Minutes

CIVILIAN PENSION BOARD A Meeting of the Civilian Pension Board was held on February 8, 2012, at 4:21 p.m. with Dr. McGlumphy presiding. Members present were Mr. Bonar, Mr. Blakeman, Mr. Clendaniel, Mrs. Hettinger, Mr. Koenig, and Mrs. Mitchell. Mr. Hare and Mayor Carey were also present. AGENDA ADDITIONS/DELETIONS Mr. Bonar moved for approval of the agenda as presented, seconded by Mr. Blakeman and unanimously carried. ANNUAL REVIEW OF PENSION BENEFITS PAID TO ALL CIVILIAN RETIREES During their meeting of January 27, 2000, members directed the City Clerk to maintain a permanent pending agenda item to review a Cost of Living Adjustment (COLA) for City of Dover retirees prior to the third week of February each year. Mr. Blakeman provided members with a list of retirement payments being issued to members of the Civilian Pension Plan as of December 2011 (Attachment #1). He stated his concern that more than 74% of those employees listed were receiving between $2,400 and $23,837 per year. Mr. Blakeman provided members with the City of Dover Finance Department Pay Plan and Benefit Comparisons - Contract Wage Increase (Attachment #2). He indicated that this document was adapted from a document reviewed by the Salary and Benefits Compensation Comparison Committee at their meeting of December 6, 2012 and that he had added information regarding increases for retired FOP and General Fund Civilian Employees. Mr. Blakeman provided members with a COLA History (Attachment #3) and explained that Civilian Pension Plan retirees had not received an increase since June 26, 2006. Mr. Blakeman noted that during the period between July 1, 2007 and June 30, 2012, active non-bargaining employees received salary increases which ranged from 9% to18.7%, FOP employees received 16%, IUE employees 13.5%, IBEW employees 15.5%, and FOP retirees 10%; however, retirees paid from the General Fund received no increases during this time. He informed members that the City’s Municipal Code provides for an automatic 2% annual increase for retirees in the Police Pension Plan. Mr. Blakeman provided members information regarding Historical Inflation (Attachment #4) and a History of Automatic Cost-of-Living Adjustments from the Social Security Administration (Attachment #5) for their review. Mrs. Hettinger stated her feeling that there was a lack of equity in that retirees in the Police Pension Plan receive an annual increase but Civilian Pension Plan retirees do not. Mr. Blakeman moved that all members of the Civilian Pension Plan who retired on or before June 30, 2007 receive a 4% cost of living adjustment effective January 1, 2013, that the retirement income of a retired member of the Civilian Pension Plan shall be increased by 2% per annum every January 1, and that this increase in retirement pay shall be cumulative and the previous year’s increase shall be included in the retired member’s retirement income for the purposes of calculating the annual 2% increase, and that the first 2% increase would be effective on January 1, 2014. The motion was seconded by Mrs. Hettinger.

CIVILIAN PENSION BOARD MEETING OF FEBRUARY 8, 2012 PAGE 2 Mr. Blakeman noted that language in the motion regarding an automatic annual increase mirrors language in the City of Dover Code regarding the Police Pension Plan (Chapter 62 - Law Enforcement, Article III, Pension Plan, Division 1 - Generally, Section 62-76 (b) Increase). Referring to the City of Dover Finance Department Pay Plan and Benefit Comparison - Contract Wage Increase (Attachment #2), Dr. McGlumphy clarified that figures listed in the “G.F. Retired” column refer to all individuals in the City of Dover organization other than the police. In response to Mr. Hare, Mr. Clendaniel explained that Police Pension Plan participants who retired prior to 2009 continue to receive Medicare Part B reimbursement. Mr. Bonar acknowledged the need of the retirees and the validity of the information presented; however, stated he could not support the motion due to the City’s current dire financial situation. In response to Mr. Bonar, Mr. Blakeman stated that a 4% increase would cost approximately $126,534.60 per year; however, if it were implemented on January 1, 2013, the cost would be reduced by one-half to approximately $63,267.30. He offered several suggestions for funding the increase, as follows: 1) Increase kilowatt hour (kWh) sales by one-half cent. Mr. Blakeman stated that this would spread the cost among all users, not just property owners, and would generate $3.5M in revenue per year. He estimated the monthly impact to electric consumers as follows: 500 kWh $2.50 1,000 kWh $5.00 1,500 kWh $7.50 2,000 kWh $10.00 2,500 kWh $12.50 5,000 kWh $25.00 10,000 kWh $50.00 2) As of February 8, 2011, there were 32 property owners who owed the City a total of more than $300,000 in property taxes. He stated that collecting these taxes would more than fund an increase. 3) As of December 31, 2010, the City’s reserve accounts had over $2,729,910 in excess of the minimum balance, some of which could be used to fund a COLA. Mr. Hare stated his concurrence with Mr. Bonar’s assessment of the City’s financial position; however, he indicated that retirees should be treated similarly to employees. He felt that if employees receive a raise this year, retirees should also receive an increase; however, he advised members that he could not support a 4% raise for retirees if employees do not receive an increase. Mrs. Mitchell stated that the last time a COLA was approved, the actuary calculated the cost of the COLA and the City budgeted money to cover this expense. She stressed the importance of

CIVILIAN PENSION BOARD MEETING OF FEBRUARY 8, 2012 PAGE 3 examining the long-term implications of any increase, noting that the issue is not to fund it just for one year but to fund it over the entire amortization period. Mr. Hare stated his reluctance to guarantee an annual COLA but stated he would be willing to consider a one-time increase that would be subject to review every year. On a call for the question by Mr. Bonar, the motion that all members of the Civilian Pension Plan who retired on or before June 30, 2007 receive a 4% cost of living adjustment effective January 1, 2013, that the retirement income of a retired member of the Civilian Pension Plan shall be increased by 2% per annum every January 1, and that this increase in retirement pay shall be cumulative and the previous year’s increase shall be included in the retired member’s retirement income for the purposes of calculating the annual 2% increase, and that the first 2% increase would be effective on January 1, 2014 failed by a roll call vote of four (4) no and three (3) yes (Mr. Blakeman, Mr. Clendaniel, and Mrs. Hettinger). Mr. Mike Karia, 54 Merion Road (former City of Dover Finance Director), stated that his purpose in attending the meeting was to request a list of the names, mailing addresses, email addresses, and phone numbers of City of Dover retirees so that he could visit and offer assistance to them. However, he stated that, after hearing the discussion regarding a COLA for retirees, he felt compelled to share his point of view. Mr. Karia noted that City Council, the Finance Director, the City Manager, the Human Resources Director, the Mayor, and the actuaries did not consider the long-term effect on the unfunded liability when salary increases were granted to management employees over the last 7-10 years, yet this was considered to be a concern during the discussion of an increase for retirees on small, limited incomes. Mr. Karia explained that there are four (4) factors that contribute to the City’s unfunded liability, including: 1) a decline in the economic market; 2) the fact that retirees are living longer than previously; 3) payments that are made to retirees (increases add to the unfunded liability); and 4) raises received by current employees every year, including management employees who have received increases up to 18%. He commended members for voting their consciences regarding the COLA because of the City’s dire financial situation; however, he requested that members investigate the causes of this situation, including bonds, the new library project which will require more staff and cause higher electric bills, and salaries paid over the last few years under the Pay for Performance system. Mr. Karia requested that members consider the non-management employees and retirees who have given their lives for the City and stated his hope that this type of request would be considered favorably in the future. Mr. Bonar expressed his respect for Mr. Karia and acknowledged that management and top-level employees have received significant pay raises over the past ten years; however, he stated that this had not happened during the last two (2) years. He indicated that he did not believe that raises would be granted during the next fiscal year unless arbitrated and expressed his hope that the City would not negotiate. Mr. Bonar stated that if the economy improves in the future, he would like to see a unanimous vote in favor of granting a COLA, but felt the City was not in a position to do so at this time. He noted that the budget process would be very difficult and painful this year. Mr. Koenig stated that there has been a great deal of hostility expressed regarding the Pay for Performance system; however, he noted that this was a publicly vetted system that was reviewed through the budget process and approved by a majority of Council. In addition, he noted that not all

CIVILIAN PENSION BOARD MEETING OF FEBRUARY 8, 2012 PAGE 4 employees affect the unfunded liability, as those in the deferred compensation plan have no impact. He suggested that further discussion on this topic could be held in conjunction with the budget process for FY 2013. This would provide time to estimate and plan for this cost and would allow for the matter to be publicly vetted through the budget system. Mrs. Hettinger noted that she had been a Pension Board member for many years and that previously Board members met with all employees when they retired and had a voice in their retirement process. She stated that the Board now meets only in regard to investments and she indicated that she was not in favor of this change. Mrs. Hettinger also stated that the Board previously tried to incorporate raises in the budget for those who retired in the 1970s and 1980s. She stated that a plan was developed to allow incremental percentage raises for retirees based on their date of retirement, from earliest to latest retired (proposed raises were not equivalent), and employees who retired during the previous five (5) years would not have been eligible to receive raises because they had received higher salaries. Mrs. Hettinger indicated that she was informed at the time that the City Solicitor determined this approach was discriminatory; however, she felt that a second opinion should be solicited to determine if staggered COLAs are discriminatory. She noted a recent encounter with a 93-year-old City retiree whose job had been to clean City Hall and stated that she was working on behalf of former employees such as this who “built this City” and retired many years ago. Mr. Bonar suggested that Mr. Blakeman discuss a COLA with Mrs. Mitchell to determine if an appropriate allocation for this purpose could be worked into the budget for eventual review by Council. He indicated that this matter could be brought before the Legislative, Finance, and Administration Committee. Dr. McGlumphy suggested reviewing the Solicitor’s previous opinion regarding staggered COLAs. He noted that the budget hearings would proceed within the next month. Mr. Hare explained that contact information for retirees could not be released to the public due to Privacy Act protections; however, the City could assist in the distribution of mailings to these individuals. By unanimous consent, the meeting adjourned at 5:06 P.M. William P. McGlumphy Chairman WPM/JS/dd/tm S:\AGENDAS-MINUTES-PACKETS\Misc-Minutes\PENSION\2012\02-08-2012 Civilian Pension Board (revised).wpd Attachments Attachment #1 - List of Retirement Payments to Members of the Civilian Pension Plan as of December 2011 Attachment #2 - City of Dover Finance Department Pay Plan and Benefit Comparisons - Contract Wage Increase Attachment #3 - COLA History Attachment #4 - Historical Inflation Rates Attachment #5 - History of Automatic Cost-of-Living Adjustments from the Social Security Administration

ATTACHMENT #1 Civilian Pension Board Meeting of February 8, 2012 (INFORMATION PROVIDED BY MR. LES BLAKEMAN)

(INFORMATION PROVIDED BY MR. LES BLAKEMAN)

(INFORMATION PROVIDED BY MR. LES BLAKEMAN)

ATTACHMENT #2 Civilian Pension Board Meeting of February 8, 2012 (INFORMATION PROVIDED BY MR. LES BLAKEMAN)

ATTACHMENT #3 Civilian Pension Board Meeting of February 8, 2012 (INFORMATION PROVIDED BY MR. LES BLAKEMAN)

ATTACHMENT #4 Civilian Pension Board Meeting of February 8, 2012 (INFORMATION PROVIDED BY MR. LES BLAKEMAN)

ATTACHMENT #5 Civilian Pension Board Meeting of February 8, 2012 (INFORMATION PROVIDED BY MR. LES BLAKEMAN)