Loading...
HomeMy WebLinkAboutR-1998-064 I 1 RESOLUTION NO. 64-98 A RESOLUTION OF THE CITY OF DANIA, FLORIDA OPPOSING PROPOSED HOUSE BILL 3075 WHICH MAKES CHANGES TO CHAPTERS 175 AND 185 OF FLORIDA STATUTES BY REQUIRING LOCAL LAW PENSION PLANS TO MEET ALL REQUIREMENTS OF STATE PENSION PLANS; PROVIDING AUTHORIZATION AND DIRECTION TO THE CITY CLERK TO TRANSMIT A CERTIFIED COPY OF THIS RESOLUTION TO THE BROWARD COUNTY LEGISLATIVE DELEGATION, THE CITY COMMISSION OF EACH CITY IN BROWARD COUNTY, THE FLORIDA LEAGUE OF CITIES AND THE BROWARD COUNTY LEAGUE OF CITIES ; PROVIDING FOR CONFLICTS; PROVIDING FOR SEVERABILITY; FURTHER, PROVIDING FOR AN EFFECTIVE DATE. WHEREAS, police officers and firefighter unions have proposed legislation for 1998 through House Bill 3075, making a number of changes to Chapters 175 and 185, Florida Statutes, concerning police and firefighter pension plans; and WHEREAS, House Bill No. 3075 contains an alternative compliance option that appears to be intended to allow overtime, terminal leave payments and other forms of pay to be excluded from compensation for pension purposes if plan benefits equal or exceed the statutory minimum benefits; and WHEREAS, local law plans for police officers and firefighters meet minimum requirements of F.S. Chapters 175 and 185, but may vary from the Statutes as they deem necessary under their local law plans; and WHEREAS, House Bill No. 3075 would reverse court and administrative rulings and require local law plans to comply with the same requirements as chapter plans which could result in increased costs to local governments; and WHEREAS, no comprehensive study has been done to determine the cost to local governments of complying with this legislation nor does the legislation give local government credit for pension benefits that exceed chapter law results in a 1 RESOLUTION NO. 64-98 i I I i "end run" to obtain benefits without collective bargaining, and circumvents the local Pension Board powers; and NOW, THEREFORE, BE IT RESOLVED BY THE CITY COMMISSION OF THE CITY OF DANIA, FLORIDA: Section 1. The foregoing "WHEREAS" clauses are hereby ratified and confirmed as being true and correct and are hereby made a specific part of this Resolution. Section 2. The City of Dania, Florida strongly opposes the proposed House Bill No. 3075 regarding police officers and firefighters pension plans. Section 3. The City of Dania, Florida urges the local governments of the State to adopt a resolution requesting that the Legislature not pass House Bill No. 3075. Section 4. That the City Clerk is hereby directed to forward certified copies of this Resolution to the members of the Broward County Legislative Delegation, the City Commissions of each municipality in Broward County, the Broward County League of Cities and the Florida League of Cities. Section 5. All resolutions or parts of resolutions in conflict with this resolution are repealed to the extent of such conflict. Section 6. If any clause, section, other part or application of this Resolution is held by any court of competent jurisdiction to be unconstitutional or invalid, in part or application, it shall not affect the validity of the remaining portions or applications of this Resolution. Section 7. This resolution shall be in force and take effect immediately upon its passage and adoption. PASSED AND ADOPTED THIS 28" DAY OF rrAPRIL 1998. MAYOR-COMMISSIONER A : V CITY CLTER UDITOR APPROVED AS NO FORM AND CORRECTNESS: By: — CITV'A RN 2 RESOLUTION NO. 64-98 FLORIDA GOVERNMENT FINANCE OFFICERS ASSOCIATION, INC. G Since 1937 F Post Office Box 10270 • 201 West Park Avenue • Tallahassee, FL 32302-2270 O A Telephone (850)4884559 • FAX (850)488-0132 DATE: April 7, 1998 TO: FGFOA Members FROM: Rick Atkinson,Deputy City Treasurer-Clerk,City of Tallithass FGFOA Past President SUBJECT: Police and Fire Pension Legislation Your immediate help is needed! The 1998 Legislature is once again entertaining legislation that is potentially very harmful to cities that have Local Law Pension Plans, and i which receive the Chapter 175 and 185 supplemental funding. This year's versions, in fact, are much more explicitly costly to Local Law Plan governments than previous year's versions. 1 And to make bad matters worse it appears likely that, given that this is an election year, many legislators are selling out to the unions. The exact impact of the bills is difficult to gauge, and j is different on each city, depending on your existing plan benefits, demographics and, believe it or not,the pension benefits for your general employees. While the bills are extremely complex and the changes numerous, the following discussion outlines some of the major changes and concerns: • Currently, existing law under sections 175.351 (fire) and 185.35 (police) provides a list of"minimum standards" that must be met in order for a Local Law Plan to receive the 175 and 185 funds. While the state has, over the years, tried to force most other provisions of the chapters on Local Law Plans, the courts have consistently sided with local governments that the other provisions don't apply. The proposed legislation UNDOES the case law by making all provisions of chapters 175 and 185 applicable to Local Law Plans. The specific impact of this is wide and varied, and, in order to fully understand it,you'll need to review the bill as it relates to your plan. • Also under existing law, a joint board for police officers, firefighters and general employees is allowed, with separate accounting of assets. The proposed bills, however, prohibit such a combination board. An election must be held to set up a new board(s), but in no case may general employees be represented on the same board. This takes control away from the municipality, who has the sole constitutional responsibility to fund the plan. The board can hire its own actuaries, investment consultants and attorneys, the cost of which is paid out of the plan and, often, directly out of the government's budget. They also have control over determination of disability tow retirements (which has been a very costly process for many cities) and investment of the plan's assets. Even if the new board has the expertise of the local government's staff, there is a tremendous loss of"economies of scale" that is obtained by having the three plans combined for investment purposes. Typically, a municipality's police and fire plan assets each make up about one eighth to one sixth of a city's total plan assets. Given this smaller asset base, the board cannot obtain the lower fees and custody charges of the combined plan. As well, the larger general employees' plan looses these same economies. Given the cost of actuaries, investment consultants and attorneys, the total cost of administering the plans goes up significantly when they are separated. • Potentially the most costly provision of the proposed legislation is in the re-write of sections 175.351 and 185.35. There are two options for the boards of trustees when deciding where to place state premium tax dollars. However, none of these options allow for city approval or disapproval. Under the bills, in ALL cases, 100% of the state monies must be used to fund extra 6ene,F-ts - and extra is explicitly defined as those in addition to or greater than those provided to general employees. I don't know how this can be measured given that the cost of a benefit changes as the plan demographics change, and that, as the result of collective bargaining, the basic benefit structure of the general employee and police (or fire) plans likely differs. Is it to be measured on the basis of total plan costs or on each specific benefit (accrual rate or normal retirement date, for example)? If the latter is the methodology imposed when the state writes the rules (which, given previous interpretations of the existing statutes, we would expect to be the case),what do you do about the areas where the benefits are already higher. This will really open up a can of worms and will be a continuing source of litigation and opportunity for the state to threaten to withhold the funds. • Further, the board may take all the premium tax monies and place them in a new, separate supplemental plan. The bill provides that member contributions cannot be increased without membership approval, and the State Constitution requires that the municipality actuarially and adequately fund the plan. This means that the board can unilaterally divert the funds from the defined benefit plan and the municipality has to make up the difference. Should the funds be diverted to a supplemental plan, this adds up to a BIG, BIG hit on the budgets of affected local governments. This provision alone will cost the City of Tallahassee $1.2 million per year, plus whatever growth there would be in the 175 and 185 funds. • One further issue that will be costly to many local law plans is the new proposed definition of compensation or salary. Currently, for firefighters, salary is defined as "the fixed monthly compensation paid a frrefrghtef'. The bill changes the wording to fixed monthly remuneration paid. We do not know the reason for this, but the change could be interpreted to mean a change in the definition. For police, the chapter law definition of compensation would apply to local law plans. This includes all income reported on the W-2 form, which would pickup overtime and other salary supplements and include them as compensation for pension purposes. This police definition was amended to include at least 300 hours of overtime, and exclude off-duty pay, but still includes unused sick leave and vacation, and anything else on the W-2. This would cause the municipality to have to contribute based on(by definition) a higher payroll. 2 The bills fly in the face of collective bargaining by mandating certain benefits while those same benefits are subject to collective bargaining at the local level. • One city (Jacksonville) is exempted entirely from the legislation, and sixteen others are exempted from two of the more onerous provisions. This is due to provisions that exempt plans that were enacted by Special Act of the Legislature before May 23, 1939, or that had Supplemental Plans in effect as of January 1, 1997. Those cities are exempted from the provisions dealing with the make-up of the board of trustees and from the revised definition of compensation. The reason for these exemptions is not known, but is assumed to be for the purpose of gamering the support of(or eliminating opposition from)those cities. We must work quickly and decisively to defeat House Bill 3075 and Senate Bill 270. The potential cost of this legislation is staggering. My estimate of the impact on the City of Tallahassee is approximately$1.5 million per year, and that estimate doesn't begin to take into account the undeterminable costs related to the board of trustees' issue. While state law requires that an actuarial impact statement be prepared before any local government can amend its plan, the legislature is preparing to implement wholesale amendments without the benefit of an actuarial costing. The unions and the State Division of Retirement are telling the legislature that there is no cost to the proposed bills. I strongly advise that you review the bill, make your own determination as to the cost to your city, and contact your local legislative delegation immediately. Make them aware of the cost to your local government and, consequently, to the local taxpayers, and ask them to vote it down. If you can't get them to commit to voting against it, ask them to amend it to delay implementation until an actuarial study can be conducted and the true cost is determined. I This bill will likely reach the floor of the House within the next two to three weeks and is also in the Senate Ways and Means Committee. If the bill gets beyond this last committee, it will be difficult to defeat. YOUR PROMPTACTIONIS NEEDED. 3 i . �I. 1 I , : i t ,: f i iIi 4 i I � " ��� � ., , , ;; :, � �, �.