Jill Porter: 'Rip-off' just a DROP in the callousness bucket
WHO KNEW? While you and I are earning bupkes on our rapidly diminishing investments, the city has been paying an inflated interest rate to city employees enrolled in the infamous DROP program.
WHO KNEW?
While you and I are earning bupkes on our rapidly diminishing investments, the city has been paying an inflated interest rate to city employees enrolled in the infamous DROP program.
Despite a brutal economy and anemic interest rates, the pension fund has continued paying 4.5 percent on employees' DROP accounts since the program's inception in 1999.
"Best deal ever," quipped Gwendolyn Bell, executive director of the pension fund, which administers the Deferred Retirement Option Plan.
It's galling that the 1,689 city employees in DROP are getting the "best deal ever" when the rest of us are facing higher taxes and fees because of the city's financial crisis.
When I called city officials this week to ask about it, it turned out that Mayor Nutter was way ahead of me.
Yesterday, Nutter sent legislation to City Council changing the fixed rate on DROP accounts to an adjustable rate that varies with the market.
That makes sense - assuming anything about the program makes sense.
Nutter also is commissioning a study to see if DROP is doing what it was designed to do, and at what cost to taxpayers.
I'm delighted that the city is taking a close look at the program - albeit belatedly, since it has been in effect for 10 years.
And I sure hope that the next study is more definitive than the last one, prepared by a consultant.
That 2003 report failed to determine whether DROP was saving or costing the city money, and concluded:
"Cost of DROP is a function of change in behavior because deferring retirement vs. receiving immediate payments is the source of the cost unless: Future salary growth during DROP is well above the assumption (or) DROP participant has very short service."
Exactly.
I am disappointed at what Nutter didn't do yesterday: attempt to fix the gross abuse of the program by elected officials who've enrolled in DROP despite the fact that it wasn't intended for them.
When I asked why Nutter neglected that aspect, press secretary Douglas Oliver e-mailed this tantalizing response:
"You are absolutely correct that the mayor is against elected officials participating in the DROP program.
"But you'll have to wait until next week for details on how he intends to address it."
Oliver presumably was referring to the mayor's budget presentation to City Council on Thursday.
I'm on pins and needles.
DROP began in 1999 under Mayor Ed Rendell as a "budgeting tool," the pension board's Bell said.
It was meant to give the city notice when a division or department head intended to retire, so a replacement could be found.
It was also designed to keep valuable employees on the payroll, by allowing them to divert their pension benefit to an account they'd receive in a lump sum when they retired - usually within four years.
The going interest rate on investments back then was around 4 to 5 percent.
Now, local banks are paying as little as half a percent on long-term investments.
Most galling, of course, is the fact that elected officials - including former Mayor John Street - helped themselves to the cash bonanza.
Council members Frank DiCicco, Frank Rizzo, Marian Tasco, Anna Verna, Donna Miller and John Kelly also signed on, as did District Attorney Lynne Abraham, Sheriff John Green and Register of Wills Ron Donatucci.
Councilwoman Joan Krajewski also enrolled - then "retired" for a day so she could collect $275,000.
It's a shameless rip-off, and every elected official who signed up for it ought to be retired for real by the voters.
The DROP costs for all Council members - so far - is $2.4 million, not that much in the scheme of things.
But the symbolism of elected officials exploiting the program while regular folk have to pony up more money for city services is sickening.
Changing the interest rate on DROP accounts is only a good place to start scrutinizing this program.
And isn't it a reflection of the times that an unsexy topic like interest rates could inspire the venom to propel a column?
Who knew? *
E-mail porterj@phillynews.com or call 215-854-5850. For recent columns: