the same poll in Illinois, 83 percent answered that way. In New York, it was 79 percent.
http://www.bloomberg.com/news/print/201 0-1 0-14/-how-dare-you-take-my-pension-becomes-refrain-as-v... 1/3/2011
'How Dare You Take My Pension' Heard as Cutbacks Loom (Correct) - Bloomberg
'Pension Envy'
Page 4 of5
"Pension envy" among private-sector workers is justifiable in some cases, but it goes too far, said Alicia Munnell,
director of the Center for Retirement Research at Boston College. The average annual benefit for public retirees
was $22,780 in 2008, according to the center's study of the 126 largest public retirement plans.
"It's surprising our teachers, police officers and firefighters are public enemy NO.1," Munnell said.
San Francisco government employees such as Yuan Zhu, who makes $38,000 a year as a food-service worker at
Laguna Honda hospital, say the city is trying to balance its books on their families' backs. Under Adachi's ballot
measure, called Proposition B, Zhu's out-of-pocket cost for his family's medical coverage would increase by
$2,639 a year.
"We are not the ones making over $100,000 per year," said Zhu, 48. "That's a lot of money for us to pay."
The San Francisco Employees' Retirement System's assets covered 93 percent of its promised obligations ag of
June 2010, said Gary Amelio, its executive director. Economists Joshua Rauh of the Kellogg School of
Management at Northwestern and Robert Novy- Marx of the University of Rochester disagree.
Different Assumptions
Their study found that the system may have only enough funds to cover 59 percent of the promises it has made to
workers and retirees. The study based its conclusions on more conservative assumptions than the 7.75 percent
rate of asset returns the pension projects.
With taxpayers on the hook for unfunded costs -- projected to double to $752 million by 2015, according to the
city controller -- Adachi is proposing to require that workers pay more for benefits already promised.
Proposition B would require that existing public employees pay 9 percent to 10 percent of their salaries toward
their retirement benefits; the city currently makes the entire contribution for almost half its workers, according to
a June report from San Francisco's civil grand jury, which investigates government operations.
Progressive Dilemma
Adachi, 51, who is running unopposed in November, said his budget as public defender has been cut for five
consecutive years. His office turned down more than 1,000 cases last year because of insufficient funding, he said.
He worries that shuttered drug-treatment centers, canceled after-school programs and other cuts to social
services will feed crime in San Francisco.
"This is a progressive issue," said Adachi, whose ballot measure has won the support of former San Francisco
Mayor Willie Brown, a Democrat. "All of the progressive programs that we fought so hard for over the years are
getting crowded out by rising pension costs."
http://www.bloomberg.comlnews/print/201 0-1 0-14/-how-dare-you-take-my-pension-becomes-refrain-as-v... 1/3/2011
'How Dare You Take My Pension' Heard as Cutbacks Loom (Correct) - Bloomberg
Page 5 of 5
Almost a quarter of San Francisco's retired firefighters receive $100,000 or more, according to the civil grand
jury report. Firefighters routinely receive pay raises of 10 percent or more in their last year on the job, boosting
their benefits over the rest of their lives, said the report, titled "Pension Tsunami."
Thomas O'Connor, president of the San Francisco firefighters union, said his members have given back $21
million in pay raises to help the city balance its latest budget.
Ballot Reckoning
For voters -- and the officials they elect -- such issues will come to a head in next month's elections. In California,
Michael Moritz, a managing partner at venture firm Sequoia Capital in Menlo Park, said he's hoping that
Proposition B will show the country a solution. He and his wife, novelist Harriet Heyman, contributed $245,000
to the proposition campaign.
"If we could get this done in a city as liberal and progressive as San Francisco," he said, "perhaps it would send a
message and set an example for other cities and states across the country."
To contact the reporters on this story: Ben Elgin in San Francisco at belgin(ci)bloomberg.net Chad Terhune in
Atlanta at cterhune(ci)bloomberg.net
To contact the editor responsible for this story: Gary Putka at gputka(ci)bloomberg.net
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
http://www.bloomberg.com/news/print/2010-10-14/-how-dare-you-take-my-pension-becomes_refrain_as_v...l /3/20 11
Nevada Switch to 401 (k)-Style Pension Adds $1.2 Billion Cost, Study Says - Bloomberg
Page 1 of2
Bloomberg
Nevada Switch to 401(k)-Style Pension Adds $1.2 Billion Cost,
Study Says
HI Darrell Preston and Dunstan McNichol - Dee 16,20 I (J
Nevada's pension system would pay $1.2 billion more over the next two fiscal years than its current obligation to
retirees to convert its $24.7 billion plan to one based on employee contributions, a report says.
That's because switching to a so-called defined- contribution plan, such as the 401(k) offered by companies,
would speed up the need for state payments to cover existing benefits, according to a report yesterday to Nevada's
Public Employment Retirement System.
Governor-elect Brian Sandoval, 47, a Republican, has pushed for an employee-supported plan to cut costs for the
fund, which has $10.4 billion less than needed to pay benefits, documents for a state bond sale this month show.
Alaska, Michigan and the District of Columbia already require defined-contribution plans, said the Nevada report
by Segal Group Inc., a Chicago-based consultant.
"We know there are no short-term savings," Dana Bilyeu. executive officer of the Nevada system, said in an
interview from Carson City. "In fact, there is a short-term higher cost."
States and municipalities are trying to address retiree expenses as the gap widens between the $1.89 trillion of
assets they have to pay promised benefits and their estimated $3.15 trillion ofliabilities, Joshua D. Rauh, a
finance professor at Northwestern University's Kellogg School of Management in Evanston, Illinois, said in an
August study.
Last year, 25 U.S. states contributed less money to their retirement funds than actuaries calculated was needed,
up from 23 a year earlier, Loop Capital Markets said in an October report.
$71 Billion Short
New York state's pension is underfunded by $71 billion, according to the Empire Center for New York State
Policy, an Albany-based project of the Manhattan Institute, which opposes taxes and promotes outsourcing to
private companies.
Illinois is the worst-ranked state in data compiled by Bloomberg, with only half the assets needed to fund worker
pensions. It may have to borrow $3.7 billion to fund its fiscal 2011 contribution.
Defined-contribution plans can reduce potential liabilities and expenses for governments because workers choose
investments for their savings and withdraw payments based on results. Conversion can create additional costs,
http://www.bloomberg.comlnews/print/20 1 0-12-16/nevada-switch-to-40 1-k-style-pension-adds-1-2-billion... 1/3/2011
Nevada Switch to 401 (k)-Style Pension Adds $1.2 Billion Cost, Study Says - Bloomberg
Page 2 of2
however, because ohhe need to fund and administer two sets of benefits at once during the transition, the Segal
report said.
"Part of the message is, there is no silver bullet," said Keith Brainard, chief of research for the National
Association of State Retirement Administrators.
Investment Shift
Closing a defined-contribution plan to new members and their contributions would force it to shift investments to
income-generating fixed assets, which would lower returns and add to the state's cost of contributing, said Hank
Kim, executive director of the National Conference of Public Emplovees Retirement Systems in Washington.
"There's absolutely no dispute that a frozen plan is more expensive," said Kim, whose organization includes 500
public- pension-fund members. Segal is an associate member. "When most politicians look at the cost of it, they
end up dropping it," Kim said. Talk of switching may be "politically expedient," he said.
Nevada may have to postpone plans to convert because of the cost, said Carole Vilardo, president of the Nevada
Taxpavers Association. The state projects a $2.7 billion budget deficit, or about half of general-fund spending, in
the two-year fiscal period that begins July 1.
"At this point, we can't afford it," said Vilardo. "The concern is in not having enough money with the belt-
tightening. "
Benefits Paid
As of June 30, the Nevada pension was 70.5 percent funded, down from 72.5 percent in the fiscal year ended June
30, 2009, according to the bond documents. The fund paid $1.1 billion in benefits to 41,900 beneficiaries in
2009, according to an actuarial report.
Segal's study may be based on some flawed assumptions, said Northwestern's Rauh. One is that the state would
be required to payoff the unfunded liability at the pace called for in the report. The report also fails to account for
the benefit of stopping growth of the unfunded liability, Rauh said.
"I would not use this as a reason to take the option off the table," Rauh said in a telephone interview.
Governor-elect Sandoval, who hasn't reviewed the report, "looks forward to meeting with and hearing from" the
pension's staff, Mary-Sarah Kinner, his spokeswoman, said in an e-mail.
To contact the reporters on this story: Darrell Preston in Dallas at dpreston(cVbloomberg.net. Dunstan McNichol
in Trenton, New Jersey, at dmcnichol(cVbloomberg.net
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(iDbloomberg.net
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED,
http://www.bloomberg.com/news/print/2010-12-16/nevada-switch-to-401-k-style-pension-adds-1-2-billion...1 /3/20 11
Atlanta Pension Fund Rescue Will Assume Lower Return Rate, Adviser Says - Bloomberg
Page 1 of.2
Blioomberg
Atlanta Pension Fund Rescue Will Assume Lower Return
Rate, Adviser Says
lh Duane D, Stanf(m!- Dee 17,20]0
Atlanta, which runs the world's busiest airport, may lower the assumed rate of return on pension assets as it
confronts a $1.5 billion deficit in the funds.
An advisory board developing the city's options is basing them on an expected earnings rate of7.25 percent, down
from 8 percent, in calculating the size of contributions needed to pay retirees, said John Mellott, chairman of the
Atlanta Pension Panel, at a city hall meeting yesterday.
Atlanta, home of Hartsfield-Jackson International, joins public pensions from California to New York that cut
their assumed rate of return on assets or are weighing such a move. The recession left 50 top municipal pensions
$382 billion short of meeting promised benefits, according to a Northwestern University study in August.
"We need to step up and address this issue," said Mellott, former publisher of the Atlanta Journal-Constitution,
whose panel includes Richard Anderson, chief executive officer of Delta Air Lines Inc., and Jim Wells, CEO of
SunTrust Banks Inc. "Putting this off to another generation I don't think is a moral act."
Atlanta is the hub for Delta, the world's second-largest airline after United Continental Holdings Inc.
The city's police, fire and general pension funds, with combined assets of $1.9 billion, have promised $3-4 billion
in benefits. Reducing the expected return would widen the unfunded liability by about $250 million to almost
$1.8 billion, consultants including Deloitte LLP said in a report.
The 14-member board appointed by Mayor Kasim Reed helped Mellott, now an adviser for Bain & Co., raise $1.5
million in private funds to hire analysts to review the pension programs.
Largest Plan
The largest public pension plan in the U.S., the California Public Employees Retirement System, known as
Calpers, uses a 7.75 percent assumed rate of return on investments and has said it will consider lowering that
expectation early next year. Calpers has $218 billion in assets.
The California State Teachers Retirement System, the second-largest U.S. public pension, with $141 billion, cut
its expected earnings rate to 7.75 percent this month, increasing the need for greater contributions as it recovers
from market losses.
http://www.bloomberg.com/news/print/201 0-12-17 /atlanta-pension-fund-rescue-will-assume-Iower-return-... 1/3/2011
Bankrupt Vallejo's Top Two Finance Officials Will Clean Out Their Desks - Bloomberg
Page I of I
Bloomberg
Bankrupt Vallejo's Top Two Finance Officials Will Clean Out
Their Desks
B\ ;\liso!1 Vckshm - Dee IX, 2illO
Two municipal finance officials who helped steer Vallejo, California's two-year effort to emerge from bankruptcy
plan to leave their posts.
Robert Stout, 65, the finance director, said he will retire Dec. 30, though he'll stay on to help find his
replacement. The assistant finance director, Susan Mayer, will become chief financial officer in Stockton,
according to a statement from Bob Deis, the city manager there.
Vallejo, a one-time Navy town near San Francisco, became a national symbol for distressed municipal finances
when it entered Chapter 9 bankruptcy protection in 2008 after employee unions refused to accept salary cuts.
"I've been doing this for almost 40 years," Stout said in a phone interview yesterday. "We have a city manager and
a five-year plan in place and it seems like a good time to move on."
He and Mayer, 52, who's worked for Vallejo since 2005, will remain until a five-year financial plan to exit
bankruptcy is presented to a judge next month, Stout said. A Vallejo spokeswoman, .JoAnn West, didn't respond
to requests for comment.
Vallejo's post-bankruptcy blueprint, approved by the city council last month, spells out how it will deal with $195
million of unfunded pension obligations, its largest liability. It delays payments to bondholders, trims employee
benefits, creates a rainy-day fund and allocates $5 million for unsecured creditors. The bankruptcy-exit plan that
includes the blueprint must be submitted by Jan. 18.
Stockton, in the agricultural Central Valley, faces some of Vallejo's issues, Deis said in an interview.
"The main thing is having multi-year labor contracts that are not sustainable with the ongoing revenues of the
city," Deis said Dec. 6 by telephone. "What we have in common with Vallejo is the employment groups are not
buying into the financial situation of the city."
To contact the reporter on this story: Alison Vekshin in San Francisco at avekshin(i1Jbloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(cDbloomberg.net.
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED,
http://www.bloomberg.com/news/print/201 0-12-17 /vallejo-s-top-two-finance-officials-to-depart-bankrupt-... 1/3/2011
Westchester Favors Bonds Over IOUs for New York Pension Payment - Bloomberg
Page 1 of 3
Bloomberg
Westchester Favors Bonds Over IOUs for New York Pension
Payment
III Michael QUlllt - Dcc 22, 2() I ()
Westchester County, the New York suburb where household income is 53 percent above the U.S. average, wants
to use its top credit rating to sell taxable bonds to finance pension contributions and avoid increasing the highest
taxes in the country.
The community of 955,962 residents on New York City's northern border is home to International Business
Machines Corp. and soft-drink maker PepsiCo Inc. It faces a $54 million payment to the state retirement plan in
2011, $78 million in 2012 and $163 million in 2015, said County Executive Robert Astorino, who's working to
close a $166 million budget gap next year.
The county, the only one in New York with the highest credit grade from the three largest rating companies, can
borrow from bond investors at 2.5 percent compared with paying 5 percent under a state program that allows
government employers to make pension contributions with rous, he said.
"Pension costs are rising so fast that taxpayers have absolutely no way to keep up with them," Astorino, a
Republican, said at a Dec. 7 conference in Albany sponsored by the Empire Center for New York. "It's the
ultimate insult to taxpayers to burden them with the double whammy of unsustainable pension costs financed at
unconscionable interest rates."
U.S. states and municipalities have only $1.89 trillion of pension assets, not counting future contributions, to
meet promised benefits with a present value of $3.15 trillion, according to an August study by Joshua D. Rauh,
who teaches finance at Northwestern University in Evanston, Illinois.
Turning to Borrowing
Some governments have turned to borrowing, betting that investment returns will exceed the cost of debt.
Illinois, v\'ith the worst-funded retirement system of U.S. states, according to data compiled by Bloomberg, may
sell $3.7 billion of bonds to pay this year's pension contribution under a proposal by Governor Pat Quinn.
Westchester's Astorino promised in his 2009 election campaign to reduce taxes. The county's property levies,
most of which go to schools, average $9,044 per home, the highest in the U.S., according to the Tax Foundation.
http://www.bloomberg.com/news/print/20 1 0-12- 22/westchester-county - favors-bonds-over- ious- to-make-n... 1/3/2011
WesTchester Favors Bonds Over lOUs for New York Pension Payment - Bloomberg
Page 2 of3
He's also proposed cutting workers to save costs. The projected 5,000-person payroll next year includes 1,678
public- safety personnel such as police, prison guards and probation officers, and 1,215 staff for services such as
child support, food and housing.
Astorino wants lawmakers in Albany, the state capital, to allow Westchester to sell bonds for part of its payment
to the state retirement system, which covers 1.06 million current and former public workers, including
Westchester's. That would be cheaper than using a state plan that allows New York and local governments that
participate in the system to make contributions partly in lO-year IOUs, he said.
Part in Cash
The IOU program, which begins in February, requires that state and municipalities use cash for pension
contributions of as much as 9.5 percent of their payrolls. They could pay the rest with IOUs that cost 5 percent
annually and must be repaid over 10 years. The cash contribution requirement would rise by 1 percentage point
annually.
By 2014, New York state and the 3,000 local governments in the pension system, including Westchester, will owe
24 percent of payroll for most employees and 31 percent for police and firefighters, up from 12 percent and 18
percent this year, according to state budget documents.
The IOU plan was created after the state pension lost 26 percent on its investments in fiscal 2009 and it increased
contributions to rebuild assets, now at $132.8 billion. Using the IOU option would allow the state to delay $242
million of payments this year, a sum that would rise to $1 billion in the year ended March 2014, according to
budget documents.
Issue of Funding
New York state's pension is underfunded by $71 billion, according to the Empire Center, an Albany-based project
of the Manhattan Institute, which opposes taxes and promotes outsourcing to private companies. Comptroller
Thomas DiNapoli, the pension's sole trustee, says the plan is fully funded. That's because assets "include the
current value of all future contributions employers and employees will make," its annual report savs.
For Westchester, selling taxable five-year bonds rather than paying 5 percent for IOUs would save $26 million by
2018, according to Astorino. The county sold five-year federally taxable bonds in 2003 to pay early-retirement
incentives, said Edwin McCormack, Astorino's communications director.
"If we borrow ourselves, we would have more flexibility to refinance or payoff bonds," McCormack said in an e-
mail.
2003 Bonds
http://www.bloomberg.com/news/print/2010-12-22/westchester-county-favors-bonds-over-ious-to-make-n...1 /3/20 11
Westchester Favors Bonds Over IODs for New York Pension Payment - Bloomberg
Page 3 or3
The bonds issued by the county in the week of Dec. 8, 2003, sold at a yield of 2.89 percent, or 0-48 percentage
point more than the average yield for three-year Treasury notes that week, according to data compiled by
Bloomberg.
Westchester's general-obligation bonds are rated Aaa by Moody's and AAA by Standard & Poor's and Fitch
Ratings, the highest grade at all three. That's partly because of the county's affluence: Median household income
of $77,057 last year was the third-highest in the state, according to Census Bureau data.
Any borrowing for pension costs, no matter how low the rate, eventually increases the county's cost and doesn't
solve the problem of rising retiree expenses, Astorino said.
Health-care costs of retired workers, for which the county paid $116 million last year, are part of the problem, he
said. Health-care plus pension contributions amount to 59 percent of next year's average worker cost of
$120,000, he said.
To close a $166 million gap in its $1.79 billion budget next year, Astorino proposed cutting spending $33 million
and firing 226 employees, including 53 at four mental-health clinics to be closed.
"Cutting workers will not be the solution to the problem ultimately because you can only cut so much," Astorino
said.
The Westchester executive suggested the state adopt pensions like the 401(k) retirement plans used at companies,
where employer contributions are fixed and don't fluctuate with investment results.
"Over the long term," he said, "the state needs to revamp the entire system."
To contact the reporter on this story: Michael Ouint in Albany, New York, at mquint(cilbloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(albloomberg.net
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
http://www.bloomberg.com/news/print/2010-12-22/westchester-county-favors-bonds-over-ious-to-make-n...1 /3/20 11
Chicago's Daley Says Pension-Overhaul Law Will Bring Record Tax Increase - Bloomberg
Page I of2
Bloomberg
Chicago's Daley Says Pension-Overhaul Law Will Bring
Record Tax Increase
III Tim .IlHlC' - Lk, 31.. 2UIU
Chicago Mayor Richard M. Daley accused his fellow Democrat, Illinois Governor Pat Quinn, of imposing "the
largest property-tax increase in the history" of the city by signing a pension-overhaul bill into law.
Quinn's action places "a tremendous burden on Chicago taxpayers" to bolster the pension funds of public-safety
employees, Daley said yesterday in a statement.
"The governor took away the opportunity to fix the legislation before he signed it," Daley said. "The direct result
of the governor's actions will be a massive property-tax hike for Chicago residents of at least $550 million, or
about a 60 percent increase in our current property-tax levy."
Under the law Quinn signed yesterday, the city's combined annual contribution for police and firefighter pensions
will rise from a projected $309 million in 2015 to about $856 million over the next 25 years, according to the city.
The law, which applies to all public-safety workers in Illinois, is meant to protect their retirement benefits by
requiring municipalities to boost funding of the plans that cover them, Quinn said.
The legislation requires Chicago to fund its public-safety pensions at 90 percent of projected obligations within
25 years. That is "a higher ratio and shorter timeframe than every other municipality in the state and the state's
own employee pension system," according to the statement from Daley's office.
The mayor of the third most-populous U.S. city said he'll push for changes, including increased payments by
employees. He said worker contributions haven't risen in more than 34 years.
Any changes to the law would have to pass in the General Assembly's new legislative session, which begins Jan.
12, said Ashley Cross, a spokeswoman for Quinn, and John Patterson, a spokesman for Senate President John
Cullerton.
"If there is new legislation proposed, we'll take a look at it," Cross said in an interview yesterday.
The law sets a maximum pension payment to a worker at 75 percent of the individual's average salary, and caps
annual cost-of-living raises at 3 percent or half of the "urban consumer price index," whichever is less.
To contact the reporter on this story: Tim Jones in Chicago at tiones"i8(a1bloomberg.net.
http://www.bloomberg.com/news/print/20 1 0-12-311illinois-governor-quinn-signs-pension-bill-that-chicago... 1/3/2011
Pittsburgh Council Finishes Pension Fix to Avoid State Takeover - Bloomberg
Page 1 of2
Bloomberg
Pittsburgh Council Finishes Pension Fix to Avoid State
Takeover
HI DUlbtan ,\kNichol - Dee :< I 20 I ()
Pittsburgh's City Council directed $736 million in parking-tax revenue to its underfunded pension system, eight
hours before the deadline to avoid a state takeover and higher pension payments.
Council members voted 9-0 to override Mayor Luke Ravenstahl's veto ofthe plan to dedicate as much as $27
million a year of its 37.5 percent parking-lot tax through 2041 to the retirement funds. The pensions had about
$325 million in assets to cover $1 billion in promised benefits before the council action, according to a
consultant's report.
It was Ravenstahl's second veto in as many days of a plan he says will undermine budgets and likely fail to
prevent a takeover. Under Pennsylvania's control, the city's annual pension payments would rise from $46
million now to $127 million in 2017, a state analysis shows.
"A state takeover would take us into raising taxes and really devastating this city," Council President Darlene
Harris said when she introduced the bill yesterday. "I believe in my heart I am doing what is right for this city to
move forward."
The state requires the plan to have assets to cover at least half its obligations before Jan. 1, or the Pennsylvania
Municipal Retirement System will take control.
With the prospect that pension cost$ may exceed 25 percent of the city's $450 million annual budget by 2017,
Pittsburgh joins cities such as Chicago and states such as Illinois and New .Jersey that have considered cutting
services or raising taxes to meet the ballooning retirement bill. Those states and 18 others skipped payments or
underfunded pensions from 2007 to 2009, according to an October report from Loop Capital Markets.
Was it Enough?
Whether Pittsburgh's strategy is enough to avoid a takeover won't be known until the second half of 2011, after
actuaries have determined the fund's asset level as of today, said James McAneny, executive director of the state
Public Employee Retirement Commission.
The city today received approval for the budget changes from Pittsburgh's Intergovernmental Cooperation
Authoritv, a state agency set up to monitor the city's finances in 2004.
http://www.bloomberg.com/news/print/2010-12-30/pittsburgh-council-sets-new-year-s-eve-meeting-for-pe...1 /3/20 11
Pittsburgh Council Finishes Pension Fix to A void State Takeover - Bloomberg
Page 2 of2
Officials in Pennsylvania's second-largest city have been trying to devise a plan to shore up its pension for two
years.
The parking tax is projected to raise $47 million in next year, according to Ravenstahl's budget.
Pittsburgh's pension system includes three retirement plans for about 7,000 active and retired firefighters and
government workers. The accounts have only enough funds to pay benefits for three to four years, Ravenstahl
said.
Moody's Investors Service changed its outlook for the city's Al rated general-obligation bonds to negative on Nov.
23, citing a potential rise in pension costs under state control.
To contact the reporter on this story: Dunstan McNichol in Trenton, New Jersey, at dmcnichol(a)bloomberg.net.
To contact the editor responsible for this story: Mark Tannenbaum at mtannen(a)bloomberg.net.
@2010 BLOOMBERG L.P. ALL RIGHTS RESERVED.
http://www.bloomberg.comlnews/print/2010-12-30/pittsburgh-council-sets-new-year-s-eve-meeting-for-pe...1/3/20 11
CITY OF BOYNTON BEACH
PLANNING & DEVELOPMENT BOARD
MEETING AGENDA
DATE:
Tuesday, January 25, 2011
TIME: 6:30 P.M.
PLACE:
Commission Chambers, 100 E. Boynton Beach Boulevard, Boynton Beach, Florida
NOTICE
ANY PERSON WHO DECIDES TO APPEAL ANY DECISION OF THE PLANNING AND DEVELOPMENT BOARD WITH RESPECT TO ANY MATTER
CONSIDERED AT THIS MEETING WILL NEED A RECORD OF THE PROCEEDINGS AND FOR SUCH PURPOSE MAY NEED TO ENSURE THAT A
VERBATIM RECORD OF THE PROCEEDING IS MADE, WHICH RECORD INCLUDES THE TESTIMONY AND EVIDENCE UPON WHICH THE APPEAL IS
TO BE BASED. (F.S. 286.0105) THE CITY SHALL FURNISH APPROPRIATE AUXILIARY AIDS AND SERVICES WHERE NECESSARY TO AFFORD AN
INDIVIDUAL WITH A DISABILITY AN EQUAL OPPORTUNITY TO PARTICIPATE IN AND ENJOY THE BENEFITS OF ASERVICE, PROGRAM, OR ACTIVITY
CONDUCTED BY THE CITY. PLEASE CONTACT THE CITY CLERK'S OFFICE, (561) 742-6060 AT LEAST TWENTY (24) HOURS PRIOR TO THE
PROGRAM OR ACTIVITY IN ORDER FOR THE CITY TO REASONABLY ACCOMMODATE YOUR REQUEST.
1 . Pledge of Allegiance
2. Introduction of the Board
3. Agenda Approval
4. Approval of Minutes from December 28, 2010 meeting
5. Communications and Announcements: Report from Planning and Zoning Director
6. Old Business: None
7. New Business:
A.1 .Alley Abandonment Between Ocean Ave. and SW 1st Ave. CABAN 11-002) -
Approve abandonment of 18.2-foot wide alley (ABAN 11-002) located between Ocean
Avenue and SW 1st Avenue, extending to Seacrest Boulevard from SW 2nd Street.
Applicant: City initiated.
B.1 Ocean Avenue Zonina Overlay CCDRV 11-001) - Approve the creation of a zoning
overlay (CDRV 11-001) for the general vicinity of Ocean Avenue, between the FEe
Railroad and Seacrest Boulevard, modifying the Land Development Regulations by
establishing revised development standards and uses consistent with, and
implementing the vision contained within the Downtown Master Plan. Applicant: City
initiated.
8. Other
9. Comments by members
10. Adjournment
C:\Documents and Settings\kahns\Local Settings\Temporary Internet Files\OLK17\01-25-11.doc
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
1. INTRODUCTION
This past spring, the City Commission established a Financial Advisory Committee to serve in an advisory capacity to
the Commission and the Commission's oversight of expenditures that require budgetary appropriation. The Committee
consists of seven regular and two alternate members named by the Commission from community residents and business
owners.
The Financial Advisory Committee created this survey to solicit community input, which will assist them in developing
their recommendations to the City Commission.
In order to complete this survey, cookies must be enabled in your browser.
2. PRIVACY POLICY
In the State of Florida, laws exist to ensure that government is open and that the public has a right to access appropriate
records and information possessed by City government. The City of Boynton Beach does not sell, rent or otherwise
distribute visitor's information, including electronic mail addresses, to any outside company or organization, unless
legally required to do so. This applies to information that may be collected on the City's site and on that of any third party
with whom the City contracts to provide Internet related services.
Occasionally, the City may have a survey on this website that only allows visitors to vote once. In order to keep track of
visitors who have voted, a cookie (a simple text file) will be created and stored on the visitor's computer. This cookie is
created by voting on the survey. It will not contain personally identifying information and will not compromise the visitor's
privacy or security. The only information that is contained in the cookie is the name of the survey and how the visitor
voted. The cookie will remain on the visitor's computer for the duration of the survey. The cookie has an expiration date
and will be deleted from the visitor's computer when that date occurs.
* 1. I agree to the terms of the Privacy Policy.
o Yes
o No
3. Privacy Policy
You must agree to the terms of the Privacy Policy to continue with this survey.
* 1. I agree to the terms ofthe Privacy Policy.
o Yes
ONO
4. Resident/Business Owner
This survey is open only to persons whose principal residence is within the corporate limits of the City of Boynton Beach;
or who own a business that is located within the corporate limits of the City of Boynton Beach; or who both reside and
own a business within the corporate limits of the City of Boynton Beach.
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
* 1. I reside and/or own a business within the corporate limits of the City of Boynton
Beach.
o Yes
o No
5. Thank You
Thank you for your time. Unfortunately, you do not meet our criteria to take the survey at this time. Please exit the
browser and have a nice day.
6. Thank You
Thank you for your time. Unfortunately, you do not meet our criteria to take the survey at this time. Please exit the
browser and have a nice day.
7. General Information
You do meet our survey respondent criteria: Your principal residence is within the corporate limits of the City of Boynton
Beach; or you own a business that is located within the corporate limits of the City of Boynton Beach; or you both reside
and own a business within the corporate limits of the City of Boynton Beach. We will begin by collecting some general
information about you.
* 1. Is your principal residence within the corporate limits of the City of Boynton Beach; or
do you own a business within the corporate limits of the City of Boynton Beach; or do
you both reside and own a business within the corporate limits of the City of Boynton
Beach? If you are both a resident and a business owner, check both boxes.
D Resident
D Business owner
2. Please select your ZIP Code.
o 33426
o 33435
o 33436
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
1. How many years have you been a resident of Boynton Beach?
o Less than 5 years
o 5to 10 years
o 11to 15 years
o 16to 20 years
o More than 20 years
* 2. What is your age?
o 18-24
o 25-44
045-64
o 65+
* 3. What is your annual family income?
o Less than $30,000
o $30.000-$49,999
o $50,000-$74,999
o $75,000-99,999
o $100,000+
o Rather not say
* 4. Do you own or rent your home?
o Own
o Rent
5. The following information is optional.
Name: I I
Company: I I
Address: I I
Address 2: I I
Cityrrown I I
State I j
ZIP: I I
Email Address: I
Phone Number: I
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
6. How important were the following factors in influencing you to move to Boynton
Beach?
Extremely important Very important Important Moderately important Unimportant
City amenities 0 0 0 0 0
City services 0 0 0 0 0
Cultural factors 0 0 0 0 0
Employment 0 0 0 0 0
Housing choices 0 0 0 0 0
Location 0 0 0 0 0
Public safety 0 0 0 0 0
Schools 0 0 0 0 0
7. I have lived in Boynton Beach all my life.
o Yes
ONO
8. Thinking back to the previous question about how important the following factors
were in influencing you to move to Boynton Beach, how important are these same
factors in influencing you to remain Boynton Beach?
Extremely important Very important Important Moderately important Unimportant
City amenities 0 0 0 0 0
City services 0 0 0 0 0
Cultural factors 0 0 0 0 0
Employment 0 0 0 0 0
Housing choices 0 0 0 0 0
Location 0 0 0 0 0
Public safety 0 0 0 0 0
Schools 0 0 0 0 0
9. Do you own or operate a business within the corporate city limits of the City of
Boynton Beach?
o Yes
ONO
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
1. How many years has your business been in operation?
o Less than 5 years
o 5 to 10 years
o 11 to 15 years
o 16 to 20 years
o More than 20 years
2. How important were the following factors in influencing you to open or move your
business to Boynton Beach?
Extremely important Very important Important Moderately important Unimportant
Arts/culture 0 0 0 0 0
Competition 0 0 0 0 0
Cost of running a business 0 0 0 0 0
Customer volume 0 0 0 0 0
Demand for product/service 0 0 0 0 0
Education 0 0 0 0 0
Expedited permitting 0 0 0 0 0
International access 0 0 0 0 0
Lifestyle 0 0 0 0 0
Location 0 0 0 0 0
Quality of life 0 0 0 0 0
Transportation 0 0 0 0 0
Workforce 0 0 0 0 0
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
3. Thinking back to the previous question about how important the following factors
were in influencing you to open or move your business to Boynton Beach, how
important are these same factors in influencing you to keep your business in Boynton
Beach?
Extremely important Very important Important Moderately important Unimportant
Arts/culture 0 0 0 0 0
Competition 0 0 0 0 0
Cost of running a business 0 0 0 0 0
Customer volume 0 0 0 0 0
Demand for product/service 0 0 0 0 0
Education 0 0 0 0 0
Expedited permitting 0 0 0 0 0
International access 0 0 0 0 0
Lifestyle 0 0 0 0 0
Location 0 0 0 0 0
Quality of life 0 0 0 0 0
Transportation 0 0 0 0 0
Workforce 0 0 0 0 0
The following questions pertain to the property tax rate, which is currently set at 6.7626 mills, and other non-ad valorem
assessments.
1. To maintain the property tax rate at 6.7626 mills, are you in favor of cutting services
for Public Safety (i.e., Police, Fire, Communications)?
o Yes
ONO
2. To maintain the property tax rate at 6.7626, are you in favor of cutting Cultural and/or
Recreation services (Le., library, Recreation programs)?
o Yes
o No
3. To maintain the property tax at 6.7626 mills, are you in favor of employee layoffs
and/or employee furloughs?
o Yes
ONO
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
4. Since it was implemented in June 2009, the Compressed Work Week for employees
(Monday-Thursday, 7:00 a.m.-6 p.m., except for essential services) has enabled the City
to budget an annual savings of $140,000. Are you in favor of continuing the
Compressed Work Week for employees?
o Yes
ONO
5. The City's Fire Rescue Assessment is a non-ad valorem fee (Le., not based on
property value). Are you in favor of an increase in the residential Fire Assessment,
which is now set at $68 a year, to $88 a year and a corresponding increase in the current
rates for non-residential buildings (e.g., commercial, institutional and
industrial/warehouse buildings) to enable Fire Rescue to maintain its current quality
levels of emergency response times and level of service? For residential buildings, this
represents a monthly increase of approximately $1.67 a month; for non-residential
buildings the fee is calculated on a square footage basis and would increase
approximately 30%.
o Yes
o No
The following questions pertain to certain taxes and fees.
1. As the City looks for opportunities to retain services despite falling tax revenues,
should the City consider shifting more service delivery to private and non-profit
providers in order to reduce cost, even if that means having less day-to-day control over
how services are performed?
o Yes
o No
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
2. How much do you agree or disagree that the following taxes and/or user fees should
be raised to the extent to which the City is able in order to maintain the City's high level
of services?
(Franchise fees are fees that the City charges utility companies for the use of City
streets and right-of-ways. The utility company - electric, telephone, cable, water - is
allowed to pass the cost on to the customer.)
Strongly Agree Agree Neither Agree nor Disagree Strongly Disagree
Disagree
Franchise Fees 0 0 0 0 0
Business Tax Receipt 0 0 0 0 0
(Formerly known as
Occupational License)
Fines (e,g., Code 0 0 0 0 0
Compliance violations)
Rentals (i.e., of City 0 0 0 0 0
facilities by the public)
User Fees (e.g., beach,boat 0 0 0 0 0
dock decals; Tennis Center,
Golf Course)
The following questions pertain to City services.
1. Relating to garbage pick up, would you rather:
o Decrease service (fewer pickup days), or
o Increase fees
2. Relating to Police coverage/response time, would you rather:
o Increase property taxes, or
o Reduce coverage and see a possible decrease in response time
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
3. The Utilities Fund is an enterprise fund for the City; operational expenses for the
Utilities Department come from customer fees. They are not part of the City's General
Fund budget.
Water supply infrastructure consists of what is built to pump, divert, transport, store,
treat and deliver safe drinking water. In order to maintain and expand the City's utility
infrastructure to meet increasing water supply and demand, it may be necessary to
increase fees. Should the City increase fees:
o Annually
o Semi-annually (two years)
4. The City recently began an Adopt-a-Park Program, which provides civic groups,
businesses and volunteers the opportunity to be hands-on members of the team that
keeps our parks and playgrounds in top condition. A program of this kind that involves
the community with selective maintenance within a park to help maintain a clean park
environment for all to enjoy becomes increasingly important in times of scarce
resources.
Some routine activities might include trash pickup, graffiti reporting, weeding/raking
playgrounds, sweeping shelters, cleaning picnic tables, mulching trees/shrubs and
reporting vandalism.
To what extent would you be interested in participating in this program as a way to help
maintain the City's parks without increasing taxes? Select as many as apply.
D Pick up trash
D Report graffiti
D Weed/rake playgrounds
D Sweep shelters
D Clean picnic tables
D Mulch trees/shrubs
D Report vandalism
D Adopt a park (includes all above activities)
OPEN BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
1. The City's Shopper Hopper service provides transportation to various shopping
areas in the City for a fare of $1 each way (seniors 62 and over receive a 50% fare
discount.)
Have you ever used the Shopper Hopper?
o Yes
ONO
1. Shopper Hopper fares do not fully cover the service's operating expenses and must
be subsidized by the City.
o Fares should be increased to cover the shortfall
o Taxes should be increased to cover the shortfall
o The service should be discontinued
Finance Advisory Committee Issues for Study and Assignment Areas - Assignments Confirmed by FAC Members as of 11/15/10
# Issue Department Near Far FAC Member Assignment By FAC as of 11/1/10
Genrl Anlys
22 Allocation anlys Finance x #4 Glenn Jergensen
1 Analysis Resdnl v Cmcl Finance x #1 Not Assigned Yet
2 Bsns tax comptv anlys Finance X #1 Not Assigned Yet
3 Bsns tax/fee assmnts Finance x #1 Not Assigned Yet
4 Tax/fee struct anlys Finance x #1 Not Assigned Yet
5 Benchmark bsns taxs/f ees Finance x #1 Not Assigned Yet
7 City land asset anlys City Mgr x #1 Not Assigned Yet
20 Capital Improvement anlys Finance x #4 Not Assigned Yet
52 City services survey Don Scantlan
CRA
8 CRA staff site City Mgr x #1 Not Assigned Yet
33 Merge CRA Functions City Mgr x #7 David Madigan
Revenue
9 Partnerships (Chmbr'Cmrc) x #2 Not Assigned Yet
10 Revenue sources-other x #2 William Shulman
11 Golf course revenue optns GC x #2 George Feldman
Revenue streams generated
12 by other munis City Mgr x #2 George Feldman
13 Grant Opptys City Mgr x #2 George Feldman
39 HOA contributions to programs x #8 William Shulman
32 Sell of city assets City Mgr x #7 David Madigan
14 Dpt Head presentns City Mgr x #3 Merline Pamplona
42 Local sales tax City Mgr x Staff Suggestion Not Assigned Yet
46 Franchise Solid Waste Staff Suggestion Glenn Jergensen
47 Fee for Service other city svcs Staff Suggestion Not Assigned Yet
Public Safety
43 Public safety fund City Mgr Staff Suggestion Not Assigned Yet
45 Public Safety Comm hub Staff Suggestion Not Assigned Yet
25 Police Pension Plan Police Cf x #6 Michael Madalena (indudes Genl Pension)
26 Fire Pension Plan Fire Cf x #6 Michael Madalena (indudes Genl Pension)
34 Fire Dpt services Fire Cf x #8 Not Assigned Yet
P/R
17 Parks/Rec (Cost/Benefit) & xfr to Cnty CityMgr x #3 Merline Pamplona
6 City park usage anlys P/R x #1 Not Assigned Yet
Personnel
21 Compensation Package anlys Finance x #4 Not Assigned Yet
29 Other Staff (non p/f) benefits CityMgr x #6 Michael Madalena
19 Allowances (cell, car, etc) CityMgr x #3 William Schulman
28 Overtime Pay policies City Mgr x #6 Not Assigned Yet
31 Hiring Freeze CityMgr x #7 David Madigan
38 Salaries x #8 Not Assigned Yet
30 PIC Insurance costs City Mgr x #6 Michael Madalena
50 Contracts without expiration dates Staff Suggestion Victoria Castello
51 Employee leave benefit anlys Staff Suggestion Not Assigned Yet
40 Volun SepPgm/Early Out CityMgr Staff Suggestion David Madigan
41 Unpaid furlough system City Mgr Staff Suggestion Not Assigned Yet
Culture
School House Museum
15 (cost/benefit) City Mgr x #3 Merline Pam pion a
16 Library (Cost/Benefit) & xfr to Cnty CityMgr x #3 Merline Pamplona
18 Forestry/Grounds (Cost/Benefit) CityMgr x #3 Merline Pamplona
Infrastructure
35 Public Works services x #8 Not Assigned Yet
36 Utilities services &sale/xfr to Cnty x #8 Not Assigned Yet
37 Development Services x #8 Not Assigned Yet
Costs
44 County/Muni services redundancies Staff Suggestion Don Scantlan
48 Close/consolidate city facilities Staff Suggestion Don Scantlan
49 Make/buy other city services Staff Suggestion Don Scantlan
23 Municipal election costs City Mgr x #5 Don Scantlan
24 Paperless billing City Mgr X #5 Don Scantlan
27 Shopper Hopper (cost/benefitl x #6 Terry Lonergan
53 Unfunded mandate review Staff Suggestion Not Assigned Yet
Term
("(j"",~"",;~--,,",',',,",,,,"',','\
\, \ f
.. ~ f
FINANCIAL ADVISORY COMMITTEE
MONDAY, JANUARY 10,2011 @ 6:00 P.M.
LIBRARY CONFERENCE ROOM "A"
BOYNTON BEACH, FLORIDA 33435
AGENDA
1. Approval of Minutes - (Copies attached)
. October 4
. November 15
. November 29
2. Review, discuss and approve final draft questions for Citizen Survey along with distribution and
timing - (See "Survey" copy attached)
3. 10 - 20 minute Presentation and Status of Member Research on one of their selected projects
(See attached "FAC Work Area Matrix as of 11-15-2010")
Members
. George Feldman - #11-Golf course revenue options
. Michael Madalena - #25 & #26-City pension costs
. David Madigan - #33-Merge CRA functions / #32-Selling of City Assets / #31-Hiring
Freeze / #40-Voluntary Separation Program & Early Out
. Don Scantlan - #24-Paperless billing / #52-City services survey
. William Shulman - #39-HOA contributions to programs / #1 O-Increases in City Revenues
. Merline Pamplona - #18-Forestry/Grounds (Cost Benefit) / #17 -Parks/Recreation
(Cost/Benefit)
Alternate
. Terry Lonergan - #27-Shopper Hopper (Cost/Benefit)
4. Discussion of FY 2011-12 Budget Schedule for the City and Timing of FAC Recommendations.
5. Other Business
1/5/2011 2:23 PM
jmp
S:\CC\WP\Board Agendas\Financial Advisory Committee\2011 \Ol-10-11.doc
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
, " JMXRODUCIION
~1 J( ~~ ;:;,~ x.,... "", "" ~ 1< ~ " ,,' , ~ i ~ _, "", ~ > . "
This past spring, the City Commission established a Financial Advisory Committee to serve in an advisory capacity to
the Commission and the Commission's oversight of expenditures that require budgetary appropriation. The Committee
consists of seven regular and two alternate members named by the Commission from community residents and business
owners.
The Financial Advisory Committee created this survey to solicit community input, which will assist them in developing
their recommendations to the City Commission.
In order to complete this survey, cookies must be enabled in your browser.
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
- - - - ~ - -- - -- - --- - - - - - - - - - ~ -- --- - --- - -- - - - - - - -
,'a!!:.I"M.~i(,~g~CY
'~"" ..' ~ -I .. A ,~ '" ~ \,," '",~ ," ;,: . y' ) 1 . . . ,,< _
In the State of Florida, laws exist to ensure that government is open and that the public has a right to access appropriate
records and information possessed by City government The City of Boynton Beach does not sell, rent or otherwise
distribute visitor's information, including electronic mail addresses, to any outside company or organization, unless
legally required to do so. This applies to information that may be collected on the City's site and on that of any third party
with whom the City contracts to provide Internet related services
Occasionally, the City may have a survey on this website that only allows visitors to vote once. In order to keep track of
visitors who have voted, a cookie (a simple text file) will be created and stored on the visitor's computer. This cookie is
created by voting on the survey. It will not contain personally identifying information and will not compromise the visitor's
privacy or security. The only information that is contained in the cookie is the name of the survey and how the visitor
voted. The cookie will remain on the visitor's computer for the duration of the survey. The cookie has an expiration date
and will be deleted from the visitor's computer when that date occurs
* 1.1 agree to the tenns ofthe Privacy Policy.
o Yes
ONO
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
- - -- - -- - - - - -~- -~ - - - - - -- - -- -
, ,3.."RltVilGI Boltel
l'ii:.",'h" 'J;. "1Jl' ,,~, ~ ~ :?i'" ." ~~''''' '" ' ,. '" ~ .
You must agree to the terms ofthe Privacy Policy to continue with this survey,
* 1. I agree to the tenns of the Privacy Policy.
OVes
ONO
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
--- -- - - - - - ~ -- --- - -- -- - -- - - -- - ~ -
M,4 ,laidlnUaMiness Owner
t :1 ~f;" t~ R; y. ~'I: ,,/, ~ > ~ k _ '" , e, ", ~ ; ^ , .
This survey is open only to persons whose principal residence is within the corporate limits of the City of Boynton Beach;
or who own a business that is located within the corporate limits of the City of Boynton Beach; or who both reside and
own a business within the corporate limits of the City of Boynton Beach.
* 1. I reside and/or own a business within the corporate limits of the City of Boynton
Beach.
OVes
ONo
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
- -- ~---- - - - -- - -- --- - -- - - - - --- -~~ --- - -- ~--- - - ~
"., ., J:.baak You 1
\' '"I"",,',;t "':/ ,,~.;'~,^> , '~, ~ T ~ '-< , ''''
This survey is open only to people whose permanent residence is within the corporate limits of the City of Boynton Beach
and/or own a business within the corporate limits of the City of Boynton Beach.
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
~------~- -- -- ~------- -- - --- - - ---- - ------- - ---- - - ---
6. General mfonnation , ,
'" ~ ~" " ~ j. , _ ,.~ 1 '
This survey is open only to persons whose principal residence is within the corporate limits of the City of Boynton Beach;
or who own a business that is located within the corporate limits of the City of Boynton Beach; or who both reside and
own a business within the corporate limits of the City of Boynton Beach. We will begin by collecting some general
information about you.
* 1. Is your principal residence within the corporate limits of the City of Boynton Beach; or
do you own a business within the corporate limits of the City of Boynton Beach; or do
you both reside and own a business within the corporate limits of the City of Boynton
Beach? If you are both a resident and a business owner, check both boxes.
D Resident
D Business owner
2. Please select your ZIP Code.
o 33426
o 33435
o 33436
3. The following information is optional.
Name:
Company:
Address:
Address 2:
CityfTown
State
[-, -~--J
----~-
ZIP:
Email Address:
Phone Number:
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
- -- -- - --~----- - ---
~ --~ -- - - - - - - - - --
"z;. , I
-' u'<' , ' ,"" k 1 ~ ~ > _' ~
1. How many years have you been a resident of Boynton Beach?
o Less than 5 years
o 5 to 10 years
o 11 to 15years
o 16 to 20 years
o More than 20 years
2. Do you own or rent your home?
QOwn
o Rent
3. On a scale of 1-5, with 5 being the most important, and 1 being the least important,
how would you rank the following factors in influencing you to move to Boynton
Beach?
5 4 3 2
Cultural factors 0 0 0 0 0
Public safety 0 0 0 0 0
Location 0 0 0 0 0
Schools 0 0 Q 0 0
City services 0 0 0 0 0
Housing stock 0 0 0 0 0
Employment 0 0 0 0 0
City amenities 0 0 0 0 0
Lived here all my Iife_ Yes/No
4. If you own a business within the corporate limits of the City of Boynton Beach, how
many years has your business been in operation?
o Less than 5 years
o 5 to 10 years
o 11 to 15 years
o 16 to 20 years
o More than 20 years
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
5. On a scale of 1-5, with 5 being the most important, and 1 being the least important,
how would you rank the following factors in influencing you to open or move your
business to Boynton Beach?
5 4 3 2
Education 0 0 0 0 0
Competition 0 0 0 0 0
Workforce 0 0 0 0 0
Transportation 0 0 0 0 0
Customer volume 0 0 0 0 0
Location 0 0 0 0 0
International access 0 0 0 0 0
Arts/culture 0 0 0 0 0
Demand for producUservice 0 0 0 0 0
Lifestyle 0 0 0 0 0
Quality of life 0 0 0 0 0
Expedited permitting 0 0 0 0 0
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
-----~ - - ---- ---~-- -- -- ---------- - - -
- - --- -- -
\,1,. ;
~ ~ ,,"",.,0' '" "^' ~ '" ,~ . ~" <.; '"~ ,~, "~ '
The following questions pertain to the property tax rate, which is currently set at 6 7626 mills, and other non-advalorem
assessments.
1. To maintain the property tax rate at 6.7626 mills, are you in favor of cutting services
for Public Safety (i.e., Police, Fire, Communications)?
Qves
QNO
2. To maintain the property tax rate at 6.7626, are you in favor of cutting Cultural and/or
Recreation services (i.e., Library, Recreation programs)?
Qves
QNO
3. To maintain the property tax at 6.7626 mills, are you in favor of employee layoffs
and/or employee furloughs?
OVes
O,NO
4. Since it was implemented in June 2009, the Compressed Work Week (Monday-
Thursday, 7:00 a.m.-6 p.m., except for essential services) has enabled the City to budget
an annual savings of $140,000. Are you in favor of continuing the Compressed Work
Week?
OVes
ONO
5. The City's Fire Rescue Assessment is a non-advalorem fee (i.e., not based on
property value). Are you in favor of an increase in the residential Fire Assessment,
which is now set at $68 a year, to $88 a year to enable Fire Rescue to maintain or
improve its 4.09 minute response time? This represents an increase of 30%.
Qves
QNO
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
I
6. The City's Fire Rescue Assessment is a non-advalorem fee (i.e., not based on
property value). Are you in favor of an increase of 30% in the commercial property Fire
Assessment fee, which is based on a square footage basis. This would mirror a similar
increase in the residential Fire Assessment fee, which is a fixed rate, to enable Fire
Rescue to maintain or improve its 4.09 minute response time?
OVes
ONO
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
---~ ~ - - - -- -~--
:;S~
"~~, ,<;q , " ", ' ~ to I , _ , c'
The following questions pertain to certain taxes and fees
1. As the City looks for opportunities to retain services despite falling tax revenues,
should the City consider shifting more service delivery to private and non-profit
providers in order to reduce cost, even if that means having less day-to-day control over
how services are performed?
aVes
aNO
2. How much do you agree or disagree that the following taxes and/or user fees should
be raised to the extent to which the City is able in order to maintain the City's high level
of services?
(Franchise fees are fees that the City charges utility companies for the use of City
streets and right-of-ways. The utility company - electric, telephone, cable, water. is
allowed to pass the cost on to the customer.)
Franchise Fees
Business Tax Receipt
(Proof of payment of
business tax; formerly
known as Occupational
License)
Fines (e.g., Code
Compliance violations)
Rentals (e.g., Intracoastal
Park Clubhouse, Civic
Center, picnic pavilions)
User Fees (e.g.. beach and
boat dock decals; Tennis
Center, Golf Course)
Strongly Agree Agree Neither Agree nor Disagree Strongly Disagree
Disagree
a a a a a
a a a a a
a
o
o
o
o
o
o
o
a
o
o
o
o
o
a
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
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The following questions pertain to City services.
1. Relating to garbage pick up, would you rather:
o Decrease service (fewer pickup days), or
o Increase fees
Other (please specify)
2. Relating to Police coverage/response time, would you rather:
o Increase property taxes, or
o Reduce coverage and see a possible decrease in response response time
Other (please specify)
3. Relating to Fire Rescue response time and capabilities, would you rather:
o Increase the Fire Assessment, or
o Not increase the Fire Assessment and see a possible decrease in response time and/or capabilities
Other (please specify)
4. The Utilities Fund is an enterprise fund for the City; operational expenses for the
Utilities Department come from customer fees. They are not part of the City's General
Fund budget.
Water supply infrastructure consists of what is built to pump, divert, transport, store,
treat and deliver safe drinking water. Should the City:
o Reduce routine maintenance of utility infrastructure, or
o Raise rates to customers
Other (please specify)
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
5. The City recently began an Adopt-a-Park Program, which provides civic groups,
businesses and volunteers the opportunity to be hands-on members of the team that
keeps our parks and playgrounds in top condition. A program of this kind that involves
the community with selective maintenance within a park to help maintain a clean park
environment for all to enjoy becomes increasingly important in times of scarce
resources.
Some routine activities might include trash pickup, graffiti reporting, weeding/raking
playgrounds, sweeping shelters, cleaning picnic tables, mulching trees/shrubs and
reporting vandalism.
Would you be interested in participating in this program as a way to help maintain the
City"s parks without increasing taxes.
OVes
ONO
Other (please specify)
BETA TEST FINANCIAL ADVISORY COMMITTEE SURVEY
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1. The City's Shopper Hopper service provides transportation to various shopping
areas in the City for a fare of $1 each way (seniors 62 and over receive a 50% fare
discount.
Have you ever used the Shopper Hopper?
OVes
ONO
2. Shopper Hopper fares do not fully cover the service's operating expenses and must
be subsidized by the City.
o Fares should be increased to cover expenses
o Taxes should be increased to cover the shortfall
o The service should be discontinued
Other (please specify)