COUNCIL OF THE CITY OF PHILADELPHIA PUBLIC HEARING AND PUBLIC MEETING BEFORE THE COMMITTEE OF THE WHOLE - - - Room 400, City Hall Philadelphia, Pennsylvania Wednesday, January 27, 1999 10:57 a.m. - - - BILL 990001 - An ordinance approved December 3, 1956 as amended and amending the Municipal Retirement Benefit Plan 1987 Ordinance, which became effective January 8, 1987 as amended, by adding new sections to, in the case of both ordinances, provide for increases to the benefits of certain uniformed and non-uniformed retirees, beneficiaries and survivors by providing for certain increases under certain terms and conditions and making certain related technical adjustments. PRESENT: COUNCIL PRESIDENT ANNA C. VERNA, Chair COUNCILWOMAN AUGUSTA A. CLARK COUNCILWOMAN JANNIE BLACKWELL COUNCILMAN DAVID COHEN COUNCILWOMAN JOAN L. KRAJEWSKI COUNCILMAN JAMES F. KENNEY COUNCILWOMAN DONNA REED MILLER COUNCILMAN MICHAEL A. NUTTER COUNCILWOMAN MARIAN B. TASCO COUNCILMAN ANGEL L. ORTIZ COUNCILMAN FRANK DICICCO COUNCILMAN BRIAN J. O'NEILL COUNCILMAN RICHARD T. MARIANO COUNCILMAN W. THACHER LONGSTRETH COUNCILMAN FRANK RIZZO - - - VINCENT VARALLO ASSOCIATES, INC. Registered Professional Reporters Eleven Penn Center, Suite 600 Philadelphia, PA 19103 (215) 561-2220 2 1/27/99 PUBLIC HEARING - COMMITTEE OF THE WHOLE I N D E X Joseph Herkness . . . . . . . . . . . . . . . Kenneth Kent, FSA, FCA. . . . . . . . . . . . Pension Board Actuary 7 William M. Mercer, Incorporated 8 Charles McPherson . . . . . . . . . . . . . . 104 9 Chief Financial Officer 10 Joseph C. Vignola, Executive Director PICA 129 11 12 Tom Cronin, President . . . . . . . . . . . . 237 AFSCME District Council 47 Les Yost, President, Local 22 . . . . . . . . 237 Pete Matthews . . . . . . . . . . . . . . . . 237 President, District Council 33 Rich Costello, President FOP Lodge 5. . . . . 237 Bob Eddis, Recording Secretary, Lodge 5 . . . 237 3 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 P R O C E E D I N G S
Will all Councilmembers please take their seats. This is the public hearing of the Committee of the Whole to consider Bill No. 990001. I would ask Mr. McPherson to read the title of the bill.
Bill No. 990001, an ordinance approved December 3, 1956 as amended and amending the Municipal Retirement Benefit Plan 1987 Ordinance, which became effective January 8, 1987 as amended, by adding new sections to, in the case of both ordinances, provide for increases to the benefits of certain uniformed and non-uniformed retirees, beneficiaries and survivors by providing for certain increases under certain terms and conditions and making certain related technical adjustments.
Our first witness will be Mr. Joseph Herkness. (Joseph Herkness comes forward.)
Yes. (Councilman O'Neill addresses President Verna inaudibly off mike.) 4 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Oh, we're just dealing with the bill at the moment.
We had them. I thought they were distributed. They will be distributed. Mr. Herkness, would you please proceed?
Thank you, Council President Verna. I'm here today on behalf of the Finance Director, Ben Hayllar, who could not be present to offer testimony for Council Bill 18 990001.
Madame Chair, I'd like to know why the Finance Director is not here.
Everything we are talking about is the Mayor saying what he will or won't do based on input from the Finance 5 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Director. If we do not have the Finance Director here to defend his position, I think it's unfair to the Council and unfair to Mr. Herkness to be here defending the Administration's position, particularly what we discussed all day Monday, dealing with the differences between and 8 percent when the sharing begins. 9 Thank you. 10
Council President Verna and members of City Council, I am pleased to appear today before the City Council Committee of the Whole to testify concerning Bill No. 990001, which would provide certain lump-sum increases to city pensioners, beneficiaries, and survivors, and establish a Pension Adjustment Fund to provide a mechanism for future pension adjustments. The Administration agrees with all members of this Council that longtime city pensioners, their beneficiaries, and survivors, many of whose pension benefits have been eroded by inflation, are entitled to an increase in their benefits. This can now be done because of last 6 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 week's sale of $1.25 billion of pension obligation bonds, which will reduce the fund's unfunded liability from approximately 50 percent to approximately 27 percent. As long as cost-of-living adjustments are funded from the earnings of the Pension Fund and not by the taxpayers through the General Fund, we can support additional payments to retirees and beneficiaries. In this regard, Bill No. 990001 is a significant advance from the provisions of Bill 12 No. 980708, which the Mayor disapproved on January 14, 1999. As set forth in the detail in the Mayor's veto message, the, quote, cost-of-living provisions of the old bill created significant risk to the General Fund and could also have jeopardized the financial stability of our Pension Fund. The, quote, Pension Adjustment Fund provisions of Bill No. 990001 eliminates these risks, and the Administration, therefore, supports these provisions. Bill No. 990001 establishes a gain-sharing approach that would create a Pension Adjustment Fund that would receive one half of all investment returns from the Pension Fund in excess 7 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 of 1 percent above the actuarial assumed earnings rate. The Pension Board would be empowered to make pension adjustments out of the assets of the Pension Adjustment Fund. Because the Pension Adjustment Fund would consist only of gains accrued in excess of percent, the General Fund 8 would not be required to support distributions 9 from this fund or from the Pension Adjustment 10 Fund. Bill No. 990001 reflects Council's intent that the Pension Adjustment Fund distributions should be funded solely from the Pension Fund investment returns and that the General Fund will not be required to support the Pension Adjustment Fund in any way. While the Administration supports the Pension Adjustment Fund provisions of this bill, we must repeat our concern that the cost of the two lump-sum payments required under Sections 131.1 and 120.1, the costs of these two ad hoc payments will be significant -- at approximately $88 million over a ten-year period. And this is more than was intended in the original budget planning. 8 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Thank you, and that's the end of the testimony from Mr. Hayllar.
Yes. Mr. Herkness, and again, Mr. Hayllar's not here and if there's an area that he can better answer, I'll be glad to wait not today but some other time for him to answer. It seems that we had a long discussion on this bill both Thursday and Monday. And our biggest stumbling block within the Council is clearly -- vis-a-vis the Administration and among ourselves is clearly whether the sharing starts at 10 percent or at 9 percent. And what I would like to hear from you -- your statement was very clear that the Pension Adjustment Fund, being set up the way it is with the actuarial certification using the smoothing, the adjusted market value, spreading the risk over five years, the upside and the downside. You said, and I quote, that this Pension Adjustment Fund now, as opposed to before, eliminates risk to the General Fund. 9 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 How does that change if 10 percent is okay and protects the General Fund and the Pension General Fund, both funds? What is the danger of 9 percent? Or is there a problem with 9 percent as opposed to 10 percent when the sharing would begin? Could you explain that? I've yet to hear in two days anyone tell me what the problem is. I see the problem for the Pension Adjustment Fund, but I've yet to hear what the concern is about the Pension Fund itself if you start sharing at 9 percent -- which means, I believe, and correct me if I'm wrong, that that half a point that the Pension Adjustment Fund would not get, because you would not be sharing that first full percentage point between 9 and 10, would be worth in an adjusted pension obligation fund, the higher fund, about $22 million in any year that there was an adjusted market value of at least 10 percent. What is the driving concern that this has to be 10 percent and not 9?
I've discussed this a number of times with Ben Hayllar. I can only -- to the best of my ability, I'll paraphrase what 10 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 his comments would probably be, and then I'll allow Ken Kent, who is the Pension Board's actuary, to comment if you want any further comment. The percent is a projected target, no 7 different than we have a budget in our 8 households. The idea is that if you miss that 9 projected budget, what do you do? You need to have some sort of dollars to offset that. And the investment losses or gains are not the only experience changes that the Pension Fund has. There is a possibility for losses due to people living longer and salaries going up, so -- above year assumptions. So that it's a cushion so that if you miss your budget, you will be able to offset that and not have a future threat to the City's General Fund. That's basically the down-and-dirty concept, that it's a protection in case you do not have good darts on your projections.
Could I ask you, Councilman, to speak -- 11 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I'm sorry. Thank you. If the provision for a starting of sharing at percent were 9 instead, what would 6 be the risk? Once you've introduced smoothing 7 you've introduced the actuarial certification, 8 what would be the risk to the Pension Fund? 9
Why don't I ask Ken Kent 10 to specifically address that, quote, risk.
My name is Kenneth Kent, I'm with William M. Mercer. I'm the actuary to the Pension Fund. If the sharing begins at 9 percent, there is a higher risk that the actuarial assumption will not be met over a long term.
Would it be significantly different if it were 9-1/4 before the sharing started? 12 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
The 9 percent assumption that is used in valuing the -- that's used in making the assumption on return of assets in use in valuing the liabilities of the Pension Fund --
Okay. Is that better? Okay. Basically assumes that there will be years where you'll earn in excess of 9 percent and years where you'll earn under 9 percent, but over time will get a 9 percent return. Once you have any mechanism that says that those excess returns are shared, it increases the potential that your long-range return will be under 9 percent. So there is a risk with any sharing, that you're 13 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 effectively decreasing the ability to meet your assumption if you believe that assumption is accurate and the best representation of the earnings rate of the fund. The higher the threshold for sharing, the lower the chance of not meeting your assumption. How much more significant you lower is based on anyone's guess of what the future market rate of returns will be and the future potential that the fund will, on a regular basis, exceed the assumption.
And the higher the sharing threshold is, the less chance there is that there will be money available to share with the Pension Adjustment Fund and the Pension Fund?
That's true, and that goes to the definition of gain-sharing. And that is that if in fact over a period of time, if you look at an average of five or seven years of return, if the average return does not exceed 9 percent, then you would think that there should not be an opportunity for gain-sharing 'cause there effectively is no gain-sharing. So it goes to the definition that says 14 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that if the market returns and the returns in the fund are expected to be better than our assumption over a period of time, then you should share those greater expectations as they're realized. So it goes to gain-sharing. If all you make is your assumption over long term, and that's our best guess, then there would not be any gain-sharing.
Right. And the majority of like funds that you're familiar with have 8 percent as their actuarial assumption rather than 9?
So already because, even though we didn't know there was going to be a bill dealing with a PAF and when gain-sharing would start, 'cause we've been doing this for a long time, our more aggressive 9 percent actually serves as a very conservative protection for the Pension Fund when you introduce gain-sharing, because the lowest anyone would ever in their right mind would agree to would be 9 percent, with a 9 percent assumption; is that correct? You wouldn't be talking about an 8.5 15 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 sharing if your assumption was 9 percent and you had smoothing; it just wouldn't make any sense. So we're really talking about 9 being the lowest number we could be discussing here, with any reason. I mean, we could be discussing 10, 11, 12, but when your actuarial assumption is 9, you wouldn't be discussing 8 or 7 or 6; you would just be killing the fund doing what. But we already have -- and what I'm trying to illustrate here is by having a 9 when others are at 8, there is already a whole percentage point that can't be shared just because of the assumption, the actuarial assumption. And I have no problem with just; all I'm trying to do is establish that that's just a fact, that 9 percent is maybe a point higher than other funds, but it ensures in a sharing situation that you don't even start talking about it until then. So there's a whole point of conservatism built into this thing because of your assumption being 9 instead of 8. Regardless of whether 9 was the right number to have as an assumption or not, it brings us to this day today in this legislation where 16 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 there's a whole percentage point difference between you and the prevalent actuary assumption that protects the fund that much more before you arrive at an agreed-upon number, whether it's 9, 10, 11, or 12. Is that a fair statement?
It protects the fund if you're trying to protect the fund against gain-sharing. It does not protect the fund if you're addressing protecting the fund against the volatility of the market.
Right because we've been trying to do that all along. I'm saying once you use the 9 to try to push the higher returns and have gain-sharing -- not gain-sharing but the smoothing work on the 9 percent assumption rather than an 8 or some other number lower than 9, it just so happens that when you introduce sharing, you're already at a higher number. And that has significance when you start talking about sharing. The higher the baseline is for sharing, the more the fund is protected. There's no question about that, just 17 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 as a general statement. And we're at 9 where another fund might be at 8 if they had the prevalent percentage.
The higher your actuarial assumption, the higher the threshold before you can share. However, the higher your actuarial assumption, the more difficult it is to year-in-year-out see market returns that will equal or exceed your assumption.
That's correct so it actually works both ways in terms of -- when I say "protecting the fund," I mean causing less money to go into an Adjustment Fund that would be used for increases, whether they be ad hoc COLAs or one-time bonuses. As that number gets higher, whether it's 9 percent or 10 percent, it prevents the possibility of that much more money going into the Adjustment Fund and also increases the amount of money that can go into the fund itself for regular distribution. Is that correct?
I don't understand the point of going into the fund itself for regular distribution. 18 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Well, if you're at 10, if you put your floor -- well, if you put your actuarial assumption at as opposed to and 5 sharing started at the point of the actuarial 6 assumption, would there be more money in the 7 Adjustment Fund if you used 8 than if you used 9? 8
Yes, but there are a number 9 of different components when you start to move your actuarial assumption around that you also need to be aware of. If your assumption was at 8 instead of 9, the City's obligation to contribute would be dramatically higher.
I understand there are other components. All I'm talking about is -- we went over, and I'll go over with you now for the record. If you go back to 10 years and we had had a PAF and the fund was adjusted to the much larger amount that's going to occur after the pension bonds are sold, there would have been, in spite of a bull market and great returns, I think everyone would agree for the Pension Fund, only two years where a 9 percent gain-sharing would 19 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 have occurred, and only one year where a 10 percent gain-sharing would have occurred. Is that correct?
No, it would have been three years at percent and four years at 9. 7
But two of those 8 are -- two of those at the 10 are just 9 insignificant numbers? In other words -- 10
I don't have the chart in front of me, but the other day we went through this, and there was only two years where there was any money.
Two points: three at 10, four at 9. And the reality is that during that period of favorable market, we barely made on average 9 percent to meet our assumption.
Okay. So if any of those dollars were shaved off, we would not have met the actuarial assumption over that ten-year period.
Okay, because of smoothing, though, an percent gain in one year 4 becomes a 12 percent gain in that year '97. 5 So smoothing changes -- we were talking 6 about market value back in December, when we had 7 the other bill, the bill that was vetoed. 8
Market value would 10 have had a -- if there had been a PAF with market 11 value, there would have shared everything from 9 12 percent to 18 percent, with no cap on the sharing. 13 It would come down to 12 percent under, with the 14 effect of the five-year smoothing. And that was 15 the best year we had in ten years. 16 The fund would have shared, with the 17 newly introduced PAF, approximately 3 percentage 18 points -- I think it was 3.1 or 3.2. And the effect of that at 9 percent would be that they would have shared somewhere -- how much is 3 points worth under the adjusted 4.1 billion?
No, this is when we had the 12 in '97. And if you had a 9 percent floor. I just want to give the two scenarios 21 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 'cause that's our best year, and a year we only reached once in ten. Each point is worth approximately 44 million under the adjusted --
Under the anticipated size of the asset value of the Pension Fund after the POB.
That's why I'm saying the adjusted 'cause I want to use the real number that would be --
Okay. So in that scenario, if we had a 9 percent floor, there would have been approximately 66 million going into the PAF; is that correct?
Actually, just looking at the statistics, if you were sharing above 9, you would be splitting 5.6 percent. If you were sharing above 10 during that same period, and this is going back 10 years, you'd be sharing --
No, no, let me -- 22 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 you're going -- you're ahead of me.
-- of sharing versus 2.2. And it would be approximately 66 to 70 million would be shared each would get under that full 3.2 sharing if 9 were the number.
Under that scenario, which at 4.1 would be 22 million bucks, ballpark.
If you were sharing -- 23 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 if it was 12.2, you'd be sharing the 2.2 under 10 percent. That gives you 1.1 go. If you went back to 9, you share another half, so that gives you 1.6.
So you've got a half a 9 point advantage. At 4.1 billion, it's about 20, 10 21 --
It's $22 million difference going into the fund. But the total for that year, under that POB-adjusted amount, would be approximately how much under 10 going into the PAF and how much under 9?
Okay, 42 million under the 10 percent, and 66 under 9. That's in the best year by far that we have on the ten-year rear projection camera. If we go back looking at the experience of ten years, 1997, the year we're talking about, the Pension Adjustment Fund gets 42 million under 10, 66 under 9. Can you go back to '96 and give those 24 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 same numbers, when the return was, I believe, 10.1?
Okay, 10.1. What is shared if you use in total dollars? 7
About million, 9 okay. And then what is shared if you use 9; 3 10 million?
It's 22 million? Okay. Okay, so 9 -- the difference between using 9 and 10 in 1996 would have been the difference between the Adjustment Fund getting 2 million or the Adjustment Fund getting 22 million; is that correct?
Okay. What are the other two years where there was -- where the fund got more -- earned more than the actuarial assumption in the last ten years?
In 1993, the fund earned 9.7 percent; and in 1990, the fund earned 10.7 percent. 25 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
In 1998, last year, it was 11 -- 11.9, I think it is. From 6/30, ending 6/30/98. It's ballpark. The new valuation will show 11.9, I believe.
In '93, I'm sorry. In '93, it was 9.7 percent. So under the 10 percent, there would be nothing going into the Pension Adjustment Fund. And what would it have gotten at 9?
About 12 million, okay. And what was the other year, where it was 10.7? 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
1990. And 10.7 would give what under a percent cutoff? 5
Okay, 34 million. And the other six years we didn't meet our actuarial assumptions, so there wouldn't be any talk of sharing under either 9 or 10 percent.
Okay. Now, gentlemen, I ask each of you if you can state for the record whether you think it's unreasonable, given this experience and what we know going into the future, if you think it's an unreasonable risk for the Pension Fund to have sharing begin at 9 percent. That's the question.
Councilman, I think the question has to be, Is there risk to the City's General Fund not necessarily the --
Well, I didn't ask 27 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that question. I'll ask that question second if you'd like to answer it.
Do you believe that starting sharing at percent instead of 7 percent is an unreasonable risk to the Pension 8 Fund? 9 Joe, I'll start with you. 10
Me. The risk to the Pension Fund is that if you do not make the 9 percent, the assets begin to deplete.
Just give me your conclusion whether you think it's unreasonable to start this at 9; then you can tell me why.
I -- I think that you -- it is unreasonable to the point that you forget your projections and you just say, Well, we're going to be right on target all the time. And, therefore, you do not have to have any sort of cushion, or you do not have to have significant 28 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 cushion. So in budget planning -- and that's really not my area of expertise -- the budget plan would have to be -- if I could use a dart board analogy, the darts have to be much, much better. And to that extent, you know, where you begin reasonable and unreasonable is reasonable people disagree where that would be. I believe that you absolutely need some cushion if you missed a point for that 9 percent, which we've been very, very lucky. It's been in effect since 1981, the 9 percent assumption, and it's very close to an 11 percent on average over time. So we've been luck the capital market's rising tide lifts all boats. This fund and the City's General Fund has been very, very lucky to have this experience. Where it begins and ends, Councilman, that's a very, very difficult question. The budget planners really have a very difficult job their.
I would want a cushion. 29 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 If I would -- let me just give you -- this is my opinion, Joe Herkness's opinion, no one else's. If I was saying you're going to plan 9, I'm going to say I need something when the people begin to grow older, live longer, and the salaries are going up. As we have a problem, we can't figure out why it's 8 percent this year, and we have an assumption that's much lower than that, there's an issue there. If that turns out, we have another loss in your budget. So that's the reason that there's additional situations where you could have additional losses aside from the investment gains or losses. If it was just investment gains or losses, the risk would be significantly low, all right? You might be talking about something different, but there's --
Joe, I'm going stay with you for a minute. Would 9-1/4, with first quarter going to the Pension Fund, which would be about $11 million, I guess, under the $44-million-per-point calculation building up over a period of time, would that -- and obviously it would worth more than 11 as you start increasing 30 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 the fund even more. But would that quarter point going first to the Pension Fund -- so instead of one point going, a quarter point would go. Would that be a reasonable amount to give you the comfort you're looking for?
That question needs to be asked of the budget people because the Pension Fund receives its money based on the returns. The Pension Fund is not involved in the budget. We basically tell the City what they owe us.
When you say "the budget people," you don't mean budget people in --
Oh, yeah. The City's Budget Bureau, the -- we give them the experience, and we say, Here's what the experiences, you owe us another 10 million this year.
Okay, Joe. You're getting to the General Fund, and I don't mind getting to that; I just want to stick with the Pension Fund now 'cause that is your area. And I 31 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 agree that that's their area, the General Fund.
And I'm sure they can answer, and you can try to answer for them on that. But right now, I'm just saying, would a quarter percent coming in off the top, the first quarter percent before any sharing and what that would mean over a period of time, would that give you the comfort level you would be looking for or would be satisfied with?
Councilman, from purely the Pension Fund -- the Pension Fund view, if nobody cared, you know, basically what any other entities -- any other problems that any other entities had and if the trustees just basically put blinders on and said, you know, we know what our job is, we don't care what the rest of the situation is, that the Pension Fund doesn't have that level of concern that the General Fund would have because they just give the General Fund the bill. And so from the Pension Fund, just purely the Pension Fund, whatever it is, the City 32 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 has to make up that difference if it's below 9. So the Pension Fund is basically guaranteed that 4 over time, although you're spending the money 5 every year, cash out. And if the losses, the 6 money begins to get amortized over a longer period 7 of time. So there is a drop in the size of the 8 fund if you in incur less than 9 percent over a 9 long period of time. Is it reasonable or unreasonable from the Pension Fund's view? This organization gives us the ordinances. If they say, Send X-amount of dollars out, we send X-amount of dollars out. We then calculate the bill, get it as precise as possible, and then give the news to the City's General Fund every year around February.
So it's really -- and this is helpful, Joe. It's not what the impact is or the risk is at this point to the Pension Fund, whether we're at 9 or 10 or some other number; it's what the impact may be to the General Fund because of --
Yeah, I think that's -- Ben Hayllar's testimony clearly says that the previous -- the problem with the previous bill -- 33 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 and if I could paraphrase a little bit here, one of the major reasons for the veto was the exposure, the potential exposure, to the General Fund -- meaning the City's General Fund not the Pension Fund.
Okay, and I don't have any problem with that. But what it doesn't say is -- I mean, Mr. Hayllar, unless he was on Mars the last couple of days. Knows that the big issue -- the Mayor even knows it -- is between 9 and 10 percent of where you start the sharing.
His testimony, which I would expect if he wasn't even on call, would have been as complete as possible, would have specifically addressed the differences and the real problem -- whether the real problem is political, whether the real problem is genuinely in the Pension Fund or genuinely in the General Fund to the City. There's nothing in his testimony that 34 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 talks to that. And I would like to know what the additional risks are to the General Fund that concern the budget people, that they are insisting -- that the Mayor insists on percent, when I 6 believe reasonable people could agree that 9 7 percent is plenty of protection all around. 8 I don't think, as a policy decision, 9 the Mayor's given us a bill that has a COLA in 10 it. We've got two bonuses in there that are separate and apart from any discussion about 9 or 10, percent the bonuses. If we're going to have a COLA and that's going to be a policy of the City, don't give us an empty COLA. Explain to us what the impact is. There may be an impact. We talked on Thursday. There's cost avoidance. The better the fund does, and if the fund doesn't have to share anything or if it doesn't have to share as much as it would otherwise, there is a cost avoidance to the City if the fund does well and doesn't have to share it or it shares less. We all heard that. If that is what's driving this discussion, I would just like us to understand it, 'cause that's the one part we have not heard in 35 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 this -- where the Finance Director's position is on the difference between 9, 9-1/4, 9-1/2. The Finance Director, the last time I checked, was not an elected official, but he is obligated to give us this information so we can make policy decisions along with the Mayor. He has not done that, and I believe he's remiss in not doing that because these are very serious questions and it's really boiled down to the difference. If you go over ten years in the past, the fund averaged of 10.8. That fund does not have enough money going back ten years to be a Pension Adjustment Fund that anybody would want to have any confidence in or really be hoping to get something out of. It doesn't have a whole time more if you go to 9 from 10, but it certainly gives you something to work with. To give a number on the record, adjusting for the pension obligation bonds, what is needed in any given year to give -- based on today's valuation after the sale of the bonds, 4.1 billion or so -- what kind of actual dollar number would the Pension Adjustment Fund have to have to 36 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 give a percent ad hoc COLA one time to give that 3 out?
Everybody in the system. I think we heard it in the caucus room 8 the other day, but I'd like it on the record. Each point is worth 34?
Approximately, yeah, so you're looking at about a $100 million.
You're looking at $100 million, okay. In the last ten years, using 10 percent as the base for sharing, was there enough accumulated -- this is for Kent -- was there enough accumulated under 10 percent in a hypothetical PAF, using the higher adjusted pension obligation bond amount in the fund, was there enough accumulated in the four years -- I'm sorry, in the three years that would have been sharing up to 1997 to get a 3 percent one-time ad hoc increase?
Okay. Was there 37 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 enough to give a 2 percent one-time over ten years ad hoc increase? Ad hoc COLA increase?
I do mind 'cause I'm on a roll here and I'm going to forget everything I'm saying. And this is critical, Michael.
I understand, Councilman. I'm just trying to understand the terminology that you're using.
Well, if he understands it. (Councilman Cohen addresses Council inaudibly off-mike.)
If I could make this clear, I will. I'm sorry. If I could just make this clear.
This is not going to make this a free-for-all please. (Councilman Cohen continues to address Council inaudibly off-mike.)
It was just a point of information. I was asking for clarification of a term. When the Councilman asked about a 2 38 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 percent one-time COLA --
Ad hoc COLA, which was described the other day as across the board affecting the base but not repeating itself the next year as another percent or percent. In other words, if you got one in ten years, your base pension would go up 2 percent forever, whatever it was. If it was 100 percent, it would then become 102 percent. But unlike a regular COLA, it would not be 2 percent next year, 2 percent the following year and 2 percent the following year.
So if the person is getting $100 a month in this year.
They would go to 102 percent the next year, and then the third year, they'd go back to 100?
Okay, so it is 39 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 continuous.
Yeah, it is continuous, but there's no 2 percent additional the following year, which a regular COLA would have.
What would 2 percent under the -- 2 percent ad hoc COLA under the 10 percent floor, would that have been possible in the last ten years?
About 1-1/2 percent. So over ten years, using a 10 percent floor, there would have been a 1-1/2 percent one-time COLA. Okay, thank you. Now, going to the 9 percent floor over that same ten years, now you have four years of 40 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 sharing because there was a 9.7 year in '93. Would there have been enough money to give a 3 percent COLA in the PAF?
Okay, we just about would have made it. So the difference, going backwards, using the experience we have, it would have been a one-time 1-1/2 percent ad hoc COLA versus a 3 percent one-time ad hoc COLA. And what -- See, Madame President, I believe there's two issues here -- one that I believe has been introduced today and we don't really have the answers to, which is the General Fund's worries. And there is a cost -- there will definitely be a cost in cost avoidance. Mr. McPherson has explained it, the actuary has explained it. In today's environment with a Pension Fund, the more the Pension Fund makes, the less the City pays. Then, obviously, when they're not making as much because part of it is being shared 41 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 at some high level (over or over percent) with the Pension Adjustment Fund before you get into the area over the cap, which all goes to the Pension Fund itself, there's going to be less cost avoidance. There's no question. These dollars will come from somewhere. Unless the Pension Fund is overfunded -- not at 70 or 75, but at 100 or 102 or something -- there's going to be an impact. The question, I think, for all of us to consider and maybe hear from the Administration for the first time is what those projected impacts are. Are they Armageddon, a quarter of a billion dollars? Are they 100 million a year, as I heard two night ago from the Mayor? Absolutely not. They are much, much lower and may, in fact, be a very reasonable amount, considering it's the Pension Fund making the money that has allowed, in the last ten years, the City to avoid payments that it would have otherwise made. Why shouldn't the pensioners be getting the benefit of that? The Administration is not here. I believe I've heard enough from Mr. Herkness. And I just ask the actuary to be on call because I think the heart of this matter is, one, do we 42 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 want, in the next ten years, assuming the greatest market we've ever seen again, as we have seen for the last ten years -- everyone agrees on that about the market -- where the adjusted returns, the posts smoothing, the adjusted market value returns were 10.8 after you brought them all down to even out the two years that were very, very bad, the two 1-percent years -- that with all that protection in the fund, it only left an average of 0.8 percent to share, which means 0.4 percent under one scenario and 0.7 percent under the 9 percent scenario. The result being that there was approximately 100 million after ten years to give out of COLA to pensioners. One time they get it in ten years. One and a half -- no one's going to vote, either the Pension Board or this Council, I believe, for a 1-1/2 increase over ten years. But that money would certainly be there, that 50 million or so, to give out as a bonus or some other things. But that's just the parameters of what looking at, is that there would be 50 million in one case, 100 million in the other. So let's look at the difference. The 43 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 difference between the two is 50 million. Under percent, which is the Mayor's floor at this 4 point, there would be 50 million. There would be 5 100 million under the 9 percent floor, $50 million 6 spread over ten years. Now, if you take the 50, 7 you spread it over ten years, it's 5 million a 8 year. But that's not the increased cost to the 9 General Fund. It is something much less than 10 that. And if the actuary could help me, in that scenario, what would be the impact to the General Fund if, over ten year years, the Pension Fund itself -- the corpus of the fund, because the PAF would be getting it instead -- got $50 million less over ten years?
Ultimately, the General Fund would be paying in the $50 million.
So it would 5 million a year would be cost to the General Fund?
It would grow slower than that and continue to be paid after that ten-year period.
Could you explain that. 44 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Sure. Each year in which the return is less than the percent -- and over 4 this ten-year period on the adjusted market value, 5 it was less in the aggregate -- the loss is paid 6 off over a 15-year period, much like a mortgage; 7 we call it "an amortization." 8 Effectively, if there was a $5 million 9 loss in a single year, the General Fund's obligation would go up about 1/10 of that, or $500,000.
Excuse me, this isn't a loss. This is less gain over the 9 percent.
Well, yes, but what I said before is that the less gain over 9 percent up to at this point has been supporting the return under 9 percent.
Over time, it averages out to dollar for dollar, yes. So that if in this ten-year period, the fund actually had an 8.8 percent return, then the City's obligation or the General Fund has been affected by having to meet 45 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that difference.
Okay? And if you shared at a percent -- over 10 percent, then the average 6 return would drop from 8.8 to 8.5. If you shared 7 over 9 percent, it would go from 8.8 to 8.2. 8
Okay. So then are 9 you saying -- and I'm really trying to get clear 10 on this -- that that $50 million that would have gone to the PAF over the last ten years with a 9 percent rather than a 10 percent would essentially just be paid right out of the General Fund?
Yeah. Sooner or later, there -- you know, there -- the General Fund's obligated.
So any PAF that we would establish, whether it be at 10 or 11 or whatever, the money comes out of the General Fund?
Yes. It affects the General Fund's obligation to contribute, so the General 46 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Fund is ultimately going to be paying for it.
Yes, but there's a difference in the timing of the dollar; that's what I'm trying to say.
Tell me what impact that would be, for instance, in 1997, which is the biggest year, the year we actually had 12.2 percent.
Right. Well, see, if you isolate a single year, you'll get a different answer.
So let me explain that. In 1997, where the fund return was 12.2 percent, it reduced the General Fund's obligation to contribute.
By between 8 to 8 million dollars. It's a rough estimate. Now, as I said, taking that single year 47 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 out of context that's the answer. The City's obligation to contribute would be decreased by about to million dollars each year for the 5 next 15 years. 6 However, adding into context the fact 7 that in '95, the return was only 7.8 percent, it 8 means that the City's obligated to contribute an additional $3 million as a result of that experience. In '94, again, the return was 7.8. So on top of that, the City's obligation increased $3 million. Over the past ten years, if we look at just the investment portion and impact on the City's obligation, the City's in the a paying position. In other words, the City's obligation is higher than our assumption guessed it should be by a small amount, and the amount is small enough that we do not, as the actuaries, feel that we have to recommend a different assumption, okay? And this addresses one of your other concerns, which is not one of ours to answer as far as the risk. But if you are sharing in excess of 9 percent versus 10 percent and we looked at the last ten years for historic inference of the 48 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 impact, the net result resulting return over that period of time would be 8.2 percent. And that would reach a threshold of concern that we would have with regard to the maintenance of the 6 percent assumption. 7 And that has implications not only on 8 what we assume for investments but how we value 9 liability to the extent that your assumption for valuing liabilities goes down from 9 to 8. That means that you assume less of your liability will be met by future investment income and more of your liabilities must be by met by future contributions. And the difference is -- a rule of thumb is that your liabilities may grow 15 percent, which would dramatically increase the City's obligation to contribute. So we really don't want to have to go over that bridge.
Now, if the difference between 9 and 10 inferred, doing a ten-year inference, would be $5 million a year roughly --
-- having the 10 49 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 percent cap, just having to share all the 10 percent, by definition would have cost the General Fund itself million a year because there was -- 5 that was the first 50.
Okay. So you make a choice if you're us collectively to have a fund at all, and at percent, looking at it 10 historically, it would cost us about $5 million a year to have a sharing fund that would have gotten what we've seen in the historical perspective. And if we wanted to lower it to 9 from 10, it would cost us an extra 5.
And somewhere between 9 and 10, we can figure out the percentages. If it's 9-1/2, it's going to be 2-1/2 a half extra million dollars a year on top of the 5 at the bottom that's already sort of in the pot. Okay. I think I understand it better, Madame Chair. There are clearly numbers involved here that affect -- and I guess this is what Mr. 50 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 McPherson was. . . This was your gloom and doom scenario, Charlie, of the sky falling, and I do understand there's costs involved that have to be dealt with, and at least I know now where they're coming from and why they're a concern. But just to give some more perspective to it, whether it impacts an extra 2.5 million or 5 million a year, what was the Pension Fund's contribution the last couple of years? I don't know.
I think last year, it was -- I have the numbers. My recollection was that it was about 232 million?
And the cost avoidance to the City because there was no PAF -- I mean I'm not saying because there was no PAF, but there was no PAF so all of the cost avoidance went to the City. And I know there's a number that those good returns saved the City. That 10.8 average over ten years saved the City from its contribution. I don't need that number right now 51 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 but just a general answer to this question. Those funds are significant, those over percent funds, the funds that were gained over 5 the actuarial assumption -- that 10.8 adds up to 6 quite a bit of money. Who got the interest on 7 that money over the ten years? Or was that shared 8 also with the City? Did the Pension Fund get it, 9 did the City get it, or was it somehow split?
Well, if you're saying that any dollars that represent returns in excess of the assumption grow with interest, those dollars are in the fund to meet the liability.
So the City doesn't get any cost avoidance based on interest on that?
How about the money that's in the smoothing account, that's set aside for smoothing, the five-year running amount that's kept there? Does the Pension Fund get the entire interest gained on that money, or is there some way that the City avoids cost on --
No, any return on those dollars that are not recognized for valuation are 52 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 still in the Pension Fund, purposes and none of the interest on any of the dollars in the Pension Fund revert directly back to the City.
Well, I don't mean directly. When I say "cost avoidance," I understand that term. Does the City give any less because of the interest gained on that? Which is the same thing -- I don't care whether I'm --
Because the assumption is that the interest gain on that is 9 percent and that that's part of the basis of determining the costs.
Okay. Thank you. I have no further questions at this time, Madame Chair.
Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madame President. Just a follow-up to the questions already asked. We've learned in the last week 53 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that this smoothing that was placed in this new bill changes all the money that we're talking about, so we're not talking about real money but maybe one fifth of what we thought we would, and it also affects the period of time of investment. So my question is, again, if we had -- if I understand correctly what was just said, Councilman O'Neill asked you and you replied that looking back historically over ten years, if the threshold was 10 percent, the pensioners would only get something once; is that correct? Is that what I heard? And it's twice if the threshold is 9 percent. Now, maybe I don't understand what I'm hearing. I'm trying to make it English and trying to translate English into --
I think he was a 3 percent increase -- at any time could, there have been a 3 percent increase, and I think that answer was no. And could it have been a percent, and I 22 think it was a "yes." And then 2 was in between, 23 based on the earnings. 24
The answer didn't direct 25 itself to how often there would be a benefit 54 1 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 improvement for retirees; it was to the level of that improvement. Basically, over the last ten years, the difference between the and the 5 percent is about half. 6 So that if the threshold is at 10 7 percent, the improvement is about half as much as 8 what it would be if the threshold begins at 9. 9
All right, let 10 me ask it another way. Would you compare between 9 and 10 percent because that's easy rather than saying 1, 2, and 'cause that's easier other than saying 1, and for those of us who may not be accountants by profession. But would you tell us, based on 9 percent on one hand and 10 percent on the other, per this bill and the historical reference where you can look back ten years and you could look up five years and tell us what a pensioner could get. If I'm if I'm a widow of a pensioner or a pensioner myself or a retiree, what could I get? What could I get, what kind of increase could I get? Based on our ten-year back projection which you're familiar with, what could I get as a retiree, and when and how often? 55 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Okay. We discussed as one illustration and just as an illustration because, according to the language in the bill the Pension Board would have the obligation to identify how the PAF would be used. The illustration that was discussed is that at a percent threshold, 8 retirees'. 9 Benefits could be improved by about 10 1-1/2 percent. So someone who is getting $100 would be able to get $101.50 a month for the rest of their life with the proceeds. At a 9 percent threshold, that same retiree would be entitled to $103 a month for the rest of their life -- to just put it into a perspective.
That's -- well, a month if that's -- we're talking or percent increase in the monthly benefit.
Translate it. It's $2 or $3 for every -- 56 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
So if you're getting a $300, pension, so you may get $303. Is that right?
For a $300 pension, you get about $305 versus -- no, 3 -- well, it's 310 versus 305.
Okay. So if you're getting $300 now, you may be getting $305, or did you say $310?
Well, 305 if the threshold begins at 10 percent, and 310 if the threshold begins at 9 percent.
Now, if we did not have smoothing, what would you get?
Mr. Herkness? 57 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Mr. Herkness, can you answer the Councilwoman's question?
I don't think I can. If you didn't have smoothing, there would be a total different method of calculating. If you said let's forget that you had an asset valuation or a smoothing process, you would take the market value of the fund, then you would take some number of return and run some scenarios. If it was -- if you used the market value of the fund, you could go -- you'd have to go back and calculate that. You could get that number. Off the top of my head, I don't know. I know I did a 10 percent scenario that went back about thirteen years and, you know, we had somewhere around 126 or $130 million in the fund, you know, over that period that was just based on over 10. And that was using the asset valuation; process we did not use market value. If we used the market value, that number would be larger, there's no question about it.
One final 58 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 question: Do you have any idea or can you explain to me why either $5 or $10 in additional money per month for retirees has created this kind of problem, all the furor -- well maybe "furor" isn't the right word -- all of the dissention about the Blackwell bill and all of this about Mayor coming up with another bill? I absolutely do not understand and would like somebody to explain how a poor guy or poor woman who gets a $5 or $10 increase can break the City's budget. We've got a Republican Convention that's coming and that's going to bring us a minimum of $300 million. We got all kinds of stuff. We had the Mayor bring in his budget. I just wish somebody could explain to me the threat of giving people who make $300 a month an additional 5 or 10. I don't understand it. Maybe I could have -- I prefer then, Mr. Nutter, if you don't mind.
If you want to clarify, I just wanted them to answer and not 59 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 yourself. Fine.
I just wanted to just at this moment and where the Councilwoman is, I just wanted to make sure that the record was clear that the response that Mr. Kent made about what percent someone may get per month based on how much money there is is only based on whether or not the Pension Board decides in the distribution of the funds in the pension adjustment account to go that particular route in terms of distribution. There are various ways to distribute the money in the Pension Adjustment Fund. It could be as, Councilman's own's example was, the one-time COLA. It could also be similar to what the front part of the bill and similar to what your bill had proposed that you could give someone a lump-sum payment. Under that scenario, using the same figures that we're presently using to get people a check in July of '99, that amount is $44 million that would allow someone to get a $1,000 base, plus $100 for every year of service over ten. So, for example, if the Pension Fund 60 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 decided not to do a one-time COLA with the money, but decided to do a lump-sum payment, the person who has been retired for fifteen years would get a $1500 check.
Excuse me, Mr. Nutter, I have no idea if -- you've gone from -- I just asked them about $5 and $10 breaking the City.
Now you've gone up to somebody getting $1500. I have absolutely no idea what you're talking about but I really would appreciate it if they would respond to that question. I'm just trying to figure out what the threat of $5 or $10 is to the City for people who make nothing.
I'm trying to understand why we are here and why, since Ben Hayllar's out of town and they represent the Administration's point of view, I'm asking them to explain it to me and to all of us so that we can understand why we have this debate.
Right. 61 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Why we had to have two bills and what this whole point is to -- all of this about so very, very little. I mean, what's 5 or $10 going to be? My goodness, I give that out to homeless people more than that in a day. My goodness, I just don't understand, so I wanted them to explain it to me.
Councilwoman, in our opinion, the total cost must be counted as to say what the total expenditure in any given year would be for the pension adjustment, whatever you'd want to give to all 30,000 -- or in this case, there's about 20,000 beneficiaries out there and survivors and retirees who would receive something based on 131.1 of this bill, and that's X-amount of dollars. That amount has a certain level of pressure on the General Fund. The City's agency bill goes up because of the increased costs there, and that is presented to the City and they pay it off. A 5 percent, a percent increase would be 25 very small for someone at 300 as it goes up. The 62 1 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 total amount is what you have to deal with. If the amount of money that was going to be given, and let's say there was an ad hoc passed just by Council -- not in the Pension Adjustment Fund, just the Council decided to give 1 percent or they decided to give $10 to everybody in the Pension Fund, $10 a month, no matter whether you earned $25,000 a year or whether your pension was $8,000 a year, you would have to do that calculation and see whether that would increase the City's General Fund contribution. But under the act, Act 205, the State law, which is really what drives increases that a municipality wants to give its retirees, you have to fund that increase over ten years, and the retirees might receive it all at once or they might receive it over their expected lifetime, which could be -- some would be less than ten years, some would be much more than ten years. But you have to put that money in addition, in addition, to what you've already been told by your actuary that you have to put in this year. So that, for the sake of argument, if it was only a $10 bill and the City already puts 63 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in 100, the City would have to put in 110 for the next ten years because they made -- there was an ordinance passed and you would have to pay additional. So it's really the State law that drives it and protects the future. Because if you passed an ordinance and didn't fund it, then you would return to what happened many, many decades ago, where they put in a pension benefit and almost paid as you go, and then the unfunded group where since -- the '70s, the City has 12 consistently paid the Pension Fund money towards 13 that unfunded and it has ever so slowly gone down. 14 The pension bond obligation, which is 15 really historic, as is this legislation, and if I 16 could just make my own comment again, I'll get off 17 the air on this. You were about to say, you know, 18 why are we fighting so much? It really is sad 19 that people who have the same objectives have been arguing so much over what is truly historic, you know, legislation. And I'll get off the air on that one. But it's the total amount of any increase that is given the retirees. The City has to fund that over ten years. And if it was to 64 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 active employees, they can fund it over twenty. So they must -- that must be in addition to what they're paying now because of State Law Act 205, which was put in into 1985. And the City -- we were asked in previous Council sessions, you know, what we've been paying. We've been receiving amounts in addition to the minimum obligations from the City's General Fund so that the Pension Fund is very happy about getting more than the State says you would have to get. Last year, it was 247 million and, you know, the pension bond obligation will adjust that, but it's still -- you know, going up to 72 percent funded is a great thing for the Pension Fund.
I will comment and then I'm finished, Madame President. And that is from the beginning, we have tried -- the union has tried and has been willing to meet with everybody. In spite of the negative stuff about the press, the unions threatening, they've done everything but get on their knees. They have brought their people in here, they have brought all their actuaries and other financial 65 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 experts here. They have tried to do everything. And yet, we read that they filled the chambers when every year Mayor gives his budget address, every City department is here. When the School District testifies, kids aren't even in school that day. But yet, when it comes to this kind of bill, labor is told that they use some other kind of threatening technique when retirees who are home anyhow come in. It think it has been very really unfairly painted. I believe that from the beginning, they have been available and certainly I have. I told the Mayor as recently as yesterday when he came by to speak to each of us after his budget address, that they are willing and I am willing to try to work out anything and have been from the very, very beginning. But for some reason when it comes to a bill where people are at the bottom rung of ladder, there are too much complications to get it done. We can get anything done. We may even end up with stadiums. We can come up with any way to deal with the State, with the federal government to fund those things we choose to. But when it 66 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 comes to people -- as always -- who need it most and who have given the most service to our city, there's always some impossible way, there's always some impossible costs, there's always all kinds of reasons why we can't do it. I would hope, Madame President, that we can take these amendments, try to be fair about 'em and not try to decide again, as labor has been told, take what we want or you get nothing, which is what they were told last December. I would hope that we would all, in good faith, I agree with Mr. Herkness that we all want pensioners to get something. But I mean it's even more ridiculous when you hear how much they get. Then all of this, all the time and effort that's put into this, they're getting nothing. Let's try to at least be fair and come up with a bill that everybody can go out of here feeling that they have some level of dignity and respect and that all this process was worth something for those people who need it. Thank you, Madame President.
You're welcome. 67 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 (Applause.)
Thank you, Mr. President. I used to think I understood a little bit about when a company made money in a year and when they lost money. But, apparently, in the pension field, it's different. You make money but if you don't meet an expected gain, then you call it a "loss," even though you've made money, right? So if you're expectations are at 9 percent, as you said, and you get an 8 percent increase on your investment, no private company would report a loss, would they? They'd say it was great, we made an 8 percent increase. But in the pension field, is this universal, that it would be regarded as a loss? Or is this something special?
Councilman, I think the private sector -- not that I -- I know what you're saying. I think the private sector massages numbers, you know, an incredible amount, and the 68 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 private sector would probably say, We're short of our projected earnings. And the analyst would say the stock shouldn't be bought or something like that. But, you know, that's only opinion about the private sector.
Right. So when talk of a loss in the sense of not having met the expectations, it may not be the loss as we generally think about it; maybe we are just disappointed that the goals that were set have not been achieved, and we only make a profit when we get above our goals. Right? In other words, instead of the school standard tests that were given out recently showed improvement in the schools and we're cheering all over at the great gains, even though the results were far from establishing that people that graduated high school could read and write.
That's right. If you have a projected of $100 one year and then 110 and then 115 and then 130 and you're assuming that, and if you don't make your assumption, if you make your assumption or greater, you wouldn't have to put in the 113, 115, 130. But if you fall below 69 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 it, you have to put in even more than your assumption. I think that's a correct perception that you're saying there.
Am I right in understanding that the body of the Pension Fund has multiplied by about 400 percent in the last twenty years? A.
That it went from about a fund of a billion to currently a fund of about 4 billion?
When the fund really got its so-called feet wet in the capital markets, it was about $880 million around 1984. It is now market value of about -- not counting the pension obligation bond -- 3.4 billion.
So my percentage is roughly accurate, except that it only took fifteen years, not the twenty years I projected for basically the fund to quadruple itself, the corpus of the fund.
You know, I have such troubles understanding the deep concern about 70 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 the stability of the Pension Fund. I mean, is somebody expecting a nuclear attack on Philadelphia so that suddenly at one time, we're going to have to pay out all the money? I mean, I just don't understand why a 4 -- billion, billion, 4-1/2 billion maybe with the proceeds of the Pension Fund, why we're so concerned about the level of increases we're talking about. Aren't these increases that we're talking about far below what Social Security pays its retirees on the normal COLA? How do we compare with it? We haven't done anything in the last ten years. How long has it been since pensioners got any basic increase based upon the cost of living or on any other basis?
In 1984 and 1985, there was a $25 increase per month on the pensioners' salary. There was a State-supported increase for police and fire that took place in 1988 that took effect January 1989. That was laddered. You had to be out five years, ten years, fifteen, you got different amounts of money. And then way back, in 1980, which is, 71 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 you know, granted, a long time, there was an percent increase passed for non-uniformed. You had to be retired as of 1975. And in the '84 $25 a month, you had to be retire by July 1, 1981.
So it's been a long, 7 long time. Whether its police and fire, it's at 8 least ten years since any of them got any kind of an increase.
And maybe fifteen years for the general employees that retired.
It just seems to me -- I thought Councilwoman Blackwell made a very compelling general case that it really makes no 21 sense. I remember when the father of one of our distinguished colleagues, Councilman Rizzo, was Mayor of the city, we had an annual budget of maybe a billion dollars a year at that time -- I'm 72 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 not even sure it was that high, but it was in that area. And a newspaper reporter asked him about a $3.5 million expenditure, and the finance director then was Lenox Moke (ph.), who was nationally respected in the finance field, and he said, "Don't bother me with a trivial question when you're talking about $3.5 million out of a budget of about a $1 billion." And I would submit we're talking even of much less money compared to this corpus. I just don't understand where there can be any kind of a danger if the amounts we were tripled over what we're talking about here. Now, let me ask you, before I get back to the numbers. There are other aspects of Councilman Nutter's bill that disturb me mightily. And I have to say that I understand that when people who work for the Mayor and the City Solicitor's Office, or whether they were trained there and currently now work for City Council, they still have that same approach they always had. I can understand that they want to protect in every way the members. But tell me, why is there this language 73 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 -- all of us had just gotten used to the words, this averaging asset valuation five-year period. I can't even remember the words that follow each other 'cause it's new strange language. But apparently that isn't enough. So, Councilman Nutter, I'd like to address this directly to you. I suddenly find in the new version -- maybe I missed it before -- that if the Pension Board has authorized it, for any reason they don't like this asset valuation spread method over five years, maybe if it doesn't produce the result they're looking for, then the Pension Board on its own may substitute such other generally accepted valuation methodology as may be approved and adopted from time to time by the board. Now, I don't know where that language comes from, but it's the easiest excuse in the world --
I believe that Councilman Nutter can answer that, Councilman Cohen.
Thank you. 74 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 The Chair recognizes Councilman Nutter.
Because I don't understand why that is. You mean Council's not going to have anything to say about it?
Thank you. The Chair recognizes Councilman Nutter.
That language came as a result of some of the discussion the other day that no one else uttered there but myself. I'll tell you why and it may not be necessary. But when we had the discussion the other day the issue was raised about why does the current bill 14 have the phraseology adjusted market value of assets valuation method. That is the method that is used by the Pension Board to evaluate or to value our assets. That is their methodology. It is why that same methodology is used for the Pension Adjustment Fund, so that there is consistency. The Pension Board decides what valuation method to use.
I guess City Council could change it. There could be financial 75 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 market implications to that and we can have that discussion if you would like. But the Pension Board does decide what valuation method to use.
Do we have any power to change that -- we as City Council?
Councilman, you're my lawyer, and I would defer to your knowledge in the area. I believe that the City Council, probably by ordinance, could change the valuation method. All I can say to you is that you would be changes the total valuation of our Pension Fund which could have financial market implications for the credibility of the pension system, but our actuary can respond to that. I don't know when the Pension Board decided to use the market adjusted value; I could not answer that question. I don't know if they've been using it for two years or fifty years. All this phrase means is that if the Pension Board does ever decide to change its method of valuing the Pension Fund, that the same 76 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 methodology should be used for the Pension Adjustment Fund so that you don't have one valuation method being used for the $4.4 billion Pension Fund and then some other valuation method being used for the Pension Adjustment Fund. And if there is a difference between the two, quite honestly, there could be some implication on how the Pension Adjustment Fund is valued. I don't necessarily think it's a particularly important line in here and that's why, quite honestly, I offer to you if it is of that level of concern, we can take it out. I just wanted to point out -- and I would have gone through this in the presentation that if the Board ever changes its valuation method, there should be consistency in how all assets are being valued because you remember, even in the previous bill, in all of the testimony in this is that the funds in the Pension Adjustment Fund are not being removed from the Pension Fund. They are staying in the Pension Fund. So I guess theoretically you could use a different valuation method for dollars that are credited to the Pension Adjustment Fund even 77 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 though they're not separate, but you'd be using a different valuation method for the $4.4 billion Pension Fund. I don't necessarily know that you want to do that. This line was put in to recognize that there has to be consistency in the valuation method that's used. It does not have to be here. If it is objectionable to you, I'd be glad to take it off, but I think we needed to at lease have that discussion.
Well, I think it ought to be eliminated from the bill. We now know we don't fully understand but at least we have a little familiarity with it. I think before that method is ever changed, it ought to be brought by the Pension Board to the City Council, go through the explanations we're going through now so that we understand why they're changing it; rather than having somebody like me very suspicious that the reason they're changing it is because they want to find another way to avoid giving a COLA or to lower the amount of it.
Because that will be 78 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 our suspicion all along.
I know you asked me a question, and I don't want to take any more of your time, but would you mind, while we're on this point, if you would ask the people at the table when they decided to go to the present valuation method that they're using?
As far as I can remember 79 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 back, we've been smoothing, there was a change one time from a three-year to a five-year. And that was in either '88 or '89, but they have been smoothing certainly during the existence of Act 205 from 1985, and probably before that, because there was a -- in 1980, they didn't even have the investments marked at market, what they call "marked at market," so that the cost of the investment might have been $100, but because of what it's worth in today's market, it might have been 90. So there was a significant value less than the fund -- than what they paid for it. So they needed -- they phased that in --"they" meaning the actuaries and the City from 1981 to 1985 to bring it to market -- marked it to market so that what's ever in the fund is valued at mark value on June 30th every year, and not play a game so to speak, that I bought it for 100 and I can only sell it for 80. That's what, you know, in 1980, that's what they were presented it so they phased it in. When they actually did the smoothing -- certainly from '85 forward because Act 205 came in 80 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 then, and in their presentations, it was three years. It definitely went to five years smoothing in 1989. So certainly at least years and 5 probably 15. 6
Thank you. With 7 respect to the power to make distributions of 8 funds, I raised this issue in the discussions. I 9 still find that Council can enact distributions -- 10 my word only -- that word is not in the bill, but I say it applies because it says Council can enact distributions if the Board fails to provide for any distributions during any period of 14 consecutive months. 15 It is very easy as a lawyer, and the 16 City Solicitor's Office has enough good lawyers to 17 know that if they give a nickel increase, they 18 have enacted a distribution and deprived Council of the power to decide that it's an inadequate distribution, and I don't know why that language is there. Why is there a limitation on Council's legislative powers inserted into this bill? And I will ask whether you would accept, Councilman Nutter, an amendment to eliminate that 81 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 restriction? I understood from your talking that Council could at any time, if it reached the conclusion, enact a distribution, that we had the ultimate power at all times. But this is a limitation by which Council can be denied any power to direct distributions as we are, you know, in this bill.
I don't need a lengthy response if you say yes, you will accept it. (Laughter.)
I understand that. You're talking about Section 131.4.
In Paragraph (b). That section was inserted for a particular circumstance. If you turn, Councilman, to the last page, under Section 3, which starts on 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 and extends to -- I'm sorry, Councilman?
I understand but you won't find this in there. It's on the very last page.
Yes. "City Council expressly reserves the right to amend the authorizations, directives, and provisions of this ordinance at any time as it deems necessary." That is a much broader reserving of rights to the Council. The issue that you raised on going into came as a result of discussions between and among Councilmembers and the union leaders that specifically talks about a lack of 83 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 distributions over a certain period of time, the eighteen months. We also have a one-year reporting requirement that the Board has to tell us within 30 days at the end of every fiscal year what distributions they have made. If they have not made any, why they have not made any. The section that you were talking about (b), on going, to , was certainly no 10 attempt to limit Council's ability to make distributions; it was pointing out an example in reporting period that would require the Board to tell us something if they haven't made any distributions in eighteen months.
May I suggest an amendment eliminating it? Because it is using the language of accountants. It is a commonly accepted legal principle that when there's a general grant of power which contradicts a specific statement of power, the specific applies. And in my opinion, the court may very well rule that Council is limited by this section, despite the general statement that appears on and 8.
I understand that. 84 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Because we don't need -- with and 8, we reserve that power. 4
The reason I have pretty much not said anything during the bulk of the hearing is, Councilman O'Neill was raising a very important point that is the primary subject of dispute, which was about the 9 and 10 percent issue on the cap. The intention today was to at least try to get as much testimony on that particular issue. It is a very specific issue. And then I had planned to actually go to the table and walk through -- section by section and paragraph by paragraph -- the various provisions. We have not even technically gotten to the point, other than them being on your desk, of talking about the proposed amendments and going through that discussion. So I had certainly planned to do that. Except on the 9 and 10 percent discussion, I would probably be the more appropriate person to try to 85 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 answer or at least respond to some of the questions that you've raised as opposed to the actuary and Mr. Herkness, who can specifically certainly engage in discussion about what the Board does or even the discussion that Councilman O'Neill raised, which is a very important issue and he makes a very good point. That's how they ended up at the table first.
Well, I'm making again the request that you consider an amendment that would eliminate that language. I tried to follow. I'm not sure -- I just couldn't follow it, but I just believe that Council ought not to be about the business of limiting its own powers.
I understand that. There was no intention to limit Council's power.
And that is a premise we ought at any time, when appealed to by any group, have the right to consider any subject and make a decision within our general legislative powers.
I will have an 86 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 amendment ready and will hope that you will be ready to accept it.
Then I still find great difficulty in determining when a survivor of a retiree gets the benefits. I think -- suppose a 30-year-old employee retired for some reason.
And meets the necessary standards -- maybe he's 40 years old. Do his beneficiaries -- and then he dies immediately thereafter.
Right. 87 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Do his beneficiaries then have to wait ten more years before they get anything?
Again, Councilman, unless the Chair determines otherwise, we have these other two witnesses at the table. That's in the first part of the bill. There's actually a separate sheet of paper that explains what that amendment is. And if the Chair wants to go into a discussion about amendments, I'm pleased to do that but --
Yes, there is a response, and you actually have an explanation on your desk.
We will go amendment by amendment. You have a copy, Councilman, of the proposed amendments that were circulated yesterday?
Yes. 88 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
We will take them up a little later and we will actually go amendment by amendments, and I think Councilman Nutter then be able to try to explain.
And he will explain it to everyone, and we will be able to question him on every one of the amendments at that time. Is that satisfactory with everybody?
Do we intend at some point in time to vote on this issue today?
Well, this is my point of information -- maybe you'd like to have another point of information. But my point of information is: 89 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Do we have a general idea in the Chair's mind when that may take place without holding you specifically to it? I mean it's --
It was my understanding that we were going to do this by this afternoon.
All right. I would like to just support Councilman O'Neill's statement. I think Mr. Hayllar is a very necessary witness. For example, Mr. Herkness, when he testified, emphasized that it was the General Fund and not the Pension Fund that they were trying to protect. Yet, as I read the statement from Mr. Hayllar, he says to the contrary in the final paragraph. As set forth in detail in the Mayor's message, the cost-of-living 90 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 provisions of the old bill created significant risk to the General Fund and could also have jeopardized the financial stability of the Pension Fund. Mr. Herkness, that is not intended to criticize your statement. You were explaining your view as the Executive Director of the Pension Fund. But Mr. Hayllar expressed a concern about both funds, and we would like to hear that. And I think we would like to understand one general question. You say that Act 205 is the determining factor in how much money the General Fund of the City has to contribute to the Pension Fund?
And do I understand correctly that in the testimony on the pension -- on the bond, the floating of this $1 billion-plus bond, we were told that the General Fund who would immediately gain a reduction of $23 million a year over the next ten years and what it would have to 91 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 pay to the Pension Fund? Well, it would seem to me that that gain itself -- that that is a gain in the sense of a reduction in the liability of the General Fund to the Pension Fund and would much more than pay for what we're talking about in this bill. And, therefore, I don't understand again how we talk about this bill jeopardizing the General Fund at a time when the General Fund is gaining an enormous amount by reduction into the General Fund of $23 million a year over the next 10 years. I'd like to hear a comment from anybody, because that's a mystery to me.
Councilman, previous testimony at the pension bond hearings was that the General Fund would accrue net dollars between the debt service that you would have to pay on the bonds, which went out at 6-1/2 percent, a little bit less than what they had expected and what they had previously projected to pay into the Pension Fund over many, many years, which was steadily increasing over time. And I think they've come up with an average. I'm really not sure. I'd have to check 92 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 with a Payne Weber or whatever. They came up with an average savings to the General Fund from the two numbers, which is the incentive to do the pension bond, I assume.
Now, you know, I'm not a mathematical genius, by I multiply by 10 8 and I come to an immediate savings to the General 9 Fund of $230 million, and all the two payments are 10 going to be costing is $88 million. 11 So I just don't understand. In that, I 12 join Councilwoman Blackwell, and all of these 13 questions about the damage of the General Fund and 14 to the Pension Fund at a time when the position of 15 the General Fund is actually being enormously 16 strengthened -- even considering the payout over 17 the two years. 18 Now, that may be rhetoric, but if 19 anybody want to answer that, I'd be delighted to 20 have an answer so that I could explain to the 21 folks in my area of the city and then to folks 22 generally in my duties as a Councilman at large 23 why we're so consumed by the subject matter and why the Mayor says this is threatening the financial stability of the City. 93 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Thank you, Madame President.
You're welcome. The Chair recognizes Councilman O'Neill.
Madame Chair, I believe that Mr. McPherson may be able to answer that question when he returns. I think he knows how much the General Fund is projected to save as a result of the pension obligation bonds. I just have a couple of follow-up questions for the actuary. Ken, you mentioned earlier -- I'm just trying to get some clarification on this -- that with a 10.8 percent return, which was the 10-year return on the chart we were using up to 1997, that even at a 10 percent floor that would -- where sharing starts at 10 percent, that that would cost the General Fund money because the actuarial assumption would go below 9 as a result of that? I don't understand because --
If they get the 94 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 first 10, how do they --
The difference between that 8 and my earlier testimony is, over the last ten 9 years, it was 8.8. 10
That's a question, you know, of what you count and what you look at.
Okay. I think Mr. (unintelligible) said 10.8 yesterday; I've been using it all along. So, actually, over ten years, we would not gotten into sharing even at 9.
There would have been funds that were shared. However, the average return over that period of time was less than the 9 percent. There would still have been years where you exceeded 9 or 10 percent respectively. 95 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Now, this is all on adjusted mark value, okay? Another way to look at it is, in the years 1985, '86 and '87, the adjusted market value returns were very significant.
But the average from -- is it '88 to '97 was 8.8 rather than 10.8.
I was using a bad number all morning, so I appreciate you clarifying that. Would you agree with the statement -- oh, Mr. McPherson's here now, he can answer the question so I'll hold that for him -- on the amount of money the City projects to save in the General Fund because of the Pension Fund obligation bonds. What I'd like to be able to weigh is how much they might offset costs you talked about this morning. 96 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Now, all the hypotheticals going back ten years is 'cause that's the experience we have, we've adjusted it for the POB base being much larger. And I think most people, if not everyone, would agree that it's been a pretty good ten years for the market. And I've been trying to project out the next ten based on that, recognizing that that's being extremely optimistic because it's been a very good ten years in the market generally. But does -- assuming that it happens that the next ten years reflect the last ten, does that have a positive impact on our unfunded liability?
Okay. And so the unfunded liability would keep going down if we could keep getting the returns we've been getting on average?
Well, let me phrase that. The unfunded liability is projected to continue to increase through the year 2003 by itself. That increase may be smaller, or it may start to go down sooner. 97 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
But in either event, it will positively affect the unfunded liability, which, in other words, means that the unfunded liability will be less than we expect it to be in the future.
Once the -- let's follow that through. We've established that if our next ten years reflect the last ten years, then it will have a positive impact on the unfunded liability in the Pension Fund. Next question, taking that a step -- the next step down the road. Does a positive impact on the unfunded liability of the Pension Fund have a positive impact on the City's General Fund?
Okay. The answer to that is that, taken all by itself, just the investment return would have a positive impact on the City's obligation and the impact of the General Fund. Taken in aggregate with the other assumptions, it 98 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 may or may not.
Like what salaries are and things like that, who dies, who lives?
Salaries, how long people live and die, right. When we set up a body of assumptions, of which the investment assumption is just one, our approach is to best predict the future on the assumption that we want neither gains nor losses.
We want -- are hoping that the fund will experience what we expect it to. To the extent that we have favorable investment gains, that helps us when we have unfavorable mortality experience. "Unfavorable mortality experience" simply means that things are good for your retirees, they're living longer.
But if you take the last ten years into the next ten, which is what we have to work with, those other assumptions 99 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 also being like the last ten, does it have a positive impact on the unfunded liability and the General Fund?
Are you saying do all the assumptions, collectively have they had --
Ell, I have to check the statistics. I know I put together statistics on the last twelve years. And in only four of those twelve years did we have a positive impact on the unfunded -- that is, net experience gains which resulted in the reduction of the City's obligation.
IN eight of those twelve years we had a negative on the unfunded; that is, the unfunded was greater than expected, which resulted in higher City obligations.
So during this period of historic returns, we have needed those historic returns to offset some of our other assumptions which were not conservative enough. Primarily one of them, which we changed 100 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 this past year, is basically our mortality table, which goes to the question of life expectancy. The retirees of this fund are living longer than we expected under a previous table. We've now adjusted that to recognize that longer life expectancy and make sure that the funds are sufficient to pay out for a longer period of retirement years.
If you had an average of 8.8 as opposed the your 9 assumption.
And as a result of that, it cost the City some money because the unfunded liability was greater than you had predicted by that 0.2 percent model.
If you had projected an actuarial assumption of 8 percent which was clearly met if it had been 8 percent.
The City would have had to pay more just based on the 8 percent assumption.
So they actually would have saved money because the unfunded liability would be lower than you would have predicted under an percent return. 6
So a lot of this 8 has to do with what numbers you pick at the beginning -- whether the City makes or doesn't make it. I mean, I'm not making a joke out of it, but that has a whole lot of bearing on this is where we start. So if we start where most other funds are -- I'm not questioning what you're doing with the 9 percent; you only missed it by 0.2. But if we were where everyone else is, at 8 percent, the City's obligation, because of a higher built-in unfunded liability prediction, would be higher all the way along, and they would actually be getting a break on those payments once you see 8.8.
Okay. Is there anything else that we haven't discussed today that might save the General Fund in this whole area because it just hasn't come up today or that might 102 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 cost the General Fund money? We just haven't -- no one's asked the question about it because we just don't know enough. Are there other variables that we haven't talked about in terms of this? I just want to know if there's something we're going to find out next week. Like, boy, if we had only known that, we could have asked about it. I mean because I'm just finding out -- and I just apologize for not being an actuary -- that, you know, setting 8 percent changes all of your answers on what it costs the City, 'cause it really just costs more every year if it's 8. And then you reduce that as you get to 8.8. If you start out at 9, it costs less with the predictions, and then it goes up to the extent if you don't make 9, if you make 8.8. So a lot of this is -- is there anything else that is missing from this picture that you could think of?
And, Joe, that goes for both of you. I just want to --
I can't predict the next 103 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 question. However, I think that we've explored a lot of it and I think that the Councilmen as a whole have gotten a pretty fair education of what the issues are. And I think that when you look at those issues, you're still looking at the fact that anything that you give away that people don't currently have a right to now -- whether it be funds going into the PAF -- cost something.
You know, the fact that we have excess returns in one year or another either offsets costs that are internal to the plan or offsets costs externally that are funds that have to come from the General Fund. So what you're really talking about is a cost.
It is the allocation of the general revenues in the General Fund that you have control over. So whether you share above 9 percent, you share above 10 percent, you're making a financial decision not within the Pension Fund but ultimately within the General Fund.
Last question. 104 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Again, I do want Mr. McPherson to answer that other question that was asked by Councilman Cohen, because it was on my list. Let me go back 'cause I might not have to ask the question if -- Charlie, the question -- basically, I don't want ask Councilman Cohen's question but how I would have asked it is, there was a savings to the City on an annualized basis of the pension obligation bonds. That's one of the reasons it was done; it wasn't just to create a larger corpus for the Pension Fund, although that's a very good thing. There actually is a projected savings to the General Fund that can be annualized by flattening out payments and doing --
With the pension obligation bond, it was two things. One, it was -- it allowed City the ability to enter into the capital markets to borrow the money at a rate that was less than 9 percent that we're paying. And it also allowed to us extend the payments. These were -- I believe they're 30-year bonds. And currently, under Act 205, the accrued unfunded has to be paid off, I believe, by 2019. So we pick up the additional years from 2020 to, you know, pick 105 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 up another, I guess, or years. The information -- I just got off the phone with Payne Weber and asked them to fax me some stuff because clearly, how the structuring was depended on what vehicles they just sold. So, hopefully, I'll have a fax literally in five minutes that I can indicate that to you. Clearly, from a budgetary perspective, there was cost avoidance because, again, under the payment methodology that we had to pay under Act 205, we had an accrued unfunded that we were paying off of approximately, I guess at that point a little over $2-1/2 billion. Those payments would have required just payment on the accrued unfunded growing from, I thin, approximately $200 million now to approximately $500 million by the year 2019. Again, that was the impetus for doing the pension obligation bonds because the City could not afford those budgetary increases from $200 million to $500 million. So what the pension obligation bond did, and I believe the first year figure was somewhere around -- was about $20 million to the General Fund. I think in total, it was about 106 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 or 4 -- but, again, I need to see the structure 3 -- which then would reduce the City's expected 4 increase under the old methodology. 5 So clearly, we were able to reduce what 6 we would have spent. And from a budgetary 7 perspective, I believe there was some savings. 8 But there was also -- a component of that was the 9 cost avoidance that the Administration would have 10 had to factor into the budget. 11
So if you take the 12 savings plus the cost avoidance, you might be 13 going from 20 to 24? 14
You might -- somewhere 15 in that range. And, again, when I see that, I 16 will -- 17
But it also does come a 20 point when we're paying more on these bonds than 21 we would have been paying otherwise because we're 22 extending the payment date for -- we're going out 23 thirty years.
Right, but also, that's future dollars which, hopefully, will be a 107 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 lot cheaper.
Right. I think from a present value calculation, I think the savings was somewhere around -- Joe, do you remember? -- about $230 million? It was somewhere in that range from a present value savings is what the pension obligation bond did. And from a total payment stream, again --
Oh, it was about 300, maybe a little more. I need to see the structure 'cause I know some of stuff was changing when they went to market.
See, Joe, as you're representing Mr. Hayllar, I'd like to frame the argument as we leave this discussion as having shifted to the General Fund, which as Charlie's indicated, that's really where the whole issue lies. Protections, number one, from Armageddon's and we have that protection. And secondly, just what the hit is. Because, as we heard from the actuary, there is an impact on the General Fund. What I would like to leave on the 108 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 record and ask the policy people in the Administration to talk about -- whether it's the Mayor or the Finance Director or whoever's doing it, is just to explain to us when the pension obligation bonds save 300-and-some million over thirty years and this projecting out what we had in the last ten years, going from to 9, is 9 going to cost $5 million a year when we're saving 10 more than $10 million a year under the pension obligation bonds. And I don't know, who took the hit, Charlie, on the $25 million in fees? The General Fund or the Pension Fund?
Well, it was added to the value of the bonds that were sold. So in essence, the City would take the hit because we're paying the debt service on those bonds, so if you're looking at it that way --
So the City took the hit. 109 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
The City is paying the debt service on the pension obligation bonds.
It came out of the proceeds of the sale, but the sale was not --
No. What they did was, Council authorized the net proceeds up to a billion and a quarter, I believe, to go to the Pension Fund.
The Pension Fund did not sell the bonds; the bonds were sold by PAID. So then the City did the service agreement with PAID, and what backed up those bonds was the City's agreement to pay PAID a yearly fee that would equal the debt service required on the pension obligation bond, which then alleviated a portion of the payment that the City would have had to make to the Pension Fund on the remaining accrued unfunded liability.
Right. 110 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
So you had to take a look at what the City's General Fund is going to be paying on pension obligation bond, what it would have been paying had it not issued the pension obligation bone, and that's where they talk about the savings or cost avoidance. It's the fact that it helps bring down that increase that we would have been paying to Pension Fund, and even why those are more cost avoidance is because from a budgetary perspective, the City realized that they could not afford, on a yearly basis, those type of increases to the Pension Fund because we would have had to have paid off the accrued unfunded, as I said, by the year 2019. And that payment was somewhere in the vicinity of $500 million. So --
I still don't understand the pension -- you float bonds. Do the costs come out of the proceeds of the bonds or not?
Yes, they came out of the proceeds of the bond. But since the General Fund is paying the debt service on those bonds, therefore, the General Fund is paying for the 111 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 issuance cost.
It's all in the way of phrasing it I guess. I could argue the other, I think, just as easily. But if you --
Right. And they would have had $25 million more in net proceeds if it hadn't been for the professional fees?
No, it would not. Because the way that the ordinance was established, we set a maximum amount.
Just answer one question at a time, Charlie. You may be absolutely right and I may be in left field on this, but all I want to know is, was there $25 million less that went to the Pension Fund because there were professional fees in the deal?
Not from the ordinance 21 that Council adopted, no. Because Council adopted an ordinance that indicated $1,250,000,000 to the Pension Fund. That's going to the Pension Fund, and then there was the ability to add on the cost of issuance on the back end to the bonds so they 112 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 actually issued bonds greater than the 1,250,000,000.
So then it's bonded separately. The costs were bonded separately from --
They were added on to what we authorized to go to the Pension Fund.
Okay, thank you. That's an explanation, I appreciate. It's nice to actually understand it anyway. It might not have been what I thought it was but I understand it. Madame Chair, I have no other questions right now, but I would stress the need to sit down with the Administration. I would particularly like to sit down with the Mayor. These numbers are not what the Mayor discussed with me and they're not what I believe he thinks the numbers are. They're very clearly much, much different. And when you balance them against the savings from the pension obligation bonds, they wash out. I'm not talking about the bonus payment. The bonus payment is coming out of the General Fund. I'm talking about the PAF. We're past the bonus part of this when we get to the 113 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 PAF. And that's all that's resolved around the 90 to percent in discussions with the Mayor and 4 everybody else. 5
Are you 6 suggesting, then, that someone from the Mayors's 7 office come up to City Council? 8
I would like to 9 have a meeting with the Mayor -- either personally 10 or with a group of people. I don't have to do it now. We've got till next Thursday to get this bill out if we're in a hurry.
I thought the Mayor had called you to discuss --
Yeah. He told me it was going to cost $100 million a year to the Pension Fund. It's going to cost $5 million. When you balance the other out, that's insignificant. And so he was significantly in error.
He may not understand that. I would like at least a chance to talk to him. 114 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
And if Mr. Hayllar contradicts this, I'm willing to listen to that. And if there's a hurry to do it today, I'll talk to him after we do it, that's fine. I'm just not voting for it, but I don't want to stop progress here.
But we do not have to vote this out if we're in a hurry until next Thursday. We can't do it any faster than the next Council meeting, which is a week from today.
Right. The Chair recognizes Councilwoman Blackwell.
Thank you. To follow-up on my colleague's comments, certainly, I would like to follow up on those comments just made. As the president may be aware, we received a different bill today with amendments than we received last night, so there have been further changes, and certainly, everybody was not aware that there would be some 115 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 changes to the language. And, certainly, I concur with those comments -- I concur with those comments just made.
Excuse me, Councilwoman, there's a point of information. The Chair recognizes Councilman Nutter.
Thank you, Madame Chair, just a quick point. Madame Chair, Councilwoman Blackwell said that the amendments, as offered today, are different from the amendments as circulated yesterday. I think I can report to you, Madame Chair, that the only difference is that there was one word that was misspelled in yesterday's version. It was corrected overnight and that was the change that was made. I believe it was in Section C on 4. There was a word that said "that" and it should have been "than." That is the only change from what was distributed to the members yesterday as compared to today. I apologize for the typo. I'm sorry, it was in Section (e), on , of 131.3. If you look at Section (e) that talks about "no credits shall be made. . ." In 116 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that last sentence, last night it read, "are less that the fund basis." That was corrected overnight read "are less than the fund basis." That is the only change that was made from last night to this morning. The change was caught -- the error was caught after the amendments had been distributed. There has been no change from yesterday to today other than correcting that one word.
Mr. Nutter, did we not receive information that deals with the age of the survivors that we did not have last night?
Councilwoman Blackwell, you are also correct about that. That was -- are you talking about the explanation or actually what's in 131.1?
Well, I thought there was a change -- perhaps I'm incorrect -- in terms of the age of the beneficiaries or the survivors.
Councilwoman Blackwell, you are basically correct, and I am in error. 117 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Yes. That is to deal with the issue of do survivors and beneficiaries have to meet the 60-year-old test. There was a lot of discussion about that. The change that's actually in addition of words to make sure that the survivors and beneficiaries themselves do not have to meet the 60-year-old test. The change -- it's actually an addition of words to make sure that the survivors and beneficiaries themselves do not have to meet the 60-year-old test. And provided this morning was also an explanation with some examples of how that situation will work out. I believe in one of our briefings, members were very upset that survivors and beneficiaries, as the bill had originally been drafted, it could be read that the survivors and beneficiaries had to meet the 60-year-old test also. And so after that discussion, a change was made so that survivors and beneficiaries do not have to meet the 60-year-old test -- only the 118 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 member does by the effective date of the bill.
Yes. Then you prove my point that there were changes that were submitted.
As well as on that deals with the fund basis and the year -- that's also been changed. So my point is again that --
-- there were changes that some people may not have been aware of because the proposed amendment to this bill 15 dated 1/27/99 had some changes -- at least two that I've noticed with an explanation -- that are different than the document that we received last night. My point is that there have been changes that we were not made aware of. And also, Councilman O'Neill mentioned discrepancies with the Administration with regard to whether we're talking 100 million and 5 million. That's a big, big discrepancy.
Right. 119 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
In addition to, number three, that Ben Hayllar, who leaves a statement, there are a lot of questions with regard to him that are not answered. And so, Madame President, I don't know how we resolve all of this today unless we can have -- certainly, if the Mayor were here, certainly he's the executive officer of the City, and we would accept -- obviously, we would accept his statement over Mr. Hayllar's. But if we were to resolve this issue before next Thursday, as Councilman O'Neill just said, then I would like to have all of the information before us.
That is what I'm saying. If that means the Mayor comes to explain the difference between 5 million and 100 million, we would certainly welcome his presence.
Councilwoman, if I can, and I apologize to you. You are absolutely correct. There were some changes made beyond a word. 120 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 The date in the fund basis explanation had not been changed but had to be changed since, in accordance with the discussion the other day, the establishment of the Pension Adjustment Fund, which was originally proposed for July 1, 2000, has been changed to July 1, 1999 as a result of discussions with unions. The fund basis definition, then, was out of synch with another section that called for the creation of pension adjustment fund on July 1, 1999. That number then had to change in the fund basis explanation. I believe, one, that was to the advantages of all involved, that there is at least consistency 'cause you can't have a fund basis with a definition that calls for something a year after the fund is established. We moved the establishment of the fund up a year. The number was left in error.
We do not disagree with what you say for clarification.
We only note that we have a different document today -- 121 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
And we don't have all the facts that we all can agree on --
I cannot answer the questions that are outstanding either to you or to Councilman O'Neill with regard to the Administration. I can certainly explain myself. And while these are significant, or may be viewed as significant changes, I don't believe that they would be viewed as detrimental changes, and I'm again fully prepared to explain it.
If the concern by the members was that the beneficiaries and survivors did not have to meet the 60-year-old test, but in yesterday's language, that was not crystal clear, the language was changed overnight. This change inures to the benefit of 122 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 the beneficiaries and survivors 'cause they now do not have to meet the 60-year-old test. So there was a change there, you are correct. There was a change in the fund basis explanation because it was out of synch. That date and that definition was out of synch with the change as a result of the discussions to start the Pension Adjustment Fund a year earlier. And the last change was the one that I started with earlier, which was that one of the words was wrong in item (e) out of 131.3. Those are the changes from yesterday. Two are to the benefit of the beneficiaries. I apologize for the error.
Well, we wanted to note that we had a different document. I don't disagree with those changes for clarity.
But we would like to -- we would like to know, Madame Chair, we'll check to see if we can get some response. It seems to me the issue of whether this change would cost 5 million or 100 million is a major, major point. And we would like to know 123 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 how the Administration intends to respond to that question. And that's the difference between having a bill and a responsible bill, quote/unquote, and having an irresponsible bill. Maybe there is some misunderstanding somewhere on the part of the Administration that can certainly straighten all of this out.
We will certainly try to get in touch with somebody in the Administration.
Mr. Herkness, did you want to say something on that issue?
Just back to originally when Councilman O'Neill said, Is there anything else where there could be any costs? The experience of the fund is where all of the costs are. All of the costs are in that experience. Under the experience umbrella is the various things that Ken Kent addressed -- the age, the mortality, the disability incidents, the death and. The two big assumptions are the investment and salary assumptions and the earnings assumption. 124 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 The percent and the salary assumption is what the State really looks at. We have to send a special letter to the State when we're more than 3 percent difference. We have a 9 and we have about a 5 in salary assumption, so we have to send a letter to the State to say, This is what we've done with the City. If we -- if the Board voted to -- and this comes up basically every year. There's an experience study every three years to see how closely the assumptions are being met. If the Board voted to decrease the investment assumption, which it has over the years had a lot of debate about almost every year.
In my opinion, the Administration would absolutely prefer it to be 9 because every quarter point, no matter what your other experience, you guarantee is going to be another $20 million. So an 8 percent assumption, plus or minus, I don't know if it's exactly 20. Could it be 17, yes. Is it 28, I think so.
(Inaudible, 125 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 off-mike.)
I'm sorry. Other than the Administration preferring it immensely being instead of 8 because of the cost avoidance 7 or savings, what is the discussion that generally 8 goes around the Pension Board when you arrive -- 9 when you're trying to arrive at 9, knowing that the prevalent return in this country is 8 or 7.5? I've heard 7.50, I'll stick with 8. What is it that drives us to 9? I'm sure it's not just because it helps the General Fund not have to pay as much. But what is it that are the other things that go into us having 9 with most others having 8?
First, let me point out that 8 percent is an assumption that is seen more often, but your fund is not the only fund that is at 9. Secondly, that the investment assumption is tested on. Every four years, a five-year experience analysis is done, which has to be submitted to the State to substantiate the reasonability of your assumptions, each 126 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 individually and in the aggregate. The assumption has been in place for 4 a long time, and the experience has held out that 5 it is still a reasonable assumption because you 6 have maintained a 9 percent return, relatively 7 speaking, on the adjusted market value basis. 8
I think it's very 9 defensible. As Joe said, it's always a long discussion. I just don't know -- what's the other side of it, somebody arguing for 8, 8-1/2? I don't think anybody's arguing for 10, are they?
I don't remember anyone ever arguing for 10. The controller -- any number of controllers always comment on the 9, whether it would be Jonathon Saidel, Joe Vignola, they're always commenting on 9 being aggressive and that it forces you to take some risks in the markets.
And other than that, you know, there's a vote, and generally, they've sustained the 9 over the years.
So the higher your goal is, hopefully, the higher -- the more you'll 127 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 push yourself to get it.
The other side of the argument is a lower assumption is more conservative. That means that you have a higher probability of equaling or exceeding that assumption on your actual experience. It will increase the City's obligation to contribute such that I imagine that if the City had to contribute on an 8 percent assumption, the cost of the plan would probably increase not 80 but more like $100 million a year, which, I would imagine, changes some of your positions on other decisions that this body has to meet on periodically. And there is no reason based on the experience to subject the City to that kind of additional increase in costs at this time.
Right. But the -- but the -- if the Pension Board did vote to have an 8 percent assumption or an 8-1/2, they could defend that also as a reasonable level. I know your 9 percent has been defended, and I'm not attacking it.
If the experience held out such that the recommendation to the Pension Board, 128 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 based on the past experience study and the projections to the future were such that we made a recommendation, number one, we wouldn't go from 5 to 8. 6
But, say, we went from 8-1/2 8 or 8-3/4, that would be the recommendation. And 9 the Pension Board would then identify for the City its obligation to contribute based on that.
And 8-1/2 instead of 9 would make it about 50 million more.
We're going to take a 15-minute recess. The stenographer is requesting that. Thank you. (Short break taken.) - - - 129 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 (Proceedings resume.)
The Committee of the Whole is now back in session. I would ask all of the Councilmembers in their offices to please come into the chamber. Thank you. All members please come down to the chamber. Again we're requesting that all members come down to the chamber, please. (Joseph Vignola comes forward.)
I want to thank you for your patience here all day kind.
Kindly identify yourself for the record so that we may proceed.
My name is Joseph C. Vignola. I'm the Executive Director of the Pennsylvania Intergovernmental Cooperation Authority, commonly known as "PICA."
And can you tell us how PICA feels about this bill before us.
Madame President, thank you for the opportunity. 130 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Madame President, I'd first like to apologize to you and members of City Council. I would hope to have had some written materials for you but because of the flux in the language of the bills and just the ability to try to listen to the testimony and get back the my office, that is not possible. I thought it was better that I stay here and listen and comment verbally rather than preparing written statement. Madame President, I would like to thank Councilman Nutter. He took the liberty of faxing to me last night a rough draft of the bill. And as I explained to Councilman Nutter during the break, unfortunately, I was busy on my computer doing some social studies homework and never changed the fax server so I did not get it until this morning, till I got into the office. But we spent some time this morning with my staff given a rough draft of the bill and the comparative analysis. And I would like to begin preliminarily by saying that in a letter that I wrote to you, Madame President, and other members of City Council on January 13th of this year, I indicated that I thought it was important 131 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that we find a methodology that affords the pension relief necessary to the employees while it is affordable by the City of Philadelphia. To that extent, it appears that the one item that is going to afford immediate pension relief, a lump-sum payment of $1,000 and $1,000 plus increment for longevity, is without controversy so far during this debate that I had. We at PICA looked at the numbers. And to the extent that it is contemplated, the operating budget impact is contemplated in the five-year plan and the budget that was submitted to City Council yesterday by the Mayor of Philadelphia, PICA would have no concern or objection to affording that lump-sum payment to certain retirees. In regard to what you're doing now in talking about a Pension Adjustment Fund, those former colleagues of mine who saw me in the halls throughout December and January know that I felt that a pension adjustment could be made based on the sharing of excess earnings by the Pension Fund. Having been a member of this City Council and been elected an official now being a member of 132 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 PICA, I think that it's something that the legislative process, the electoral process and those elected officials should decide to what extent the fund should be established. At PICA, though, we are a financial oversight board. I would be remiss if I didn't say that it's the staff's and my considered opinion that in looking at the establishment of the fund and how the money is paid into the fund, there has to be a methodology where every aspect and I believe the actuary for the City of Philadelphia indicated that there are three parties to this: the retirees, the active members, and the City of Philadelphia. There has to be a methodology whereby everyone could share in the gain and minimize the pain to everyone. And a methodology of funding this PAF that would afford some monies into the fund before distribution occurred would be reasonable. Again, those of you that listened to some of things that I was talking about in December and January said that, you know, would hear that I was talking about a 10 percent. And that 10 percent ways based on an actuarial 133 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 assumption of 9 percent. In reading the rough draft of Councilman Nutter's proposed amendments, he's talking about 1 percent spread above the stated actuary assumption, whatever that actuarial assumption may be from time to time. And that is consistent with what I was saying over the past two months.
So to that extent, you know, we at PICA feel that the bill does begin the process that affords pension relief to retirees who need the pension, and can and will be affordable by the City of Philadelphia. Again, not only in this fiscal year but through the fiscal years throughout the five-year plan and beyond and. With that presentation, Madame Chair, I'd be glad to answer any questions you may have or any questions that other members of City Council may have.
Thank you. Are there any questions for Mr. Vignola by members of committee? (No questions.)
Thank you 134 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 very much.
Thank you, Madame Chair. I would certainly be prepared to have a discussion about amendments if that's okay with the body.
Thank you and good afternoon, Madame Chair. First what I'd like to do is acknowledge and reemphasize and point out that what changes were made from the material that my colleagues and the leaders of the unions as well as Mr. Vignola and probably Mr. Herkness received from last night versus what was handed out today. And the document I'm working from says at the top "Proposed Amendment to Bill No. 990001," and it 135 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 has the date of 1/27/99 on that document. To the best of my recollection, from last night into this morning, these are the changes: In section 131.1 --
These are the changes -- if we look at the bill, are these the changes from the memo of yesterday?
These are the changes from the memo of yesterday. There was discussion earlier today about a change between the document that was given out yesterday and the document that was given out this morning. I just want to get on the record what those changes are, and then I'd be prepared to talk about the actual amendments -- what they are and what they mean.
It's what you received yesterday, Councilman. 136 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I didn't receive anything. I might have a copy in my office.
Councilman, it's a document that I put in your hand last night when I was in your office.
Does everybody have copies of the proposed amendments?
Well, it's not the proposed amendments of today. It's in addition to that. The status of the bill as of yesterday. You mean what I took home with me and read has been changed?
There were some 137 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 minor changes. I just want to go over them, and then I will be prepared to discuss. In Section 131.1, lump-sum increases: The change from last night to this morning is that the bracket was extend to include the comma in front of the word "beneficiary."
It's the first line. It reads: "Each member, beneficiary or survivor." "Beneficiary or survivor," last night those words were only in the brackets; this morning, the comma was included in the brackets. That is a change. On the second line, the words "or would be" were added from last night to this morning. This deals with the issue of making sure that the beneficiaries or survivors do not have to meet the age 60 requirement. It was not clear from the language of yesterday that that problem had absolutely been resolved. That's on the second line and also on the third line. The phrase "or would be" was added today. On , as was discussed earlier, 138 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 under the definition section for "fund basis," the original bill had the fund starting on July 1st of the year 2000. The fund basis is directly tied to when the fund is established. And, unfortunately, last night's version went out with the date of July 1, 2000 to be consistent with the original date of the bill which was the establishment of the fund on July 1, 2000. We did not catch that last night and realized this morning that that number had to be July 1, 1999. On , in item (e), which starts with the phrase "No credit shall be made to the Pension Fund," in the last sentence of that paragraph --
It's (e) at the top. Last night it read: ". . . or less that the fund basis established as of July 1, 1999." The word "that" was incorrect. That word was changed this morning to "are less than the fund basis established a of July 1, 1999."
Oh, that was changed to "than." 139 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Yes. On , in small letter (c), it starts with "If in any period of two consecutive fiscal years. . . " The version that you received last night, on the third line said, "using an adjusted valuation methodology." In order to be consistent with all the other terms in the bill, the words "market value of assets" was inserted between "adjusted" and the word "valuation." We have the phrase "adjusted market value of assets valuation methodology as a defined term" and so the terms had to be consistent. All of those changes, because of the way the bill was written, this is essentially a bill that has two primary sections: one is amending the Requirement System Ordinance of 1956; the other is amending the Retirement Benefit Plan of 1987. All of the changes that I've mentioned are also replicated in Section 2 in the appropriate places because Section 2, the language is an exact mirror of the language in Section 1. 140 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 There were no other changes made from last night to this morning. Or at least that I've been able to catch yet. But I feel fairly confident that those are all the changes that were made.
Madame Chair, they all seem to be just technical changes.
Except for the change of the date of 2000 to 1999, July 1.
Yes. And that was, again, for consistency purposes because originally, the fund was to start on July 1, 2000; therefore the fund basis would be as of July 1, 2000. When we made the change to establish the fund to July 1, 1999, then that date had to be changed in the fund basis definition. That was an error that was not caught; we caught it last night. Madame Chair, I'd like to proceed through the various sections or paragraphs of the 141 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 bill itself.
So now we can put aside yesterday's bill and concentrate on today's.
Councilman, you should destroy -- by any method you have, you should destroy what you received yesterday.
Yesterday, okay. I'll put it on Councilwoman Krajewski's desk. (Laughter.)
Which will only cause a problem when Councilwoman Krajewski comes in. Okay, I understand. So I'm now reading from the sheet that is the "Proposed Amendment to Bill 990001," with a date of 1/27/99, which includes, from the earlier discussion, changes that were made overnight. And as Councilman Cohen said, they're all technical in nature with the exception of a date change for consistency purposes. Section 131, and then subsection 131.1, the lump-sum increases. There was -- the primary purpose of this section mirrors the previous bill 24 which allows for a $1,000 base payment and $100 for each year over 10 that the member is retired. 142 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 It calls for a first bonus payment on July 15, 1999 and a second bonus payment on July 15th of the year 2000. Those are consistent with the previous bill. There is a provision that makes two changes from the past bill. First, the beneficiaries and survivors are included as eligible to receive the two lump-sum bonus payments, again, for July '99 and July 2000. Second, there was great concern at one of the briefings or meetings that we had about whether or not beneficiaries or survivors had to meet the 60-year-old age test. My recollection of that meeting is that virtually none of the Councilmembers believed that the beneficiaries or survivors should have to meet the 60-year-old test given circumstances of people's lives and who's at what age and the theoretical possibility that the survivor certainly could be under 60 years of age. One of the handouts that was given with the proposed amendment is a full explanation -- or I hope a full explanation of the proposed amendment to eliminate the age requirements for 143 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 survivors and beneficiaries in order to be eligible for lump-sum bonuses in 1999 and 2000. That is on a separate sheet of paper which was given out with the proposed amendment. Does everyone have a copy of the separate sheet? Councilman?
Could I ask a question on that just a hypothetical question? A police officer who retired at age 45 dies at age 58. The beneficiary is not entitled to survivor's benefits until two more years pass?
'Cause I think that's only in police and fire that we have that earlier age.
Right. Councilman, if I can ask you a further question about your hypothetical.
The police officer retired at 58. That's the first part of your --
No, he retires at 45. 144 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
For your example, 10 when did the retired officer pass away? 11
Well, what difference does that make? It could be any year.
The way the bill 20 reads, Councilman, is that the person is or would be 60 years of age by July 1, 1999.
Say he'd be -- say it happens at a time when he'd be 58? Is there a 145 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 two-year break in the period of benefits?
I believe the answer to your question is if we moved it into this year, let's say that that police officer retired at 45, dies at the age of 58 this year.
The deceased member would not be 60 years of age by July 1, 1999 which, is the trigger date for qualification for the two lump-sum payments.
Exactly. That person, or their beneficiaries or survivors, would not qualify. If the officer retired at 45, died at 58 three years ago, that person, had they lived, would be 61, depending on when their birth date is by July 1, 1999, and that person or their beneficiaries or survivors would qualify.
As to the one who would become 58 on July 1, 1999, does that -- do the beneficiaries become entitled to survivor's benefits when two more years pass, or are they, as 146 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 far as these bills, just out of the picture?
They would not be eligible. Naturally, there may be other provisions in the Pension Code that deal with beneficiaries and survivors whenever a member passes away. But in terms of this particular provision, the qualification for lump-sum bonuses, the person either has to be 60 by that date or would have been 60 by that date if they had deceased at some earlier point in time.
And if a beneficiary is not entitled to the first year, would the beneficiary automatically then not be entitled to the second year? Is it the same?
You're right because the eligibility date is July 1, 1999.
All right. I just wanted to understand it. I'm not taking any 147 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 position with respect to it.
Now, your example, I will, at the risk of. . . Okay, we can have a separate discussion about that.
You will also notice from the sheet that there are at least four examples of different scenarios that could play out for either the member or their beneficiaries or survivors. Again, this particular provision has to do with removing the age requirement for beneficiaries and survivors. I would like to read those into the record. The first example is if the deceased member had been 60 years or more and retired for 10 years or more by July 1, 1999, the survivor or beneficiary would automatically receive the bonuses for '99 and 2000. And the second example, if the deceased member would have been 60 years old by July 1, '99 148 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 and had been retired for ten years or more, the survivor or beneficiary will receive the bonuses for 1999 and 2000. If a member had been retired for 6 years and was 60 years of age and then died and 7 there is a survivor or beneficiary who had been 8 collecting survivorship benefits for one year, the 9 survivor or beneficiary would receive a lump-sum 10 bonus of $1500, which is calculated as follows: 11 it's the $1,000 plus 5 years times 100. 12
We're taking the person's -- I'm sorry. Well, in the third example, you're taking into account the fact that the retired member had him or himself been receiving benefits for 14 years, then passed away, and their survivor or beneficiary had then received benefits for one year, we're giving the survivor or beneficiary the credit for 15 years.
And then the last example on the sheet, which kind of went to part of the discussion that we had: Number 4, if a 149 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 member had died five years ago and was or would be 60 years of age by July 1, 1999 and had been retired for five years, meaning that the survivor had been receiving benefits for five years, then the survivor would receive the bonus because of the member's five years of retirement, plus the survivor's five years of receiving benefits, thus meeting the ten-year retirement criteria, and the survivor or beneficiary is then eligible to receive lump-sum bonuses for 1999 and 2000.
And the words "member" means a member of the pension system?
Yes. It was the person who actually worked for the City.
Councilman Cohen, do you have any other questions on that issue?
Does anyone else have a question on that issue? Councilman O'Neill, your light is on. 150 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Did you want to ask a question on this issue? (Councilman O'Neill responds inaudibly off mike.)
No, on this one amendment. We're going to go amendment by amendment.
I request to the Chair -- I know that we're going through each of the amendments, and I have no problem doing that.
But I do have a problem. I have asked, and Councilman Cohen has joined me, but even if it were just one of us, if we had some time deadline like tomorrow that this had to be done by, I could see not taking more time with it. I think a whole lot of information has come out here today, and I'm assuming that people haven't just dug in their heels that they got to be with one side or the other. We have learned today, if we didn't already know it -- and I didn't -- that the Pension Fund is not effective whether it's 9 percent or 10 percent. Bingo, all the talk about protecting the Pension Fund is gone. 151 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 What we are talking about, though, is that someone pays -- and it's the General Fund that eventually pays. And that it's roughly $5 million given the last ten years if we do 6 instead of 10 in addition to what the costs are 7 that already are in here to the General Fund. 8 And, naturally, if we're 9-1/2 or any other number 9 you want to split out, but at 9-1/2, the cost would be $2.5 million a year. We also have heard the enormous savings or cost avoidance that pension obligation funds have and will benefit the City with that dwarf any numbers we're talking about here. And if there is some pressing reason when we have one bill that goes four months and somehow passes by the pension bonds, they get done first, that we have to do this now, particularly today with at least a week left. So I'm not sure if the Administration understands the full impact of this, and I'd rather be talking about a bill 22 that's in committee with them rather than talking about a bill that's scheduled for a second reading. I don't mind -- I have no problem with 152 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 any of these amendments except percent. And I think that there's a valuable amendment in here, particularly going to July 1, 1999. But I don't see the rush to judgment on the percent from 6 any timing standpoint -- not a timing standpoint. 7 We haven't heard the Pension Fund -- Pension Board 8 say that you got to have this by tomorrow or we 9 can't get it ready for July 1st or anything like 10 that. Just as a common courtesy, I don't understand -- we've had this bill ten days, two weeks today I guess it is, and I just don't understand why it is that we're talking about getting this out when our differences, I think, are rather small. And I would just ask the courtesy of the Chair to get these amendments done and hold the 10 and 9 percent. That's the only issue that's left, as far as I can see. And I would like to see some serious discussions with the Administration about the small size of our difference. We originally heard there was a large size, that it was enormous. I believe we've learned today that it's very small. 153 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 And I would hate to see this Council factioned out like this over an issue that is so small, over who wins and who loses or somebody voting for pensioners or against unions when our differences are minute -- it's minute, it's not just small, it's minute.
And I do believe that a commitment was made in December that hopefully by the early part of February, the middle of February, the bill would be passed. If I'm wrong, I'd like somebody to correct me on that. I think that commitment was made to the unions in December.
But if the unions are opposed to what we're doing, what's the difference about a commitment to the unions? If you're telling me we're going to do something against what you believe your interest is, why are you rushing to do that? I think when the commitment was made, it was the understanding that this was going to be something favorable. All I'm asking even is if you just boil it down to a week, I don't think we need to talk about this for months. But when we've narrowed 154 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 down the differences to this small a number, I think four or five days would be plenty of time to see if there's any movement that can be gotten between the two sides, and we could all agree on it. I don't think we're that far apart. We're not arguing over the majority of this bill; we're arguing over a very small part, but I think it's a very significant part.
Thank you. The Chair recognizes Councilwoman Blackwell.
Thank you, Madame President. I was present during discussion of a mid-February or February 14th date. And certainly that discussion was with regard to whether or not a recall was being requested and granted. And we did not go that route, so it seems to me that that question is then moot. I believe that it is worth us trying to come together as a body. We did hear -- we noted Councilman Nutter talked about some changes, but we are for the first time really having a public discussion here about what these proposed amendments are. I think it would be a more fair 155 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 to everyone here that we have an opportunity to review it, that we also try to get some answer to the question about our differences versus what the Administration thinks in terms of costs. And for those reasons -- the opportunity for fairness and review and the opportunity to get a response from the Administration, I, too, request that we not have a vote on this bill today, but that we, since we do have until next week, I agree with Councilman O'Neill, and that we continue our discussion with the amendments today, but that we defer so that all of us have the time to review and hopefully come up with a consensus of opinion on this bill.
I just think this discussion is premature. We obviously at least have until next Thursday morning, a week away -- in fact, more than a week away before any Council action can occur. To go as fast as we want to go, all we have to be ready to do is to have the first reading at the next Council session on February the 5th. We have from now on until that day -- as 156 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 a matter of fact, we even have more than that time because the February 5th meeting could be extended for -- you know, recessed for a few hours if we weren't settled. I think we're going to be settled long before that so I don't know why we're discussing it. I would like to hear the amendments, I would like to have also the opportunity to propose amendments, and at that time, we can all make a decision. And I think if any member -- I don't think it ought to go to a vote -- if any single member requests time at a time when time doesn't delay anything, this body has always honored such requests. There's no need today; we don't advance our cause by acting today or tomorrow, as long as we're ready to act by next week, by the February 5th date; that's the next date that something could be done. And I would be delighted, and I think everybody would be, if we were ready to pass this bill by February the 12th. We ought to be ready to do it because I'm sure by next Thursday, a week from tomorrow, we're going to be -- is today Thursday? The days are moving so fast. Today's 157 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 only Wednesday, right.
So we have until a week from tomorrow before the next Council meeting and we have to be ready at that time to put the bill on the first-reading calendar so that it will be ready for action by February 12th. So I think all interests can be accommodated. There's plenty of time for that.
I understand. Just a quick check of the calendar, though, Councilman, just a minor point. Our next session days are February 4th and February 11th.
Fine, correct my record. I thank the Councilman for correcting me on the calendar.
It may be the only one I get in today, Councilman. Okay.
Excuse me, one other question, Madame President. Also the reason for the mid-February date was to try to come up with a bill. However, obviously, there was discussion afoot because the 158 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 new bill came up the next day. So it's obvious we don't have that same kind of deadline because the bill was, in fact, introduced last Thursday. So that February 14th -- that deadline was in response to getting a new bill ready from Wednesday so that we would -- so that there was no 8 rush from Wednesday to Thursday. But, apparently, there was already some move afoot, so there is in my judgment, again, no 11 need to adhere to any date unless we feel that we're ready.
Thank you, Madame Chair. You will see in the proposed amendment that the entire Section 131.2, entitled "Pension Adjustment Fund" has been bracketed and stricken and replaced by a new section, 131.2, "Pension Adjustment Fund." The essential elements of this new section are that the Pension Adjustment Fund is established on July 1, 1999. The term "fund basis" is a part of the section. It is defined 159 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 later on in the bill. As a result of the creation of the Pension Adjustment Fund on July 1, 199, effective June 30, 2000, which is at the end of that fiscal year, the Board shall make a determination as to whether or not the fund basis has been maintained and whether there are excess earnings available to be credited to the Adjustment Fund pursuant to the provisions of subsection 131.3. There is additional language added. I'm sorry?.
In this section, we have here that the Pension Adjust Fund is established in July '99.
But then in the next sentence or two down, you talk about effective 2000.
Now, the request was that when it's established, it begins 160 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 functioning as opposed to in terms of a different effective date.
The Board looks at the return of the Pension Fund for that fiscal year. They don't make a determination of how the fund has performed until July 30, 2000. That's the meaning of that section. Effective July 30, 2000, the Board shall determine whether the fund basis has been maintained and whether there are excess earnings available to be credited to the Pension Adjustment Fund pursuant to the provisions of Subsection 131.3.
But I think that's the question, that why could not the fund start on July 1991, which means we didn't deal with the back year in terms of the review so that the fund could begin immediately?
Councilwoman Blackwell, I had never thought of that. But why can't the Pension Fund say when it's established July 1, 1999 immediately take the last year --
Exactly. 161 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
-- and make the determination as to the year that ended, you know, as to the year that just ended. They will have the data very shortly so that you can gain a year in the beginning of the operation of the fund. Is there any legal -- I would know of no legal reason why that could not be. Is there anybody here that knows of any legal reason? The actuary? Couldn't we establish -- I'm just talking could we; I'm not talking with whether we should or not. But is there anything that would be wrong legally as far as you know if the Pension Fund immediately started on the previous fiscal year instead of waiting for the future fiscal year? I think it's a very interesting question and I think it would --
Councilman, I can make a note of that. I think that the general concept has been that you start something at the beginning of the fiscal year, you evaluate how that thing has performed during the course of that fiscal year, you look back at it, and decide whether there are any credits to be put into the 162 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 fund based on that year's performance.
And this is another reason for the view that we would like to put this on the table and we would like response back before we have the opportunity to vote on it, because we would like this starting date and this effective date for --
Let me make sure that I understand the question. Are you essentially asking -- it sounds like you generally agree that you would want the fund to start on July 1, 1999.
But you want the valuation of the previous year's return, which would mean 6/30/1999, to be used as the valuation starting point.
Whatever that is, because you have to then deal with the previous year, but if we begin the fund, we want 163 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 to begin it immediately so we can get input so that the pensioners can get some payback as quick as possible.
I think the other -- I mean, again, just for consistency's sake or some level of mirroring, if you look at the previous bill, it read: "Beginning in fiscal year 2000 and continuing each year thereafter, a portion of the assets of the Pension Fund representing one half of the previous year's actual annual return on investments over the actuarial investment return assumption in effect for that year shall be designated for cost-of-living increases and accounted for as such." Now, it very well could have been my error but I believe that that section of the previous bill would have you evaluating that year's annual return -- that year being FY 2000.
I think that -- we're pulling the bill, but I do believe that it --
I have a copy here, Councilwoman, if you'd like. 164 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
But I do believe that we would like to consider that so as to begin this immediately, to begin input into the fund, that we consider it as we requested.
Madame Chair, I don't think we need to have further discussion on that.
At this time, we'd like to hear from the Administration people what their response is. Maybe there is some legal impediment or --
I said I would like to -- before I reach a conclusion, I would like to hear from the Administration and from anybody else as to why this would not be a reasonable way of proceeding. I don't know why we want a delay on any of this. I think we want to put it into effect as 165 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 quickly as possible. And if there is a legal or an accounting reason or some other reason that, you know, indicates to the contrary, I'd like to hear it.
Why shouldn't we? The new fund would be ready to operate quickly, and they will have the statistics shortly available to them for the previous fiscal year. They consider that as Year 1.
Now, part of the problem here, Councilman Nutter, is we're still in the learning process. We were unable at the beginning of this discussion to even realize there might be these kinds of questions. As we're learning about this, we're learning, you know, how to deal with it.
And that's the reason some questions are coming up now for maybe the first time, because we're only beginning to 166 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 understand this area. None of us know what's really going on yet, but we're beginning to learn step by step. And I think if we're serious and we want the retirees to think we're really considering their interests, we ought to say we've not only established a Pension Fund, but it's an operation. It's not going to sit around for a year until the reports for that year come in.
Yeah. I mean, I've taken note of that. You want to basically talk about the previous year credit.
And so that would be June 30, 1999. The additional language in this section 21 tries to get at the heart of what the Pension Adjustment Fund is being created for. And there's express language here. It maintains that the Pension Adjustment Fund shall not be segregated from the assets of the Pension Fund. That's 167 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 consistent, I believe, with every person who's ever testified about this. The purpose of the Pension Adjustment Fund is for the distribution of benefits as determined by the Board for retirees, beneficiaries, or survivors. The Board shall make timely, regular, and sufficient distributions from the Pension Adjustment Fund in order to maximize the benefits of retirees, beneficiaries, or survivors. This additional new provision tries to deal with an issue that was raised a couple days. Within six months of the establishment of the Pension Adjustment Fund, the Board shall develop various plans that the Board shall consider for preliminary approval based on actuarial reports on the anticipated credits that may be transferred to the Pension Adjustment Fund after the actuarial certification for the fiscal year ending June 30, 2000. So as to ensure that if there are any funds available in the Pension Adjustment Fund on or after July 1, 2000, a distribution may be made within six months and without delay in accordance 168 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 with the provisions of Section 131.4.
Excuse me. On that question, Councilman Nutter, we know we have the date to contend with that you are reviewing. But if there is the actual payout to the retirees, why do we have that six-month review in the middle? It's supposed to be an automatic payout.
I understand. Based on the original wording here -- Councilwoman?
Based on the original wording, we had the other discussion about why don't we look at the previous year. But based on this wording, the six months is important in that -- the concern is if the fund started on July 1, 1999 --
-- and you only value it on June 30, 2000, and if there are 169 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 credits transferred to the Pension Adjustment Fund, say, for arguments's sake, in July or August of the year 2000, the concern was that the Board would then have to make a determination of what was there, they'd have to take a vote, they'd have to decide what plan of distribution they wanted to utilize. And all of that may take some time, and there could cause a delay in that year for any distribution. The reason for this particular language is that within six months of the establishment of the Pension Adjustment Fund based on the July 1, 1999 date -- so you're talking basically sometime in December '99 or January 2000. This section is saying that the Board should have already tried to make some decisions about what they would do with different sums of money that they would anticipate receiving sometime in July or August of 2000. So, for instance, if the Board's actuary said in July or August of 2000, you might receive $30 million or $40 million or $50 million or $60 million, we want the Board to go and make preliminary plans and preliminary approvals on what they would do if they had certain dollars, so 170 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that they then don't have to make that decision all over again or go through that process after July 1, 2000 -- which could cause some delay in making a distribution. If they have already done all of the prework and made their analyses, then when the true number comes in, after the actuary certifies the following June 30th, the Board would literally be in a position to virtually immediately make a decision, and you would be able to get checks out, if there were funds available in the Pension Adjustment Fund, sometime in the fall of 2000. So that's all that six-month time period is. It's saying that immediately after creation, the Board has to start making preliminary plans and approvals on what they would do if they had money the following year.
There are two 171 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 definitions in this section which, I guess, whether we wanted to or not, we've learned a great deal about. At least one of these terms, out of the discussion in the caucus room, there was a request that the adjusted market of assets valuation method be written down, to be distributed as well as be included as a definition within the bill. I believe the other day, by way of a copy of a letter from Mr. Kent to Mr. Herkness, there was a definition provided that explains this terminology, and that explanation has also been included as one of the definitions in the bill. The fund basis is essentially recognizing that there is a particular actuarial funding level that's established as of the date of the establishment of the fund, and that level then becomes the level by which you measure in the future whether or not credits will go into the Pension Adjustment Fund or not. That, then, goes into the next section, 131.3, "Credits to the Pension Adjustment Fund," which has been the subject of a fair amount of discussion today. It is presently established as 172 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in letter (a), the first 1 percent of the earnings go to the Pension Fund itself. In small letter (b), the percentage between 1 and 6 percent over the actuarial return rate -- which is, based on those numbers, is essentially 10 to 15 percent. Fifty percent of the excess earnings would go to the Pension Fund; the other 50 percent would go to the Pension Fund. And then letter (c), all earnings in excess of the 6 percent over the 9 percent rate go to the Pension Fund itself. On , letter (d), this was an item of some discussion earlier. Councilman Cohen raised an issue about terminology that I had inserted for consistency purposes. As I said on the record earlier today, I do not believe that there is any material need to have this language here. It was more for explanatory purposes than anything else, and I am certainly open, Councilman Cohen or any other member, to having that language removed. That has to be with "(or such other generally accepted valuation methodology as may be approved and adopted from time to time by the Board.)" It was a mere recognition that the Board 173 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 does decide what valuation method they used. And if there ever were a change, then the same method should be used to value the pension adjusted fund. I do not know what potential problems may be caused by using two different valuation methods; although, again, I will point out that since these assets are not technically separated from the Pension Fund, I literally do not know how you would have two different valuation methods going on for assets that are all in one place. This language is not, at least in my view, significant enough to have any dispute about, and I would gladly remove it.
All that's needed is to say, put a period after the word "method" and cross out the rest. We don't have to go through a formal amendment 'cause there's nothing to amend as of the moment.
The sole question is 174 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 whether you're going to introduce an amendment which, in turn, would have to be amended.
Right. I mean, these are the amendments that at some point in time would be offered, and so I would make a specific statement about that or ask that that language be stricken from the overall body of amendments being offered.
So I've made a note to myself. I don't know if anyone else feels particularly strongly about it. As I said, it could certainly come out; it was merely for recognition purposes that the Board does make this decision. On this particular point, I'm more than cooperative.
Thank you. I agree with Councilman Cohen on that point.
At amendment time, 175 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I'll certainly go right back through it, but for this discussion, there would just be a period after the phrase "valuation method" and everything that's underlined and within the parentheses -- "or such other generally accepted valuation methodology as may be approved and adopted from time to time by the Board." At the appropriate time, I will ask that that be stricken from the amendments as offered. The next section, letter (e), is the section that reads, "No credit shall be made to the Pension Adjustment Fund for any fiscal year in which the total assets of the retirement system, as determined by the Board's actuary used in the adjusted value of assets valuation method are less than the fund basis established as of July 1, 1999." Again, as we know, the establishment the date of the fund is the date by which we will use the measurement of making the credits. And if the fund is -- whatever its value is on that particular day, that would be the bar that would have to be maintained for credits to go into the 176 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Pension Adjustment Fund. If the Pension Fund itself is funded at less than the level that it was on July 1, 1999, then no credits would go into the Pension Adjustment Fund.
Could I ask you to give us a for instance? I don't understand how it ever would come into action because the fund, on July 1, 1999, is always going to be lower than the fund will be at any later date. 'Cause even in the worst years, the fund gains assets. It may be technically a loss with respect to expectations, but the asset value of the funds has got to be higher any date after July 1, 1999 than it is now -- unless there's a catastrophic series of losses, none of which have ever been experienced by this Pension Fund. I'm just trying to figure out what that refers to.
Yeah, I'm sure you want to talk to the actuary, but it again at least tries to anticipate in a worst-case scenario if there were --
You use the term 177 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 "catastrophic"; I might use the term "potentially disastrous market impact" or activity on our Pension Fund that, at some particular point in time, could drive its funded level down below the level that it was at on July 1, 1999. Or if there were benefits subsequently given that somehow drove up our unfunded liability level. It's something you have to anticipate.
It seems to me like you have a half a dozen belts and a half a dozen suspenders that you're wearing to make sure everything holds in place. 'Cause I just can't conceive of a scenario in which --
-- that paragraph would be activated, but there may be, and --
Sure. In 131.4, "Distributions From the Pension Adjustment Fund," one of the changes here -- and it came directly out of some of our many meetings. In this 178 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 scenario, every year within 60 days of the end of the fiscal year, the Board will have to consider whether to provide an enhanced benefit distribution -- or, as we've more generally come to know them, just as a distribution from the Pension Adjustment Fund. In the original of the bill, it read that no later than the third anniversary of the creation of the Pension Adjustment Fund -- which certainly means that they could do something in less than three years, but there were many concerns that they would not do anything until three years. In response to that, the new provision requires the Board every year, within 60 days of the end of the fiscal year, to consider whether to make a distribution or not. There are some terms that have added to that section: lump-sum bonus payment, monthly pension payment increases, lump-sum ad hoc cost-of-living adjustments, continuous cost-of-living adjustments -- which all have become defined termed further down in the bill. (Councilman Cohen asks a question 179 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 inaudibly off-mike.)
Councilman, we'll hear more testimony about this. You've raised a very significant question, and you've also caught an error. In Section (e), it should read: "No 8 credit shall be made to the Pension Adjustment Fund for any fiscal year in which the total fund basis of the retirement system, as determined by the Board's actuary, using the adjusted value of assets valuation method, are less than the fund basis established on July 1, 1999." That was a word error -- or a term error.
I took out -- see the part, Councilman, the third line from the bottom of that Section (e) that starts to read, "Assets of the retirement system. . . "
The word "assets" 180 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 is incorrect.
That's the only change: you substitute the two words "fund basis" to replace the word "assets."
Right. Councilwoman, you see all the language that's been 181 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 stricken and that has brackets around it? Right after that is the phrase "assets of the retirement system." The word "assets" was incorrectly placed there. The correct term is "fund basis," which is a defined term.
And that will need to be amended subsequently. But you see the definitions there of ad hoc, cost-of-living adjustment, continuous cost-of-living adjustment, and lump-sum bonus payments? Those, again, came out of a letter from Ken Kent to Joe Herkness. We thought, just so that everybody's on the same page in terms of how these terms were used, we would also insert them in the bill. Letter (b). This is a new reporting requirement for the Board. "The Board shall report in writing to City Council, no later than 30 days after the end of the fiscal year, any distributions that have been made or are proposed to be made from the current balance of the Pension Adjustment Fund. If no distributions were made in the previous fiscal year, the Board will explain 182 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in writing the reasons therefore. Subject to the availability of funds in the Pension Adjustment Fund, if no distributions have been made by no 5 later than 18 months after the creation of the Pension Adjustment Fund or any 18-month anniversary thereafter, and if the Board has not voted on and improved an enhanced benefit distribution plan at that time, the Board shall notify City Council of such inaction in writing and explain why no distributions have been made and provide a full financial report on the current balance of the Pension Adjustment Fund. The Council expressly reserves the right to provide by ordinance for enhanced benefit distributions from the Pension Adjustment Fund, if the Board fails to provide for any distributions during any period of 18 consecutive months. The Council shall follow the same procedures as are required of the Board pursuant to this section before any distributions may be authorized." This section comes as a result of a concern that the Board may not make distributions for some reason, for no reason, for malicious reason, or any other reason. And it is at least 183 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 my attempt or response to try to force the Board to adhere to the earlier statements that were made about what the purpose of Pension Adjustment Fund is and that they should make regular and timely distributions. Generally, I think we want the Board to take their Board actions seriously, but we are putting them on notice, by way of the legislation, that if there are no distributions and there is money in the Pension Adjustment Fund, one, we want to know about it; and, two, if an extended period of time passes, we are putting them on notice that we will take action of our own, and we reserve the right to do so. There is a further in (c), and this was inserted as an attempt to respond to the argument made by Councilman O'Neill and some of the union leaders which has to do with the valuation method and what goes into the Pension Adjustment Fund. "If any period of two consecutive fiscal years the Pension Adjustment Fund does not receive any credits, even though the Pension Fund's rate of return exceeds 10 percent using an adjusted market value of assets valuation 184 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 methodology, the Board shall make a report in writing within 30 days of the end of the two-year period to City Council to explain these circumstances. City Council reserves the right to make any amendments to the authorizations, directives, or provisions of this ordinance or to take any other action in order to correct this circumstance, as the Council deems proper." Again, the primary purpose of this section is to try to address if there is a worst-case scenario as presented and there was tremendous discussion about it, that City Council puts itself in a position and expressly reserves right to take actions necessary to correct the scenario as primarily laid out by Councilman O'Neill but also as discussed by other Councilmembers.
May I recommend for the sake of clarity that we've talked about 30 days, 6 months, 2 years, year. 25 Couldn't we have a yearly review. I mean, to keep 185 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 up with the 18 months, then the years, and then the 30 days, then the months, and back and forth, it's going to be very simple -- a lot clearer if the -- if the amendments deal with the yearly review.
Councilwoman, there is a provision for the yearly review.
I mean in terms of all this these times, could we revisit this and see if it won't be a lot clearer if like instead of months, we deal with a yearly review 13 so that we have a consistent period. 14
You will have a 15 yearly review, Councilwoman. You also get 16 information at the 18-month mark, you also get 17 information at a 2-year mark, but you will always 18 get a yearly review. That's covered by the first sentence on , letter (b). "The Board shall report in writing to City Council no later than 30 days after the end of the fiscal year any distributions that have been made or are proposed to be made from the current balance of the Pension Adjustment Fund. If no distributions were made in the 186 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 previous year, the Board will explain in writing the reasons therefore." So there is an automatic yearly reporting requirement by the Board of Pensions.
But it seems to me that it would be a lot clearer and simpler if we deal with that yearly period as opposed to 6 months here, 18 months here and then a year other places, and then 2 years other places. Then we can get a consistent understanding and a consistent policy that we have this yearly review every year, and it will make things a lot clearer for all of us.
And we could find out and have all of our reporting and all of that done in this yearly fashion, and then it would make -- I think it would make this bill a lot clearer, and everybody won't feel like we have to deal with it every second.
And it will add a lot of clarity to the issue. 187 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Councilwoman, I appreciate your point. I think the effort here was to have more reporting than less and not have extended periods of time pass by. And in some cases, an extended period of time could be another year before Council is informed as to what the bill is Board is doing or, in the alternative, what the Board is not doing. You have a yearly requirement. You also have the Board essentially having to make another report months later if they've not made 13 any distributions in an 18-month consecutive 14 period. I mean, the burden is on the Board of 15 Pensions and Retirement to make all of these 16 reports to us. There's no particular burden on 17 the Council other than reading the document coming 18 over from the Board. Again, it was just an effort to make sure that we get as much information as possible, that the Board is staying on top of what they're supposed to stay on top of, and that City Council is always in a position to take any action that may be necessary with good and timely information. That was the only purpose of adding 188 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 additional reporting requirements -- primarily because of scenarios that were expressed as a concern to me, some of which came out of the Sunday afternoon conversation and others from other meetings that we've had as a body.
Well, we'll consider what you say, we'll consider and review the whole issue and we will let you know.
Madame Chair, may I -- would you indulge me as a person certified to teach English and who did it one summer many years ago.
In Section (b), the end of the sentence on Line 4, I suggest that the word "therefore" has an (e) when it ought not to.
There are two therefore's, and this is the other one. It should read T-H-E-R-E-F-O-R, without the e at the end. 189 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Oh, okay. I'm sorry. I didn't mean to offend your English sensibilities. I think, apparently, spell-check considers that a word.
And as a former English teacher, I'm glad to hear that, that my colleague was also an English teacher.
Councilman, what year was that when you were teaching English?
That's quite possible. My parents were definitely little kids 190 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that at that time. This is -- I love this place. Section 131.5 goes to, I think, as Councilman Cohen has referred to, the belts and 5 12 suspenders. This section pretty much remains 6 unchanged, I believe actually, except for one 7 significant addition. 8 This says that "it is the intent of 9 Council that distributions to retirees, their 10 beneficiaries, and survivors through the Pension 11 Adjustment Fund pursuant to this section should be 12 funded solely from investment returns generated by Pension Fund assets." I think all of the testimony has always indicated that these distributions should only come from the Pension Adjustment Fund. "Nothing in this ordinance is intended to require the City of Philadelphia to make any contributions from the General Fund to support the Pension Adjustment Fund in any way." And what was added was the comma and "except by ordinance of City Council." The purpose of that phraseology is to deal with the previous section. If in the event that the worst-case scenario were to play out, as 191 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 again, as well articulated by Councilman O'Neill in the hour-plus discussion earlier, and if there is a two-year period during which the Pension Fund itself has returns in excess of percent, but 6 because of the pension system's valuation method, 7 there are no credits made to the Pension 8 Adjustment Fund, one, City Council wants to know 9 about it; and, two, we would take the position by 10 this phraseology that we would have the right by ordinance to make credits to the Pension Adjustment Fund from sources that we determine.
The record will note that I never made objection to the statement. I'm in full agreement.
I would desperately like to move on if you have no objection.
All right. As I mentioned earlier, this bill, Section 1 will mirror Section 2; or in the reverse, Section 2 will mirror Section 1. And unless there are any objections or unless anyone has found any inconsistencies between Section 1 and Section 2, 192 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I'd like to move to Section 3 on . There was a concern expressed about the sunset provision of the bill. That sunset provision would allow the Pension Adjustment Fund to expire in five years unless reauthorized by City Council. And so virtually inaction by the body could result in the expiration of the Pension Adjustment Fund. There was an objection raised to that certainly, I'm sure, by the unions; I don't recall it by any members, but there was discussion about it. That provision has been deleted. The new Section 3 would allow for review periods, and that reads: "Within 60 days after every sixth anniversary of the establishment of the Pension Adjustment Fund, the Board shall determine whether the authorizations, directives, or provisions of this ordinance should be amended. If the Board, by a majority vote of its members determines that amendments are necessary, the Board shall provide a written explanation of said amendments and make a recommendation in writing to City Council requesting that the amendments be implemented within one year by ordinance. The 193 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 recommendation by the Board shall also include a statement documenting the actuarial impact of any recommended amendments. City Council expressly reserves the right to amend the authorizations, directives, and provisions of this ordinance at any time as it deems necessary. Any amendment by City Council shall be accompanied by a written explanation of said amendment and an actuarial impact statement documenting the impact of any recommended amendment." I would believe that that would actually be for our own protection, to make sure that we know what the particular amendment is about and what the potential actuarial impact is of that particular amendment. Madame Chair, that at least represents a reading into the record of the general provisions of the proposed amendments. And if there are any other questions that I can answer -- I think there are some other questions, they may not be for me, I'd be prepared to answer them at this point in time.
Are there any questions from members of the committee? 194 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I would urge all Councilmembers to please come to the chamber. All Councilmembers, please come to the chamber.
Would it simplify and make clearer Section 3 if we deleted everything in that section except the last sentence. It would make it about half as long, and I think it would achieve --
The very last -- 7 and 8. I'm suggesting that the suggesting Section 3 review period, that the only sentence needed really is the final sentence -- "City Council expressly reserves the right to amend. . ." That whole sentence.
I would only take 195 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 the position that it was necessary from the standpoint of -- we have asked the Board of Pensions to do a number of things. What I'm proposing that we ask them to do here, again, from a monitoring and accountability standpoint, is that they review what's going on an even extended basis to make sure that whatever was put in place -- whether it's now in 1999, or, I guess, 2005, 2011, in these six-year time frames -- that they review and reevaluate and be required to do so for certain periods of time. If there is no recommendation that they want to make, then they don't have to make one. But it's really more putting in an additional responsibility on them to make sure that things are working right, that whatever it is that you're doing is consistent with the times and the financial circumstances of the Board. They are merely required to review it and to make a recommendation. The recommendation could be one of two things: either everything is all right and we have no recommendation to make; or we think that there is something that needs to be changed, and it has to be accompanied with an 196 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 explanation and an actuarial impact statement. And that's only a recommendation to City Council. There's no requirement for us to implement any of those recommendation, but it's an additional reporting requirement, and nothing more.
All right, I think that's a reasonable explanation. I don't see any harm. Madame Chair, I'd like to correct the record. I stated before that I received certification as an English teacher in 1937. The year was wrong; it was 1934.
Madame Chair, at this point in time, if there are no further questions for me, I don't know if there are other 197 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 questions for other people, nor do I know if there's any further discussion or debate at this point in time, I would like to -- or even if there is further discussion and debate, I'd like to be in a position to be able to offer these amendments in a public meeting, have whatever action is to be taken on them, and continue from that point.
In Section 131.4, I had raised the question about the clause containing the "subject to" phrase.
Councilman, you're talking about the phrase "however, that all disbursements made pursuant to this section shall be consistent with all federal, State, and local laws, ordinances, and regulations," is that the phraseology you're talking about?
Just a moment, please. Yeah, that's the section I had 198 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 referenced to, the one beginning with "Provided, however. . ."
Right. Councilman, you and I have had a couple discussions about this. I had committed to trying to get in writing an explanation from the Law Department as to what that phraseology was about. I believe on Monday it was distributed to you and all members. There were three letters or memoranda from the Law Department to me on three different issues, one of which was the legal limits on distributions and the phraseology in question. What I'd first like to do is read into the record the response that we received back and take it from there.
This is a memo from Evan Meyer, Deputy City Solicitor, to me, Councilman Nutter, dated January 22, 1999. The subject is Bill No. 990001, Pension COLA and legal limits on distributions. The letter reads as follows: "You have asked for an opinion as to the effect of a sentence in Bill No. 990001, as 199 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 introduced, that subjects future distributions from the Pension Adjustment Fund to certain other laws. Your question relates to a specific phrase in Section 131.4. I quote the entire sentence with the phrase in question underlined." Councilman, what I'd like to do, since there is a proposed amendment on that whole section, is just to read the phrase in question, is that okay?
"Provided, however, that all disbursements made pursuant to this section shall be with all federal, State, and local laws, ordinances, and regulations." The letter continues. "A concern that you may have is that the underlined phrase could be interpreted to prohibit any distribution whatsoever so that none would be made. I advise you that the underlined phrase does not have so broad a meaning. I am certain that the intent of the phrase is to ensure that the Board, in exercising its discretion, would not create a benefit that Council would not have been legally prohibited from enacting by 200 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 ordinance. "An example of such a prohibited benefit would be a benefit that violated the anti-discrimination rules of the Tax Code by providing a benefit only to the highly compensated members and not to lower-compensated members. Paying such a benefit could jeopardize the tax-exempt status of the Pension Fund. "Another example would be a benefit that violated Act 205, the Municipal Planning Funding Standard and Recovery Act, or the PICA Act, by increasing City's unfunded liability, which does not appear to be a possibility since the bill provides that all distributions are to be funded solely from investment returns." "Another example would be a benefit that violated the federal Uniform Service Employment and Reemployment Rights Act of 1994, by failing to provide a required benefit to a veteran -- also unlikely since any disbursements are likely to be, quote/unquote, across the board. "The underlined phrase does not contemplate that a disbursement would be prohibited if it was not specifically authorized 201 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 in the current Retirement Code, Title of The Philadelphia Code, as enacted by Bill 980843 since no disbursement would meet that requirement. "Clearly, in enacting Bill No. 990001, Council would evidence an intent that the Board may make disbursements in addition to benefits specifically authorized in the current Retirement Code. It may be helpful to arrange for testimony on the intent of this provision at the hearing on the bill. Then the legislative history of the bill will make the legislative intent clear."
I would like to 14 respond to that -- either now or I'll have to 15 offer an amendment. Obviously, the City 16 Solicitor's Office is not going to say, We're 17 going to use this for other than proper purposes. 18 The fact that the City's administrations 19 historically have been opposed on pension bills 20 and have presented Council with all sorts of 21 reasons why no action should be taken. They tell 22 us either everything has to happen at the negotiating table or they tell us that we're fiscally irresponsible. That's one area. The second area is that the City 202 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Solicitor will have full opportunity to present their case. If they find any reason object to anything, we will hear them at the hearing on the bill. I can't see any conceivable reason for this provision except to give the Mayor of the city an additional super veto power. After Council overrides a veto of the Mayor, he can then have the City Solicitor rule under this provision that City Council itself said to the City Solicitor, Protect us from our errors, we are too stupid to know if we violate some law, so we're counting on the City Solicitor. If they fail to note it at the time of the hearing, if Council failed to note anything wrong, if the Mayor in his veto message failed to note anything wrong, that we'll have one last crack at voiding the pension legislation by having the City Solicitor find some reason that there may be a question of legality. I assert that the City Solicitor always has the right to find something illegal, whether it makes sense. But certainly we should not, in City Council, empower the City Solicitor to use against City Council its own language. 203 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 So I am asking that that be removed from the bill. I want to take away their argument that you, City Council, asked us to make this final check. And that's the purpose for my amendment.
And I would like to ask you, since it has not been, you know, introduced as of now, to eliminate that language from the amendment that you propose.
And I might suggest that I think it's a matter of collegial courtesy that you ought to accept the legal advice of a member of the City Council over the legal advice of a City Solicitor who works for the Mayor. I think you ought to at least assume that the City Councilmember who is a lawyer has the interest of this City Council at heart. And I find it personally offensive to have any Councilmember take the Mayor's lawyer over a lawyer who serves in the City Council.
Councilman, I 204 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 appreciate that, and no disrespect is intended.
I would be glad to adhere to that if you're willing to take a member of Council who is financially trained -- their advice over someone else's advice.
But, Councilman, the lawyer is giving -- the City Solicitor's lawyer is not giving you any examples of improper use of the power.
They're merely explaining in the normal course of events, we'd only do it under these circumstances.
We don't really have an argument, Councilman, between us. 205 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 From our previous conversations. And I would generally believe also, your position on this is probably that whether the phrase is in or out, it doesn't really make much of a difference; is that correct?
No, no, it makes a very big difference. It gives the City Solicitor the --
Then if the phrase is out, then you're all right with it? If it's out.
Okay, one last question. Would you agree in that same section 17 that before any distribution is made, that the Board itself should seek advice of its own legal counsel, that whatever distribution is going to be made will not have any impact on the tax-exempt status of the Pension Fund?
I would impose that on the grounds that I think it's an insult to the retirees. The Board has the right to consult with any whatever legal counsel it wishes to. I don't 206 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 think we have to tell the Board, especially now, We're worried that maybe you're going give a little money away, make sure you get a legal opinion.
And we might very well even ask them if they've consulted.
Okay. Under that scenario, then, the sentence would read: "To retirees, their beneficiaries, and their survivors, and the Board may, by a majority of its members, authorize distributions from the Pension Adjustment Fund."
Right. 207 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Madame Chair, based on the discussion that has taken place so far -- and I'm sure that I'll be corrected if I'm in error -- there are corrections and/or amendments that would need to be made to the proposed amendments, all of which can be made at one time. I'd like to, Madame Chair, offer a proposed amendment to Bill 990001, which is dated 1/27/99. The corrections or amendments to this proposed amendment would be the deleting on of the -- in small letter (d), of the phrase "or such other generally accepted valuation methodology as may be approved or adopted from time to time by the Board." That phraseology should be stricken.
We have discussed a lot of amendments. Certainly we will like to see these amendment in writing.
They're here; you have them before you. 208 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
No, he's talking about the amendments that we just discussed, but we want to see the changes that were recommended in writing. I mean, we've talked about a lot of amendments. The one in discussion is the one that Councilman Cohen just mentioned that we had deleted.
But some of the other things that we mentioned are not as simple, and we would certainly like to see clean bill on something that's been this debated. We'd like to see a clean bill before we vote.
I understand. Councilwoman, are there some other places where there's a more complicated deletion or -- 209 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
All those things that we've been talking about all day, we would certainly like to see a clean bill, and I don't think it's too much to ask to see a clean bill before we vote on it.
Actually, for the deletion on , all you have to do is draw a line.
Well, that's one. I'm saying, obviously, that one's easy.
But what other amendments are you referring to, Councilwoman?
We mentioned several other ideas, one which, Councilman Nutter, we talked about, for example, the July 1 date, July 1, 1999 -- not July 1 1999. We didn't mention that just to mention that; we mentioned that seriously. Now, if he's going to tell me that he's going to change that effective -- or take that phrase out or have it effective on that July '99, when the Board establishes and also 210 1 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 deletes this other part. . . See, I don't know how that looks. We talked about that. We didn't make these suggestions and these recommendations just to --
Excuse me, Councilwoman, are you talking about ? Are you talking about the Pension Adjustment Fund? What are you referring to exactly?
I am talking about -- I'm talking about -- we talked about the -- establishing the Pension Adjustment Fund and how having that effective at the same time. When we made these suggestions, we did not make them to make them; we made them because we wanted them to be a part of this bill. So I don't know -- until we see this bill in writing, I want to make sure that all of our amendments are enacted. Now, if you want us to orally read again what we said over again, we can spend another -- I don't know, however long we've done this, about three hours talking about them. But I believe that we should be able to see a clean bill with all of the amendments that 211 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 we've suggested included. I don't think that's too much to ask for. For something that's been this controversial, this much debated, we ought to have a clean, clear bill that we can look at and to vote on.
Councilwoman, at this point, that is not an amendment that I am offering; it's someone else's.
I offered it. You didn't offer the amendment, but I did. I want to see a clean bill.
How do I know whether or not my suggestions have been included in his amendments? He may have one idea on what he wants to amend, and I may have another.
I want to see a clean bill, and I don't think that's too much to 212 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 ask. How are we supposed to know whether or not our amendments have been incorporated into the bill unless see it in print? A bill this detailed and this --
Councilwoman, you will know by whether the amendment is offered and voted on.
But I think we should be able to see it in writing.
I understand; I'm not objecting to that. All I am putting forward is the amendments that I am making.
You as a Councilmember have a right to make other amendments.
But we already went over your amendments. Then what are we doing now? We went over all of yours already, did we not? Are we reviewing it all over again?
No, we're not. What we are doing is, there have been proposed amendments generally revolving around language to be stricken, and I'm going back over what those 213 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 strikings are before I make a final motion to offer these amendments.
I understood that we went through this process today so that you -- we didn't say you, did not say, and the president didn't say that we offer your amendment or Administration amendments first --
-- and then other people offer amendments. We did it together.
You offered one, I offered one. You offered one, Councilman Cohen offered one. So it's been a joint process.
So to review yours and not ours is unfair. I would like to see a clean bill with all of the amendments. I don't 214 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 want to go over the same thing over and over and over. If we are expected to consider a bill, I think we certainly have a right to see one that incorporates all of the amendments suggested. I don't think that's unreasonable, and I don't see why there's reason for debate about the issue.
What I would like to do is point out what the further amendments are to the document that is in members' hands, that I am prepared to offer as amendments. Every member of this Council has a right to propose their own amendments. And just because something was discussed extensively does not necessarily mean that that is being offered as an amendment by me. It may be offered by another member, and they will have, you know, their right to do that.
Excuse me Councilman. Councilman Rizzo, I know your light's 215 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 been on.
Madame President, I agree with the Councilwoman that after all the amendments are offered, it would be helpful to me to have a clean document so that I can understand it 'cause this is has been very difficult, very hard to follow, and I'm not sure what's been stricken, what's been added. So I would like to have time to read it to be sure I know exactly what the issues and the amendments are.
I also find it absolutely regrettable that, all of a sudden, that my colleague wants to only entertain his own amendments. So, in other words, we've got to --
With all due respect, Councilwoman, I think all of us reserve the right to -- (Unintelligible; parties talking over one another.)
Right. 216 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
If this is your bill and you agreed to prepare it you and agreed to write the amendments and this was the way you were doing it, if the process was somehow changed, then you should have said so. You should have said, I'm going to submit mine in writing and you submit yours in writing -- which we still could not have done because we just got this amended bill today. So we could not have been prepared with our amendments in writing, and now you want us to go through this whole process all over again because you want to offer only your amendments. And that is absolutely unfair. You want to consider all of the amendments and you want to go through 'em 1400 times, that's fine. But I don't think it's right for you now to consider that you want to repeat your amendments and not deal with all of the amendments that are on the table. That's unfair, Madame Chair, and I take issue with that.
Councilman Cohen? 217 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I have an in-between point of view. Councilman Nutter is the chief sponsor of the bill. He -- after lots of discussions, he's offered many amendments. Some of them, I know I have felt ought to be in turn amended; that's why I've asked him not to introduce certain things before they become official amendments. But I do think it would be in the interest of everybody if Councilman Nutter's amendments were voted on today, and I think they'll be approved at this stage. And then we'll get an opportunity to study them and I will know what amendments I may want to offer. For example, I have one other question that did not get raised. I'm worried about that situation where the Board offers a nickel as a pension, you know, and thereby defeats the ability of City Council to act. Now, I don't know whether I'm right at this stage. I would like to see the complete Nutter bill with Nutter's amendments and with an opportunity for us to see it to see whether or not any amendments are needed. We've had lots of 218 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 discussion. Councilman Nutter has agreed to a number of the changes; and other things, we're still thinking about it. So what I would like to suggest is partly what Councilwoman Blackwell speaks of and partly what Councilmember Nutter speaks of, that Councilman Nutter put in all of his amendments. He has the right to change own bill. Any sponsor at any time has the right to change their bill and offer their own amendment, and then circulate that among us Councilmembers and give us an opportunity to study the situation. As we pointed out before, we have a week before anything can happen, before there's any need for any action. That will give everybody an opportunity. We may probably agree with his amendments or have a chance to offer other amendments that he may very well accept. But still, we haven't solved the most basic question of that amount, that 9 to 10. I would like to have some discussion on that 9 to 10 matter. But can't we get those amendments in so that we'll know whether we want to change 219 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Councilman Nutter's bill further?
Certainly on that question, I disagree with my colleague. Due to the political nature and certainly -- I'll say two things: Number one, we have two deputy mayors in the room. We've asked the Mayor to come. The Commissioner's back, and if he was out of town with the Commissioner of Recreation, the Commissioner of Recreation is back, so it seems to me the Mayor should be back. We would love to hear the Mayor respond to the initial questions raised by Councilman O'Neill with regard to the amount, whether it's 5 million or 100 million dollars talking about. That issue has not been raised. I do not agree that we should have the Nutter amendments on the table. Due to the political nature of this, I don't want a bill in any way perceived in its final form by the Administration. I don't think that's fair. I don't think it gives -- for those of us who have other interests, I would rather see a more balanced bill on the table before we are asked to 220 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 consider it. I think that is the fairest way. Given the nature of this bill, given the controversial aspects of it, I would prefer that we have a bill on the table with all the amendments in place.
Thank you, Madame Chair. In response to Councilwoman Blackwell, there is work being done on the amendments again that I am offering. If another member has an interest in offering amendments, as Councilmembers, they have a right to do that.
And Madame President, I will agree only if we agree that we not vote on it. I do not want to have to vote on amendments to a bill without all of the amendments being in. That's my point. Let's hear from the Administration, let's hear from the Mayor on the initial questions raised earlier. Let's hear from them. We still haven't decided on 9 or 10 percent, and I would rather have all the amendments on the table before 221 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 a vote.
Well, I think the question of or percent has been 5 constantly said, Councilwoman and -- 6
And the 9 Administration will not go for anything less than 10 10 percent.
Well, then they should say that. We're not the Administration.
I don't think so, I don't think so. The Administration should state that. Mr. Herkness and Ken Kent answered questions with regard to that. Nobody specifically answered that question and said that they are the Administration or that they are speaking for the Administration. I want an answer to my question. It is not fair and it violates the Charter to be asked to vote on a bill without a 222 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 specific provision defined. I want a full bill if I am required to vote on a bill. I want a bill 4 where all sides are defined. I want the Administration to say where they are, and I want Council with all of its members having the right to have input into a bill so that we vote on one that is as least as fair as we can get it. And I really don't think that's unreasonable to ask.
Councilwoman, if I can just try to get one basic understanding. Councilwoman, are you asking -- you're asking that the amendments that you're interested in you, are asking me to write them and discuss them and propose them?
What I'm asking for, Councilman Nutter, is an opportunity for the Administration to respond as to their position on the 9 or 10 percent, and I'm asking for the opportunity for everybody that's been a part of this debate all day today to have an opportunity to submit their amendments so that we have a balanced picture as far as we can go.
Okay, Councilwoman, I'm not stopping anybody from submitting 223 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 amendments.
Well, then I make that question to the Chair that we not be told that we need to vote on a bill, that we do not have to try to vote and report out a bill that does not reflect a balanced picture of the concerns of all of the members in this body. That's all I'm asking.
Councilwoman, all I can say to you is that if you have --
And I'm not saying that that's your question to answer, Councilman Nutter. I understand that.
But I think that we want the opportunity to see them in writing. We want to see a balanced bill.
Okay, we -- Councilman, we're working -- 224 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I don't want to see -- (Unintelligible; parties speaking over each other.)
Councilwoman, Councilwoman, please. This will go on and on. Do you have amendments to introduce?
I have amendments but I don't have them ready today, Madame Chair. We just got this bill today. We just got this today. We just got this today. Do you want to recess for a couple hours? We are not prepared, I do not have my amendments written. Given the fact that we just received this today, I think it is unfair that we are asked to review, to evaluate, and to submit amendments to this today. I think that's unfair. I think we all as deserve a right to review and to amend where we see fit. I don't think we should be forced to vote on this today. Fair is fair. That's all I'm asking, that we have the opportunity to review this and that we not have to vote on this today. I really don't see where that's a big problem and 225 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 why we can't have an opportunity the for review. That's all I request.
Excuse me, I'm asking for a ruling by the Chair, if you don't mind.
Councilman Nutter, no disrespect intended, but if we don't have to vote on this, I'm happy to hear all of your amendments as long as it takes.
Well, we're going to take the Councilman's amendments because he never completed --
He completed them, he went through the last page on the bill.
No, he didn't. He was still talking when he was interrupted.
Councilman 226 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Nutter, please continue.
I'm asking that we not have to vote, and I would like a ruling from the President on this matter, that we not have to vote on the amendments until all are on the table. That's all.
The Chair recognizes Councilwoman Tasco for a point of order.
Are we at the point of voting, Madame Chair? I thought we were at the point where we were still listening to the amendments being offered by Councilman Nutter.
We heard them all already. We're reviewing them again.
Thank you, Madame 227 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Chair.
One question. I'm asking for again, for determination on us not having to vote on this issue today until we all have an opportunity to see a clear bill and until we have, one, a response from the Mayor; and, number two, until we have an opportunity to see all of our amendments in writing.
Councilman, what other amendments did you make other than --
Madame President, would you make a ruling on that issue?
Do you mind? Do you mind my asking a question, please, Councilwoman?
But I would like a ruling on the question. We have a question on the table to which we ask a response.
And I am saying that Councilman Nutter was still addressing his proposed amendments. He did not have an opportunity to complete them. We are now considering amendments. I think he has -- he should be given the courtesy to at least finish. 228 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
And I am further going to say that once he is finished, it's my understanding that we have one more witness that would like to testify, and that is Mr. Costello. Is that so? Somebody just told me that you wanted to testify. If you don't, that's fine. (Mr. Costello responds inaudibly, off mike.)
Madame President, I would defer any further discussion on this matter until then.
I mean, we 229 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 have to continue on with this hearing. That's my opinion.
I defer any further discussion until after that. Thank you.
Madame Chair, you stated at one point a few minutes ago that the Mayor will veto anything under 10 --
I said he would not agree to anything less than 10 percent.
Oh, all right. Because I don't think we have to confine our discussions or decisions to conform to the Mayor's concept of what's appropriate for Council to do. I think Council makes that decision, not the Mayor. If we come out with a bill and the Mayor vetoes it, then we're going to try to 230 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 override it again 'cause we're going to have this pension thing up and back, up and back until we get a right bill. You know, I just want to make that clear I don't think we ought to be thinking that we got to do a bill that the Mayor is going to accept; we got to do a bill that we think is right on behalf of the retirees. The Mayor will do what he wants to do.
Councilwoman Blackwell says maybe others will be retired, but I won't be. Okay. (Laughter.)
Please proceed. 231 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
As best I can determine -- Councilwoman, as best as I can determine, all of the changes pretty much revolve around of the document that was handed out.
In response to Councilman Cohen, letter (d), "The language or such other generally accepted valuation methodology as may be approved and adopted from time to time by the Board." I would ask that that would be stricken. In letter (e), there was a word that was incorrect. The word "assets" on the fourth line of the Section (e), the word "assets" should be stricken. It should be replaced by "fund basis." In 131.4 letter (a), in response to Councilman Cohen, the phrase "provided, however, that all disbursements made pursuant to this section shall be consistent with all federal, State, and local laws, ordinances, and regulations," that should be stricken. There should then be a period at the end of the previous 232 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 sentence that ends with "Pension Adjustment Fund." Councilman Cohen pointed out a grammatical error in letter (b), the fourth line, in the word "therefore," the letter e should be taken off the word "therefore." (So that it reads "therefor.") Now, those are the only proposed amendments to the larger document called "Proposed Amendment to Bill No. 990001" dated January 27, 1999.
Yes, yes, Madame Chair, as best I can figure out, they're all on --
And I would think that anybody wanting a clean bill could probably have one. It's only that one page that would have to be retyped by the time the other witnesses complete their testimony.
I would certainly hope so. There are three strike-outs and the changing of a word.
Is there a 233 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 secretary around?
May I ask that Councilman Nutter respond to that question I raised about if the Pension Board votes a nickel.
I didn't want to confuse that with the earlier conversation.
In response to that -- you have mentioned that to me on a couple of occasions. In response to that, what I would propose is that on , as a part of that Section (b) that starts with the 30-day requirement for reporting and then goes into 18 consecutive months with no distribution and the Board having to explain why, if you go over into , what I would propose is this change: "The Council expressly reserves the right to provide new language at any time by ordinance for enhanced benefit distributions from the Pension Adjust Fund. If the Board fails to provide for any distributions, new language, or if 234 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 deemed by Council an inadequate, during any period of consecutive months." 4 That was sitting at the table here or 5 actually a little earlier. It was my attempt to 6 try to respond to the inadequate distribution 7 issue, and you're saying that there could be some 8 insultingly low amount even though they have a 9 large amount in the Pension Adjustment Fund and 10 that they would technically be in compliance. 11 I want to reserve the right for City 12 Council to make some further determination as to 13 whether or not it's an appropriate amount. That 14 language is consistent, Councilman with the. . . 15 with the language that goes to what the purpose of 16 the Pension Adjustment Fund is, which it starts 17 down at the bottom of : 18 "The purpose of the Pension Adjustment Fund is for the distribution of benefits as determined by the Board for retirees, beneficiaries, or survivors." This is the important phrase: "The Board shall make timely, regular, and sufficient distributions from the Pension Fund in order to maximize the benefits of retirees, beneficiaries 235 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 or survivors." The whole concept of this fund is to make distributions of benefit to the retirees, and that the Board in its decision-making process should try to maximize any distribution that they make to the retirees, beneficiaries, and survivors. That should certainly be their goal. If they have another reason for not maximizing at a particular point in time, they should tell us. Maybe they want two years of buildup and they have a plan to two years of buildup because they want to make an even larger distribution in a subsequent year. We should be able to get that information, they should be able to explain all the time why they are doing what they're doing or why they're not doing something. So in the de minimus distribution we should be able to make an evaluation of whether we think it is de minimus. If we believe it is, we should be able to take the legislative action to correct it.
I think that deals with the problem I raised. It seems like a satisfactory solution. 236 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Councilman, would you like to have that included as --
I would, again, just like the opportunity always. No lawyer ever accepts anyone verbally.
I would like to see it but it sounds as if it beats the problem I thought existed.
Okay. I think there are others who wish to testify. I want to take this language down the hall and get it included in the document.
Yes, is being worked on now and what I just discussed with Councilman Cohen is on , and I'll seek to have that included as a part of the document that comes back to us shortly.
Right, thank 237 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 you.
Are there any other questions of Mr. Nutter? (No further questions.)
Thank you, Councilman. I understand we have other witnesses who would like to testify. Would you please come to the table, gentlemen. (More witnesses come forward.)
Gentlemen, please identify yourselves for the record and proceed with your testimony.
Bob Eddis, Recording Secretary, Lodge 5. 238 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Okay, Madame Chairwoman, Members of Council, I don't think I'm -- perhaps I am belaboring the obvious when I state that we're facing an extremely complex, very important issue. We've all agreed on that. The unions, together with Councilwoman Blackwell and other cosponsors, had a bill 9 introduce in late September to initiate a cost-of-living adjustment for our retired city employees. A great deal of work was generated in December and again in January. Members of this Council who are sitting in this room, and many times as tempers flared, stated that the bill was so complex, they did not have sufficient information, they weren't sure of what exactly bill said, and they were extremely concerned about that. Now, that was in the bill 19 that had been distributed three or four months previously, and we acknowledge that. But the unions were also accused of railroading that bill through, shoving it down people's throats. That's a bill that had been in existence for four full months. Now, today, after spending a full day 239 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Thursday and a full day Sunday and being promised amendments to the bill first thing Monday, and the amendments were offered ten minutes after 10:30. At 5:30 they didn't exist. All day yesterday, they didn't exist. At 5:30 last night -- and I might have gotten one of the early -- a copy of the amendments comes through. This morning, at 12:30, we're handed a second copy. A few minutes ago, we heard during testimony amendments were offered in every other sentence. Some of the problems that we've heard today -- and nobody's sure exactly at this point exactly what bill have before us, we heard two different smoothing methods defined, two different start dates, there were probably three different time periods for review. The unions who were accused of excluding survivors are now looking at a bill that intentionally excludes the family members of City employees who are killed in the line of duty. There's no provision for them in there when they don't meet the age or the time of service requirements. And, unfortunately, employees don't get to pick when they're going to be asked to 240 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 sacrifice their lives. So right now, as a group, we admit the complexity and the confusion, and we're probably less sharp than a lot of the Councilmembers, but it's impossible for us to have any input in a bill 7 that not only has nobody in this room read, nobody in this room has even seen yet. And we certainly hope that the same folks that accused of us railroading something aren't intending to vote out of this committee or out of Council today a bill that nobody's read, that nobody's seen, that nobody's had a chance to study. That would be sending entirely the wrong message to the citizens of this city and retirees. To vote something like that out today would be nothing less than an outrage and a fraud. The way we read the bill in its initial form, which was about four hours ago, and it's changed four or five times since, is that it created a very cleverly worded mirage. And if there's one thing that's worse than telling people who come before you, "No, go away," it's telling them that you're going to grant their request and then you keep them standing their forever with 241 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 their hand out and their hand empty. It does no good to include cost-of-living provision in a bill when the conditions of that cost-of-living provisions will never or very seldom be met. It would be much better not even to include it. It does no good to say we'll give a cost-of-living provision and then set all of these conditions and parameters to make sure that such never took effect. That would be a fraud, a deception, and that would be far crueler than just telling people no at the outset. And yet, in its initial form or in one of its forms, it's our position that that's exactly what this bill would do.
But in an effort to keep the confusion going, every time a question was asked, a verbal amendment was offered. We've had enough verbal amendments here to have an entirely new piece of legislation. And now we're out copying them. If we remember, the first set took over 48 hours, and now we're able to produce them in a matter of minutes. In fairness, I'm sure that the Mayor's staff is generating them quicker than Councilman Nutter can read them, and that may be why he's bumbling through some of the 242 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 answers to the questions. The fact remains that this is a serious issue. Some members of this Council have requested just a week to go over what's left of it. We think that members who said that it four months was an insufficient time cannot, in good faith, sit before us, our members and the citizens and say that three hours is more than sufficient. We would join with those members who asked for at least a week to go over this and make sure we all know. And if we're still voting against it, fine. If we're voting for it, fine. Everybody in this room has to know exactly what the hell they are voting for, pro or con because you don't want to make a very serious mistake on something this important. That's all we're asking and I'll defer to any of my colleagues.
Mr. Yost, please identify yourself for the record.
My name is Les Yost, I'm from the Firefighters Union. 243 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I'm not sure that Bill 990001 allows enough leeway with regard to cost of livings. Just like Rich Costello just testified, the amounts that we've heard, and we've heard them from the Pension Board's actuary, would give very few and very small cost-of-living increases in a ten-year period. One of the years, the amount to be split would have been 0.1. We would have gotten 0.05 of 1 percent. That year, the amount of money that was earned on that Pension Fund on smoothing system that's used was 10.1. So we would have gotten that 0.05. Council should pass a bill that's going to provide a realistic and a reasonable yearly cost-of-living increase to our retired members, to our widows, to our survivors, to the orphans that are out there, to the families of members that were killed in the line of duty the same. We're asking you to take a look at Councilman Nutter's bill and amend it to do those things that are required, that we're asking you to do for us. Thank you.
Anyone else to testify at the table? 244 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
My name is Tom Cronin District Council 47. I think a delay -- and I think we're all together on this. We would support a delay because there is a lot of confusion. The only thing that we clearly see is, we see the lump-sum bonuses. That's clear; it's been clear witness after witness. The cost of living, there's a great deal of confusion, we think, out there about the cost of living, whether we would get a cost of living or not. I think the unions have been very clear in that they wanted to see a cost of living after the lump-sum bonuses. However, Council President, with all the different language that we've heard, some of which we've seen, some of which we haven't seen, we can't in good faith completely trust that; we need to see it down in black and white so that we can evaluate what's going on. As labor leaders, you never sign a contract, and we were able to see that during the SEPTA negotiations when everybody thought they had a signed, sealed agreement. And then there was a 245 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 serious question that came up about different parts of that contract. And all, I think, that we're saying is we want to see it down in black and white, we want to have an opportunity to look at it, and we want a realistic cost of living for our members that we can agree on. We don't want to be able to say to our individual members, Listen, we have two lump-sum bonuses, and there's a cost of living that you'll probably never see. That's not going to work for us. The other language in the bill I think that Bobby has pointed out to us at least raises a number of questions in our minds that we need a little time to talk about. But I honestly feel now that I don't quite understand what the rush is. It feels like we're on a train here, and that all we want to say is that we want to slow down that train so that we have an opportunity to study this because when you look at our combined membership from all these unions, we're talking about an awful lot of people that have a stake in this in the City of Philadelphia. I don't want to see us work out -- 246 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Excuse me. You said Bobby has some concerns. Can you be a little more specific? What are the concerns?
Well, I mean, I think those concerns can be listed for you, but let me finish what I was going to say. I just think if we leave here now with the feeling that we have, there's an awful lot of bitterness. There's no need for us to have a continued war on this if we can get it resolved with just taking a little bit more time. That's my only point. You know, earlier on, we heard from the Administration that these are things -- that these pension increases or negotiations should take place during labor negotiations. Council President, after you've seen what you've seen going through with us, do you honestly think that these could have taken place, the issue of pension during labor negotiations? This is where it has to be taken care of. Labor negotiations, it's an impossibility, and this is why it's an impossibility because it's so complicated, so difficult to muddle through. 247 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Thank you.
I'd like to make a point. Realistically, we heard all the testimony. We heard the Monday, we head the testimony today from Councilman O'Neill. And the point is realistically, are members going to get anything at 10? Realistically, no. And my point is to fight for the 9 percent. This bill -- I don't want to go back to my members and say, you know, we supported this bill and we come up with we got you a lump-sum and we tell 'em we got a cost-of-living adjustment which you'll never reach. And I think the testimony we had today -- and I didn't see anybody really dispute that, that we won't get any adjustment. At 9 percent, it will be minimum at best, if we get something at 9 percent. So we're asking, I mean, just to be treated fairly in this sense, and I don't see the reason why we have to rush this. That's all I have to say. (Brief interruption.) 248 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Madame Chair, there was a few things that you had asked. I just wanted to know if you wanted me to raise those questions again.
Thank you. Originally when we came in with the bill, the first bill that was, we knew that it was getting to take a lot of discussion in order for there to be a mechanism that everyone can live with. Obviously, that's proved to be true from us sitting here today. We're going through the bill, without boring you with rhetoric, with a comparison since 12:30 between the first bill we had and the second bill we had, and in an effort I believe that everyone's truly here trying to do the right thing, but our concern is --
Mr. Eddis, I don't mean to interrupt you but, you know, with the first bill, I'll be very honest with you, I don't know that Council ever had a briefing on 249 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 that. I don't know that the labor leaders were included in on the briefing. How many briefings have we had on this particular bill? And how many hours have we spent together addressing this bill? We did not do that with the first bill, did we?
We're not objecting to that, Madame Chair, that's not the issue.
Oh, okay, but we have spent a great deal of time discussing this and dealing with the concerns; whereas nobody ever got together on the first bill. I don't know that anybody ever really discussed that with me. Councilman DiCicco.
I believe it was December the 16th, if my memory serves me correctly, that we asked for that extension. I believe it was December the 16th, if memory serves me correctly, that we asked for a recall so that we could discuss the bill, and we were flat-out denied that opportunity. So I don't understand. I think we should get past that and talk about this bill, which I think on the 13th, we had a caucus about 250 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 this bill on the 13th. And, again, those issues we can never get an extension which we asked for. And I'm being -- myself and several others are constantly being accused of not giving enough time.
I just don't understand this City Council. I've been a member for years, and I've never seen a process like 10 the one that seems to be evolving here. If we're 11 just puppeteers for the Mayor, let's say so 12 publicly. Let's say when the Mayor calls up, 13 people kneel before him and do what he wants. 14 We have all kinds of involved 15 complexities in this bill, and I'm prepared to 16 discuss and stay here and talk from now on through 17 the night because there is absolutely no reason 18 for rushing this bill through. 19 What are we trying to tell these workers of Philadelphia, that we don't care about you at all? The Mayor wants us to do something and, by God, we're going to do it? Then they don't need us. People ought to turn us out of office if all we're doing is doing what the Mayor wants. 251 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 We've got to do what we think is our duty towards the retirees. That's where this thing is. I can't understand. We don't even have a Council meeting for a week yet. What kind of nonsense is this to talk about a vote tonight?
It's been moved and seconded that this matter be tabled. We will have a roll call vote.
To table this. 252 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Table it? (Councilman O'Neill speaks inaudibly off mike.)
. . . so that it has a date certain on it for when we would -- (Councilman Cohen speaks inaudibly off mike.)
Well, could I suggest no later than a week from today?
No, we don't. I'm just asking that it not appear that we just want to put this thing off but that we have a time frame in mind. It that does not affect the reporting out of this bill at the next available session.
Fine. Madame Chair, would you accept that amendment to --
The question 253 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 is, shall this bill be tabled until Wednesday -- I don't know what date it is -- at o'clock. What 4 date is that? 5
Councilman Longstreth? 254 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Councilwoman Verna, no. 255 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 The nays are and the ayes are 5. The motion fails. Mr. Eddis, please continue.
One of our areas of 6 concern, as we said, is some of the wording 7 interpreting between both. One of the words that 8 was changed today, I understand, but it's one that 9 has great bearing. It's changing from the word "fund basis" to "assets."
That's on . I understand that it's possibly a typographical error, but I know in the past that when there was different things that we had written, it wasn't viewed in the same way, and I think it changes the flavor in regards to the actual funding. The determination can change. I know the assets will continue to grow and there's no guarantee that the fund basis will. I believe that's another issue that we have to be able to discuss. I believe also in the area, like we said, in regards to the wording in the intent of 256 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 the bill, I believe was to be able to ensure that survivors of members who either died or were killed in the line of duty would be included. However, the way the one section's written, it really doesn't spell that out. Some of the wording in the bill today in regards to taking out in the area if there was any distributions. I know that issue's been addressed but it's also been a concern because of the fact that if there is as much as a dollar, which I know wouldn't be the case, but because of us looking at the possibility that that could happen, we want that be able to looked at. We know the understanding in regards to the methodology in regards to the adjusted market value. We had sat down the other day and discussed that, and I believe that there was an agreement in regards to that. And I believe that I today that the changes with it have had an effect. I believe, without going on to any great extent, that there is just certain issues as a result of trying to do the best that we all possibly can by reviewing the document we have in 257 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 front of us. We would be remissed (sic) if we would let anything go through that could possibly hold us up. As the Councilwoman explained earlier, there's certain dates in here where we go from 7 months, 6, 18 months. There may be need for all 8 that, but I don't necessarily agree with the way 9 it's being presented in the structure. And that's 10 why our original recommendation was that we felt 11 that this type of issue has to be addressed, this 12 has to able to withstand the test of time. Believe me, I have no intention to digress, and we appreciate the time and the effort that Councilmembers have spent on this. They've obviously shown us a great concern in the same way that we do. We don't believe there's any good or bad here. We believe that there's everybody trying to come to a same common goal. And in order to get to that common goal, we have to understand what it is that we need, does it address it, do we have the questions answered along the area? The other day, I was held up to the fact that our writing said that we had asked 258 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 between 1 and 6 percent. We gave that out as a little brief to try to help somebody out, and we explained that we take responsibility for that, even though intent was from 0 to when we 6 testified. But when I sit here and see difference between the fund basis and the assets just being dismissed, for a lack of a better term, then it has a great bearing. And I think the that these are part of the complex issues that could possibly be resolved as a result of everyone taking the time, going back through this, without rushing. What we're trying to do here is, at today 12:30 today, we were given a document to compare to what we had from last night. We're trying to check it at the same time we're hearing testimony. Well, there may be people in this room that are that talented, but I can't sit here and tell you that we can for something this important. We felt from the very beginning that there needed to be a mechanism to be able to review, to ensure that once it goes, that it works for all. I don't believe that it's anyone's intent to put in some -- 259 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Well, weren't they very minor changes that were made in the amendments that you received this morning?
The amendments we received this morning actually, Madame Chair, was received this afternoon, not for the sake of --
Well, this afternoon. I mean, they were inconsequential really.
Well, some of the issues that are still in the bill, I don't believe that they're all inconsequential, and I believe --
No, I'm saying the form was the same, was it not?
Yes, except for the amendments that Councilman Nutter made while sitting at the table recently, addressing that there had been some words that weren't meant the way that they were supposed to be. And what I'm saying is that's going 260 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 along the process, trying to review it and trying to read it and trying to compare it, to make sure that the bill actually says what everyone wants it to say. I believe the point in regards to the funding, which seems to be, for lack of an argument, the only major point of contention that needs to be clarified prior to the bill going any further. We had different testimony from different Council people on the floor today in regards to what the funding level was, where were we, how does it stand? I just believe that as a result of getting this information and then being able to digress it and review the document would better serve everyone sitting here and outside of these walls that's going to be affected as a result of this.
Thank you. Councilman Nutter, Councilman Nutter.
Are you in a position at this point in time to address some of the concerns as expressed by Mr. Eddis? 261 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Yeah. I think if we look at the pink version of the bill. . .
Yes, certainly it is true that there were some changes made from last night into this morning. I think, as the Chair stated, all of those were rather immaterial changes but no substantive changes -- although you do point out that there was this one issue about assets.
The word "assets"? If you look on in the pink version of the bill, this is at a time when the bill was dealing with 81 percent funded and 19 percent unfunded.
If you read the definition of the bill, you will find that the problem with the amendment that came in today is that the bracket should have gone as far as the word "assets." That word was in the original version of the bill. There is no fundamental change. The section had to be changed because we've now gone to a date certain for creation of the Pension Adjustment Fund. And so what should have happened in the amendments that you received either last night or today is that the bracket should have gone from the phrase "unfunded accrued actuarial liability as determined by the Board's actuary of the Municipal Retirement System is greater than (19 17 percent) of the total assets of the retirement 18 system assets." And the bracket should have 19 closed there. It did not. But that is the same phraseology that came out of the pink version, the original version of the bill. There is no switching of terms. That term now is not relevant when you take out the rest of the language in front of it. That was the problem. 263 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Mr. Nutter, I understand what you're saying. And believe me, I'm just trying to say we spent many, many hours studying this part of the bill.
As everyone in this building has. We were then given another amendment to show that there have been other changes.
There's been additional changes over and about the ones made here.
So now we see that there is changing in a word between "assets" and "fund basis."
Because "assets" should have been bracketed, and it wasn't.
I understand that. But what I'm saying is, when we're looking at a piece of paper and trying to make a comparison when we were told that this was going to be the issue of discussing, my concern was, how did it get to the point? I was sitting right back there with the 264 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 actuary. How did it get to the point where it was changed to "assets"? What I'm saying is exactly what I'm pointing out that in order for us to --
Mr. Eddis, what I'm trying to explain to you is that it was not changed to "assets." "Assets" was always in the bill; it's in the pink. The pink version of the bill is the bill as it was introduced. If you read that definition, it includes the word "assets."
I'm saying that changing the word "assets" to "fund basis" changes the meaning. I understand the difference between assets and fund basis.
Right. And "fund basis" is a defined term in the bill.
And "fund basis" is now a defined term in the amendments that are being put forward. 265 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I understand that. My point of concern is, going through the bill, seeing issues that are coming up and being able to try to identify them. The original question was that, as Mr. Cronin stated, that I had certain concerns.
Right. Can you tell me what your concern is about this change?
Can you tell me what your certain is about this particular error that was made?
The determination in regards to overall, we know that the fund basis is able to be changed such as the assets can go up; yet the fund basis can come down. If mortality can affect it, there's a lot of different issues that can affect it.
We can have our fund basis decreased while at the same time the assets are increased. I think everybody agrees on that.
What's your definition of -- why don't you play out that 266 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 scenario.
Okay. You have the first wording saying it's based on assets. The assets of the fund currently, for the sake of argument, we're still in Section (e), 131.3, on .
For a point of reference. You have your assets the way it's listed here. It shows you that there's going to be disbursements based on what the asset level is of the fund.
, letter (e), at the top, where the word was replaced between "fund basis" and "assets."
Letter (e). 267 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
What I'm saying is, you asked me to explain the difference -- correct me if I'm wrong, but you asked me to explain the difference between assets, my definition of "assets" and "fund basis" and what effect it would have on the overall performance.
I'm saying, reading this today when we first got it, seeing that the disbursement was going to be based on what the asset of the fund was, so as long as the fixed --
See, that -- I'm sorry, but that's where you're confusing me because there's nothing in this section talks about disbursements.
Okay. The determination -- assets of the retirement system as determined by the Board's actuary using the adjusted value of assets valuation method are less than the fund 268 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 basis established as of July 1, 1999.
Okay, there's going to be a determination made as a result of that, which then would --
Okay, so we're not playing semantics on words, I would rather finish the definition of the one to say that if the assets -- if the disbursement is based on the assets, the chances of the assets going down are literally impossible. If it's based on the fund basis, that stands a possibility that the fund basis could go down. We had said from the very beginning that we never wanted there to be any disbursements of funds if the level didn't stay at where it should be, as determined by a fixed date.
We totally agree with the fixed-date, thought it was excellent. 269 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
But what I'm saying is, to change it from determining it to the assets to the fund basis definitely has an impact.
Okay. I guess -- but all we're saying here is that you have to compare fund basis to fund basis at two points in time.
I have no argument with that, I have no argument with that. The determination was that we're saying that there has been various changes which have led to a point where we have to be able to look at it to make sure other than in a manner where we're rushing through. Our concern is that if we rush something through right now, it's not going to be the right way. We've spent a lot of time, we've met over the last few week weeks. And I think --
You yourself have admitted today that there were certain adjustments that needed to be made to this.
Absolutely, right. 270 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 That's why went through it section by section, line by line. Now having heard that, though, what I'm still trying to understand is, what is your concern about the error that was made which does involve putting a bracket in the wrong place? But you know when you read the entire sentence the Board has to compare the fund basis of some future point in time back to what the fund basis was on July 1, 1999 for the establishment of the fund. I mean, you can only compare fund basis to fund basis.
As a result of us sitting here today, we know that we believe it's the intent of Council that any City employee that either died or was killed in the line of duty, their spouses -- we'll use William Faulkner as an example.
Right. 271 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
We see in the wording that there's a possibility. What we're saying is the same way that I understand the benefit of the doubt that the changes had to take place here today. By us reviewing both documents in the manner for which we are today.
When we had the other document for a week, five days, whatever, to review, how do we know -- I'm using this as an example -- that there's not something else in here that we're rushing through?
I understand, I gotcha, right. Let me separate these two discussions then.
Are you saying that you don't have any problem with correcting this particular error. Your issue -- or how this is being calculated. Your issue is more about that this one 272 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 was caught today and that there might be other things that have not been caught that could have an impact? Is that the real issue?
So the issue is not about whether the fund basis should be used or not; the issue is that this may have been a problem and there could be other things.
I believe that we should use the fund basis. I'm in agreement with that.
All right, great. Now, what are some of your other concerns?
Excuse me one second. When you went through the amendments from the time we started today, I believe you made four changes prior to going to the sunset clause. I'm saying, without going back through and reiterating what it was that you said, what Councilman Cohen pointed out, what Councilwoman 273 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Blackwell pointed out, I'm saying that I believe that it is the same possibility that there may be other issues in this bill that have a similar problem.
You're asking me to go over it and I can reiterate the difference between -- the explanation between the review process. The review process, from my understanding, the way it breaks down, there's a review six months after, there's a review in one area months. That if 13 there's no disbursement of funds, which was 14 something that was thrown, what I'm saying is -- 15 and I'm not trying to belabor this -- is we now 16 are discussing how it should be so easy for us to 17 digest all of these technical amendments that were 18 made. Yet, with the other issues that we've had, we been able to say a lot of people didn't understand these problems. So I'm saying we listed some of the areas of concern we have such as in the first section with the survivor, some of the other questions in regards to when the credits are going to be applied. Is it July 1999 that the fund 274 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 starts with credits being applied in the year 2000? Or does the credits get applied in 1999 as a result of -- I'm sorry, from July of '98 to June of '99? I know that's a possibility. You said there could be an amendment made by other Council people as a result of them bringing that issue up today, but what I'm saying is, going right through the bill, there seems to be certain issues that were conflicting in regards to dates that were --
Going -- I don't want to go back to the old section because this has already been amended from the one I originally had today.
What section are you speaking about specifically? What has already been amended?
What I'm saying is on 2, on the amendment that we worked on last night, it seemed that there was conflicting information in regards to whether it was 1999 or the year 275 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 2000.
Yes, sir. And I know that some of these issues have been addressed.
We know that there had to be a need for adjustments or amendments to be made from last night to tonight.
What I'm saying is, after I listed three of those, which you're saying to me has been addressed as a result of us sitting here, trying to take notes, and I didn't leave the whole day -- you saw me, I sat in the front, trying to pay attention, we're trying to do this right.
We want to make sure that 276 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 everything I wrote, number one, was right, that the comparison I have is right, and that we see that the bill is able to do what it is we want it to do. In one section there in regards to that you took out on also, your third amendment, "All disbursements made pursuant to this section 9 shall be consistent with all federal laws, ordinances, ordinances and regulations," that's easy.
That's basic understanding. Something's taken out in the process of a bill.
Going into the question in regards to any distributions. Without being repetitive, you added an amendment, and just to see how well my memory is, I put "or if deemed by Council an inadequate amount."
Right, that's what 277 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 I --
Okay, we know we have words turned around. And if for some reason I'm reading that to say, "if deemed by Council an adequate amount." I'm just saying that I believe.
If deemed by Council an inadequate distribution. That's to address Councilman Cohen's concern that the Board, trying to come into technical compliance, will give some piddly amount of money, we would want to know about that and we would be able to respond to it.
Exactly. And that was in regards to your discussion that addressed -- originally said for any distribution. Now, any distribution has been cleaned up to show any distribution that isn't deemed to be adequate.
What I'm saying is I believe that the same complexity that had existed before, we would all be better served if we 278 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 brought these issues, we know what they are, we see them, we have time to read them in a setting that enables us to being sure that the bill says for everyone what it is they want it to say. We know we have a dispute and a discussion in regards to the level between and 8 10. We believe that we need explanation in 9 regards to that as to where we're going to stand.
The one question is, according to the bill today, if a person is 60 prior to July 1999. I heard today the testimony and I really didn't see it anywhere in there particularly spelled out that they would receive the thousand dollars in both years. If somebody was to turn 60 in the next calendar year, would that entitle them to the second disbursement? And has that issue been addressed?
I don't think that issue has been addressed other than it's been acknowledged that it is the same exact language in the previous bill. To the best of my recollection, there was no testimony about that the at that time, nor was that question raised 279 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 back in December.
The language from the previous bill was: "Each retired employee has been separated for at least years and is 60 7 years of age or older shall receive two lump-sum 8 payments plus and additional 100 for each full 9 year that the retired employee has been separated 10 as of the effective date of this ordinance."
The previous bill 13 set a date by which you had meet that test.
Mr. Nutter, when you refer back to December, not to correct you, but we were told to forget that bill. That bill's over, let's just deal --
I understand that. I'm just trying to give you a sense of --
What I'm just trying to say is now that we're looking at it the same way when I sat here in December being questioned over what my interpretation was in regard to (unintelligible), my explanation to you is, I need to know what your interpretation is in regards to 280 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 what the flavor of the bill is. If it's between that off-year, does that then qualify a member, if it's a survivor of somebody who died or was killed in the line of duty --
-- does that then address that issue? I believe that the other changes are insignificant but still one that deserves the time necessary to be able to ensure that it's the proper bill. That's all.
Right. All I can say to you is that I believe my response earlier today was, there is an effective date by which a person becomes eligible. For the moment, there's been no change in that effective date, nor has there been, I don't think, a direct resolution of the if you turn 60 by July 1st, 2000, whether you qualify for what would then be the second lump sum; although for that person, it would be the first and only. I don't think that has been resolved. There is no -- there was no proposed amendment to respond to the question that was asked earlier. 281 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 And so, lacking that, the only interpretation is that everyone has to meet the July 1, 1999 criteria in order to be eligible.
Okay. Like I say, I believe that they are the points that we had. I use this term frequently without digressing, one of the issues that was thrown to us was us not taking into consideration our survivors. And I believe that since that issue was brought to the table, that still has not yet been resolved.
I just believe that the overall intent of the bill that we all have sitting in this room isn't completely reflected the way the bill reads now.
Madame Chair, the requested amendments -- or the requested composed amendments -- 282 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 (Interruption.)
Madame Chair, there was a request that the proposed amendments and any amendment to the amendments that have been given out earlier be made and that they be made in writing. They are now available.
Thank you. They are being distributed. I would ask that all members please come to the chambers.
And what we've done is shaded and by striking, Madame Chair, all of the -- (Interruption.)
Excuse me, gentlemen. Councilman Nutter, please proceed.
I was just trying to explain, Madame Chair, that where there are any changes, members will find on the new document, which is entitled "Proposed Amendment to Bill No. 24 990001," dated 1/27/99, Version 2, in that document, you will find strike marks -- 283 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 (Interruption.)
Councilman, I'm sorry. The noise level is much too high. Everybody's having their own little caucuses, and we can't hear you. I think we have to have respect for each other here.
Madame Chair, there would be more respect if Councilmembers respected that this is City Council and permitted to hold discussions to study the bill. I think what we're going through is the most disgraceful episode. That's the reason --
Councilman Cohen, I think there was a motion regarding that, and the motion was denied by a voice vote, so I would now ask that Councilman Nutter please proceed with what he was talking about the amendments.
Thank you, Madame 284 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Chair. Hopefully by now, the amendments have been distributed. The changes that were discussed when I was at the table are all in a shaded, or what is called "red-lined," so that the members can see that the changes are on and on . Those are the only proposed -- I'm sorry. And then the required changes are made in comparable sections on and .
So everyone now has what we would consider a "clean" copy?
Do you accept his answer as one you would have given if you had been listening? 285 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Precisely. This is what we are -- someone asked for a clean bill; this is now the clean bill. Councilman Nutter, anything else you want to add to that?
No, Madame Chair. I'll respond to any questions that anyone has. (Councilman Cohen speaks inaudibly off mike.)
No. We are giving you the opportunity to check it. It was just distributed. And the Councilman was trying to explain exactly what is being -- 286 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
But when he talks, we can't read. I'm unable, despite, I think, I have many abilities, but the one I've not been able to achieve is --
Councilman Nutter, maybe we could walk through this, please. Let's get to , if you will, . Now, Councilman Nutter, would you please --
But we have no time to read anything or discuss anything.
Councilman Nutter, would you please get to and explain, please, exactly what is being deleted.
Yes, Madame President. Madame President, language is being stricken at the request of Councilman Cohen on , in letter (d), at the end of the sentence. In the shaded block, the language is "or such other generally accepted valuation methodology as may be approved and documented from time to time by the Board." That language is proposed in the new set of amendments to be 287 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 deleted.
The next one is letter (e), same page. The word "assets," which stricken earlier was not. The word "fund basis" was left out; it has now been included, it's in the shaded block. In Section 134 --
Well, that was not an amendment I had anything to do with.
The President was just asking me for my. . . 288 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
I just wanted to make sure that you had an opportunity to read it.
Madame Chair, I just want to make it clear for the record that I have no understanding of what "fund basis" means.
Councilman, if I can refer to you on that "fund basis" is a defined term in the bill. We had discussion about that earlier today.
And it's defined where? 'Cause there are three definitions I see on that same page.
On , Councilman, there's a section called "Definitions."
Those are for other 289 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 terms to be defined that are relevant to 131.4, Councilman. But the question you asked me was about fund basis, and that is defined on in the middle of the page.
And is there a definition of "the actuarial funding level"? The definition of "fund basis" begins with the "actuarial fund level." Is that anywhere defined? 'Cause I don't know what an actuarial funding level is so I would defer to Councilman Kenney and ask him whether he -- (Councilman Kenney responds off mike).
Councilman, my recollection is that this -- I thought that this only took place after midnight, Councilman Cohen.
The term "actuarial funding level," I don't believe, is a particular term of art. It is the level that the actuary decides based on valuation as to what the funding level is of the Pension Fund. You will recall the discussions about 70 percent, 72 percent, 81 290 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 percent. That is the actuarial funding level. It's the level of funds that we have as compared to the level of liability that we have.
You mean the funding level is the opposite of the unfunded liability?
You're very good, Councilman. Councilman, I do have one to give you credit for. In Section 131.4, on the same page, , in the middle of the page, you asked that the phrase "provided, however, that all disbursement made pursuant to this section shall be consistent with all federal, State, and local laws, ordinances, and regulations." That is in the shaded block, that is being stricken.
It accepts the amendment. 291 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Councilman, in recognition of your 60-plus years of English grammatical expertise, we have stricken the e in the word "therefore."
Thank you. I very much appreciate it, and you'll probably get a letter from the English Association of America congratulating and thanking you.
You're welcome. On , at the top of the page, which is a continuation of letter (b) from , Councilman, this is responding to two issues that you raised. This sentence reads: "The Council expressly reserves the right to provide at any time that is (new language) by ordinance for enhanced benefit distributions from the Pension Adjustment Fund. If the Board fails to provide for any distributions or if deemed by Council an inadequate distribution (new language) during any period of 18 consecutive months."
I think that's a 292 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 very good amendment.
Councilman Nutter, isn't there another on that page?
Yes, I apologize. In letter (c), this is the section that was created to try to deal with and put Council in a position to take some action. "Council reserves the right to make any amendments to the authorizations, directives, or provisions of this ordinance or to take any other action in order to correct this circumstance or any other circumstance as the Council deems proper." This is in the section that deals with the possibility and the great concern expressed about lack of credits going into the Pension Adjustment Fund, even if the Pension Fund return exceeds 10 percent but there are no credits in the Pension Adjustment Fund. That is the -- Madame Chair, those are all of the amendments. The same changes have been made in the appropriate sections. 293 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
On Pages and 7. 4 All of the sections read exactly the same. 5 Madame Chair, I would ask at this time 6 if we are able to move into a public meeting, I'd like to move these amendments.
Yes. If the sergeant-at-arms would be good enough, if you'd give each to the Councilmembers, to the members of the press, to the members of the labor organizations that are here. (Councilman Cohen's amendments are distributed.)
Does everyone have a copy of Councilman Cohen's amendment? The Chair recognizes Councilman O'Neill.
(Off mike -- stenographer could only hear fragments of the testimony.) 294 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Thank you, Madame Chair. I would like to state. . . The same matter on what I heard with witnesses who were just up talking about extending the survivor provision to include the survivors and those who may not reach 60. . . benefits because this bill. . . the reaction of this Council that we can't do it if the Mayor doesn't agree to it, I'll wait until we get to final passage on that also after I find out what the Mayor's position is on it. Thank you.
And the bill 14 could always be amended, Councilman, on the second-reading and final-passage calendar.
I'm still trying to figure out what the rush is on this.
Are we talking about at amendment that Councilman Cohen just put forward?
We're going to be able to, though, right? 295 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
When we get into a public meeting. But I would like to ask that the representative of the union -- Mr. Eddis is his name? -- whether this fairly represents a proposal. Does this language result in the purpose of the amendment, which is to lower the ceiling or the floor from 10 to 9-1/2 percent? I would like you to read it and make sure, because we're dealing with technical language. And under the time constraints, I'm not certain whether I've prepared the amendment fully accurately. If I could ask that he come to the table and after he looks at it and expresses his view and bring with him whoever else, Mr. Kent too. I'm not asking for testimony on this; I'm only asking, does that express the proposal which is to lower the 10 percent to 9-1/2 percent? I'm asking whether the language does that. I'd like to hear just as to its technical accuracy.
Thank you, Councilman 296 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 Cohen. I believe the question was in regards if this basically depicts exactly what it is that we wanted to say, and I would say that that's absolutely correct, sir. Thank you .
You're welcome. The Chair recognizes Councilman Kenney.
Thank you, Madame President. And I apologize if the question is not directly related to Councilman Cohen's, but something occurred to me that I wanted to know if I could get clarification at this point. There's been some discussion over survivors and people who may have been left out. And my understanding is that the concern is if you have a person whose husband, for example, wife had been out nine years and passed away suddenly of a headquarter, and that individual was 55 years of age, that they would not be in the current mix in this bill for benefits, for increases in benefits? Is that basically the concern? 297 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Fine. In the original Blackwell bill, was that individual covered, that same 55-year-old woman whose husband passed away with nine years separation, was she still covered, that you remember?
The intent of the original bill was to give anyone that was killed or died in the line of duty that benefit, yes.
But even -- but was the language in the Blackwell bill that you recall, the specific language to do that?
Councilman DiCicco, did you want to ask something, or was that just a private --
Should the Council decide to include those individuals, the survivors or beneficiaries of the individuals who may have been killed in the line of duty, could we do that after today?
Only if the Mayor 298 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 approves.
Well, I said if the Council were to make that proposal, amendment, what have you, would we be able to do that as a Council? And I don't care if the Mayor wants it or not because that is something I personally would want to see.
Okay, for the record, whether the Mayor likes it or not, I would vote for that.
I think it's very important that the wording reads "died or killed in the line of duty" because of the fact that there's been a lot of technicalities --
The reason I'm saying that is because that's part of the discussion we had earlier in regards to the exactness of it because there's a whole new procedure, I know, within the Police Department of how you carry. If the person has a heart attack, in the old days, if they were chasing someone and had a headquarter, they 299 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 weren't covered. Bobby Smith, in 1980, was not covered. It was amended, so now, when we're saying in regards to the exact wording, I believe the wording of that is added in there should be die or be killed, any City employee.
So that we would be able to do that. So I can cut the strings that the Mayor's been pulling and vote for that according to what some are people saying.
I'm getting tired of this being accused because I don't agree with some members of Council, that I only do things that the Mayor wants. I have a right as an elected official to make my own decision. You can think and imply or assume that I am at the behest of the Mayor, but these are something that Councilperson DiCicco from the 1st Councilmatic is deciding to do. This is wearing much too thin for about seven weeks with me.
Yes, the Chair recognizes Councilman Nutter. 300 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Recognizing what Mr. Eddis says, it seems there is a sentiment to do something about that particular situation. Mr. Eddis used a particular phrase. In my conversation with Mr. Herkness, he used a slightly different phrase. And I'm not trying to pit the two against each other. All of us, I think, want the get the right phraseology. Mr. Herkness told me over the rail that we should look to use language that talks about a service-connected death. I'm not sure which one is correct. I at least, though, would like to get Mr. Herkness from the Pension Fund to come up to the table so that we can get the correct language.
I don't believe we want to use "service-connected death" because the City controls that entirely, and we have members that come down with -- there was just an article in the paper two Sundays ago where one of our members came down with a lung disease, died a few months 301 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 after coming down with it, on the fire ground, taken from the fire ground to the hospital and then died a couple months later, two and a half months later. It was definitely traceable back right to that fire.
Is this the story -- I believe there was a columnist who wrote a column, and the son or the nephew or someone is trying the get rectified through the Fire Department?
Okay, I understand. And from that standpoint, you're taking the position that that death, even though it didn't happen that day at a fire, came as a direct result of some action that that person was doing while they were at work.
That member never went back to work, was hospitalized for about nine months, and died maybe a month after that.
Okay. Mr. Herkness, in view of that and what you hear is the sentiment around the chamber, is there terminology that we can use to cover not only that person but 302 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 also the person who is literally, you know, killed on a day at work or is chasing somebody somewhere or has an incident in the Fire Department any other branch of the municipal workforce?
Councilman, there's a benefit when there's a death when an active employee dies, the employee either has an ordinary death -- meaning for any particular reason.
Right, right. Or it could be a service-corrected death, which covers literally anything in the line of duty -- whether you are walking on the street in L&I and you're robbed or whether you're killed in action in the Police Department or in the Fire Department. When the benefit is going to be paid under those circumstances, eventually, it will have to be a service-connected death benefit. Now, there's a determination --
There is -- a recommendation will come from the department. 303 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 There is then a decision at the Pension Board. And if necessary, an outside independent medical examiner or a medical panel will render an opinion. But it's one or the other. All people who receive it have been determined to have died in the line of duty.
Let's take Mr. Yost's example. That's a real live situation that happened some time ago; I don't remember exactly when. If that happened again, if that happened next week, last week, would that person qualify, using the language to experience the service-connected death?
Any situation, anytime anywhere must be considered a service-connected death by the Pension Board. If that's not done, then the person will not receive service-connected death benefits across the board. There then can be a debate about the facts and it can appealed to court, it can be appealed to the Board, etc. But if the Board does not declare the individual eligible for service-connected death benefits, then a service-connected death benefit 304 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 would not be paid.
The Board typically doesn't recognize lung disease as something that kills us, and we have had, over the last five years, at least four members that have come down with lung disease, never went back to work, came down with lung disease at the scene of a fire emergency.
They are classified as "ordinary deaths" by the Pension Board, and we wind up going in and fighting for the family to win some kind of a Workman's Comp. award. They would get whatever small pension the widow would be entitled to.
In order for us to try to resolve this issue, I'd like to hear from what you would propose as language to try to cover the situations and circumstances that you're concerned about, and then let me try to better understand how my conflict with the Board of Pensions and their determination. Do you have any suggestions? 305 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Excuse me, Councilman. Excuse me, Mr. Yost, at this time I'd like to recognize Councilman Longstreth, who has very urgent business to attend to and would like to be recognized.
I would like to cast my vote in favor of the Nutter amendments only and also in favor of voting the bill out of committee and request your permission to leave the chambers.
I believe the wording should say something about "killed" or "died in the line of duty," and should be tied to an occurrence at the scene of -- whether it's a fire emergency or some type of a work-related. The man has to be in work when the initial injury or disease is contracted. Now, it's not just police and firefighters that are killed at work. There are other people that get killed typically in every department -- it could be a secretary, I don't know.
Mr. Herkness. 306 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
Mr. Herkness, we had a disastrous, unfortunate recent incident involving the Streets Department.
Tell me whether or not, based on the current definition that the Board uses, whether the beneficiary or survivor of those two employees who were killed would or would not benefit based on the phraseology that you've laid out versus what Mr. Yost has laid out.
On that specific example, the recent unfortunate deaths of the two Streets Department employees, both employees, it was ruled that it was a service-connected death. One employee's beneficiary has not yet made a selection. There is an option of ordinary death and going to the State Workers Compensation Board, if you want; or taking the service-connected death benefits from the Pension Board. One employee's beneficiary selected the service-connected death benefit; the second one has not made a selection yet but has an option. 307 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001 But they both were declared service-connected.
Okay, let me give you this language. Hopefully, you can live with it. The sentence starts earlier than this but: "For any beneficiary or survivor of a member who was killed or died in the line of duty related to the work environment. . . "
That's fine. I've been told many times by the Law Department that I don't have a right to interpret the ordinance; they have to look at it and say whether it's a --
All right, your response is you don't have a response, thank you very much.
Yes. I'd like to discuss the amendment that I've introduced.
Well, can we do that in a public meeting? 308 1/27/99 COMMITTEE OF THE WHOLE - Bill No. 990001
The recent cost discussion with respect to what happens to survivors --
Are we about to go into the public meeting and then have a full discussion about all the amendments? Do you agree with that?
No, we're not; we're still in the public hearing. Does anyone else want to be recognized? (No response.)
Seeing none, this concludes our public hearing. 309 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting - - -
We are now going into our public meeting. The Chair recognizes Councilman Nutter.
Thank you, Madame Chair. Madame Chair, I would like to move the adoption of the proposed amendment to Bill No. 10 990001, dated January 27, 1999, designated as "Version 2," with now an additional amendment.
Technically, Councilman Cohen, yes, right. If you go to the third line of 131.1, where it says "Each beneficiary or survivor of a member who was or would be 60 years of age or older. ." insert "or any beneficiary or survivor." 310 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Could you go a little slower. Any beneficiary or survivor.
" . . . of a member killed in the line of duty. . . " -- I'm sorry -- ". . . killed or who died in the line of duty related to the work environment."
I'm sorry. Again, it would read: "Each beneficiary or survivor of a member who was or would be 60 years of age or older, or any beneficiary or survivor of a member who was killed or who died in the line the duty related to the work of environment related to the work environment."
That is the additional amendment to the Version 2. And I move the adoption of all of those amendments.
Second. 311 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
It's been properly moved and seconded that all of the amendments regarding Bill No. 990001, Version 2 as of this date, along with the added amendment be adopted. All in favor signify by saying aye.
To get a unanimous vote on as much of it as possible, could all the amendments except the amendment dealing with the 10 percent floor be separated out?
Madame Chair, I would ask that all the amendments, except for the amendment that includes the 10 percent floor before sharing, be done first.
Separately, yes, and I believe the sponsor of the amendments agreed to that.
Madame Chair, I 312 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting only move amendments that I have put forward. The other amendment is Councilman Cohen's amendment, and he has not made a motion on that yet. We are only voting on the amendment that I've put forward, including the issue of the death survivors and beneficiaries of those killed in the line of duty. That is the only amendment that's been offered, that's the only motion that's been made.
I was asking for a separate vote on the one particular amendment dealing with the 10 percent.
All those in favor of Councilman Nutter's motion? I'm sorry, the Chair recognizes Councilman Cohen.
There was a famous author who said that if everyone visited packing houses or saw the making of sausage, that person would forever be cured from eating meat. I think the same thing would apply to any visitor to this chamber who today saw amendments being written by hand, some of which we understand in part, some of 313 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting which we will later regret 'cause we, to the very last minute until Councilman DiCicco or the members testifying -- I forget who it was -- first raised the question of people who die in the course of duty, we were going to leave that out. God knows what else was left out. I don't understand. The Mayor, I think, must have a lot of basketball tickets or hockey tickets for every night this coming week 'cause I can't understand why we're in a hurry on a Wednesday afternoon -- on a Wednesday afternoon when we don't have a Council meeting for eight days why there is this urgency to make sure we pass --
Madame President, I ask the relevance of this line of questioning and ask Mr. Cohen if he would direct his comments to these amendments.
No, I will direct my comments to whatever I think is relevant to this discussion. 314 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting (Unintelligible, parties talking over each other.)
Councilwoman Clark, I would appreciate it if you would -- Councilwoman Clark, if you --
There's no lateness of the hour; we have unlimited time.
To me, to me, given the lateness of the hour, that we might infer that everything that is not written here is left out go, and we should forward and make our yea or nay vote on what is written on these amendments which have been presented to us.
Point of order, Madame Chair. 315 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Anyone who makes a point of order is free to discuss it but must merely state there point of order, and I refer to Mason's which is the bible for this City Council and Parliamentary procedure. I think Councilwoman Clark, if she discusses her point of order is totally out of order.
I though she made a point of order and then she went on to discuss it. 316 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
No, because she's not letting me finish. Why should I let her finish? I started first, I have the floor. (Laughter.)
But if you want to discuss this for the next two or three hours, fine, I cancelled all other appointments to be available here.
Well, I resent being interfered with in a discussion. I don't know how many times Councilwoman Clark has orated at great length, and no one has stopped her from talking, so I don't know why she's trying to stop anyone from talking. I just don't understand it. She came late today and --
Madame Chair, Madame Chair, I respectfully submit that orating a great mess is not something that characterizes my way of speaking on the floor of Council. And today, I still think that there is much merit in our confining our comments to those issues that 317 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting will make it possible to vote this up or down, and that is my point of order.
Thank you. The Chair recognizes Councilman Cohen.
Thank you. I think there's absolutely no reason for us to be considering this or any other amendments or the bill today. I don't understand what the hurry is, I don't know what the pressures are. I think it's a disgraceful exhibit by this Council of an inability to legislate properly. The one thing where we've had differences, we've been proud of fact that we've been free to discuss the differences that we have and to show courtesy to others who want to know what their legislating on, who want the opportunity to consider what's before them and to evaluate whether there should be other changes or other additions. There's absolutely no reason that I know of, Councilman DiCicco, I don't know whether Mayor spoke to you and I don't -- and nothing I said ever indicated that I thought you were acting. I'm saying we all know we recognize the 318 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting representatives of the Mayor who are in this room 3 here. We know when they're talking to people, we know what the Mayor's position is. He has the right to do whatever he's doing. But I'm saying legislators have a responsibility to the voters who put them in office not to just bend their knee to the Mayor. We're busily engaged in the first serious pension bill. We've never -- all of us are just learning as we're going through, and there's an extreme rush, and it makes no sense. There may be other amendments we're going to want to deal with. As we were going, all of us were learning. Isn't it quite a thing that at the end of this discussion, after Version 2 -- today's Version 2, not counting yesterday's version or the version that came before us, that at the very end, suddenly, we all became aware that we left out something important. I just think we ought not to be moving in such haste and, therefore, I don't want we ought to be asked to vote on any amendments today. I think we're all entitled to the opportunity of 319 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting studying these things, and as a result of this, having the opportunity to come up with other proposals. I, therefore, suggest, Madame President, that this meeting not go forward with the fact of amendments that are now going to be in. I think they all ought to be printed up and be made available to everyone. Now, with respect to the 9-1/2 percent amendment, which I don't think ought to be voted on tonight, but I've got to present it.
Point of order. It's not been submitted, there's not been a motion made to introduce it. How can we speak about it?
For Councilman Nutter's amendments, and it was seconded.
Councilman, we're in the middle of another vote, Councilman. We had started voting. 320 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Point of clarification, Madame Chair, I just want a clarification.
In Councilman Nutter's motion, what we're voting on is on this package, Version 2, the whole package?
With the modification just made for the survivors of those killed or who died on duty.
So once we vote on whole package, then Councilman Cohen's amendment becomes really moot because we have already approved the 10 percent.
We're only voting on 321 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting the amendment that Councilman Nutter proposed in Version 2, right? (Discussion continues off mike, not fully audible.)
You know, it gets another amendment approved over the top of the first amendment, you know, it's just kind of whatever is the last thing that gets done is what it is.
I submit that the confusion that Councilman Ortiz is referring to is in everybody's mind because we're not even sure of on a the floor on a subject brand new to all of us. If we're going to deal first with Councilman Nutter's --
There's no 20 confusion on our side of the room, there's no 21 confusion here. Madame Chair, the motion is on the floor. Unless there's any other debate, I would call a --
It has been 322 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting moved and seconded. Now, do we want a roll-call vote on this to move the adoption of Councilman Nutter's amendments?
Madame Chair, I will not be calling for a roll-call vote. If another decides, that's fine with me.
Madame Chair, I thought the sponsor agreed to separate out into a separate vote the section dealing with 10 percent.
I'm sorry. I thought you meant that there would just be separate votes on one package versus another package. You want that entire section taken out?
I mean, obviously, I'd like it taken out but I would like --
Okay, and I'm just clarifying that because I would need a roll-call 323 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting vote certainly if that's removed. I think everybody would -- I don't think there's differences around this room on the point of your entire amendment except are for the percent, so 6 why can't we discuss that separately? 7
Right, so you want 8 that part of this package removed from this 9 particular vote. 10
You want a separate vote on 10 to 15, and you want a separate vote on 9 to 15.
Does it matter to you -- I mean, how does it ultimately matter whether it's a separate vote or is a part of a package?
Okay, let me explain why it means something. I'm going to vote no, and maybe I'm the only person here that matters to. I think there's some very good things in your amendments -- for instance, starting this 324 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting year, July 1st, and many other things, I won't go into each one.
If percent is 6 in here, I'm going to vote no on it. I would like 7 to vote yes on everything except the 10 percent. 8 That's as clear as I can make it. 9
Madame Chair, I think I'm in a position where the package is a package. I'd like to keep the package together and I'd like to vote the package of amendments that I have voted as one on an up or down vote on that entire package of amendments.
Madame President, certainly, I absolutely disagree with that, but let me ask another question on the amendment made for persons killed in the line of duty. I'm not sure that the wording of that -- I ask that it be repeated -- deals with the ten-year -- deals with the time involved.
Councilman 325 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Nutter?
Councilwoman, I was distracted, I didn't hear the question.
You introduced an amendment talking about individuals killed in the line of duty, did you not?
Now, would you read me that again because I'm not sure that you deleted time served so that they are not penalized by length of service when they're killed in the line of duty. I also, just as an aside, agree with Councilman O'Neill that you should be able to vote for parts of bill that you want to but I'm also not surprised that that opportunity doesn't exist here. But, Councilman Nutter, would you clarify that, please.
Councilwoman, maybe the better way to do that is to just make it an entirely separate sentence. 326 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
As opposed to inserting it in the earlier section. For instance, I could propose to add on to the last sentence of 131.1 -- the last word being "benefits" -- just a new sentence that says: "Any beneficiary or survivor of a member who was killed or who died in the line of duty related to the work environment is eligible to receive the two lump-sum payments in 1999 and in 2000, regardless of any age requirement." Or possibly not even add that last phrase on; just put a period at the end of that.
I think that will take care of that amendment, Madame President. I certainly again agree with Councilman O'Neill about being able to try to segregate these parts of the bill that we agree or disagree with. But, again, I'll repeat that I'm not surprised that it's not possible.
I'm sorry, I'm about to recognize Councilman O'Neill.
I yield to 327 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Councilman Cohen.
I would like to suggest as a way out, or otherwise we're going to be engaged in a long debate because I think a Councilmember has a right to ask -- I think the word is (unintelligible) that provisions of a bill 8 be considered desperately. But I suggest instead of getting involved in that that we get consider my amendment first, which deals specifically and separately with the amount of money involved, and that then, based upon the --
There's already a motion and it has been seconded.
There was motion on the floor that's been moved and seconded, and you now want to insert another motion in the middle of it. I mean, we can have debate on that motion, but it's out of order to submit another motion on top of a motion that's not been voted on yet.
I'm making a suggestion as to how we can avoid a lot of parliamentary problems because I am concerned if I vote for the entire amendment of Councilman 328 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Nutter, this whole package, I will be voting in favor of percent, and I don't want to vote in 4 favor of 10 percent. 5
Now, I think I have 7 a right, and I'm requesting that the order of 8 consideration of the amendments be reversed. 9
Point of order, Madame President. You know, we've been sitting here since 10 o'clock this morning, and that's fine, all right? There is -- talk about parliamentary problems. There's a motion on the floor that has been moved and --
Will you let me finish my point of order for once. Simply because someone doesn't agree with you is no reason to interrupt them, and you've been doing it all day. Now, there's a motion on the floor and it's been moved and seconded. We can debate that motion, but you cannot insert another motion on top of it. 329 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Yes, you can. You can at any time ask the maker of the motion to withdraw the motion to permit consideration of another.
Very well. Roll call vote on the adoption of Councilman Nutter's amendments as a package.
I can't turn it on once someone else turns it off. The only section in here that I want to focus on is the 10 percent floor for the sharing. I have talked about this extensively on Monday and 330 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting today and listed a lot of questions specifically around these numbers, whether 10, -- 9-1/2 would 4 obviously be a compromise. I haven't had a chance 5 to talk to the Mayor since I got the information 6 that came out of questioning today, and it looks 7 like I won't until the bill's perched for final 8 passage. 9 But it's clear to me from what came out today that not only does going from 9 percent to 10 percent, or having 10 percent instead of 9 percent or something in between, really make this Pension Adjustment Fund pretty close to worthless. Just looking over the last ten years, I believe the facts and numbers speak for themselves. We may all disagree on what is giving the pensioners something in the way of potential increases. But I would submit that the amount that would have gone in the last ten years, given the 10 percent floor of $50 million adjusted for the pension obligation bond size of the fund, is a pittance, and isn't worth any effort on our part to be talking about and publicizing a Pension Adjustment Fund that would be approximately 331 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting $5 million a year for our pensioners; when to give a 1 percent across-the-board increase, just as an illustration, takes $34 million. That is as clear to me, and I'll debate anybody in this Council. I have yet to have a discussion about any other opinion than that and what the figures show the difference between and 10. 9 But my biggest problem came today, because there may be disagreements as to what will make for a fund that can really have the potential to do something for pensioners by way of increase, but I don't think any of us can disagree that for the last month or seven weeks, we have heard and read how fiscally irresponsible this Council was being both to the Pension Fund and to the City's General Fund. And as recently as Sunday, the Mayor said if this bill went to 9 percent, he was going to veto it, and the reason was because it would cost the Pension Fund from going from 10 to 9 percent, when the sharing starts, $100 million a year. Today we heard both from the actuary and from Mr. Herkness, who runs the Pension Fund on a day-to-day basis, that there would be no 332 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting impact, no impact at all to the Pension Fund -- not 1 million, not 100 million, no impact. That would be if we use 9 percent instead of 10 percent. Yes, I asked for a courtesy on this bill, to talk to the Mayor about that, what I consider a major discrepancy from the Administration side. These are Administration witnesses. Mr. Herkness was testifying for the Finance Director and as the Executive Director of the Pension Fund. I think that discrepancy in itself should bring into question everything we've heard about the dangers inherent in what we're doing to the Pension Fund. No impact. No impact and no courtesy. Now, that's to the Pension Fund. The General Fund will be impacted 'cause it all boils down to the General Fund having to make more payments. And just having 10 percent, if you go back over the last ten years, would have cost, with all the adjustments for the larger fund and everything, would have cost $5 million a year to the General Fund. No disagreement with that number. 333 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting There are obviously costs involved in the one-time bonus, the two one-time bonuses that are in the bill that are spread over ten years -- 88 million, 90 million, it's in that area and spread over the ten years and then it stops. 5 million a year. This argument and this issue on this Pension Adjustment Fund, I would submit, is not about money anymore. Maybe it was at one time.
5 million a year -- 'cause we were also told today that the Mayor would veto 9-1/2 percent -- means it's not about money. The City gives the Pension Fund $247 million. 5 million impact after you just agreed to 5 percent, a $5 million impact to have a 10 percent floor means it's not about money. It's not about protecting the Pension Fund and it's not about an Armageddon about to occur to the General Fund. It's about something else. I don't know what it's about. I would have loved to have the opportunity to discuss this with the Mayor 334 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting before it's ready for final passage, and I think that is a most reasonable request. But what I'd like to hear from the sponsor or someone else why it is so important to have and not either 9 or somewhere in between 9 7 and 10. I have yet to hear anything. We are 8 about to close the record on these hearings and 9 meeting with these amendments, and I have yet to 10 hear the overriding reason why this Council is split, why we've got the unions against the Administration over something that is very, very small. We're not talking about breaking the bank. There's all kinds of protections to the Pension Fund and the General Fund built into this but there is some impact. There's no question about that; there is some impact. But there was also some impact on the positive side when this Council passed the pension obligation bonds, the largest bond deal in the City's history, which saves the General Fund out of the pension bond issues an average of $30 million a year for the next thirty years. 5 million a year is a trifle compared to 247 million that was given last 335 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting year. It's a trifle to $30+ million a year over thirty, years. It's a trifle no matter how you look at it because if you're going to have a Pension Adjustment Fund and you know there's going to be some impact, I don't know if you could make it any smaller than that. What I would just like to hear is what is the problem with going below 10? Is there something I haven't heard, something I missed, that there's some protection that has some comfort level, some cushion that needs to be out there, that not even 9-1/2 would give? All I know is that 10 gives so little that I don't think it's worth doing. I'm just perplexed on that. And I'm perplexed on the courtesy 'cause that's to me -- I have colleagues that I just asked for a courtesy for a week, and it wouldn't have affected this at all. And Councilman DiCicco, some members are very honest with me, and the Mayor -- and I won't name them 'cause they were being courteous to me, telling me what their reason was. The Mayor wanted this out today. He didn't want it 336 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting out tomorrow, and he didn't want it out Monday, Tuesday, or Wednesday; he wanted it out today. Now, and Marian, you might want it out today. I'm telling you, there were enough people that told me this was the Mayor's position, and they would have made a difference in that vote. That bothers me as much as not having heard one good -- one reason, good or bad, for why it has to be 10 because before I was hearing that we need these protections, we need these cushions. Well they're not needed. All the protections and cushions are there, and this is not General-Fund- threatening in its amount. Now, if anyone would like to discuss that, debate it, fine. If no one wants to, we'll just vote the bill, vote the amendments. Because I can't understand going through this. We're going to have people voting for and against a bill, debating whether it really did something to create a COLA when we could have done it and all have been walking together. Instead, we're starting off on a course on our first issue of the year under new circumstances around here, fractured, when it's absolutely not necessary, in 337 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting my opinion vote.
The first fracture I saw was the vote on the courtesy. I haven't seen anything like that -- if somebody remembers it, please tell me -- for a long time when it didn't impact anything. It's just that some people said, This is it, I don't want to talk about this anymore. Well, a lot of times, we didn't want to talk about it anymore, but we gave it courtesy, especially when it didn't cost us anything in terms of time. Does anybody specifically, between 9 and 10, whether it's Councilman Cohen's, whether it's my 9, have a response to that? What is the pressing urgency or the importance having it be 10? I didn't hear it today from the actuary or the representative of the Administration and the Finance Director.
Madame Chair, I just ask, while Brian was talking, I asked for clarification from Councilman Nutter, and he clarified it for me, so it was a point of whether we are voting and whether that 10 percent is part 338 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting of the package. But the 10 percent is not an amendment to this bill; it is a part of the bill. So the 9-1/2 amendment that Councilman Cohen has can be introduced separately. I just needed that clarification from Councilman Cohen and it's been done.
With all due respect to the Councilman, and the answer may have been somewhat short, the longer version to the answer is, it's not a part of the amendment package. There was nothing to separate out.
Well, we could wait for my answer 'cause we have to vote on the bill afterwards. I mean, basically, this is a substitute bill. We can call it whatever we want. Is there anything in the bill that's not here?
Is there anything in the bill that's not typed on Version 2?
I can wait and we can just do these amendments. 10 was a part of 339 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting the original bill. I can just vote against the bill, that's fine. I stand corrected on that from a procedure standpoint. And when we get to the bill, as amended, or Councilman Cohen's, I can have the same conversation, hopefully, about the 8 percent. 9 So I withdraw my question at this 10 time. I will bring it back though and I don't think I have to repeat it.
If this bill is voted out of committee today and receives first reading next week, does any Councilmember have the opportunity to offer amendments to that bill?
Madame Chair, that's insulting. The inference there is that I don't know and that somebody else doesn't know we 340 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting can offer amendments at final passage. We still have a week here, and that's all the courtesy's about. The courtesy isn't making me wait and then have to delay for a week from February 11th to February 18th. I understand the rules of Council and what it takes on final passage, and I think everybody else in this room does. The issue was never about that. I understand what you can do at the end. We could have done it -- we could have changed the whole bill if we want. But this is something that to me is much more important than just an amendment. It has to do with the very objections from the Administration. I think the differences within this room that may be very, very small and that they could be resolved. I submit that it will be a lot tougher if this bill gets reported out today based on my experience. Thank you.
You're welcome. The Chair recognizes Councilman Rizzo.
Madame President, I have business outside the Council chamber, and I 341 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting would like to leave my vote and I'd like to vote no on the amendments.
I'm going to vote no 15 if the Cohen amendment is not included in that.
Madame Chair, we did not hear what Councilman Rizzo said first, and then I'll ask.
Councilman Rizzo said that he had to leave, that he was 342 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting voting in the affirmative for Councilman Cohen's amendment. And if the amendment did not pass, he would be voting no against the bill.
What did he say? Didn't he say that? Councilman Rizzo, would you repeat your request, please.
I will vote yes on the bill if the Cohen amendment passes.
Wait a minute. How are you voting on Councilman Nutter's amendments?
I will vote yes on the amendments on Nutter's amendments if Councilman Cohen's amendment passes.
Brian, could we go over this again? We'll do this one more time.
I'm going to yes on the Nutter amendments. I'm going to vote yes on the Cohen amendments, yes on the bill, if the 343 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Cohen amendment passes.
Yes, on Nutter -- yes, on Councilman Nutter's amendments?
And yes on Councilman Cohen's amendments? And no on the bill 16 if Councilman Cohen's amendments are not adopted?
To Councilman Rizzo, may I suggest to Councilman Rizzo that he might want to reconsider. The bill, if my amendment goes down, which it appears likely, there nonetheless is a bill which provides for two annual cost-of-living payments. Your position, to be consistent would 344 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting be, though we would regret the no vote on my amendment, the final bill that would remain is the bill that the retirees want desperately, and I would just suggest that you consider that.
And the member can then vote how ever the member wants to while the member's here.
While the member is here, we will -- if you'll just bear with us for five minutes. There is a motion on the floor to adopt the amendments as submitted in the package by Councilman Nutter. That motion has been seconded. All those in favor of the adoption of the amendments, Councilman Nutter's amendments will say aye. Those opposed? The ayes have it, there are none opposed, and Councilman Nutter's amendments have been adopted. The Chair now recognizes Councilman Cohen.
My amendment proposes to change the 10 percent level to 9-1/2 345 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting percent.
Madame Chair, point of order. On Councilman Nutter's amendments, I had asked for a roll call vote.
I think I've seen some people not say anything either way. Okay, I'll let it go, all right.
It's coming from Councilman Ortiz. Everybody agrees it was unanimous. Anybody that disagrees, please say something. Councilman Cohen, please.
All right. I think Councilman Nutter should be congratulated. I think he went through a tortuous path ever since these bills came before us, and I think he ultimately did resolve in a sense of unity all of the important questions. I wish, however, he had been ready to extend his abilities to cover the issues of the 346 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting amount of money because I think we're faced with the fact that we're passing a fraud, we're passing something which is going to be said to the retirees, We have set you up with a COLA, and we are not setting them up with a COLA. I don't know whether 9-1/2 percent will create a COLA, but there's a much greater likelihood, if the standard set at 9-1/2 percent based upon the history that we've had in the last ten years, there's a much greater opportunity at 9-1/2 percent than there is at 10 percent, that there could be the beginning, a small beginning but some kind of beginning. It would appear if the standard kept at 10 percent, we have gone through the motion putting words into saying there's a cost-of-living increase, but we've created conditions which will prevent a cost-of-living increase at any time in the foreseeable future. That's why my amendment calls for setting it at 9-1/2 percent so that we can begin on maybe a little tiny piece of a COLA. So therefore, I urge all my colleagues to support this amendment. I think it is totally in line with what has been stated to be the purposes of 347 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting bill.
Is there a second to Councilman Cohen's motion? (Duly seconded.)
It's properly been moved and seconded. All of those in favor of the adoption of Councilman Cohen's amendment will say aye.
Councilman Cohen, I just want to make sure I understand the proposed amendment. The purpose of the amendment is to change section 131.3 and 120.3 such that the rate of gain-sharing for the Pension Adjustment Fund would be adjusted from 10 to 15 percent down to 9.5 to 15 percent; is that correct?
I cannot answer your question except to say that wherever 10 percent appears, my motion and an amendment is aimed at changing that figure of 10 percent to 9-1/2 percent wherever, and it appears in a number of sections, including the one that you have referred to, but it also appears in other sections. It 348 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting makes 9-1/2 percent the standard.
Yes, Madame Chair. I can wait till we vote on the bill as amended, but I think a more appropriate time may be right now. If I could ask the sponsor or anyone else supporting the 10 percent if they could give me their reason because I remain open that if I'm missing the mark here as to what is the compelling reason for 10 percent. And I'll be honest with you, the only compelling reason I've heard up till now, other than things that were refuted today, was that the Mayor wouldn't sign anything under 10 percent. If that's the reason, that's fine. We're realistic too. That's why I asked for the courtesy, to talk to him.
Probably one of the 349 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting briefest responses I'm ever going to make on the floor, is I think this is just an area of reasonable disagreement between reasonable people. My purpose is that I have a very conservative nature personally as it relates to Pension Funds and Pension Fund assets, and so I can only speak for myself to say that at this point in time, I would rather have the comfort level of the 10 percent, with a 1 percent -- we can call it a "cushion," you may not like the term.
But that's how it's been referred to. And so as a legislator and a person with some limited experience in the area, for the moment, that's all I'm comfortable with doing. The other considerations are just that; they are other considerations. This is a personal financial view and belief of my own, and it is why I'm supporting it. That may be completely irrelevant.
Councilman, do you disagree with the witnesses that today that there 350 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting would be no impact on the Pension Fund whether -- 'cause you said your concern was about the Pension Fund because of your expertise in Pension Funds.
Do you agree that there is no risk added to the Pension Fund if we go from 10 to 9.5 or to 9? Or do you disagree with that?
Councilman, I think, Councilman, all I can say to you is that I am not thoroughly convinced enough to vote on the matter at this point in time at a rate of less than 10 percent. That's the only response that I can really give you.
You have confusion or you don't understand? If you do not believe what they said today, Mr. Herkness and the actuary, that there is no impact on the Pension Fund -- and I thought they explained it very well 351 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting -- is that statement you could agree with? And is all this move over to the General Fund for purposes of judgment calls?
I think again -- I mean, Councilman, you know I'm going to be respectful to you, and I think all I'm going to be able to say at this moment of time in this discussion is the same statement that I made a few minutes ago. Now, I don't want to be disrespectful to you --
Right, so you don't want to hear the same answer, I know that.
That's right. Twice is enough for me to ask the same question.
I'll just leave it open if there's anybody else that has anything to add to this 10 percent versus 9-1/2 or 9.
I'm happy to share 352 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting my reason and it is that I am persuaded that Michael Nutter has done the kind of work that warrants my blind, slavish following of his leadership. (Laughter.)
I request that the notes of testimony from this hearing be made available immediately. I would like to keep them in my house. (Laughter.)
Since Councilman Clark did not vote to not extend me the courtesy today, I will certain accept that answer. She may have if she were here, but she didn't.
Thank you, Madame President. I think that the last time we considered this bill and the veto of mine, that I guess I said everything we need to. I certainly think my colleagues have said it best, and 353 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Councilman O'Neill has been saying it in caucus, I've been saying it for a week. And I think it is absolutely -- it is absolutely a bad day when we become pawns of some kind of political maneuver to not give pensioners any money. And it comes down that, we've heard it over and over. We've heard about in history, if we if look historically back ten years at 10 percent, they may get something once. At 9 percent, they may get something twice. So we can pass the bill and we'll pass a bill where pensioners know they get two lump-sum payments, period. And it is the will of this body, and I agree and I will go along with the majority of the vote because I believe in democracy. I absolutely believe in that, and I believe as long as we do that there is at least some hope, but I think it is absolutely -- I think it's absolutely -- I don't want to say "sad" because I said "sad" last week. But for all the people who were called politically irresponsible, and we talked about the press using the word "courageous" to those who voted on the other side and all the of those things to try to dupe the 354 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting public into thinking that people who wanted to vote to make sure the retirees would get something were anything other, I just think it's a shame that as a body, that we don't have the collective will to do better and to do what we can to make a change. And I'm finished.
Thank you, Madame President. It's not often in this chamber that Brian O'Neill and I agree on an analysis of an issue. But on this one, I think he's right on point. And as David Kendall said the other day, the City did not make their case for the 10 percent. The actuarial representative with Joe Herkness made those statements, they are on the record. I think at this point, the only reason we're not going through with this is because we have a mayoral veto as a threat. I hope -- and I understand Michael's conservative nature in terms 355 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting of his finance background, but I do hope that the promise that is being made to the retirees here will survive, and I will hope that we can keep our word next time around and revisit this, revisit this when it is shown by empirical fact that the percent does not create the fund, that it only 8 creates the illusion of it because the retirees 9 will sit and wait another 18 years if we leave it 10 at that level. So I do hope that the promises being made are revisiting, coming back, and I know that Michael is an honorable guy, and I know that my colleagues here are honorable people. I know that we will revisit this. Thank you very much.
Okay, I would like to try this again. I would like to vote yes on -- I want to vote yes on Councilman Cohen's amendment. If it passes, I'm going to vote yes on the bill. If it fails, I'm voting no. Got it?
Okay. Thank you. 356 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting The Chair recognizes Councilwoman Tasco.
Madame President, I know people are tired, Madame President, but I'd just like to say that I don't think it's doom and gloom. I believe that we've come a long way. We have come up with the retirees will get their lump-sum payments, the two lump-sum payments, and we have done something historical by putting a process in place whereby the pensioners, the retirees can look forward to a review and possibly some increase over the years without having to wait years. 15 And I do believe, because I had an 16 extensive discussion with Councilman O'Neill on 17 his argument, and I sat with Michael Nutter a long 18 time yesterday to discuss Councilman O'Neill's point of view, and I think he listened to that point of view and put into this bill an amendment and a process whereby we can revisit it, and as a Council body, we always have the right to come back and revisit an issue. So I don't believe that it's a sad day, I think it's a wonderful day, that these retirees 357 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting will get their lump-sum payments and that we have a process in place for the Board of Pensions to take care of the survivors and the pensioners. And if that is going to be problematic, there is a process to deal with that.
Thank you, Councilman. The Chair recognizes Councilman Cohen.
Just to say I've always felt that the provision in the bill for 10 percent was totally inadequate as a basis for a cost-of-living increase. I never saw that it would produce anything, and if did, it would be very minuscule. I hope that in the next few weeks the labor organizations working with members of City Council will produce a bill which will provide for a genuine cost-of-living increase. And I'm announcing to them, and I think there will be many other union members that will want to join in some gets away from an illusion but gives a guaranteed annual cost-of-living increase to all of the retirees. Thank you. 358 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
The question now is, shall Councilman Cohen's amendments be adopted. All in favor, signify by saying aye. Those opposed? Roll call. Councilwoman Blackwell?
Councilman 359 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Longstreth is not voting. He was voting no, he only voted in favor or Councilman Nutter's. Councilman Mariano?
Councilman Rizzo is voting aye. Councilwoman Tasco?
Madame President I just have a question now. 360 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
If I understood Councilman Rizzo correctly, now that the amendment offered by Councilman Cohen has been defeated, his vote on the Nutter amendments is now no. 8
On the bill, okay. I want to make sure. All right, thank you.
The motion fails. The ayes are 5, the nays are 9. We will now consider --
Madame President -- Madame President, actually under these circumstances --
Two very brief statements. One, if the scenario that Councilman O'Neill has talked about on a number of occasions and also my colleague Councilman Ortiz in his comments, I guess I'd just like to put on the record that I too want the Pension Adjustment Fund 361 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting to work and to be able to make distributions. If I am wrong, I am fully prepared to respond to any errors, any deficiencies or anything else as a legislator, admit any errors, and get to work on correcting them and making sure that the goal, which is to get people regular cost-of-living adjustments, is achieved. And that is a commitment that I'm certainly prepared to make, and it's one of the provisions in the bill. Secondly, Madame Chair, you will recall at the public hearing back in December, and you also will recall, I believe, on the day of the Mayor's veto message, we have heard impassioned statements by Councilmembers, there have been letters read into the record about the need for people to get funds as soon as possible. As a result, Madame Chair, I would propose one last amendment to the bill which changes the date by which people would get the first bonus payment of 1999. It is my understanding that the Pension Board would need about two months to put the operation in place for people to get their first lump-sum payment. And, therefore, as a result of that and after 362 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting discussions with yourself and Councilman DiCicco and other Councilmembers, I would propose that we amend in Section 131.1 and in 120.1 the language that presently has the first bonus payment shall be made on July 15, 1999, that that language be stricken. And I propose to amend it that the Pension Board ensure that those payments are made no later than April 30, 1999. And I move the adoption of that amendment. (Duly seconded.)
It has been moved and properly seconded. Councilman O'Neill, did you want to speak on this?
All those in favor of the adoption of the amendment will say aye. Those opposed? There are none opposed, the ayes have it. The motion carried. The Chair recognizes Councilman Nutter.
Madame Chair, I 363 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting think at this point I would like to move the bill 3 as amended out of committee. (Duly seconded.)
I'm voting yes in part because it has percent. And while I agree 10 with both Councilman Tasco and Councilman Nutter's statements that corrections can be made later, when they're as foreseeable as I believe they are now, you can't go back to two years. And if someone in the next two weeks can show me how the scenario of the last ten years repeats itself, and in two years, when we realize it's repeated itself, we can make up for those two years, I'm open to that. I haven't even thought of a way of doing it, but I'd be open to that suggestion. There could be a fail-safe that I haven't considered. But I'm voting no today because I want the record to reflect that I asked for and I'll forget the four unions and I'll Councilwoman Blackwell and Councilman Cohen, they could deal 364 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting with the lack of courtesy to them themselves, but I asked for a one-week continuance with no Council meeting in between. And I have never seen in almost twenty years that denied to any member or any image major group of supporters or objectors or interested parties that would appear unless there a compelling reason. And the only compelling reason I heard was, Let's get this over with, and the Mayor wanted it out today. They were the only two reasons I heard. And I'm voting no as much because of that as because the 10 percent, I believe, is totally inadequate to set up a pension adjustment fund. Thank you.
I will be voting for the bill because I think it awards these two bonuses because of the two single payments that are made. But I share totally the sentiments of Councilman O'Neill. I think today the procedures adopted by this Council were a disgrace 365 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting legislatively. The one thing we've always prided ourselves on is our collegiality, that anybody who sought more time would be given generally a week when there was a Council meeting every week, and we haven't had a Council meeting except basically for the purpose of listening to the Mayor, and there's nothing coming for the next week. I think Councilman O'Neill is absolutely right. I think today, despite the fact that this bill will offer some relief, today procedurally was a bad day for Philadelphia because I think what we did today has never been done not only in the twenty years, Councilman O'Neill, since you've been here, I never knew it back in my original term in 1968 or '71 such a lack of display of consideration by the legislative body to a reasonable request made by other legislators.
Thank you, Madame President. I'd like to say to my colleague and certainly to this body, when one is disrespected, 366 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting it does not mean that one does not know it. Certainly, I know that this bill was tried to be amended to be the exact same bill that I introduced and for which we had nine votes. Certainly, we know that this bill was amended but destroyed in the smoothing process so that the retirees would get nothing which was the initial intent of this legislation. I only vote for this legislation because I absolutely when I understand when I've won, and I understand when I have lost, and I accept it. But does not mean that I agree with it, that I do not feel regret that we have decided to function as an appendage of the Administration. And not to disrespect and violate not only our Home Rule Charter but the very Constitution that calls for the separation of powers, that calls for executive, legislative, and judicial bodies. So I say to my colleagues, certainly I appreciate all that you have done. I consider it an absolute affront to this body and to each of us individually and personally as legislators that the Administration would not even respond, that 367 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting certain deputies would be here, and all through this the Administration, has been here, they have had their people here, they have seen fit to not even pretend that it was not their bill, and even went so far as during the Chamber of Commerce luncheon, to certainly even speak and talk about the Nutter bill on record. Certainly, it's been obvious from the very beginning that it was an intent that these retirees get nothing. I said when I first spoke that it is a question of the rich getting more and the poor getting nothing. When we first spoke in cabinet room and we had a meeting before the vote, the Mayor said no, this would do nothing, this bill would do nothing but reduce the cushion when unions negotiated. All of a sudden, the business community said they didn't want it and then there was this threat of layoffs after the Mayor himself told us there would be no layoffs. I was not in this cabinet meeting alone. All my colleagues were invited, and the majority of you were there. So I say again, it is not that I do not know when I am not disrespected and when I'm not insulted. But certainly again, I understand when 368 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting I win and when I lose. I only regret that this body does not have the political will to certainly fulfill its mission and do what it can to help the least of those in our city who have spent their lives and deserve some kind of relief and some kind of COLA in their lifetime. Thank you.
Thank you. It has been moved and seconded that Bill No. 990001 be reported out of committee with a favorable recommendation, as amended. All in favor will signify by saying aye. A roll call is requested. Councilwoman Blackwell?
Councilman Cohen? 369 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Councilman Longstreth is voting aye. Councilman Mariano?
Councilman 370 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting Ortiz?
Councilman Rizzo is voting no. 6 Councilwoman Tasco?
Councilwoman Verna, aye. The ayes are 13, the nays are 2. This concludes or public meeting. Thank you all very much for your patience.
I'd like to thank everyone for working so hard on this issue of importance to us and our extended families.
I would like to make one comment. It's been long process, it was never meant to be a splintering, and I have nothing but respect for the people in this chamber for the time that you spent with us. And I think we're all here for the same good.
And I think you realize that we were all trying to be of help.
Thank you. 371 1/27/99 COMMITTEE OF THE WHOLE - Public Meeting
Thank you. (Adjourned at 6:15 p.m.) - - - 372 C E R T I F I C A T E I HEREBY CERTIFY that the foregoing proceedings of the Council of the City of Philadelphia of Wednesday, January 27, 1999, were reported fully and accurately by me, and that this is a correct transcript of same. RE: COUNCIL COMMITTEE OF THE WHOLE BILL NO. 990001 __________________________________, JOSEPHINE CARDILLO, Registered Professional Reporter