The Big Rush

City Council's DROP dithering has cost us another $136 million.

by Ralph Cipriano

[ fiscal responsibility ]

Since Aug. 2 — the day before Mayor Michael Nutter publicly called on City Council to eliminate the DROP program —1,247 additional municipal employees have signed up for DROP benefits, according to records obtained by City Paper. If those 1,247 employees collect what more than 6,000 DROP recipients have previously collected from the city — cash bonuses that averaged $109,277 each — the additional price tag for the new DROP recipients would be more than $136 million.

DROP is the city's Deferred Retirement Option Plan, which allows city employees to collect both their salaries and pensions during their last four years on the job — essentially, a double-dip. The pension benefits are paid out in the form of a onetime cash bonus the day the employee retires, in addition to the employee's regular pension and a minimum of five years of health insurance.

Since 1999, the city has paid out $725 million in DROP bonuses to 6,638 retired employees, a City Paper investigation found [Cover Story, "The Billion Dollar Boondoggle," Ralph Cipriano, April 22, 2010]. Another 2,107 active employees had previously signed up for DROP benefits, at an estimated cost of $338 million, which put the taxpayers' bill for DROP at more than $1 billion.

On Aug. 3, at the end of a summer marked by debate over the program's efficacy, Nutter declared, "It's time to drop DROP. ... We cannot afford this program any longer and it must go."

The mayor cited a Boston College study that claimed that since its inception in 1999, DROP had cost the city pension fund an additional $258 million. (That study looked at only the pension side of the double-dip, ignoring salaries paid to employees who were enrolled in DROP; City Paper looked at the total price of DROP cash bonuses paid to city employees).

City Council, however, which includes six members who are signed up to collect future DROP bonuses of more than $2 million, has been reluctant to follow the mayor's directive. Rather than eliminate DROP, Council decided in August to hire Bolton Partners, an actuarial firm based in Baltimore, to study the Boston College DROP study's methodology, at a cost of up to $30,000. The city previously spent $80,000 on the Boston College study.

Asked about the additional cost of new DROP recipients, Nutter spokesman Mark McDonald writes in an e-mail, "The mayor has repeatedly urged the City Council to hold hearings on the DROP issue. As you know, he is unflinchingly opposed to the continuation of this benefit because of its cost to the pension fund. Further, he remains hopeful that the Council will take up this matter in the time before the Council adjourns in December."

"Council shares the mayor's hope that the public hearings can be held shortly and that the issue can be resolved by the end of the year, either way," says Tony Radwanski, Council's communications director. Council hasn't been able to schedule those hearings because of a two-week delay in receiving the Bolton Partners study. (The city previously waited four months for the Boston College study.)

"Boston College's workload is so high at this point that they're just having trouble getting together with Bolton," Radwanski says. "As soon as [the Bolton Partners study] is finished, then the public hearings will be scheduled. ... We were hoping to get it back by now."

Meanwhile, the issue continues to simmer. On the one side, the city's municipal unions have declared their stalwart opposition to ending the program, especially without collective bargaining; these unions insisted the Boston College study was flawed, and demanded (and received) a new one before Council acted. On the other hand, there's populist outrage, perhaps best voiced by Larry Mendte, a former television news anchor who contributes to Philadelphia magazine's website (phillymag.com), who recently called for a march on City Hall to protest DROP: "It's the slowest bank robbery in history. And we are all eyewitnesses," Mendte wrote.

But despite Mendte's enthusiasm, no march has yet been scheduled. And City Council has yet to set a hearing date.

The longer Council waits, the more likely it is that the additional DROP price tag will climb higher than $136 million. As of the first week in August, 3,132 employees were eligible to enroll in DROP, meaning 1,885 employees could yet still sign up.

(editorial@citypaper.net)