Philly Council now tackling DROP problem

The election's over, so City Council now can turn its collective attention to the political lightning rod that is the DROP pension program.

Should DROP be killed - which is what Mayor Nutter wants - or should it be altered to become "revenue-neutral"?

At Thursday's Council meeting, the leadership plans to introduce a bill that would amend the publicly reviled program by, among other measures, raising the number of years a city employee must wait to enroll.

A Council-hired consultant and Council attorney briefed members Thursday on the proposed legislation. The briefings were held in small groups so that a quorum of members would not be present, which would have required the gatherings to be open to the public.

DROP - the Deferred Retirement Option Plan - allows certain city employees to commit to a retirement date, deposit pension payments into an interest-bearing account, and then collect a lump-sum payment when they leave their jobs.

According to Council sources, the legislation discussed Thursday would propose three changes to the DROP program, all of which were included in a consultant's February report to Council. They are:

Requiring employees to wait two years beyond the minimum retirement age to enter the program.

Lowering the interest rate on the lump-sum DROP accounts. The rate now is 4.5 percent.

Offering employees a "revenue-neutral" option in which the lump sum is deducted from their future pension payments.

Employees eligible for DROP before the bill becomes law - or who would become eligible within 90 days - would be grandfathered in.

The changes are designed to make the entire program revenue-neutral - in other words, to stop costing the city money.

The problem, said Nutter's spokesman Mark McDonald, is that the effects of the proposed Council bill could not be measured for years.

The original DROP plan was presented in 1999 as "revenue-neutral," but after a four-year test period, it was estimated to be costing as much as $7 million a year.

"The same scenario will occur here," McDonald said. "The authors may think it's revenue-neutral, but only time will tell."

In fact, Kenneth Kent of Cheiron Inc., actuary for the Board of Pensions and Retirement, told Council in a letter this year that he could not and would not try to calculate the cost of pushing the DROP eligibility age back.

Council plans to hold hearings on this bill and Nutter's proposal to kill the program, in the hope of acting before the summer recess.

The question is whether Nutter can muster the votes to end DROP - and how hard he'll lobby to make that happen.

Nutter has counted few supporters on the issue. Seven of the 17 Council members are enrolled in the program or have been.

"It's a little early to be counting noses," McDonald said. "Will we be pushing hard? Yeah, we think this is an important issue for the city. . . . I'm optimistic that Council members will do the right thing and end the program."

Nutter commissioned a report, released last summer, that estimated DROP's cost at $258 million since 1999. The Council-commissioned analysis released in February put the cost at $100 million over that time.

The public revolt against DROP began when politicians enrolled in the program, beginning with Mayor John F. Street in 2004. Elected officials also discovered that they could retire for a day, collect their DROP payments, then return to office.

DROP played some role in the retirements of five Council members this year - President Anna C. Verna, Frank DiCicco, Donna Reed Miller, Jack Kelly, and Joan Krajewski. All were enrolled in DROP, with Krajewski retiring for a day four years ago and collecting her payment.

While the legislature has banned future elected officials from joining DROP, there is no talk on Council of banning current members. Ten sitting Council members can still sign up when they reach retirement age.

Six of those 10 have promised never to join the program, while Council members Jannie L. Blackwell, Darrell L. Clarke, William K. Greenlee, and Brian O'Neill have declined to take such a pledge.

Voters this week turned away City Commissioner Marge Tartaglione and Councilman Frank Rizzo, both DROP enrollees.

Before the Council briefings were held Thursday, one DROP opponent, Councilman James F. Kenney, said he would not vote for any bill to amend the program.

"I've been in politics for 30 years, and when something is clearly wrong, it's clearly wrong," he said. "This program is bad, costs the city money, the public's outraged by it, and I think it needs to go."

Kenney also said, "If we want to start over and do something for city employees, we should do that."

Verna said she had no idea if there were enough votes on Council to kill the program and start over. She also said she had not settled on a position.

"It depends on what information our consultant is going to be giving us," she said. "If it's revenue-neutral, I don't see how it bothers anybody."

She also disputed that DROP played a role in Rizzo's and Tartaglione's being voted out of office.

"Councilman Rizzo had a little problem with his party before the DROP issue," she said. "Commissioner Tartaglione was ill, and I don't think she was able to campaign the way she would normally."

Although she wasn't on the ballot Tuesday, Verna said she didn't think voters were sending a message about DROP.

"Gee, they didn't tell me a thing about that," she said with a smile. "Nobody said they wouldn't vote for me because of the DROP issue."