THE VIRGINIAN-PILOT
Copyright (c) 1996, Landmark Communications, Inc.
DATE: Sunday, October 6, 1996 TAG: 9610060053
SECTION: LOCAL PAGE: B1 EDITION: FINAL
SOURCE: BY TONI WHITT, STAFF WRITER
DATELINE: PORTSMOUTH LENGTH: 203 lines
A ``Rolls-Royce'' of retirement packages once offered to police, firefighters and top city officials continues to hobble a city that at times has had trouble paying for even a Pinto of pensions.
The Police and Fire Departments' Retirement Plan, which was designed by the people it was meant to serve, is one of the most generous in the country, according to interviews and national studies of benefit packages.
The plan, envisioned as an incentive to offset the city's low base salaries, was offered from July 1994 through June 1995. New department hires are now covered under a less lucrative state pension. Yet the old plan leaves a legacy of unexpectedly high benefits for retirees and looming costs for the city from 410 other police and firefighters eligible to retire under it.
The effects:
The retirement package resulted in a rush of early retirements. In the past two years, 80 police officers and firefighters have retired - more than in any other two-year period in the city's history. Nearly one-third of the city's police force retired.
Early retirements also mean the city will pay out pensions for more years.
This year the city will contribute more than $3 million to the pension plan, up from $2.2 million last year - an $800,000 increase.
That cost does not include adjustments traditionally made to all retirees to account for inflation. The City Council decided it could not bear the estimated $2 million additional cost this year.
Prior to the plan, Portsmouth taxpayers paid 4 cents of the $1.36 per $100 real estate tax rate toward police and fire pensions. Now they pay 6 1/2 cents - or $65 a year on a $100,000 house.
The city moved quickly to staunch the bleeding once it realized how much extra the plan would cost. Weeks after adopting it in 1994, the City Council voted to keep future top executives from joining it.
City Manager V. Wayne Orton and Deputy City Manager Roy W. Cherry were already enrolled, however. Today they are among the top beneficiaries of the plan. Sheriff Gary Waters worked through the General Assembly to also be included in the plan. Former city managers Aubrey Johnson and Robert Williams retired under an earlier, less lucrative version of the system.
Last year the council closed the plan for all new police officers and firefighters. Officers hired after June 30, 1995, are enrolled in the state's retirement plan for law enforcement officers.
However, those who were working when the previous pension plan was in effect retain their benefits package. When they retire, the city will have to pay the higher rates throughout their life span.
``When we found out what the total cost was and how it would affect the finances of the total city budget in years to come, we decided we couldn't do it,'' said Councilman Bernard D. Griffin Sr., who approved the pension package and then later voted to change over to the state plan.
All other city employees had been covered under the state's pension plan for nearly a decade. The city had opted out of its own pension plan for employees long ago because of the cost.
The pension plan allows officers to retire after 20 years of service, regardless of age, with 60 percent of their gross pay for their highest three years in salary.
Gross pay includes all overtime and allowances for things such as weapons, education, emergency medical technician training and uniforms. The longer officers serve the city, the higher the percentage of salary they earn after retirement.
With allowances and overtime, four retirees are now receiving pensions higher than their top base salaries, according to a computer analysis of salaries and pensions. Eight others are earning pensions between 90 and 100 percent of their base salaries.
Portsmouth's plan is better than retirement packages in Baltimore, Washington, Atlanta and any other city in Virginia, according to state and national reports. Portsmouth's plan is also one of the few that does not require the officers to contribute to their own pensions. The Virginian-Pilot also obtained copies of other retirement plans from cities across the country.
With 25 years of service, Portsmouth officers can earn 70 percent of their pay, and they add 1 percent to their pay for each year served after 25. The benefits are guaranteed for life. In addition, retirees get a $200 monthly supplement until they reach 65, when Social Security benefits would kick in - and spouses have a free option to collect 50 percent of the pension after the retiree dies.
The new state plan also allows officers to retire after 25 years of service and at age 55. With full service, their pension is about 48 percent of base pay - overtime and perks are not included in the base.
The average age of Portsmouth fire and police retirees dropped from 59 to 51 once the new plan was adopted, said J. Peter Teig, of the city's finance department, who described the plan as the Rolls-Royce of pensions.
At the same time police officers were lobbying for the pension plan, they sued the city for overtime pay and won. That overtime pay is included in the pension calculations.
Not only did the overtime affect the officers' salaries, but the pensions of those already retired had to be adjusted to account for their overtime back pay.
Det. Ronnie Davis, president of the Fraternal Order of Police, said officers rely on the overtime earnings to bump up their pensions and to subsidize low salaries.
``It's especially important in the last three years,'' said Davis. ``How much I make in those years will affect my pension.''
Davis, who has worked for the city 34 years and earns $32,000, said the city is working to stop overtime to try to keep officers from collecting on larger pensions.
``They sure look at the overtime,'' he said. ``The pension plan is based on top three years pay. That's why were not getting paid any more.''
Griffin and city administrators say that too much overtime is a dangerous practice because overly tired police officers can get hurt or even killed.
In 1995, on average, Portsmouth officers added 8.5 percent to their salaries - and therefore their pension bases - through overtime pay, according to a computer analysis of city overtime, salary and pension records. Many officers boosted their salaries by as much as 25 to 35 percent by working overtime.
The city is working to boost the base salaries of its police officers, but the budget remains tight, said Councilman Cameron C. Pitts. When council members did away with the pension plan, they promised officers their salaries would be competitive with those of other police departments across the region.
The starting salary for an officer is $22,729, the lowest in South Hampton Roads. Chesapeake pays $23,884, Suffolk $24,183, Norfolk $24,556, and Virginia Beach $27,085.
The council has long been looking to economic development to help the city pay its bills, boost city employees' salaries and pay for putting more officers on the street.
Council members say now that the money they are spending on the old pension plan could be better used for economic development projects that would bring more money into the city and allow them to pay all officers better.
Pitts, who voted for the city pension plan three years ago, said its cost could delay some ``quality of life'' work such as neighborhood drainage projects or new curbs and gutters.
If the city had the added $800,000 designated for the retirement plan, Griffin said, ``we would have used the money to aid us in economic development recruitment.''
The city's finances have been on the rebound for the past two years. Last year, Portsmouth budgeted $700,000 to its reserves but was able to add nearly $2 million. The city needs to continue adding to its reserves to help get back on its feet and to improve its bond rating, Deputy City Manager Johnna Whitaker has said.
Councilman Pitts said that if Portsmouth had not ended the pension plan when it did, it could have bankrupted the city.
The police and firefighters unions say city officials and the council are exaggerating.
Another study on the plan is due out this month, which should give the city a better sense of how much it will cost over the next two years, Teig said.
In addition to the guaranteed benefits, the city has traditionally provided cost-of-living increases to its retirees. But because of the extra costs associated with the pension plan, the city would have had to pay nearly $2.2 million in cost-of-living raises for all retirees this budget year, Teig said during budget hearings earlier this year.
Instead, the city opted to give a one-time raise out of its general fund, costing more than $300,000.
If the council decides to give an additional cost-of-living increase this year, the city would be in the same dilemma: Come up with $2 million for the increase or take another $315,000 out of the general fund.
The cost of the pension plan, if it continues rising, may soon force the city to choose between its tradition of giving cost-of-living increases or paying for the plan, said Pitts - although he added city officials will work to continue both.
Another option the Finance Department offered last year is to give raises only to older retirees who were not part of the more lucrative pension plan.
Those kinds of issues are exactly what will split the police unions and the retirees, Davis said. Until now, the retirees and the police have worked together to lobby for cost-of-living raises and changes in the pensions.
In addition, Davis said, officers under the state pension plan will be unlikely to support the older officers in their requests for raises.
Both Councilmen Griffin and Pitts said the city must bring salaries in line with those of other police departments in the area.
Portsmouth is working toward salary increases, Pitts said, but those also will depend on the strength of the budget and the city's economy. ILLUSTRATION: Photos
Roy W. Cherry
former deputy city manager, who is receiving $74,465, retired 7/1/94
B. Odell Benton
former fire chief, $66,943, retired 7/1/92
V. Wayne Orton
former city manager, $52,933, retired 7/1/95
Theodore E. Masters Jr.
grants analyst, $48,428, retired 7/1/94
Three of the top four recipients in the retirement program are not
former law enforcement or fire officials; the city initially allowed
top managers into the plan.
Graphic
THE PLAN
The pension plan allows officers to retire after 20 years of
service, regardless of age, with 60 percent of their gross pay for
their highest three years in salary.
KEYWORDS: PORTSMOUTH RETIREMENT PENSIONS by CNB