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Council Gives Preliminary Approval To Plan that Amends DROP, Exempts Police and Fire From Some Changes

City Council just gave preliminary approval to a plan that would keep the publicly hated DROP program alive with some changes to reduce costs – although police and fire would be exempt from one of the reforms.

Under the plan that got committee-level approval this afternoon, the employees would not be able to enter DROP until two years after they hit retirement age - which varies by job. And the interest rate, now set at 4.5 percent, would be adjusted based on U.S. Treasury rates. But, police and fire would be exempt from the two-year delay.

Council approved the plan 15-2 with Council members Jim Kenney and Jannie Blackwell voting against.

Mayor Nutter had called on Council to end the DROP program, arguing that it was too expensive for the city to maintain. But Council declined to act on Nutter's legislation to kill DROP. The Council plan must now go on for a final vote, before heading to the Mayor's desk. Prior to the session this morning, the mayor declined to say whether he would veto a plan to revise DROP.

"End the DROP program and support the bill I sent up," Nutter said when asked about his message to Council.

Established in 1999, DROP allows city workers to set a retirement date up to four years in the future, at which point their pension benefit is frozen and they start accruing payments in an interest-bearing account while still on the payroll. When the employees retire, they collect a lump sum and start receiving pension payments. DROP was billed as a way to keep talent on the job a little longer and to better allow managers to plan for retirements.

A big reason the public hates DROP is that elected officials have signed up for the program and in some cases won re-election, "retired" for a single day, collected six-figure DROP payments, then resumed collecting city paychecks. A Boston College study commissioned by Mayor Nutter reported last year that DROP had cost the city $258 million since 1999. A later actuarial review by Council's consultant put the cost at $100 million.

During a morning hearing, Council remained virtually mute as a slew of union leaders, residents and activists testified about the program. Council's actuary, Thomas Lowman of the Bolton Group, said the proposed changes would help reduce, though not eliminate, all costs.

Fraternal Order of Police President John McNesby testified that the program should remain in place for police, saying it was a collective bargaining right that could not be eliminated and that it had not cost the city.

"In point of simple truth, for both the officer and the Philadelphia police department, the DROP program is working exactly as you intended," McNesby said.

On behalf of the Nutter administration, City Finance Director Rob Dubow testified in favor of killing DROP, saying it was simply too expensive given the city's weak pension fund. Committee of Seventy President Zack Stalberg also argued that DROP should go.

"The public hates the DROP program. It has become the symbol for arrogance and entitlement," Stalberg says.