HomeMy WebLinkAboutCC 1975-09-23 MinutesCITY OF MIAM
SPECIAL
COMMISSION
MINUTES
OF MEETING HELD ON
SEPTEMBER 23, 1975—Proposed APPROPRIATION
ORDINANCE
PREPARED BY THE OFFICE OF THE CITY CLERK
CITY HALL
II, 1), SOUTHt RN
City C1e'I
RALPH G. ON(11
Assist,sit Crr,, c,, .
MINUTES OF SPECIAL MEETING
CITY MML S CN , OE M AM , *FLORIDA
On the 23114 day o f Sepiembeh, 19'te, the 'City Commissiono,
Miami, Fkontda met at ita heguta. meetkng ptatt at City Hatt
said City in SPECIAL 8E8S7ON to eovisideh the proposed apphophkk
ation oxd :nance 4oh the City 04 Miami toh t zcad. yeah 1475-76.
The meeting was cared to ohdeh dt 9:2O C'Ctoch A.M. with
the goeQowing membett og the Commission pneseott
Commissionek Rosa 'Gohdon
Commissioneh (Rev.) iheodone Gib.aon
Commi,t,ioneh Mavto:eo Pebo.tto
"Vice Mayon_ J. L. PQumneh, Jh..
Mayon. Mauhice A. Pehne
At4 o Pne, nt
P. W. Andhew4, City Manageh
A. R. Crouch, A44istant City Manage&
John S. LiLoyd, City Axtonney
H. D. Sou.their, City C.Cenfz
Ra ph G. Ongdi.e, Assistant City Ctenh.
An invocation was deJivened by Revehend Gibaon who then red
those resent in a ptedg e o i a .teg.Lctnce to the i.eag
A motion to waive the /Leading og the minu.te4 ways i.nxhoduced
and b econded and was pa44 ed unanimou4Zy.
Mayor Ferre: Good morning ladies and gentlemen. This is a budget hearing
from the City of Miami on September 23rd and I'm going to alter the tenative
agenda and before we take up employee's negotiations. Question- Mr. Andrews,
I'm going to recognize you so that we can and then Mr. Gong in that order.
14! nayo wand members of the Commission, there are several items that you
need to review and have me present information to you and hear from others
in order to finalize this budget. The main subjects that we need to discuss
this morning are employee negotiations. The budget adjustments considered by
the City Commission and as part of that Mr. Gong has a presentation to make
with reference to the pension system. Questions that he's raising.
Mayor Ferre: I'd like to reverse the order, so that we can get into the
last part first.
Mr. Andrews: All right, fine. Ok. All right, then you wish to start with
Mr. Gong?
Mayor Ferre: I'll leave that you to you Mr. Andrews, if you want to address
the question or if you want Mr. Gong and then you respond.
Mr. Andrews: Well, I think he should pose the question, the procedure has
been set up with both boards and their presentation and if you wish he can
Mayor Ferre: All right, the chair recognizes J.L. Plummer and then Mr. Gong,
Mr. Plummer: Well, in fairness Mr. Mayor, you might want to recognize Mrs.
Gordon. Mr. Mayor, after I speak - Mr. Mayor as you know I sit as the Chair
man designated by this committee of one portion of the pension fund that i S re-
lating the system of police and ;fire. After the split occurred the first of
this year the board empowered to hire an outside attorney and further you
will recall approximately two months ago that attorney came before this
Commission asking for the right to hire an outside auditor or an independent
auditor for the board, then there was an action some three weeks ago in which
the Manager proposed to this Commission that the accrued liabilities of 145
million dollars be started anew as far as the amortization schedule for that
loss. Now, that is a paper loss, there are no dollars that are lost and then
Mr, Gong started to do research as to that loss, Mr, Gong approached me (I
think it was Tuesday of last week),it might have been Monday informing me
SEP 23197.
what he feels was a very serious flaw or the ii ip_ttiper its :§direeta: rt of fu it L a§
it related to the City and to the pension futd. ter. Gong then &eked because
of this meeting today Tuesday where possibly we were going to adopt the final
appropriations ordinance today, to call a special meeting of my board which I
did oti fast Thursday. Now, Mr. Gong is here this morning as council to the
board and Mr. Stokes is here of the auditing firm of Raskin & Sells. They
trade a presentation to our board and then because of the serious stature Mrs.
Gordon requested that they appear the fallowing day at aft emergentcy meeting of
her boards Let me say to you Mr, Mayor the whole basis of this tontentioni of
Mt. Gong is very simple. The tatifications are great. The simplicity is that
in our charter there is a provision which speaks to funding of the pension ;r
fund to the tune of four tills. That this four mills can only be used for
relief and pension fund. Then Mr. Gong's contention and he will expound
further and t really shouldn't be Ct guess) going too deep into this. His
contention is that between he and the auditors they have recognised that there
are other things being supplemented from this four mill act other that pension
or relief. Namely, one and half million dollars to pay social security-. Appt"
oxitnately a million and a half dollars to pay group insurance and Mr. Gong will
contend that under no circumstances that this be construed is either relief or
pension. Then of course, the other thing was looked at. That of the 35year
funding as opposed to the normal 20'year funding. It is the feeling of say
board and I'm speaking now as chairman of that board that if Mr. Gong's cont-
ention is correct;there is absolutely no need to go to a 35-year funding;that
the special act in the charter is tore than staple to pay for the pension needs.
Well, now you're getting into another round by increasing the millage "yes",
except the thing that Mr. Gong I don't think yet has an answer on and in the
same way-- by the way, this is not just in our charter this is a legislative
action in Tallahassee in the same way that this City is exempt from the ten
mills on debt service it conceivably can be exempt from about four mills on
pension, we don't know that is what Mr. Gong is researching now. That conceiv-
ably it could be but we don't know. I certainly hope so too. Now, that is
where we're at. Let me tell you that my board took two actions. The first
action was to recommend to this Commisison and to the administration that they
immediately remove from that 4 mill act any items not directly involved with
pension funds. The second that they adopted which to me is really not necessary
but they did that based on that finding that there was absolutely no need to
go to a 35-year funding, that a 20-year funding was adequate. Now, I think I
have expressed --Mr. Gong is that basically the two resolutions. Well we have
them in written form if any of you want them, so that's where we are today
Mr. Mayor, I'm sure that the Manager has a different idea and I thought that
it was important that that should be the first item today because if Mr. Gong
is correct we're talking about openers -three million dollar difference. Well,
let me stop there and then Mr. Gong let me make one other statement. Now, I
speak as a Commissiner Mr. Mayor you know that my statements were loud and
long at the last budget hearing and just violently opposing what I call deferring
the inevitable and that is paying this thing out over 35-years instead of 20.
I have worked awful hard Mr. Mayor for two years in this area of pension and
I'm proud to tell you that a great amount of change in the right direction has
come about with the last two years of work and Mr. Mayor if you stop and think
about the proposal. This proposal doesn't even speak to a man that is today
working for the City of Miami that the man that we're looking to at the end of
this funding will go to work for this City seven years from today. The average
policemen works for 29 years add to that six years. You're talking about a
man going to work for the City six years from today is when that funding would
be over. So Mr. Mayor I think at this time we should hear from Mr. Gong and
Mr. Stokes.
Mayor Ferre: No, no, no. I'm going to follow your recommendation now and
recognize if Mrs. Gordon wants to say anything but before you do Rose I want
to say just one thing J,L. first of all I want to commend both you and Rose
because I think you both done an absolutely magnifi cent:ob and I know that
you're been very much involved personally and I - you know it's one thing
for you to say that because some people might misinterpret that as being self
serving but I want to say it because I'm not involved in this and I know for
a fact that if it hadn't been for your participation this matter would not be
any where near as clear as it has been, So I think this City and this community
has a great deal of debt to you and to Rose Gordon ..,
Mr, Plummer: Mr, Mayor, I appreciate your fine words but the original committee
and you canuJt delete my friend Reboso is the original committee some two years
ago with Reboso and I that started that and Mrs, Gordon has worked very closely
with the and as far as --_-
S P 23197
•
Mayor Verret t make my words extensive to all that worked on this including
OoMMist iott itehoso, Now, the thing i 'want to tell you is that this thing
about being concerned about putting off the inevitable. Let me give you an
analogy death is inevitable,
Mrplumper: t know that very well Mr. Mayor.
Mayor Verret And I'm sure that even you, even though you have a conflict of
interest there, but I'm sure you are a subscriber to the faot that we ought to
put off that inevitable thing as much as possible so I would not be too con=
e.erned about the intents of tiie management or of anybody else to put off the
inevitable because I think we all do that every single day of our lives and --
Mr. Plummer: Unintentionally.
Mayor yerret Oh, and very intentionally. I put off death intentionally as
touch as I can and I think there ate other things... so, t wouldn't be too
concerned -about that portion of it, what does concern is the implementation
of the rest. And I would now like to recognize Rose and then Mr. Gong and
the Manager.
Mrs, Gordon: I'm going to be very brief for the sake of saving time and for
the need to hear from the professionals who made the presentation. However I
will say very simply that our board after hearing new evidence took a different
position then they had at a previous meeting and one of the things that is very
concerning to the Retirement board is that both boards be treated equally.
Whatever funding years are the final determination of this City Miami Commission
that both -- all of the employees receive the same funding term for the un-
funded death and that is the key point to their concerns. They express that
desire above and beyond any other of their concerns.
Mr. Andrews: Mr. Mayor and members of the Commission there is one area in the
Vice Mayor's comments that I would clarify before we proceed with Mr. Gong.
Because'I think these illustrations that are used to bring out points in refer-
ence to this should be as accurate as we can get them and I just want to be
helpful in making sure ---
Mr.°Plummer: If I said something that's in error I'll be glad to correct it.
Mr. Andrews: Well, when you used the example of the six or seven years individ-
ual in relation to the 35-year unfunded liability I wonder if the Commission is
aware that that person that we now employ has no connection whatsoever with the
unfunded accrued liability in that any emolument that that person receive is
funded ongoing each year that we appropriate funds. This unfunded liability
is only for those people who are now in the service. Not any new employees.
Mr. Plummer: Well, Mr. Andrews I will take exception to that remark if you say
it this way. The true test of any pension fund is if tomorrow morning it didn't
exist. We would be 145 million dollars short of paying off everybody in the
fund, correct?
Mr. Andrews: That's right.
Mr. Plummer: All right. Now, I will also tell you that it does have a direct
bearing because under your proposal and I was going to leave this to M. Gong
but since we're going to clarify let's do it. That the funding which has some
of it started back in 1965 on 20-years to be amortized which would have been
finished in 1985. Your proposals start it anew today wiping out that 10 year
funding that's already taken place. So we're not simply talking about from
20 to 35 or a 15 year difference. We're talking about from 1965 to the year
two thousand and five no, excuse me it's 25-years, the 10 from 65 to 75 plus
the 15 gives you a net of 25-years and those people who are presently members
of the pension fund are affected because that amortization sarted 10 years ago,
correct?
Mayor Ferre; Gentlemen, I'll tell - let me interject myself because I know this
is an important matter that you want to both clarify but we're going to get down
now trying to clarify something which is really going to lead off of the main
stream of what we have to address now, Would it be acceptable now if we just
leave these clarifications to later on and now I'd like th---- if Mr, Gong
would address the Commission,
SEP 231975
Mr. Gong. Mr, Mayors C•otttmissioners of the City of Miami, t don't knots how I
got in this position here this morning at this time this date tie history of
the City of Miami, I do want to say that it's probably fact that you
have three fellow r0otnttissiotiets, who in discharging their sacred duty to the
citisens of this city were in ty opinion. This is ty own personal opinion.
tit not running for anything I'm retired, getting old. tike Reverend Gibson
said people was his hassle. Now 101§§ fishing is ty hussies but now l'ttt
back here with you'all as brethren and I feel because l know each one of you
all personally that you would want The to tell you that's truly is in .niy
heart as a professsional and a friend. tit here primarily as a professional
as ati attorney. I do want to say that 1 would not be here however if it had
not been for Reboso and Plummer report of two years ago that went into the
pension field made it's recotnnendations and I think that resulted in reforms
beginning and I think this is just a very beginning of what those two gentle-
men started. To Ctrs. Gordon who had the courage to after hearing some evidence
was willing to say we say we tight have made a mistake on the plan board acid
We want to reconsider and hear new evidence. 1 say that this is the essence of
statesmanship and government to J.L. PLumtter whc,ni live known since practically
since his birth because we were brought up across the street from each in the
City of Miami. I saw him mature in my own eyes because when I catite to hits and
said I think that the law requires you not to do certain things that you had
been doing for many years at the City of Miami. And I know that J.L. you're
running for election and I know that it may affect other people's pay in the
negotiations. In the simple words where Eddie let the chips fall as they may.
It's not an easy thing to do in politics I know because I spent 10 years in
that arena, so I want to compliment those three Commissioners personally. Ad
a citizen, not as a professional. As a professional representing the system.
I want you if you would to look at me not as a representative of thepolice in
the P.O.P. or the union and International Fire Fighters Association or City of
Miami I want you to look at me as a person representing people who cannot be
here today that is the pensioner, the policemen and firemen who are working on
the job protecting our safety and the widowers who are drawing money from their
husbands who might predeceased them in the line of duty and the children and
dependents that's who I represent. When I speak I want you to know that I
represent those people and the moment that I began to represent you as a City
of Miami or the unions for the city or the firefighters I want you to tell me
that because at that point I must under my duty resign. When Commissioner
Gordon and Commissioner Plummer sit as chairman of their respective retirement
boards and board of trustees, they sit with a hat, not as a city official, not
asan individual, but as a trustee of their particular funds with a fiduciary
duty to the participant and beneficiaries of that trust fund. It's as simple
as that. The law holds a duty of loyalty to those people not to the City of
Miami or to themselves personally. Obviously, Mr. Mayor and Commissioners this
is not an easy concept to accept particularly, when I think the issue when
show that in most municipalities and perhaps in government that this concept
has been cast aside and fortunately I think the Congress of the United States
has passed the pension reform act 1974 and in that act they're sweeping reforms
and by January 1 of 76 they are to make December 31st of 76. They are to make
recommendations on whether or not municipal and government funds will be brought
under this broad protective law. At this point it is not. It's my feeling
professionally that the City of Miami must prepare itself to be at the forefront
of all cities of ,this country not to wait until a law tells you what to do in
the way of your trust fund but to take the ball in advance. To lead as you
always have. I'm very proud of the fact that for example, the firefighters of
the City of Miami are so outstanding that they rank with only two other fire
departments in their class and that they are so outstanding that they are trade
a new class of fire fighter quality just for the City of Miami and then it will
be one and only. This is what I personally would like to see the pension system
become for the police and fire. This is my goal. We are here today on an issue
which is not something that I as an individual sprung on the City of Miami and
for the record Mr. Mayor I would like the Commission to know-- Commissioner
Gibson particularly and Commissioner Reboso and yourself that this presentation
has been given twice in these very same chambers. In fact the first presentation
was three hours to this system board. The second - was about 3' hours to the
plan board. We don't propose to be here that long because your time is precious.
Mr. Plummer; Mr. Gong let me clarify it because that gets the Mayor very upset.
The actual presentation itself only took about 15 minutes. All of the discussion
and questions and answers took the 3 hours, so Mr. Mayor relax.
Mr. Gong; Mr, Mayor and Commissioners I would like for you to know that the
questions that were raised here today have been discussed, the legal questions
have been discussed with Mr, Lloyd and Mr, Weston and also Mr, Silver two days
two weeks ago we spoke about the problems of pension funds in the city. We had
SEP 2 31975
otie teeting for three hours and another mtetitg for four hours and we have had
a cordial and fine professional relationship. True we disagree. Second 1 urart
to say that there is no effort on the part of council to conduct a witch hunt
because 1 have as 1 said no political ambitions, t represent hb party or
candidate and 1 have told Mt. Andrews, who is a trustee along with Mr-, bailey
of the plan that what 1 had to say was not personally and that it was to intent
to paint anyone with any color of shale and Mr, Andrews, 1 think, had the opp-
ortunity to express how he felt and 1 toant to thank hit for that attitude be-
cause bat we're saying-- what tit saying to you is ty philosophy is if tae're
doing something wrong If we -can agree that it's wrong or that it taybe wrong
then we should do something about it, The first ptoble► that we have = we
have three in essence particularly. We have one = the actuarial assutiption and
the actuarial report and what they find it this particular report. One of the
things that 'cotat►issioner nutter is concerned with is the average re'tiretnent
age of the members. they retire at the average age of 53.9 and they serve
their average age is 36.9 we're say 37 andreally the average age is closer to
52, this is a three year floating average but the 1974 average age retirement
was 52,2, Mr. Kruse in this report kruse O'Connor and ring say that if they
follow the 52 age it would cost 600,000 dollars bore but they say that they ate
going to use the age of essential 54. Nov, if the average age of the people in
the fund are 36,9 or 37 years old.
Mayor Ferret Eddie I'm sorry but t've gotta interrupt because I just can't
understand that. You mean to tell me that everybody put together the average
age is'36.9 years at retirement because of disability and if you take the dis-
ability out it goes up to 52, is that what you're saying?
Mr. Gong: I'm saying that the average age of the people that are covered.
Mayor Ferre: Oh ---the average age of the
Mr. Gong: Right. I'm sorry Mr. Mayor.
Mr. Plummer: Mr. Mayor in all fairness and Eddie I'm sorry to interrupt but so
the Mayor can understand. The average age when you include the disabilities is
what about 46, 45, 46?
y��oh
Mr. Gong: I haven't worked that average out..
Mr. Plummer: Ok. But it comes out way below 50. That the average age when
you add that in.
Mayor Ferre: The average age the people retiring from the City of Miami is
below 50, is that what you're saying?
Mr. Plummer: In Police and Fire with the disability.
Mr. Gong: Ok if you subtract the average age of retirement at 54. The average
age of the people now in the fund let's say 37. You have 17 years , you have
-- a majority of the people you have now will be retired. The extension of the
35-year funding as Mr. Plummer pointed out extends you from the present which
is present loss 20-years 1965 to 1985 and they want to extend it as we under-
stand and we just found this out the other day from 1975 to 35-years which is
a lot different than starting from the period of 1965, so you have a difference,
a tremendous difference because in one case you're extending it. It just seems
like you're only going 15 years but you're going 25 years that's the point that
was brought out. There are many other questions in this report and I, think
that's of judgment of policy for the Commission to make so that I will move
quickly Mr. Mayor to the first legal point and then the second legal point which
is the final point. The first legal point has to do with the question of
whether or not the procedure requirements under the ordinances of the City of
Miami were met in determining of what system you should use to meet your contr-
ibution in fact whether or the 35-year funding was in fact justifiable. In
order to consider that I would like to ask Mr. Stokes if he would pass out to
each member of the Commission a two memorandum which are relevant,
Incidentally, all of these memorandums were passed out at previous meetings
so that what you have others have received, All the members of the boards and
trustees have received these copies. Mr, Mayor and Commissioners the first
letter that you should have in hand is a memorandum to Mr. Andrews from Mr,
Silver who represents the system and the plan board (Retirement Board). it
should have attachment to it a legal opinion by Mr, Lloyd dated June 6, 1974'
If you will take a moment to read this it will be very helpful to the remainder
of other presentations the fact you will really have to read it in order to
understand what follows, The background of this memorandum was written at the
request of the system Retirement Board was written to Mr, Andrews and it
SEP 2a 1975
requested that the city ordinances of Miami reflect the responsibilities of
the board it a mandatory fashion. The most essential part of the letter of
,tune.. memorandum of June 17th is on page 24 Section (414 408) t (2) where it
says Regular Contributions by City= paragraph (c) is one Of the key paragraphs,
disregard the first page and pick up at this particular point (2'(c)) it says
the regular annual contribution by the city shall be determined annually by
actuarial valuations and on the basis of regular interest, mortality and such
other tables and assumptions as ate adopted by the board. The word "shall" is
the key word because under your code Section 1-2, Rules of construction under
code the word "shall' is tattdatory and the words may having been missing, so
the position of the board is that this is a mandatory requirement. The follow-
ing page under 3. (6) a.- the emphasis is underlined the,; board_shali._fi e with
the City Matiager its certification of the attount of the appropriation necessary
to pay theriOttu 13:and accrued liability contributions to the trustees,. �.
to the both funds. None of these have been met. And finally, on page
4, the attorney for the board who works for the City Attorney's office says it
is believed by the board, not by hirnseif, but by the board that this procedure
is tot currently being followed and that independent action without advice from
the board is being taken. The board requests -- now this is very important ---
The board requests through Mr. Silver that they be furnished with all necessary
information in order to fulfill their responsibiities. This is an official
request on the part of the Retirement Board of the System. Nov, Mr. Silver
says I close for your convenience a legal opinion rendered by the City Attorney
on June 6th 1974 with regard to certification of contribution returns by the
Retirement Board. Turn to that which is attached as an opinion from Mr. Lloyd,
City Attorney to Mr. Passer, Secretary to the Retirement Board at that time
and dated June 6th,74. The legal question raised for answer by the City Attorney
is the following question. DOES THE RETIREMENT BOARD OF THE CITY OF MIAMI
HAVE THE POWER TO DETERMINE CONTRIBUTION RATES TO BE PAID BY THE CITY AND ITS
EMPLOYEES? Mr. Lloyd answers in the negative. With due respect to John Lloyd
whom I know and'I have highest opinion of him professional I trust respectfully
disagree with this opinion. As I read the general law because of - and for this
reason there are no statues or say ordinances cited to this opinion only essentially
McQuillen, he cites certain ---does cite certain ordinances, but they're not the
ones which I had referred your attention to in Mr. Silver's letter. Because
these in my opinion govern. And when you have a governing ordinance or statue
an Attorney General's opinion is helpful perhaps but it is not decisive. If you
have a basic ordinance or law you must go to what the law is existing.
Mayor Ferre: Let me interrupt you a moment Mr. Gong to say that I've served
on the City of Miami Commission now for over 5-years as a Commissioner and as
acting Mayor and as an elected and I do not recall once, not one time where this
Commission has ever taken a position contrary to the City Attorney's ruling on
a legal matter now, it could happen for the first time but the very purpose for
our having a City Attorney is precisely for him to in-terpret to ttzis elected
body what the law of the land is including our own law which is the charter of
regulations and our state laws and ---now as it happens we have had attorneys
on this Commission. Irwin Christie was an attorney, but at this point we don't
have any of the five of us who are lawyers, so all the more reason why we are
dependent upon the legal advice and guidance of our City Attorney and our legal
staff. I've always been a proponent and a strong advocate and a strong adversary
to the premise that the City of Miami should not have a law department and that
the City of Miami should merge this law department -say with Metro or to hire
out to the very same reason we must have independent guidance just as you
represent the people that you described, the City must have someone who legally
looks out for the best interest of the City of Miami and the citizens that this
Commission represents. So with all due respects to you I must express my per-
sonal opinion that I certainly must be guided by the opinion of the City of
Miami attorney in this matter and I recognize that you might have a discrepancy
and a difference. We've had that situation many tithes before. I don't have
to say because like you I have great confidence in John Lloyd and I'm sure he
realizes the seriousness of the matter and I'm sure he's dealt with this very,
very carefully. I just wanted to say this.
Mr. Gong; Thank you very much Mr. Mayor. I think that's a very important
comment you made. I think certainly that Commission and the Mayor has insulated
from any personal liability by a legal opinion but that does not necessarily
mean it's correct in the final analysis. We're looking for the correctness in
the final analysis. I might say Mr, Mayor and Commissioners that one of the
problems that is fundamental in this and I'm glad Mr, Mayor you brought it up
and the reason that you pointed out why you need independent counsel, The real
jest of this whole matter is that there is a contribution to be made annually
by the City of Miami, Now, the philosophical and political question is how
much is that going to be and who is goingto determine how much? And what I'm
S P 231975
trying to say Mr Mayor, it when you haste a City Attorney who represents the
City and the City is like the vary _ going to 'take the contribution and the
City Attorney says bey the employer makes that decision, the tity, and not a
separate independent trust fund. t think you have a bash conflict prober,
l didn't matt to get into that but Mr. Mayor you very steodly, t think that
is the reason why you would like to haste independent counsel perhaps philos-
ophy l don't know, but that is a real problem ruching throughout the whole
matters that we are discussing. Ism glad that you brought that out.
Mayor Terre: lddie, since I don't want to get into too long of a discussion
on this, but l think this is worded in an important cross section here. You
see we're elected not to pratett the rights of employees or of a Commission
or a' City Attorney. We're elected tot by the employees. We're elected by
cititetis who ate the taxpayers so our obligation, the five of us -our
primary obligation is not for the pension board or to the employees or to
the Manager or to the City Attorney. Our primary obligation is to the citizens
who elect us. We are their representatives just like you are the representatives
of the employee pension board, you represent their. %4e represent the taxpayers.
Now we as a board that sits here in judgment have got to be concerned as to
how taxpayers Monies are going to be used and how taxpayers --now we have to be
just. We want what's right to be done. We t4ant justice to be done. We've got
to be guided by the law. The law has to be interrupted for us by that person
who's capable of doing that. It's our City Attorney that's what we pay him for.
He is an employee of the people of the City of Miami through the Commission
who appoints him. He is our instrument. He is therefore the instrument of
the people. Now, he represents the people of Miami through us in the way our
system works. Now, the determination of the expenditure of taxpayers money
in my opinion . I'm not a lawyer I'm just talking about the philosophy of a
government official must remain in the hands of the people and it can't be any
where else. In the hands of the people of the elected officials.
Mr. Gong: Thank you Mr. Mayor. Do I have rebuttal for a minute.
Mayor Ferre: No, I'll tell you I'm a rebuttal but I'm almost embarrassed be-
cause I don't know of t yabody in the State of Florida who is a more keen observer
student of government ddie Gong. Without any question I had the privilege
and the honor of serving with him in Tallahassee and I say this and I don't
think anybody could take offense at it. There wasn't anybody that served in
Tallahassee with me that was more knowledgable of the democratic principles of
the law than Eddie Gong so I'm embarrassed and this comment is not for you
Mr. Gong but for the record.
Mr. Gong: Thank you Mr. Mayor. Those were stormy days in the early part of
your career I recall them with strong I won't say - sentimentality I guess is
a good word. Ok, Mr. Mayor and Commissioners I'm not necessarily saying per-
haps that the boards have to for argument purposes have to make this determin-
ation but I think we would all except that the board should have some input
and some say and what I want to demonstrate to you today is that the boards
had no input whatsoever into this valuation or into this contribution now.
If I buy your argument Mr. Mayor and say ok we don't the city father's determine
and I say fine I'll agree but we at least get a chance to look at it and say
something.
Mayor Ferre: I agree. I totally subscribe to that and that what you're talk-
ing about is due process and that's exactly ...
Mr. Gong: That's right. Fairness I'm talking about.
Mayor Ferre: Or the fair process of the participation of those that are
involved and with that I completely agree with you. And if it wasn't done
then it was wrong and I would subscribe to that.
Mr, Gong: Ok Mr. Mayor and Commissioners you would then look at the letter of
June 26th 1975, this is a letter to Mr. Ling- his company- Kruse,0'Connor and
Ling submitted 1975 the valuation upon which your contribution is based. If
you'll take a moment to read the letter it speaks more strongly for itself,
As you recall this is a letter in which Mr, Plummer and Mrs, Gordon never
received at. the September 2nd meeting you'll recall that they said they never
received as Mr. Neagle, the secretary for both boards said he had not received
although there's an indication that it was received by both chairman, Ok Mr,
Mayor as you will see this letter is a letter of a harassed public official
tremendous problem of balancing the budget, In this letter he writes to the
actuary who is supposed to make an independent calculation of what the contri-
butions should be the fiscal 75-76, In the letter Mr. Andrews, in the last
paragraph says - he says, I recognize that your primary concern and responsib=
SEP 2219
Who has a
ility is to supply the City with an actuarially acceptable funding plain;
however, you should be aware that the City will be faced With a Bost
difficult task, based on financial information available at this time, it
the City 1975-76 pension funding contribution ex Beds a range of
$8400.000 to $842505000. Weil, the recottttiendativn Mt,. Mayor and Commissioners
for this year is $15O over the lowest amount stated in this letter. Now, 1
do not attribute told Mr. Andrews that 1 understand that he is under a
press because the records reflects that trot until Jute the 27th that he gets
this tillage from Metro. 8o he did not know what tillage he needed to bring
it up to the 74 level but 1 riust for the record acid to advise you that it
this report there ate three references to the fact that we were requested and
1 don't think Mr. Andrews requested what the actuary said they requested on
page 3. It's on page 3,4, and 8 if you have your system book. And if your
permission 1 would like to read `- maybe we could have it copied. 1 think
Mrs. Gordon is aware of this but softie of you have not have a chance to hear
this should see this. On page 3, the second paragraph, because of the sharp
increase in cost by salary increases and other factors as mentioned above and
due to the nature of the economic situation faced by virtually all municipalities
these are the key words specific information has been requested with regard to
the possibility of lengthing the period of funding. Discussion of this flatter
as well as an alternate contribution requirements under 30 and 35 year funding
had been included in this report and it goes further. It tells you how to
handle your business as an adoption of this alternate funding standard would
require an ordinance change. ok. Now I defy anyone that say that Mr. Andrews
ever asked this man these actuaries for any 30 or 35 year funding. On page
4 of this report -I'm sorry it's page 8. If you'll turn to page 8 I have a
whole chapter dedicated to the alternate city contribution requirements under
30 and 35 year funding. The first sentence is key it has been requested that
the city contribution requirements be determined on the basis of 30 and 35
year funding of the unfunded accrued liability which is 145 million dollars
this system in a deficit actuarially. There is cne other page which - those
are the two main pages and what I'm suggesting to the Commission Mr. Mayor and
Commissioners is if he did request that 35-year funding directly it was wrong
because the only thing these people are supposed to do is say to keep your
system and plan financially solven`tpu need to ccntribute x-number of dollars
ok, to keep it financially sound. If he didn't ask it and they volunteered it
themselves they are playing the policy makers. They don't recommend it but it
gets pretty close, what is reasonably and what they recommend. And I think
Mr. Mayor you went into that with Mr. Kruse. You said these people want to
make double sure that what you say is right. Now, Commissioners- Mr. Mayor
and Commissioners the plan -- neither the plan nor the system have had any
input into this vital document. They've never ieenit until August. It went
to the City Manager's office first and Finance Director but neither board ever
got a copy of this. In fact Mr. Plummer had only a few days to read as of
September 2nd, so the record is clear. I'm not suggesting that there's any
hanky-panky here and all I know is that there is a letter and a report and they
come out within 160 dollars of the low side of what the city manager needs to
meet his budget according to his letter. Ok. that is the key problem I believe
that there is in a question of the procedural due process not been --- the fact
it's been violated either inadvertently or intentionally. I would hope it was
inadvertently. Not intentionally, but let me say Mr. Mayor and Commissioners
for the record if it is intentionally then I think that is a very serious ----
it's a very serious acts of the people who may or may not be involved that's
my personal opinion. I'm not threating anybody but I'm talking about a very
serious matter here. At the time of our meeting we didn't even know when the
35-year funding would begin Mr. Mayor and Commissioners when you asked about
this question on September 2nd no one knew what it could be because there's
several possibilities. It turns out that the 35-year begins in 1975 and the
statue for the 20-year funding was 1965-1985. They started in 75, they didn't
start in 65, so what we're doing is we're going to go ahead another 25 years
not the difference between 20 and 35, 15 years we're going 25-years which is
250% further rather than 75%. It's a huge leap into the unknown future. We
were advised by Commissioner Plummer and by the City Manager that the 35-year
period would start in this year. Now, I've seen the City Manager has probably
inadvertently not brought the chart that shows that was passed was sitting up
on the easel during the last meeting. I would like to have - is it here --
can we put it up?
Mayor Ferre; Eddie, I'll tell you for the - in the interest of the public
so that we can yea that's what I want to get into - I want to get into the
numbers so that we understand what the impact we're talking an awful lot
of philosophy and in a little while I want to see if I can synthesize so that
everybody can understand what we're really talking about,
SEP 23197
Mr. Ootigt Mt. Mayor.* your reaction is normal and t Waft you tO totgiVe the for
putting you through this but t think that it you/11 bear with us.
Mayor l'errat Wellt watt tti bear With you,
Mr, gong: 1 think that you'll appreciate to have this backgrOUnd.
Mayor Verret SOMeWhere along the line it the next five or tet ultutts Paul,
What 1 Watt tb do I Want to see if t dab gritheaitt ec that the public & all
of us can understand it simple terms what the money perimeters are involved and
what it is that we're talking about, Atd why it's such at important decision
at this point. Go ahead,
Mr. Gorigt Now, you have a chart up here Mr. Mayor if you'll see left hand
corner at the top 1975/76 the contribution which the City Manager has in his
budget to ask you for his contribution is $8,100,160.00 ok, now the Andrews
letter of June 26th the last paragraph he says if you can't cote up with a
funding contribution -.-if you come up with a funding contribution exceeding
ehe range of 8,1 million to 8million and 3/4 we're going to have a heck of a
hard time in the City of Miami so the figure that the actuaries reached is
that figure. They went 160 dollars over the lowest figure that the Andrews
letter requested. Ok, If you're look at the bottom --I'm sorry the top middle
page the loss on the sale of assets it was a 19 million dollars loss Mr. Mayor
and Commissioners on the sale of assets at the last fiscal year. 19 million
dollars and they want to carry that over a 10 year funding basis. Ok, that
picture is not complete look at Assets -12/31/74 you see 78 million on the left
that's what the assets were worth then. But the actuary is carrying them at
97 million, ok. So you have a the difference there being carried over a 10
year funding and then you drop down to the middle, the thing that we're talking
about the unfunded accrued past service liability -145 million dollars. That's
if you followed the funding that you are supposed to under the existing law
you would move over to the box at the bottom right. Summary of results, city
requirements and under the 20-year funding which you're under now you should
contribute $10,957,936.00, ok. City Manager says you have a short fall of
-- the difference at the bottom-- $2,857,776, so if we go to 35-year funding
gentlemen we could make this short fall, so we end up with the $8,100,160.00
this may be co -incidence or it may not be but the figures workout within 160.00
dollars of the low side of the Andrews letter. Now, and you're asking your-
self what difference does it make this is what I want to go into at this point.
The second legal point other than procedural due process is what the city is
entitled under law to use under the four mill levy. If you will bear with me
I would like to pass out --- wait a minute I'm sorry I forgot my script. The
first thing we want to do is have the (a) part and (b) part. The (a) part is
a presentation by Haskin & Sells - Mr. L. Stokes. A very short presentation
it shows you where the money comes from, how it's spent and he will pass out,
I will pass out a chart and he will put it on this particular slide so you can
see it. If we could have the lights cut down Mr. Mayor we could ---
Mr. Stokes: We were engaged originally by the trustees of the system to help
him sort out their requirements as trustees and help them understand the
accounting matters involved in their duties and we started out our presentation
to the trustees the other day by giving them a very simple example of how
pension plans worked. When you boil pension plans down to their very simplest
elements they involvetwevery fundamental mathematical concepts. The first of
these concepts is what we're going to pay the man after he retires and that
is essential involves the use of the annuity principles and the related finan-
cial tables. In our very simple example of a pension plan we talked about an
employee who will be paid a benefit of $10,000 a year on retirement and we know
that he will live 10 years. We don't need the whole $100,000 on the day he
retires though in order to fund his pension because we'll pay that pension out
to him over a period of 10 years. If you'll look at the first line you'll see
that, that $10,000 - the $10,000 that we'll pay him in the first year we must
in fact have on hand at the time of retirement, However, as to the $10,000
that we'll pay to him during the second year we don't need to have the whole
$10,000 when he retires because we'll have those assets to earn income during
the period until we're getting ready to pay it out, so we'll earn some income
on that and actually instead of needing $10,000 we only need $9,620 to fund
the second year's payment. The number that we need to fund any given year's
payment decreases the longer from the period of his retirement to the time of
payment so that in the overall rather than needing $100,000 to fund this
particular pension on the date of retirement we actually only
need $84,000. That talks about the queStion of what we're going to pay out
and the second of our slides deals with the question of where we're going to
get the money to pay out and that involves the second of the mathematical
concepts involved in our very simple pension plan and that is the sinking fund.
SEP 2 3 19710
The ttinkitig fund basically tells us by looking at the sinklttg fund tables hots
much we tteed to put away each year so that at the tittle this Hiatt retires at the
end of his 30 years of service will have that $84,000 that we need to fund his
pension plan, you'll see that we've computed a level eontribution of $14500
a year. We only teed to t otttribute $1000 a year because at you'll see if you
look at the first iitte we Contribute $1,500 durittg the first year of the enipl..
oyee's active service with us aftd dtiriftg the 0 years from the day we contributed
it until the day he retires that contribution accumulates $04364 in earnings so
that for the original $1500 that we tontributed to the retireiettt trust there's
a total of $4,864 vailable at the time the mat retires in order to fund the
$84,000 that we need to give hits the appropriate pension. We've only reproduced
5 years of this table because it followsthe same prittciple throughout. Each
year we contribute another $1,500 dollars and that earns a lesser atttount of
income because we have it oft deposit in the trust fund for a shorter period of
time. Now, I started out this little presetitatiott by saying that this was the
worlds simplest pension plate because we only have one employee we know he's
never going to quit. We know he's not going to die before he gets eligible for
retirement, we know exactly how long he's going to live once he retires and
we know what his benefit is going to be, unfortunately, it the teal world in
dealing with pension plans especially one as large in complex as yours we don't
have the benefit of knowing all these things for sure, at least the actuaries,
because it's the actuaries that normally deal with the computation of the
contribution not myself. I trade this example very simple because I didn't want
to give you an example I couldn't explain myself. The actuarial assumptions that
go into this computation are what helps in the teal world, help the actuaries
determine what the annual level of contribution is in order to appropriately
fund the plan. In a letter that may not have been distributed to you yet, one
of the trustees of the system asked Wyatt & Company,which is a group of a nat-
ion actuarial firm to look at the assumption based on very limited data given
to them that were used in computing the contribution to your plan and the act-
uaries in that a letter to Captain Jaremko in March criticize those assummptions
as not being appropriately conservative by conservative what they had in mind
was the fact that if we don't make the right assumption or appropriate assumptions
about how the real world is going to be we could contribute our $1,500 hundred
dollars a year and still not have enough money to fund this man's pension when
he retires because the benefit has gotten larger or we didn't earn as much
money as we thought we were going to earn. WE were originally encraaed to help the
trustees understand the accounting for their plan and one of the things we
found when we started looking at that accounting is that one of the reasons
they were having a hard time understanding where everything was, was that the
financial statements given to them because of the structual, the fact that trust
funds are separate entities and separate apart from the city don't really cont-
ain quite all the numbers that you need to understand just exactly where the
money comes from and where it goes. The reason for that is that the money that
the city uses to fund it's contribution to the pension plan comes from the
special four (4) mill levy fund and only the actual contributions to the pension
trust show up in the financial statements normally given to the trustees. The
right now in the screen and the third page of my handout to you is
a a shows how the money in the four(4) mill levy fund is collected
and where it goes. You'll see that in the current fiscal year of the city, the
year to begin October lst, the management of the city has projected that
$11,352 will be collected in the (4) mill special levy fund, that represents an
actual millage of about 3.32 mills. All these numbers are of course based on
the budget book issued by the City Management earlier in the year. One mill
for purposes of reference was projected at that time to yield $3,000,417. You'll
see that we've taken this $11,000,000 and broken it down into three components
One of the major components or perhaps the major component is the actual contri-
bution to the plans themselves. Of the $11,000,000 raised almost $8,000,000
will be contributed to the pension trust, both the plan and the system. Now
this number does not tie into the number on the board because presumably the
city worked up it's budget numbers before the actuarial survey was actually
available. You'll see however that there are other two major elements of the
$11,000,000 expended by the city, The first of these is the expenses that the
city reimburses itself or the amounts that the city reimburses itself for expenses
incurred in the operation of the pension plans because the city as part of its
accounting functions takes care of all the administration of both of the system
and the plan. The city has paid itself $76,000 for personnel cost. A $62,000
fee has been paid to the Finance Department. $22,000 to the Legal Department
and approximately $10,000 for Xerox, so the total expenses reimbursed to the
city amounts to $171,000. You'll' see that the other major category of expenses
paid out of the $11,000,000 are what we have labored here as third party charges,
the two largest of these are the 11 trillion dollars paid for social security,
this represents the city's portion of the federal social security tax, the
10
SEP 2 31975
F
employer's portion if you will, The other major dispersment out of the
$11,000,000 is another million and a half dollars paid for various group
1nsurattee programs of the city. The last major item is approximately 015,000
paid "out in the form of money management fees and "custodial fees to the bank
safeguarding the pian's assets, The other Items are relative small it cotpat*
ison to those threes They are about $17,000 paid to the actuaries. $15,000
paid for various medical items, these presumably being medical expenses
Incurred iti cothectton with determining disability retirements. The last
itett is about $14,000 of m sceii:atteous dispersnent, If you'i.i add up the
three categories of expense you'll find that it doesn't crate back to the total
$11,552,999 it's about $1,000 off and presumably that arrises out of a typogrsph.,
ical error in the budget if you'll look back at our flow chart there, let's
try our attention now to the two other major sources of futdLng of the pension
trust. 1n other words the two other places we can look to -to get the
$841000 that we need to fund Tension on retirement, the $84,000 in our example.
The pension plan in our example was a non-contributory plan. in other words,
no part of the amounts to fund the pension contribution rage from the employee
in question. It was done that way in order to keep it simple. In the case of
your plan however, the members of the system contributed :a substantial percent.'
age of their salary each year to the plan in order to help fund their pensions
upon retirement. The other major source of income to the pension trust with
which to fund it's ult fte liabilities is the investment income on it's invest-
meat portfolio. That folio is held by a bank as custodian & is managed by three
money management firms. Having talked about where all the money comes from that
goes into the pension trust, let's talk for a moment about where the money goes.
One of the main things of --or about the only thing that the pension trust spends
its money for is benefits. In addition to paying out substantial benefits, the
pension trust has to make refunds to those people that terminate what their
service with the city prior to retirement and are entitled to a refund of their
contributions. Prior to February of this year our refund was also made to persons
who suffered disability retirement in the total amount of the contributions made
to them. After paying refunds and benefits any remaining funds that the pension
trust has left over from its monthly income from the employees and from the city
and from its investment income is re -invested in the investment portfolio to
earn future funds with which to pay pensions. If you'll direct your attention to
the lower right hand side of the diagram you'll see that we've divided benefits
into two separate categories what we call regular pension benefits and what we
call disability pension benefits. The regular benefits are very easy to explain
because in the case of a regular benefit all you do is you figure out what the
man's entitled to under the terms of the city's pension plans and that amount is
paid directly to him. In the case of disability retirement pensions that's a
little bit different because under the terms of the city's plans, the city is
entitled to offset it's pension liability to those who retire on a disability
basis against the amounts it is otherwise required to pay to them because of
workmen'scompensation claims for the same injury. There has however been a
change in the handling of this since the inception of the plan. To give an
example of the amounts involved let's assume that a pensioner would normally
be entitled to a pension of $1,000 a month. Under the workmen's compensation
status however, he's entitled to recover $300.00 a month from the workmen's
compensation insurer in this case the city because it is self insurerfor
workmen compensation purposes. What happens then is that the pensioner gets
a check for $300.00 from the City of Miami from the Workmen's Compensation Funds
and a check from the Pension Plan for $700.00 that has remained constant through-
out time. However, there was in beginning with January of 1973 a rather fund-
amental change in what happened to the other $300.00. Up until January 1st of
1973, that $300.00 just remained in the pension trust and therq_hy gave the
city a benefit by virtue of reducing the future contributions the city would
be required to make under its pension plan. The city's contributions at any
one time of course being a function of the short fall left over after consider-
ing the assets currently in the plan projected employee contributions and pro-
jected earning on the fund, From January of 1973 forward however a different
treatment of this 300.00 was made and in that case from January forward this
$300.00 is rebolk to the city. In other words, the general #ustt for the
workmen's compensation funds are repaid for the amounts that are dispersed in
the case of disability retirements. We're still trying to determine the docu-
ment thatC4ustaL this fundamental change in the treatment of the $300,00. We
presumed since this represents an overall fundamental, economic change in the
treatment of the assets to the plan that there is a city attorney's memorandum
or some other document that set forth the chance. The last two slides that we
have and they're last - ----- handouts or informational primarily, you'll have
to forgive the quality of this particular slide, because it was made from a
very tired Xerox copy presumabir he handouts are much easier to read. What
this handout represent is a financial statement for the (4) mill special levy
fund for pensions, and if you compare the numbers at the bottom of page 2, you
SEP 231975 i
will find that those ti4ack into the tity's audited financial statement for
the years in question. There is of course no financial statement available
for the four frill special leafy fund for the 7445 year of the city because that
year in net yet toritplete. The last slide that we have for you is a reproduction
of a page out of the audited financial statements for the trust funds prepared
by Tottthe ions and is presented to you merely to show the item that we talked
about as regards the workmen's compensation offsets in its remittance to the
City of (Miami. The workmen's compensation offset is this item here where its
withheld from the pension amounts paid to the beneficiaries, That amount is
shown as a receipt because the full pension - the $1,000 in our example is
included in this atnouttt pension's paid. The diapers -tent to the city is shown
again down at the bottom of the slide and down at the bottom of the handout as
workmen's compensation, The difference between these two numbers .arises out
of the fact of the tithing of the withholding from the pension beneficiaries and
the payment to the city and that $4,000 difference resolves itself in the period
before and in the period after this slide in questioned. In the absence of any
questions that terminates my ----
Mayor Ferrel All right, can we have the lights back on again? Mr. Gong, since
I made a statement in the record before I want to modify it a little bit because
I was wrong and before you correct me, in that we're dealing-
Mr. Gong: That's all right, Mr. Mayor.
Mayor Ferret In that we're dealing not only with the taxpayers fundsbut we're
also dealing with employees funds and these funds that the employees themselves
put in for their own pension, so there's absolutely no question that the right
decision is that not only of the taxpayers involved but of course because this
is their own funds that they're putting in and they also have a right for due
process and for verification of information as you recall I made a statement
to Mr. Kruse last time and it was a question that I didn't want to offend him
but I put the example that if I went to a doctor and he told me that I had some
kind of skin cancer I would want to go to another doctor and verify that that
was true before he cuts me open, so I think that there's no question that we
represent the taxpayers here but they're also employee funds and therefore they
have equal right to the same type of consideration and representation so let
me stand corrected on that.
Mr. Gong: Thank you very much Mr. Mayor. I think that the eminent widson of
the city has provided for these safeguards and that's the point that we've been
pressingJtrying to show. Excuse me. Now, we get Mr. Mayor and Commissioners
to the question, the legal questions presented under the city's authority under
the (4) mill special levy tax fund to use this tax fund in the manner of which
its proposed to be used 10 the coming year it has been used for many years past.
That use, my opinion, the opinion I expressed to the retirement board of trustees
system, retirement system, is that this is an improper -- they they have a improper
applications money which should be exclusively used for pension and I would like
to address myself to that at this time. You saw from the handout that Mr. Stokes
of Haskin & Sells passed out on the flow chart of where the money came from and
where it was spent. I you could turn to that, that wou]d be helpful because we
.are going to be talking about those expenditures and Mr. Stokes if you would pass
these out-- Mr. Mayor, Commissioners, the things that I want to direct this
specific attention to and there are other matters but these are the main ones.
On the flow chart that Mr. Stokes gave out , you will look at social security -
$1,550,000, group insurance- $1,456,000, that totals to $3,000,000 that does not
include the proposed for coming fiscal year approximately $200,000 on this
workmen's offset, so we're talking about 3.2 million dollars that are being
expended out of the (4) mill special levy fund. Now, the question arises as
I said earlier, is that a proper use of the funds? As a lawyer or as a city
commissioner you would first to determine that question have to look at your
charter, so we turn to charter and we find it on page 178, section 89, subject
pension funds. I would like to pass a copy of that out. Mr. Mayor and Commissioners
if you'll look at the copy that was passed out section 89 says Pension Funds.
Under section (a). I want to give you a little bit of a legislative history of
where we are at this point, When you look in this code as I said you look to
page 178, that's the only thing you have on the (4) mill fund with the exception
of the appendix which is a second handout that you're received, It says
appendix 2, city employee's pension and if you want to look in this book to
determine what the law is)gentlemen and lady/ you cannot find it because the law
that governs this particular right of the city to use these monies under this
flow chart are determined by law which you cannot find in the city code boob,
Now, this is one of the problems that we have in pensions in the city of miami
to find out what the law is and I've been practicing law for some 15 years. To
find out anything about pensions you have to look at this book, you have to look
12
SEP 2 3 1975
in this book, you have to look in this book, and you have to look in this book
and then a thick set of ordinances that go back to 1931 to understand what the
rights of the city are and what the rights of the pension boards are. Now,
what I'm showing you is the result of many hours of trying t•o find out what
the answer is and I was accused by one of my trustees of being kind of a legal
Charlie Chann because I kept asking questions trying to find out where it was.
I cart tell you when t went to see Mt. Plummer I finally found it and I was quite
moved by what I found so I said I had to see him, he did give me some time to
see him, so Mr. Mayor and Commissioners as I said we cannot find the answer in
volume 1 and I'm going to tell you why. Section 89- Pension wads (a) was the
first time the pensions were mentioned in the city charter and you'll note I
wrote chapter 10847 May '9, 1925, that's the granddaddy of that particular section
(a), ok? In 1927 (b) of this handout was passed by the state legislature, about
almost two years to the day that was added and that deals with pension annuities
some type of group insurance, ok? In 1937, was the first time that you got
tillage, but if you'll look at the second handout I passed to you. It says that
particular statue was amended in 37 and that this appendix II is the 47th act.
Well a 47 act only did one thing it raised the tillage from 2 to 4 and that's
all that did and that appendix is incomplete because it's a section (b) and a
section(c) so I'm going to give you now that missing link which was passed in
1937 which you cannot find in any of your code books like --
Mayor Ferre: This is current state law?
Mr. Gong: yea, this is your current state law, all you change in one number
from 2 to 4 and this is the thing you have to read to see what you can do legally.
Mayor Ferre: Boy, you really done your homework here Edddie , you're going to
make us do a lot a work now, uh?
Mr. Plummert Plus we had to pay for a trip to Tallahassee, that's where the
real answers were.
Mr. Gong: Well, I did tell you Mr. Plummer I'm not going to charge you for that.
Mr. Plummer: That's on the record Mr. Gong.
Mr. Gong: Had a reunion up there. Ok, does everybody have a copy of the 37 act.
If you will turn to the second page under section 1, the third from the bottom
line and change 2 mills to 4 mills that's the only thing that the 47 act did.
It just changed 2 mills to 4 mills.
Mayor Ferre: Eddie these are all -as I understand these are all special acts
that were passed especially for the City of Miami.
Mr. Gong: That's correct.
Mayor Ferre: Which of course we couldn't do today, but it's still --these are
acts that were passed and are binding upon the City of Miami as ---
Mr. Gong: That's correct. Now, Mr. Mayor and Commissioners I must say again
to you that Mr, Lloyd and Mr. Weston, and Mr. Silver and I have discussed this
two weeks ago. I asked Mr. Lloyd and Mr. Weston, Mr. Silver if they had any
ordinances or legal opinion that said the city could use 4 mill money for group
insurance, workmen's comp. offset, and social security, to this date they have
not come up with one because I don't believe there is one. I also reported to
the board that Mr. Weston, who's here today expressed to me - said to me at
our first meeting, he said you know, I didn't know until you just told me ten
seconds ago, it was just before that, that social security comes out of the
4 mill fund and I think that that is important to note for the record. Now,
we read section 1. It says that the Commission of the City of Miami, a municipal
corporation organized and existing under the laws of the State of Florida and
these are the key words which you should underline shall establish a fund or
funds for the relief of pensions of persons in the classified and unclassified
services of said city. Ok, shall, which is mandatory, establish a fund or funds
and we have two funds for the relief or pension of persons in the classified
and unclassified services of said city, ok, and continues-- the city may receive
gifts, devises and bequests of money or property for the benefit of such fund
or funds may make contributions of public moneys thereon on such terms and
conditions as it may see fit and shall make rules and regulations for the manage-
ment investment and administration of said such fund or funds and shall have the
right to raise - this is -you want to underline this too -and shall have the
right to raise by taxation such amount as maybe necessary for such purposes not
to exceed and it was originally in 37/2 , It should read now 4 mills on the
13
SEP 2 31975
dollar of the assessed value of all property in said city, both real or person 1,
alk, tit sorry.
Mayor Ferret Well, go ahead t111 ask the question later on.
Mr. Gong: It's to position and the board relying on the opinion of counsel is
that this section 1 is a sacred section. It is a contract between (in no opinion)
the State of Vlorida and the people .of the City of Miami, It is inviolate, It
is sacred for this reason, first the general law of the courts in interpreting
a statue such as this is very simple, No one with ._ ,... anything about munic-
ipal corporation would have disagreed. It is very simple, it says when you read
a status that gives the city the power to tax you trust read it in a very strict
tray. The reason a city does not have the inherent power of taxation. it is not
a political. subdivision, Mr, Mayor 1 feel like I'm lecturing you because you
know this and 1 apologize.
Mayor Terre: yea, I'm wondering,
Mr, Gong: I just want it for the
has no inherent taxing power. It
legislature gives a city a taxing
that authority and if there's any
the use ok.
record that a
can only come
power it must
doubt it must
city,,aa a creature 6f the lens -
from the legislature, Once the i atttia,
stay within the guidelines of
be resolved against the tax or
Mayor Ferre: Now, comes the question if there are other bills that in any way
contradict or countermandthis position, for example, you and I were in the
legislature when the legislature voted to put a 10 mill cap on the taxing ability
of the municipality. As I recall we both voted against that. I don't remember
whether ----
Mr. Gong: For me it's irreverent Mr. Mayor.
Mayor Ferre: Well, I hope for historical purposes wanted to bring that out.
Mr. Gong: 0f a has been.
Mayor Ferre: But the point is that it was passed and the point is that also is
a mandate of the legislature to us the creature of a legislature of the City of
Miami. Now, the question I ask you is , is there a conflict between these two
laws in the State of Florida and is there a contradiction and if there''can we
resolve'tand if there isn't what's our next step, is there a solutions
Mr. Gong: Mr. Mayor, I have my own personal opinion about that. I have not
research'that.I think, as I told the retirement board, that question is not
a question - at the time it was asked -prepared to answer -this is a question
that surely should be within the bosom of the city because the concern is there
in the city.
Mayor Ferre:,,,I think your concern is just as much as mine because it's the
only viablerbecause if on the other hand what you're recommending and well ---
why don't you go ahead and finish .
Mr. Gong: I'd like to finish my recommendations because I think you know what
it is Mr. Mayor. I would like to on that question though Mr. Mayor if you
would like to yield to my colleague in the law Mr. Lloyd to answer that question
perhaps he has a legal opinion to that. I don't. The usurp of my opinion that
the word fund or funds for the relief or pension of persons excludes the use
by the city of 4 mill tax levy funds for social security payments of•$1,550,000
the coming year for group insurance -$1,456,000 for the coming year and an
estimated $200,000 for pension offset which is charged both pension funds. Making
a total of 3.2 million, Now you will see from this chart a short fall on the
20-year to 35-year funding is 2.857 million.
Mayor Ferre: Just happens to be.
Mr, Gong: Yea, just happens to be, Just happens to be if they don't -
with our money Mr. Mayor we'll have 3.2 million and you're even have the
surplus left over for some of that $10,000 of xeroxing which the city has
charged for both of these pension funds in fact I think they should consider
maybe buying a xerox at that sort of rate, Now, Mr, Mayor to conclude because
I think you'all sophisticated, you know the issue here, Our position is we
realize it would cost some problems perhaps in the city, We think that and we're
conscience and aware that you have negotiations for pay raises and money gotta
to come from something, but as I said in the beginning, I said I don't represent
the union, police or fire and they have sent a message to me and my message back
them was if you want your people to represent the unions unions on the
trust fund and they're going to do What you tell them to do and then Mr, Plummer
is going to decide and going to have the very thing that t would cant to avoid
and the law says you cannot do because once you do that Mt. Mayor t watt you
and the cottission to understand I will no longer be able and get guys to serve
the system and as long as you see The here you're going to be able (t hope) asp
sutne that that is hot the case. The word relief as t understand the position
the city attotney's office - the word relief would intomp4ss social security,
group insurance, and workmen's comp. t strongly disagree with that position
the simple reason that tie can look in 1925 it team i t a social security system,
so it could not have referred to that. The word relief deals with health and
welfare issues u ich ate separate types of trust funds as opposed to pensions
funds. ilas nothing to do with relief because if you define the word relief to
include social security payments, workmen's comp. and group insurance then
there is no reason why salaries for employees cannot be under relief and the
city could then come and use it for salaries which I strongly would resist under
the prevailing law. tf you look at the title Mr. Mayor and you werejoastute
reader of titles as t recall in the House of Representatives when you were there
and then taken away by duty to the city. You will find nothing in the title of
the 35 act. Listen to the title.Mr. Mayor,this is something that you and 1
learned by laboring the vineyards of Tallahassee. You'll see nothing in that
tile of the 37 act that says anything about group insurance or anything that
says anything about workmen's comp. Now, section (2) does talk about group
insurance. You read section (2) of the 37 act, take a moment to read it. It
is an enabling act to permit the city to have contracts of insurance, group
insurance and also to have annuities under insurance programs but it ends up by
saying and for any all such purposes may appropriate out of its treasury any
money necessary to pay premiums or charge this incident to the carrying of
such policy or contracts and if they had met that you could take the treasury
and met four mill the legislature in it's infinite wisdom would have said out
of the four mill money because it's in section one ahead of it. But they didn't
say that and under the rules of interpretation we have to assume that that was
left out of the four mill fund because the four mill fund is sacred. Now, Mr.
Mayor as you see from the title and again this is a very legal thing which you
and I are attribute to from our experience. The fact that there is no mention
of group insurance /0 that title means that section (2) is questionable.
Probably unconstitutional and cannot pass because there was no notice to anyone
reading this act that there was group insurance. So there is a serious question
in my mind of whether that can even be read along with this bill. So if we
exercise section (2) then we have only section (3) which says that you have
existing funds and they shall exist until you set up a new fund. I don't want
to labor that point. I don't want to be an advocate to non -lawyers but this is
what I repeated to both t!e sffte.h board and the plan board.Fo sum up Mr. Mayor
very briefly the 35-year funding is unjustified on the basis of lack of money
in the four mill fund. There is a overfall if you will. A 3.2 million over 2.857
so therefore if that is the supposition to go to the 35-year funding. 35-year
funding must fall (2). The mandatory pre requirements of the system
to let them have their input under due process was not met to this day, to this
moment nobody in the city has even argued that point because it is so very clear.
Procedural mandatory due process was not met in establishment of the 35-year
plan. The fact it was not met with respect to what the real contribution should
be for 1975-76 and finally and the crucial one and again I apologize for being
here. I don't know how I got here probably Mr. Plummer is the cause of it.
Mayor Ferre:
I can answer that] throughSheer ability.
Mr. Gong: I don't know about that, I don't know where we're going but the
final point Mr. Mayor is the improper use of the 4 mill special tax fund by
the city. In this proposed budget it's of grave harm to the system and to the
plan. I don't represent the plan but everything I say to the system goes for
the plan and to do that would be something that I think in this day and age
when Mr. Drucker, --I'm sure you read that Mr. Mayor in the Wall Street Journel
he said one of the - - - --of America is that 5% of the people own 90% of
the assets of America, That's not true, Because 60% of the people in this
country Blake between $9,000 with their husbands and wivies, they own 60% of
the pension funds and assets of this country which owns General Motors, Texaco,
and all these great fine companies,
Mayor Ferre; The City of Miami included,
Mr, Gong; And the City of Miami; but the point Mr, Mayor is the main asset,
Mr, Drucker said the main asset of these working' people is not their house, not
their car, not their life insurance, It is their pension, And if they come and
work for you and get paid their pension because they give money to rather than
SEP_23197
pay cotnpttitatiott If they cans t get their petition them I think that we all
Might as we2.i give up beeause wetre going to be in & very bad fix in this city
and this county. Mr. Mayor I would urge the 'G-ottntission an behalf of the systettt
not to go to 35,,year funding, riot take monies out of the 4.tttill fttide for the
expenditures that I've Mentioned and (a) and hopefully wcuid continue as you hate
in the past to give us the itittruntente. The wonderful C.P,A. that we have here
I must say that he did a fantastic 3eb of finding out answets To give us an
actuary, to give us our own administration because thousand &ollari§ for
administration, the taxpayers Money Mr. 'Mayor run up to pension fonds of this
Magnitude to tie I think it an area which you could find great reduction of tuxes
and if you could move your social security and other functions we Will keep the
city, cost accounting system honest, that's what we want. We're tot saying any.'
one was dishonest here. I want that on the record, tut we t li keep it honest
for objectivity sake. As you and I know Mr. Mayor froth the legislature otie of
the greatest critttes that I think is taking monies out of a fund that doesn't
belong there and then blame those people for messing it up. This is what has
happened in the past. I think it should cease and budgeting Mr. Mayor and
Commissioners is an old game in government. but because it's an old game doesn't
mean it's right.
Mr. Plummer: Mr. Mayor, let me for the record and Mr. Gong's edification clarify
one point and then one other point. First of all Mr. Mayor and Mr. Gong, let me
tell you that as you're both well aware I have been deeply involved in this pen-
sion fund for two years and I want the record clear Mr. Gong that last year when
it came time for funding that Mr. Andrews took me in to all of the discussions
that last year one of the alternatives that was discussed only in that meeting
among us was the 35-year funding as well as cutting off all of those pensioners
that are presently there and any new employees start under a new plan so I don't
want any aspersion tasted on Mr. Andrews it had been previously discussed. Nbw
to the Commisison, regardless of what your interpretation of this conversation is
this morning I think that the one paramount idea that must come is that this act
was for pension and I think that what we're looking at is converse rather than
the needs of funding being fully met for pension first and then if any was left
over to pay the group insurance and social security. It has been reversed. We
see in the budget as presented 100% of social security being paid. 100% of group
insurance being paid and then approximately 70,80% of pension being paid and the
remaining 20 to 30% being amortized out over 30, so it's been just reversed and
the final point that I will make and I think the point that was made very strongly
that as our ordinances stand today this budget which has been presented to us is
in fact not a balanced budget. This can only be a balanced budget if this Comm-
ission changes ordinances as it is presented today it is not a balanced budget.
And,'I give that to you for what it's worth but for on the record.
Mayor Ferre: Well it's a very, very serious accusation.
Mr. Plummer: By virtue of the message of Mr. Andrews, he readily admits that
to accomplish this 35-year funding with the figures which are presented there
must be an ordinance change.
Mayor Ferre: All right. I going to try Paul, if it's all right with you. I
want to try in about three minutes try to sensitize by asking a few questions
as to what this is all about because we get off on tangents and thing gets
awfully, awfully confused and even though we all know some of these figures
you get your budget book out and and if we could just answer some just basic
simple questions so that we can see what the impact of what we're talking about
and why this is an important cross section from the city. Right now your
proposed budget is how much?
Mr. Andrews: The total budget or budget for the pension.
Mayor Ferre: The total budget. Absolute total budget.
Mr. Andrews: The total budget is 89 million, 286, 761
Mayor Ferre: Well, just round it off and call it 89 million dollars. All right
if you would tell me now the total 89 million dollars, how much goes to the
general fund?
Mr. Andrews: 60 million, 706,
Mayor Ferre: 61 million dollars, round it off. All right, now that means that
there is 28 trillion dollars that goes somewhere else, Part of it is for debt
service, part of it is for the pension, How :Ruch of it goes to the pension
sytem?
Mr. Andrews; The pensior systeti would require 11 million, that's pension,
aoeial security and intutance, 11 million 352. 11 million.
Mayor Verret 11 Million dollars that's...
It. Plummer Fceuse me Mr. Mayor that if you
Mayor Fette: 1 undetstatd, t understand if was go to 15-years_. Now, what is
being presented here is that if we leave it on a 26=year basis, the difference
is 2 million 857, but we are talking about a difference of 3 milliofi dollars,
is that correct?
Mr. Atidreras: That's correct.
Mayor Ferre: All right, tow what we are discussitg now is 3 million dollars.
Mr. At dtewfis: That's tight.
Mayor Ferre: Al]. right, tows. Hors many people ate served by both the system
and the plat presettly?
Mr. Plummer: You mean recipients or active members?
Mayor Ferre: Well, first the recipients and then the actual members.
Mt. Plummer: 14 hundred and 16.
Mayor Ferre: 14 hundred and 16 recipients at the present time.
Mr. Plummer: Correct.
Mayor Ferre: How many active members?
Mr. Plummer: 36 hundred and -- I'm sorry Mr.Mayor, it's 1416 recipients.
Mayor Ferre: 1476 .
Mr. Plummer: 1476 recipients.
Mr. Andrews: According to the actuaries.
Mayor Ferre: And how many members do we have now?
Mr. Plummer: Approximately 37 hundred. .
Mr. Andrews: I'd say 36 hundred.
Mayor Ferre: 36 hundred members. How many citizens are there in the City of
Miami?
Mr. Andrews: 360 thousand.
Mayor Ferre: And how much do they pay to the City of Miami in taxes?
Mr. Andrews The total taxes would be approximately 39 million dollars.
Mr. Plummer: Is that from ad valorem?
Mayor Ferre: Yes from ad valorem.
Mr. Andrews: 37.5,
Mayor Ferre; Well, let's call it 38 million dollars, So on the taxes that
are paid for by the people of Miami is 38 million dollars out of a total pro-
posed budget of 89 million, All right, now how about 38 million in taxes,
How much of it actually goes into the 11 million dollars of pensions?
Mr. Andrews Well, all of that would be --no excuse me Mr, Mayor, about - the
total tax requirement would be 11 million 170 thousand dollars, 11 million.
Mayor Ferre: 11 million. So, out of the 38 million dollars, 11 million dollars
which is somewhat less than a third - 0.34 out of every dollar that the tax-
payers in this city pay go for pension system, is that right?
Mr, Plummer, That's Mr, Gong's contention, He's contenting that it is not
17
SEP 2 31$75
D,300 toWarda pefisioh, He is saying that With group insurance arid with the
aocial security,
Mayor Verret going to get to that in a moment.
Mt, Plummer: Ok.
Mayor Verret Nowthere's 11 million dollars that's being paid, but actually
of the 11 million dollars, 8 million 100 thousand is what actually goes to the
peftsion4, AM 1 tight so far, Stop me when I'm--- over the 35..lear fundirip,
ism talking about the proposed budget, That means that there is almost 3 million
dollars that go into something else 'which is what Mr, Gong is referring to. Vitt
just trying to simply so we all understand what we're talking about, All tight*
Now, what Mr. Gong is saying as 1 understand is that number one that there has
been to procedural due process since the plan or the system have not participated
in the decision making of transferring it from 20-years to 35-lears. Number two,
he's saying that the four mill provisions fees will be the 1037 and the amended
1947 bill does not provide the City of Miami Comtission the right to do what is
being done and therefore number three, he's saying that the use of the four mills
is provided by the statue since in his interpretation we .---- in fact section two
does not speak to that and by title it doesn't refer to it that it is an improper
use of the provision of the law that gives us four mills as I understand it that
where we are taking 3 million dollars of the 11 and putting it into other things
other than pension and what he's therefore requesting is that we use that 3
million dollars and come back to the 20-years and increase the budget then by
3 million dollars. To do that then the taxpayers rather than paying 11 million
dollars would pay 14 million dollars in the budget rather than being 89 million
would then be 93 million dollars, unless of course, we found other ways of
reducing which the manager has said at this juncture he can't find. So the crux
of the matter is this, that's why I come back to the simple statement. We're
talking about taxpayer's money. We're talking about the $360,000 residents
citizens of the City of Miami who are paying almost 0.3C4 right now or whatever
it happens to be of the tax monies for the pension and the other benefits
that are either legally or illegally as the attorney has stated rightfully so.
The question as I see it is there are two aspects here. One is a legal aspect
which only as far as I'm concerned I may have served in the legislature but I
haven't got the foggist idea of what's right and what's wrong legally because
I'm not a lawyer and this is a legal matter and we have to rely just as Mr. Gong
said that the people that he represents to rely on him for legal counsel and it
is his interpretation, and therefore he was speaking for his group, therefore
I have to then assume that he would concede us the same right that we have to
let our attorney do the same thing he did. Now, that's the legal aspects of it.
The second aspects ofit are the moral aspects as to whether or not due process
was really followed and if not then what the decision is at this point and the
last aspect is the practical one because somebody has got to pay for this, some-
body has got to pay for this and the somebody is the people of Miami who we
elected to represent and that's where the nitty gritty is going to come and
that's where it's going to get tough because we have to make a decision taking
into consideration not only the right of the pensioneers and the members on
both of these plans but I think we also have a responsibility to the taxpayers
and the citizens of the City of Miami and that's where the decision has to be.
made. Now, I've already addressed myself previously and I find nothing that's
going to change my position to this regard but we're talking about is how monies
flow into these pension systems plan to pay for these retirement pension benefits
of the people that are involved which amount to 14 hundred 77 that are recipients
of 360 that are members. In othecwords, for the over 5,000 people that are
involved as recipients of all of Sand what the manager is saying and what
Mr. Kruse said before us and what Mr. Ling said as I heard it ,was that it is not
unheard of and it is a common practice for this to be done over a 35-year period.
Now, the fact that we've done it over a 20-year period is admirable. It's very
conservative, but it is not unheard of. As a matter of fact it is common practice
throughout the nation as I heard it that 35-years be the period that should be
used, Now, that's like saying I'm going to have a mortgage from my home and the
mortgage from my home is going to be paid for instead of over a 20-year period
over a 35-year period. And the mortgage payments are obviously going to be
smaller, Now, the decision I see the resolution that's passed by the board of
the retirement, Now, let me tell you what the board by passing this resolution
and with all due respects to my colleague J,L, Plummer what this means. This
means my friends a 3 million dollar tax increase and that's where it's at, Now,
we have to decide whether either legally or morally we are forced into that
position or whether we can follow what the manager is trying to do, whether or
not that's it's fiscally conservative. I want to tell you right now Paul, the
thing that bothers me the most about this whole process to the fact the board
18
and the aystef were not a part of the decision making press That's the ottiy
hattg...up I have and with that those are by cotttt$ents.
Mr. nutter,: Mt. Mayor, let me just clarify one point because I think, unites
I'tit correct Mr. Mayor if sae go from a 20 to a 35 year funding itt the same way
Whet you re -negotiate the mortgage on your hone to make your payments smaller
the interest eats you up. And Mt. Mayor I think that Mr. Kruse stood at that
rtictophone and readily admitted, No, I'm not ptoposittg that all, but he readily
adfitted that if we go to the IS year funding that it would cost approximately
20% tore.
Mayor Perret J.L. all right, now would you tell me where the stoney is coming
from because I don't know of any other place other than the taxpayers. Now, if
you want to tell the how you're going to do this without increasing the tax to
3 million dollars then I really want to listen.
Mr. Plummer: Well, Mr. Mayor, that's all well and good to throw the hot potato
oft the but let file say this Mr. Mayor.
Mayor Ferret No, no, not on you on us.
Gio
five people that have to vote on it.
Mr. Plummer: I understand. But I think the whole crux is this Mr. Mayor, as
far as the boards being by-passed I think that really is a protection so that
the boards have an input they know what's going on and well it's a protection
Paul for them to know what's going on and the ordinance readily speaks to it.
But, I think that that saving factor is Mr. Gong and Mr. Stokes here today,ok.
That has been caught before it goes any further and Mr. Mayor the point is very
simple as you put it 3 million dollars, that's the point. I don't think we
really are speaking to that point Mr. Mayor. I think we're speaking to a legal
point and that is what must be established first. Is the four mill act solely
for pension? If it is then the other actions are illegal. It's not the 3 million
dollars that has to be addressed first. The first and four most point is -
whether it's policy of this commission, legal as far as Mr. Gong and the courts
or the administration or the city attorney. Mr. Mayor if we are doing something
wrong we've got to correct it. Then if that answer comes out that it is being
done wrong then we have to address the 3 million but to talk about 3 million
from the beginning is unfair.
Mayor Ferre: I agree.
Mr. Plummer: First, we must address the question.
Mayor Ferre: I stand correct. Mr. City Attorney you are now on the floor. I
think,Paul, unless you want to answer. I think Plummer' has put his finger right
on it, the first thing that we have got to decide is get a legal opinion. Be-
cause if the legal opinion is different from Mr. Gong's then this Commission
has to decide whether we're going to back our City Attorney or not and then
the rest of it is really surplusage, then I think it's up to you.
Mr. Plummer: No, let me tell you something else and I gotta put this on the
record and I won't mention any names, but I gotta to put it on the record. There
has already been a request of an individual before my board wanting to know if
Mr. Gong's contention is correct, does that preclude their right of a lawsuit
asking for retroactive remuneration to that fund that for so many years has been
paying social security and group insurance that should have rightfully been in
the pension fund, so it's not just today's answer, there's already been on the
record someone asking for that right to file a lawsuit on behalf of the pension
fund that if Mr. Gong is right to go back and get the funds that has been mis-
directed if that is the case for the fund. It's only been asked. It's not a
threat.
Mayor Ferre; Of course, of course, that threat which is a threat I don't care
what anybody says.
Mr. Plummer; They asked a question.
Mayor Ferre: Well, that threat as I see it is a threat of eliminating the
City of Miami, because if anybody wants to get and I say this to the enemies
of the City of Miami who want to editorialize I sure, very quickly on this, that
if anybody wants to eliminate since they're been looking so desperately, Even
though the people have voted time and time again not to eliminate the City of
Miami if they want to of accompanying what they have not been able to
do through the electrical process this is the way to do it, No, Ernie I'm not
al le
I will later on but right now we're asking for a
going to recognize you, legal
opinion of the City Attorney,
SEP 23197
Mr. Lloyd First, ny opiniott is as follows: It is not illegal for the budget
to have beet prepared it the matter er in tnhich it ia. getot diy, t aay thie, that
it ie tot wrong to do it either way. It other words, if you with to have the
pensiott fund Solely ttisetltiot ed as $_ this tillage solely tamed for the pension
fund and trot have atiythitig else included you may do it that way, but here is
the crux of the whole thing which has been :dated attd that is the words in the
appendix two and it the 1937th act and that is everybody's bees speaking about
four tills with the assutttption that you trust appropriate four dills. The tern
is not exceeding four mills, so that's where the difference lies because actually
Mc&
Mayor Ferret t'tn sorry, there was two of us and t wasn't listening, will you
repeat that again..
Mr. Lloyd: Yes, yes. If you look at each one of these statues, the 1937 act
and of course the amendment the 1947 amendment which solely chances the two
trills to a four mills is that what has beet tnisconstrued here this mortil.ng is
or the assumption trade that it trust be four mills. The tett is tot to exceed
four trills. Nov, if you take that pie, this is the whole crtn. If you take
the pie you will see in the beginning of the budget and'I think it's 3.26 mills
have been appropiate for pension, social security and insurances Nov, assuming
that you use your prerogative and say well we don't want social security and
insurance included in the pension you cut it off ---
Mayor Ferre: And put it into the regular budget.
Mr. Lloyd: And put it into the regular budget then you'll have something less
than 3.269 mills appropriated for the pension which is perfectly legal.
Mayor Ferre: Can we do it that way?
Mr. Lloyd: Sure.
Mayor Ferre: So in other words, you're wishing out of one pocket and putting
it in the other one. Well why don't you do that and then we avoid all the
arguments.
Mr. Lloyd: This is what you're talking about Mr. Mayor.
Mrs. Gordon: That's the bookie thing type of entry in effect but that is not
the point.
Mr. Plummer: That is not the point at all.
Mrs. Gordon: That is not the point that the boards were addressing themselves
to.
Mr. Plummer: The point, Mr. Mayor is not that simple. It is that simple. And
that is and I have stated and Mr. Gong stated without saying not to exceed we
have stated that if the full realization of the pension fund under the 20 years
was met there are more than ample funds in that four mill fund, that's all. I'm
telling you.
Mayor Ferre: But J.L. that has to be an increase in taxes. You have to increase
taxes 2 million, 857 thousand 776 dollars
Mr. Plummer: Or, or, cut the operating budget.
Mayor Ferre: All right you tell me where we are going to cut the operating
Mr. Plummer; Mr. Mayor, let's get to the legal problem first, let's don't talk
about if comes.
Mr. Andrews; Mr. Mayor and members of the Commission obviously having gone
through this process with the plan board I was prepared to if necessary make
an extensive presentation to the City Commission which I won't to save time,
I was going to bring out the fact that the State of Florida has a 1 billion
700 million dollar accrued liability which they're just began to fund on the
35-year cycle, It's going to bring out facts and bring the documents in to
show in a way that the City of Miami is already in a funding plan of 35-years
or more, In that in 1940 and we have this document to substantiate this and
I had these at the plan board in which the police and fire pension program
went defunct and was picked up by the retirement system and included, Now,
setting that al.l aside if you're going to address an area of practicality and
an area of all of the laws that applies then you have to have another area of
understanding$ 'you cannot talk about this four mill limitation in isolation.
So here me out for just one moment and Mr, Mayor if you'll please be kind
enough to write these figures down as 1 give them to you on a piece of paper.
for a tottiett strike away the fact that we have a 10 mill taps just for a momenta
All right, the state statues and the charter provisions which ate adopted by
state law provide us with a general fund niiiiage of 12 mills with pension of
4 mills.
Mayor Verret In addition to the 12?
Mr. Andrews These are in addition to the 12 bills. publicity 21 tills and
street lighting, the last one unlimited, but for practical purposes although it
exceeds budgetary requirement, let say we ourselves place a limit of tit trills
in that area just for convenience., street lighting. A total of all of that is
20 mills. Now, that's what we're authorised to levy is 20 dills. The laws
are all there. Otte of those laws has been adequately quoted with reference to
the pension fund, the four mills, but now and there's been some adjustments
from 1927 to about 1947. Now, we have a more moderate law in the books that
supersedes all of this in is judgment
p y j gment and that is that we're faced with -,..-
and these are operating niillages, incidentally, debt service is excluded. These
are operating millages. Now the state law provides that there is a limitation
of 10 mills, so being practical, being logical, and following the intent of law,
in my judgment you'd have to go back now and pro -rate those charter provisions
and old state laws to make them work under the 10 mill cap. So now we have
6 mills for general funds to operate on. We have 2 mills for pension, 1.25 mills
for publicity and 75 mills for street lights and that's a 10 mill cap .75. No
that's a 10 mill cap.Now, the problem you face and if we're required it can
be done or it can be done if it's not required, move social security and group
insurance out of the pension millage area and move it into the general fund.
The general fund millage would be fine....
Mayor Ferre: Well, how much is the general fund millage right now?
Mr. Andrews: The general fund millage is 4.783, and this would be less than a
mill.
Mayor Ferre: All right, if you added these provisions it would less than a mill,
so you still would be under 6.
Mr. Andrews: Right.
Mayor Ferre: So why don't you just do that and solve those problems?
Mr. Andrews: Well, all right. And we can do that, but you have to track this
if we're going look at this from the standpoint of a legal issue beside it being
a moral issue and a right thing to do. Now, you don't have enough money to
fund the pension budget at a 35-year plan and you don't have enough money to
fund it at a 40-year plan. Because if you apply two mills to it it's not going
to produce enough money to fund the pension system.
Mayor Ferre: Yea, but there's no law that says that you have to ---
Mr. Andrews: That's right. The general fund can make a contribution under this
and in fact it is my contention that right now the way we're juggling these
around that its the general fund that is supporting the pension fund.
Mayor Ferre: There's no question about it.
Mr. Plummer: Well, the general fund if you're using it as 1007 taxpayers money,
I agree. Ok, look the legal question as far as I'm concerned if you wish to
resolve it this way it's fine but I think that the point that is being missed --
Mr, Mayor, let me give you 1% ok, and I think this is something that better hit
home because I supplied all of you an article out of U,S, News and World Report
about pension funds breaking cities across the country.
Mayor Ferrer That's exactly where we're headed,
Mr, Plummer; Ok, Now, let me ---what's your thing about the fiddler Mr. Mayor,
the fiddler has to be paid- he's playing loud and long, If we stay on a 20 year
funding and remember Mr. Andrews spoke of a state fund which is on 35 year which
has just started and I concur completely any other benefits that are given to
that pension fund today if we understand today that they're pn a 35 year funding
that means that we have a complete picture. When we gave these other benefits
we understood that it was a 20 year funding, Father I want you to listen to
SEP 221975
this because this really hits
hold to the 20-years which is
this -..commissions before us,
horrible but let's agree with
to the point. tinder what
the way it was originally
We are looking at 41.11%
Mr. Andrews if we pay for
Mayor Parte What do you mean 41%?
we have done today if we
proposed and passed by
of payroll, that's
a minute?
Mrs Plummier If we hold to the 20 year plan which has been in existence for
55 of what the payroll is today, 41.11I Chore money has to be detived to put
into the pension fund to make it sound. boes that sink iti?
Mayor Vette: No, I don't understated that because the payroll is around 60
trillion dollars.
Mt. Plummer: 45.
Mr. Andrews; The actual payroll. is 50 billion.
Mayor Ferre: 50 million dollars. And 41% of 50 million dollars is 20 million
500 thousand dollars.
Mr. Plummer: Paul, am I inistating this? Well, I'in reading from -'--
Mr. Andrews: I'm having difficulty
Mr. Plummer: From the study of the actuary approximate breakdown of cost by
benefits. 41.11% is the percentage of total payroll, page 6 of the 1974s--=
excuse me I have to put a stiputaltion, that is for police and fire.
Mayor Ferre: Oh ---
Mr. Plummer: For police and fire it does not address the general employees or
Mayor Ferre: Look, as I see it is this way-- our payroll is 50 million dollars
a year and what you're telling me now and this is why ---excuse me for being
confused but what you're telling me is that 10 million 957 thousand dollars --say
11 million of 50 is 41% I couldn't understand that.
Mr. Plummer: Ok. If we accept Mr. Andrews proposal of 35 years the actuaries
say even that figure is 24.35% of payroll. 24% call it for round figures 25%
of payroll.
Mr. Andrews: May I interrupt you please? And it's just been pointed out to
me by Mr. Jaremko, now I remember why that figure is the way it is that includes
employee contribution adjusted to payroll. 81% by the employees. You have to
add all of their contributions.
Mayor Ferre: Oh--- ok. How much is the employees contribution?
Mr. Plummer: 81% and mine 71 and Rose's.
Mr. Andrews: Mr. Mayor for convenience 8 average of the total payroll, so it
would be about 4 million dollars. So in other words, in addition to our 8 million
it's for 10.9, there's 4 million from the employees(commented by the Mayor).
Mr. Plummer: That's right.
Mayor Ferre: All right, now I understand, All right, Mr. Andrews.
Mr. Andrews; Well, I think that I don't have anything really to contribute other
than, other than hearing from Mr. Lloyd as to whether this can legally be accomp-
lished and he's answered the one question to eliminate any doubt that could be
moved over to the general funds. We lose some advantages in my opinion as to
what we were trying to accomplish as far as getting the state statues adjusted
to exclude this whole area so that it would be treated as a contractual obligation
and be equivalent to debt servicing. We can move that out and we achieve it then
we're not able to capture that, but if you move it out and put it over in the
general fund and you increase the millage there and decrease it for the pension
system it balances out and it could be done and I told the pension board this
same approach could be done just simply adjusting the ordinance,
Mr, Plummer; l disagree, We don't lose we gain,
r)
F
SEP 2$1975
Mayor Ferret Mr, Plummer, you requested and I subscribe and you said this is
primarily a legal question and before we get into whether we're corning up with
tni iron dollars we teed a legal ifterpretetii n, We subsequettly ask the
attorney, the attorney then gave us his ruling as I understand his ruling, His
ruling is that what the manager's done is correct. It is legally acceptable and
legally correct, He said that this is a balanced budget that the manager is
legally able to do what the manager has done, Now, -.—
Mr, Mutt -hen He did not say than Let hit speak for himself.
Mayor Ferre Didn't you say
Mt, Lloyd: No, I'm not qualified as to the budget...
Mayor Ferret That it can be done anyway --
Mr, Lloyd: oh yes, yes, that I said.
Mayor Ferret Didn't you just say that the manager has the legal right of
doing what he's done with those four mills? It can be interpreted either
way?
Mr. Lloyd: Oh yes.
Mayor Ferret Well, that's all I'm saying. All I'm saying is that you legally
said that what the manager has done is acceptable under the law as you understand
the law and that you are advising us that what the manager has done is legally
correct, so that what I'm saying is that that our lawyer has said that this is
acceptable legally. Now, as Mr. Gong says that it isn't but he represents
somebody else. He doesn't represent the City of Miami, so now the legal question
is determined as far as I'm concerned. Now we get to the next question, if its
legal then what do you want to do about? As far as I'm concerned I've expressed
my opinion.
Mrs. Gordon: May I ask a question just for information to get it on the record?
The actuary assumption on the earnings of monies in the trust fund, are they
taking into account in your determination before the contribution?
Mr. Andrews: Only to the extent that the actuary-- I'm quoting from memory
4 3/4% earnings is what the actuary is using because that's what's described
by ordinance . Correct me Mr. Bailey if I'm not correct and you better come
up here and keep me straight 4 3/4% is what is utilized.
Mrs. Gordon: Utilitized in what way?
Mr. Andrews: The retirement board established 4 3/4% as the basis for actuarially
determining the incomes derived from the assets.
Mrs. Gordon: Ok. Fine, now what I just want to determination for information are
those earnings in anyway used as part of the contribution either by the employees
or the city-- is there any accounting of the assumption of the earning made
except for the growth of a fund?
Mr. Bailey: That's all a part of the tables adopted by the board which the
actuary uses in his annual evaluation. That's taken into consideration.
Mrs. Gordon: Yes, but the point is this and the only reason I'm asking it is
whether or not a higher assumption would reduce the contribution of the employees
or the city?
Mr, Bailey; It would reduce the city's contribution if you raised it half a
point then it would reduce the city's contribution.
Mrs, Gordon; Well, isn't it a very valid matter that that is an unrealistic
amount that is being used to 44 or 5 since I understand
Mr. Bailey;
Might be unrealistic but its conservative.
Mrs. Gordon: But isn't it a fact that's its unrealistic and isn't it also a
fact that under the new pension laws that are being considered that six is
going to be considered as a minimum?
Mr. Andrews; Bailey, you better listen to this. I have found no such infor-
mation Mrs, Gordon,
Mars. Cordon: t have beet given that kind of unofficial inforthation and that
this will be coming into effect within the text year when the nuniciDalifies
and when governmental bodies will become apart of the law with regard to
pension futtds. Noww, if in fact you're fighting such -a dilemma as you're
fighting right tow at unrealistic assumption. 1'tn asking you whether or tot
you might re.,consider that unrealistic assumption. 1 know thetnnservative
factor. You might think hero and hero would be the more conservative than
44 or.
Mr. Bailey: All 1 Can say is that the lower the assumption on the earning the
higher the city's requiredcontribution.
Mrs. Gordon; 1 bitg your pardon.
Mr. Bailey: The lower the interest assuttption the higher necessarily will be
the city's contribution. Now, actually this fund has not earned 4 3/4% on the
average over the last 5 years.
Mrs. 'Gordon: Well, you don't need to go that far back Mr. Bailey because we
need to go back to the point of the separation of the boards and the engagement
of new money managers and the kinds of returns that have been made available
even during bad economic times has been hired in that hasn't it?
Mr. Bailey: No ma'am.
Mrs. Gordon: Has not,it's been lower. It's been lower?
Mr.Bailey: Yes.
Mts. Gordon: What has it been?
Mr. Bailey: Well, it averaged about 4 3/4% over 5 years period.
Mrs. Gordon: I'm not asking you for that Mr. Bailey. I'm asking you from the
point 1974, January 1. I want you to tell me that if you can?
Mr. Bailey: I do not know offhand.
report.
Mrs. Gordon:
Mr. Bailey:
from sale of
I'm sure it must be in the evaluation
But you know it's more than 4 and what you just said.
Well, if you take into consideration the tremendous losses incurred
assets you'll find that it's a negative figure.
Mrs. Gordon: But isn't--- well I won't pursue it but that is a very
point and ---
Mr. Bailey: I don't know how you can debate it. That is a realized
debatable
loss.
Mrs. Gordon: That's a loss that accumulated over a period of 20 some odd years
prior and I'm not going to accept the fact that, that is a loss contributable
to any action of this Commission or any other party.
Mr. Bailey: Don't misunderstand me I didn't say that.
due to sale of assets. It is realized.
Mrs. Gordon: That became a recorded loss of a loss
but not recorded as a loss for many, many years.
I said it was a loss
that had been on the books
Mr, Bailey; Well, the value of the stock - but I mean it's actual sale is same
as you selling a security of which you own. You don't have a realized loss
until you --
Mayor Ferre: Yea, but accounting principles are changing as you well know and
now you know, the accounting principles are to record the value of something
as you go along,
Mrs, Gordon; That's right,
Mayor Ferre; What Mrs, Gordon is saying is absolutely correct,
Mr, Andrews; Yes, Mr, Mayor and members of the Commission what Mrs, Gordon ---
(may I assist you Mrs, Gordon)is the fact that we have now substained the loss
of the sale of assets and all of those conditions are now in place which should
maturely improve our earnings and what she's asking is it realistic to continue
S P 2 31975
with an earning level of 4 3/4, shouldn't it be somewhere near 5 3/4 or 3 ?
NOV, if it were 3 that would produee about 1 million 200 thousand dollars more
itt earnings that would help to offset this number of years or could be used to
further reduce the city's contribution, either way, but it would be real earn
lugs that should be counted upon and the only way that can happen is for the
board to change its policy with regard to where they believe the earnings should
be stated so the actuary cats
Mr. Plummer: Let me blow the horn for a minute and I won't talk about the
first two quarters but the last two quarters Mr, mayor, the money tanagers have
showed a return on our investment of roughly 12n,
Mayor perret See, that's exactly what Rose Gordon is saying,
Mr. Jareinko: I'm the trustee of the system. Ot this question of the earnings
assumption I'd like to refer you back to the Hanson experience analysis, who as
an independent actuary, who evaluates our tables. In this report he stated that
not only should the earning's assumption provide for the funds but it also should
compensate for the inflationary spiral and that he recommended that it should be
lower, not higher and this is precisely why we're in this predicament today by
adopting unrealistic assumptions,
Mrs. Gordon: Mr. Jaremko when was that Manson report dated, the one you're
referring to? The date only that's the only thing I want. The date specifically
is very important.
Mr. Jaremko: Let's see 68 to 72 experience analysis. It was received by the
board in 1974.
Mrs. Gordon: Right, well you see what I'm trying to say to you is that ----
we're riding on a different horse, that's exactly what I'm trying to tell you.
Yes, that was right at that point and time, but not --- today it's not.
Mr. Plummer: Rose, for your information it's dated August 22, 1972.
Mayor Ferre: Yea, but see that's the whole point.
Mrs. Gordon: That's even more pertinent to the fact that I'm disgusted.
Mayor Ferre: You're talking about 68 to 72. We're talking about 1975.
Mrs. Gordon: You bet:
Mayor Ferre: Well, I'll tell you -- are you finished Mr. Jaremko?
Mr. Jaremko: I'd like to take a few minutes to look for it and show it to you
because what we're talking about is the inflationary spiral and that is by no
means behind us and he states that we should earn the interest assumption plus
the inflation which brings us to around 10% per year. Now, if you're planning
on increasing the assumption you are going to further decrease the fiscal stand-
ing of the fund.
Mrs. Gordon: No, you've got to follow me, I'm sorry.
Mayor Ferre: Rose, we're going to end up-- this is going to be half hour
discussion and I completely subscribe with what you said here. Plummer said he
agreed so let's
Mr. Plummer; The paragraph that he wants is #3, the investment portfolio return
must increase to the 8-10% level which is necessary to offset the continued
pattern of wage increases that have been granted in recent years,
Mrs. Gordon: Well, it's true that that has happened, that is happening and
that's exactly what we're saying.
Mr. Jaremko; Ok, I'd like to refer you I've found it here on page 17 of the
experienced analysis, The indicated annual rate of inflation at 8.6% and 9,7%
respectfully lead to the conclusion that to maintain the proportionality of the
actuarial obligation, the portion of the assets set aside for the actualize
use earn a yield of 13 to 14%'--- plus the rate of inflation, If an allowance
is made for the fact that the retired life asset do not have to be adjusted for
inflation it can be concluded that will be a little experience lost to inflation
if the overall portfolio return to annual rate of approximately 10%,
Mayor Verret 'Wert going to be here until rildtight and t watit to tell you are
you going to sit here with us until tie"re finished?
Mr. Jatetko. yes.
Mayor retire: All right. Beeause I at not going to ad j orn this tteeting until
we finish this budget and tit predittii:tg tight now at the rate were going it
will be tiidnight tonight.
Mrs. Gordon: Mt. Mayor, I trust tell you now --
Mayor Petrel I want to tell you that I will not adjourn this decking. Were
going to sit right through here through lunch, through dinner, until the early
toning until we finish this budget.
Mrs. Gordon: Mr. Mayor I trust tell you that I have a committtent at 4t00 which
is irrevocable. I trust leave at 3:30 or no later thane -
Mayor Ferret What time will you finished with your commitment?
Mrs. Gordon: About an hour, an hour and a half.
Mayor Ferre: you all adjourn and come back in an hour. We're going to stay
here until we finish this budget. I want to tell you we're going to be here
until way over midnight at the way we're going We're going on all kinds of
tangents. As far as I'm concerned I'm ready to bring this thing to a head and.
to a vote. I think we've discussed it long enough. Is there anything you want
to add?
Mr. Jaremko: I just want to summarize that this is precisely why we're in this
predicament by adopting unrealistic assumptions. Not only with the interest
assumption but the ages also and --
Mayor Ferre: Well, let me tell you what the alternatives are so that we all
understand. The alternatives are to increase the taxes by 3 million dollars or
to reduce-- because of one of two things you either get more money or you reduce
your expenses. Now, I'm going to tell you that I don't know and I will admit it
and I will admit it publicly that I'm going through this budget. I've read it
I do not know where the City of Miami can get 3 million dollars in the reduction
of taxes in the budget without decreasing service and that means firing people.
Because out of the 89 million dollars - 50 million dollars of it is for salaries
and the rest of it as you know is the 11 million dollars for this and the debt
service and if you remove that and you get down to the general budget, the general
budget is 51 million dollars out of which 50 million is salary and as far as I'm
concerned there is only one way to reduce the budget in the City of Miami and
that is to fire some people and just get rich and in my opinion when you get rid
of people that means you're going to lower the service to the City of Miami. Now
the other alternatives and I don't care what anybody says about the legal aspects
of this and with all due respects to my friend Eddie Gong what we're faced with
is an increaes of taxes because there is only one way, one place where this comes
from, that is from the ad valorem taxpayers and that means that we would increase
from 38 million dollars we would increase an additional 3 million dollars 7 or 8%
or whatever it is to accomplish that and that where we're at. Now we're got to
make a decision.
Mr. Plummer: Mr. Mayor, I disagree with your point in the same way that the
City does not operate solely from ad valorem. It operates from many other areas
of taxation in the same way in a proportionate share. The City pension fund would
be the recipient of ad valorem as well as other funds. Where 37% of it comes
from ad valorem, the remaining 63% has to come from other funds in a proportionate
share so will the pension fund.
Mayor Ferre: I'm willing to accept a recommendation as to what other services
are going to be cut or what areas you want to cut from this budget.
Mr, Plummer: Well, the Manager is saying that he can do it in a simple transation
of bookkeeping,
Mr, Andrews: If you lower the millage in the pension fund and increase the
millage
Mr. Plummer: No, no, I'm not saying that. I'm saying that for practical purposes
and really_ the motion that I'm trying to get to is that the Manager be instructed
to remove anything other than pension from the budget as it relates to the special
act of the city employees in pension funds section one. Now, he's saying he ea►z
26SEP 2a 1975
do it with a special a bookkeeping transaotibn.
Mayor Verret tf you do that and theft you add it over on the other side of
your gettetai tillage theft all it is, is a bookkeepitig trattsattiot but it
certainly is trot going to provide an addition of 3 million dollars unless theft
you ittrease the tillage that you removed from the general fund by that atpoutt.
Anyway you slice it that's 3 million. bricks, t meats we're not going to do it
with mirrors.
*Amy Pehhotto: you've let all the lawyers speak, but how about the taxpayers?
Mayor rette: I'i going to let the taxpayers speak it a little while. 1'ti
going to recognise you,
Mr. Gong: Mr, Mayor, Cottrissiotiers 1 have not wanted to bring these two points
up at this tithe but because Mr, Mayor you brought up the point of finding the
fat itt this budget. You said you've looked and you've tot beet able to find
because --
Mayor Verret I wish you'd point it out to me.
Mr. Gong: Ok. I've got two items Mr. Mayor on behalf of the system not for the
plan but this would go for both because they're all lumped together. 0n page
136 of the budget under pension for fiscal year 74-75 and 75-76 you have
executive secretary I position.
Mayor Ferre: How much money does that amount to now so we can total up and
see how we get to --
Mr. Gong: Well, I'm not the budget chair but I'm going to raise a question.
If I'm wrong I want to be corrected. I understand that position of executive
secretary has never been filled. I think it calls for - I think its around
20,000 or 25,000.
Mayor Ferre: Eddie, there are a lot of things in here that I can pick out and
show you where we can get 2,000 and 3,000 and 10,000 and I've gone over with
the manager, but the point is we need 3 million dollars.
Mr. Gong: Mr. Mayor will you bear with me just one more point? Over on page
150 of the budget it says that there is a rental in the middle of the page.
The building at 110 West Flagler Street is rented from the pension fund for the
years as a department of finance collection office 24,500 (repeated). Let me
just finish. Last year it was also in the budget for 24,500. That building
has not existed for some years.
Mayor Ferre: Would it be all right with you if you'd let the manager answer
at this point?
Mr. Gong: 0f course.
Mayor Ferre: All Mr. Manager.
Mr. Andrews: Starting with the building that admittedly is in error. That
was brought to our attention and that adjustment has already been made. What
concerns me is the administration that is being provided and charged for. If
you want to move that out of the pension fund and put it in a general fund that's
all right, but if you're attempting to do away with that then the general fund
would stop rendering that service and the pension boards would have to go out
and get their xeroxing---
That's what we would like to do Mr. Mayor. We think we could
do it more efficiently.
Mr. Andrews: Excuse me. Issue their own checks, do their own accountability
provide their own secretarial services and you treat it as you would the off-
parking or some other agency of the city which is part of the city government
but they're a separte entity. And the only thing we would make is a contribut-
ion to the trust fund as required but you lose control from the standpoint that
the city commission then would have to receive a separate budget from those
trust funds and they would have to justify to the city commission the expenditure
of xeror, how much they spend for the executive secretary, legal services and
accounting services and all the other services.
L7 $ P 231975
Mr. tong; Mt. Mayor on the point of personal privilege t just feel its really
important to shop everything because Mr. Andrews has said the key word. He said
how we're going to control of this thing? These funds don't belong to the
City of Miatni. That's what we're been trying to get over here. These funds
don't belong to the City of Nimbi.. Thy belong to these beneficiaries and the
participants and until you can get that out of the mind of the City of Miami
any city it's going to be a constant going back and forth on this question.
Now, I agree with Mr. Andrews that the detertiinatiott of the annual •contribution
because it's your responsiblity should be done in a fait way, brit let's find a
way in which everybody gets their ---
Mayor rerte: As long as the people of the City of Mlattti are paying good hard
earned taxpayers monies into this system , the elected officials that represent
the taxpayers are going to be involved in the process and am perfectly willing
to -
Mr. Plummer: What he's trying to say is this, that is correct you and I are
charged with that
Mayor Ferret He's saying is ..that we've got nothing to do with it.
Mr. Plummer: That's right. Once the payment is made to the fund itt the same
way that we pay anything else.
Mayor Ferret Whether it's sufficient or inefficient, whether it's being.,,
Mr. Plummer: When the monies are turned into the funds this commission does not
hold control.
Mr. Gong: You have responsibility but you don't own ---
Mayor Ferre: I don't say that we own it and I don't say that we have to be the
determining factor but I will never except the fact that we're putting taxpayers
monies into something which we have absolutely no responsiblity for.
Mr. Gong: Mr. Mayor I agree with you completely. I think it's
what I simply say is that--- as Mr. Plummer say you control the board in a
political since but you have four members, this is a system board chosen by the
city administration -(2) by police (2) by fire and if you have the time to vote
Mr. Mayor, Commission, your elected officials who protect the taxpayer, makes
the deciding vote and so you have a working majority on both boards, so I'm not
at all suggesting that you shouldn't have that.
Mayor Ferre: Look, I'm not going to play Winston Churchill around here and I'm
not about to decide over the dismembering of the City of Miami.
Mr. Andrews: The alternative Mr. Mayor is wait until this year is complete as
far as negotiations is concerned. Re-evaluate the City's whole system and make
a determination whether the City Commission wants to set as boards of trustees
for each of the system and plan design the ordinances so that you are the trustees
and eliminate all the other participation and then you have direct control.
Mr. Plummer: All right, let me ask one question real quick like and I'm speaking
as a Commissioner, not Chairman of my board. Mr. Andrews is there any possibility
look, we know the dilemma as the Mayor has stated. Is there any possibility
that we can adopt under the 20-year funding with the administration recognizing
the shortage proceed to go into this next coming's months to iron out these
problems? In other words, I understand that it would be an acknowledgment on
your part that we adopt the 20-years and that we will iron out the difference on
the 3 million dollars and then go into negotiations next year with the full
package, is that possible?
Mr. Andrews: Anything is possible. I can't recommend it, because when you
do this what you're going to tell me is that well, when we go to sit down to
achieve this you're going to tell me yes, but don't do anything with police,
don't touch fire and don't touch sanitation, ---Impossible - that represents
over 60% of the total budget, It's 40 million dollars,
Mayor Ferre: Paul, this is not Disney World, this is the City of Miami and we
have got to come to the reality, We are not:-- we cannot escape the very simple
basic fact if you say don't touch the police, don't touch sanitation, don't touch
the fire department, Find 3 million dollars to increase-- there's no way in the
world that that could be done from this particular budget because the fire depart-
menu- would you tell me Mr, Andrews out of the 61 million dollars what's the
fire, police and sanitary?
SEP 231975
Mr, Andrews: 41 milliott.
Mayor Ferrel 41 out of 61,
Mr, Andrewst Yes,
Mayor Verret That leaves us 20 million dollars, And I just tell you from a
practical point of Viet4 there is no way that we tat reduce 3 million dollars
from 21 Million dollars that's left and there is to way it my opit►ion that
this can be done without reducing services and therefore there's ottiy one may
that this can be accomplish and that is by an increase of takes acid let us not
avoid the issue, that's where we're at. bo We want to increase taxes by 5
ttilliott dollars, yes or to? It's that simple, And we're here, we're there
right now.
Mr. Erny I`annotto Mayor, can 1 be heard noW for a second?
Mayor Ferret Go ahead Mt. Erny Pannotto.
Mr. Erny Pannotto: Well, I'l.l wait until you get through with the call.
Mr. Plummer: I still think that we've got to resolve the first issue. Is it
proper or is it improper in the way that it is being done? Now, I think that's
the first determination.
Mayor Ferre: The lawyer has told you that it's proper. The Manager has inserted
that in his opinion it's proper.
Mr. Plummer: All right, so in other words what you're saying Mr. Lloyd is if
I understand that what you're saying is that the Manager has the right to take
group insurance and social security from this four mill act?
Mr. Lloyd: Yes.
Mr. Plummer: All right, we've reached that plateau.
Mayor Ferre: All right, what's the will of this Commission? And I think it's
right to that point and that's the decision we have to make.
Mr. Plummer: Well, then there's no other decision to be made. The City Attorney
has made a ruling and his ruling is that it is proper. --- Mr. Gong, you
disagree with that, I mean I know you disagree with his opinion, back where we
are right now? Nobody can disagree with that.
Mayor Ferre: That's where he's at. Where we're at is we can increase 3 million
dollars worth of taxes.
Mr. Plummer: No, no, he has reached that plateau. Now, the only action of this
Commission would be to overrule. That would the the only action of this
Commission, overrule the City Attorney.
Father Gibson: Mr. Mayor, I haven't said anything, so I better say my little
bit. I take the position. I want all the people to hear me today. I operate
on the theory if you have a staff and if you don't trust them fire them. Very
simple for me if you have a staff don't trust them, they're not capable fire them.
Now, if you aren't ready to fire the City Attorney you better follow his recommend-
ation. One thing I learned if you go in court and you don'd dispose all your
facts to the attorney. You know what'll happen he'll stand up any say to the
judge I want to withdraw, isn't that right counsel? 1 want to withdraw because
he lied to me. I move that we sustain the City Attorney. J.L. said all we got
to do is sustain him.
Mr. Plummer: No, no, the only thing you gotto to do if there is another action
is to overrule.
Father Gibson; Well, all right, Then I want to reconfirm my position that we
sustain the City Attorney,
Mr, Plummer: Father, as hard as I have fought here today and in the past there
is never a point that I am going to go against the ruling of my City Attorney,
now if Mr, Gong has disagreement as a representative of the board then it behooves
the board to take action and instruct Mr, Gong to disagree or not to agree but
I am not going in opposition to my city Attorney's ruling, I will be in another
motion making some other factors, but I'm not going to disagree with the ruling.
SEP 2 3 1975
Mayor Pyerrrtt 'Unless {��p1 ;hear yo�the ifse Icy&ssume thst's tie position of this
full 'ttiMthisisot. 1How, Mr. krny yannt tto,
Mr% gtny Pannottot Honorable Mayor, the tbers of the ComMissitft. I'm president
of the taxpayers league in Miami and Dade County. 1'tn president of Homestead
taxes. 1 have looked over the budget, approximate budget that the County
Manager has reco etdeds,.. 1 dean the City Mattager has recommended and it appears
to me to be an economy budget and a businesslike budget. 1 think he's taking
the taxpayers and the people who need itn mind when he's kept this budget down
and we have 18 or 20,000 people out of work in the City of Miami. We have
senior cttisetts who are financially facing their back against the wall. We
have matty, many people who are just -= can't pay higher taxes. Now, City Manager
as 1 said, giving an economy budget and a businesslike budget and here we are
here we come with technicalities-- Mr. Gong, comes up here and so forth and so
on that might increase it 3 million dollars. Well, let me tell. you 5 million
dollars is a lot of money, your City Manager is as formally asked has given you
Some ideas of how to increase the pension fund and spread the money out over
35-years. Mr. Gong doesn't want it that way. Mr. Gong wants it 20-years. Well
that's going to work a hardship on the taxpayers. As your honorable Mayor ..---
it's going to cost 5 million dollars extra and these people just can't pay 3
million dollars. And t commend the City Manager doing what he's doing and 1
think he's on firm grounds and I think we got a City Attorney's opinion is just
as good as Mr. Gong's. Because I think Mr. Gong who was up here today is just
a little high pressured. You know I'tn for labor when they're fair . 1'tn for a
pension system but let me tell you something the city law says that the assets
-- can the City of Miami give 4 million dollars to a pension system. I think
the law says they can if they want to but they don't have to give that much and
it doesn't stipulate how much they have to give. So Mr. Gong I'm going to tell
you one thing and that's this you're coming up here with some high pressure
talk, you're going to sue the City of Miami, you're going to do this. Well, let
me tell the City Commissioners and Mayor if you do there is no obligation that
the city had to pay 11 million dollars a year to subsidize the pension fund and
you're liable to have if you think you're going to try to break the City of Miami
and the taxpayers, you got another guess coming because you might find yourself
that the taxpayers of the City of Miami will high pressure the Mayor and the
City Commissioner and say don't use anymore of the taxpayers money than you have
to to subsidize the pension fund and they don't have to do it legally Mr. Gong
and I want you to know that there. And now I again going to repeat that your
City Manager have you given you an economy and a businesslike budget- stay with
him, stay with your opinion of the City Attorney. If you have to go to court
fight it and Mr. Gong will be a long while before he can get what he thinks
he's going to get. The courts will be years and years before they ever win the
case and Mr. Gong again I'm going to tell you you're a very able attorney,but
you're a high pressured attorney. I think you're going to lose. The pension
fund people are going to lose, the City of Miami is going to win in a long run
because they're not going to subsidize 11 million dollars in the pension fund
that they don't legally have to do. Thank you Mayor. May God Bless You.
Mr. Plummer: Mr. Mayor, the only motion that I would like to make now is to
direct the City Attorney unless you're ready John to make an absolute ruling
right now to investigate and report back to this Commission, whether or not
that four mills is included in the ten mill cap. Are you willing to make a
ruling now or do you want time to look into it?
Mr. Lloyd: No. I would like time to look into that.
Mayor Ferre: Yea, but that's an important decision because you see if it's in
the ten mill cap then -- you see,then what the Manager says isn't quite right
then - whoever is in the ten mill cap or isn't decides whether or not we can
just shift around with these things.
Mr. Lloyd; Oh, this is correct.
Mr, Plummer; Well, I, understand but right now this is an unanswered question.
And I think that we need these kinds of answers. The City Attorney says-- I
don't know how long it's going to take you to research it.
Mayor Ferre; Are you telling us that you don't want to adopt the budget?
Mr, ?timer; No sir. No sir, but I think this is the question that has got to
be resolved, It's got to be resolved,
;J O
Mayor ferret Weil, t don't see how we can adept the budget unless we have that
answers
Mr. Plummer: YOU can adopt it Mr. Mayor because let the tell you the budget Is
Mt a fixed item. It is a livable item that has changed two, three, four time+
A year.
Mayor Verret l didn't know that.
Mr. Plummer: Oh sure. l remember a month ago we rioted on the appropriations
ordinance to change it. Am l correct?
Mr. Andrews: yes, but you have to take that within an area of reasonability
when you adopt the appropriations ordinance after public hearings you can't
take any major adjustments to the tillages the tray they're set without going
through the whole process again and having tone_
Mr. Plummer Are we saying we're scared to hear the answer?
Mayor Ferret No, what we're saying is that once we get this it's going to be
chisel and stone, that's what we're saying.
Mr. Plummer: What I mean Mr. Mayor if that in fact in the law we have two
disagreements here, ok?
Mayor Ferret No, there's no disagreement. What we have to do is we have to
wait as Z see it until we get a legal interpretation of that and once we do
that then we can adapt the budget depending on what the answer is. Because if
the answer is one thing then we ----
Mr. Lloyd: Well, here is the thing now if you see-- what you're asking is
whether or not this up to were not to exceed four mills for relief or pension
maybe it has to be outside the ten mill cap and is therefore analogous to your
debt fund which is. Now, of course, you see, one of the difference which you
have to consider there is that- that debt fund is a fund which has been voted
on by the people of the City of Miami to tax themselves so you see that's
mandatory to come outside the ten mill cap. So therefore you do not have an
analogous situation with your four mills because that is not a vote of the
people who tax themselves for---- that's the fundamental difference.
Mayor Ferre: I don't know the law and I'm not a lawyer and I'm not putting
myself in that position. But Eddie I'll tell you what I remember was our
intention at that time or what the legislature is because I voted against it.
And the intention was that this be a 10 mill cap on taxes and the only thing
that was excluded was those things that the people voted on which was that
and therefore I think that this is within the 10 mill cap and if it is within
the 10 mill cap and it doesn't make a bit of difference whether you put it in
the left pocket or the right pocket.
Mr. Lloyd: Actually I might say this that I would like some time to research
this very carefully because it isn't important, however let me say this prelim-
inarily. You see another fundamental difference besides the fact that the
citizens have voted to tax themselves in the bond issue which constitutes a
debt against the taxing power of the city. Number two is you see, that is an
actual fixed rate whereas this is not a fixed rate. It is not to.exceed and
if you were to carry this to its logical conclusion if you say it has to be
a fixed rate you'd have to take your 12 mills and all of those other things
which are set up and say they're not to exceed also you'll come out as the
manager pointed out with 20 mills. So therefore it would appear logical at
this time to say that it is not probably within - it is probably within the
10 mill cap rather than outside of it. However, I don't like to make something
just off the cup and I would like a little time to further research it.
Mayor Ferre: Well, how much time would you need?
Mr. Lloyd; A day or so.
Mr, Andrews; Mr. Mayor it was my intention that after you settled all of this
that we bring the appropriation ordinances actually to the meeting on the 25th,
It's too complex to try --
Mayor Ferre; All right now so is there anything else to come up before this
Commission on this matter?
V
Mt. Plunkett I just want to research the matter that 1 have a question itt and
that's it. Mr. Mayor, I just will for purposes as speaking as a Commissioner,
I have been opposed and l know your thoughts real quick like, but there is no
way that I can vote for a 55-yeas funding. And, 1 will vote that way when the
ordinance comes up.
Mayor Petrel t el i, and there is too way that l'ri going to vote for a 3 million
dollar intreasem,-.,.
Mr. Plummet I understand.
Mayor Perret And, if you can find a middle ground then I'm all for it.
Mr. Plummer Well, that's that I had hoped that we might teach, but obviously
it's not the case the City Attorney has ruled and as a 'Commissioner I'm bound
by his ruling.
Mayor Ferrel Veil, that's where we're at. Now we gotto to talk to the employee.
It's 12t20. Rose, you got to go by what time?
Mrs. Gordon: I must leave at 3:30 Mayor and not any later at all.
Mayor Ferret
Mrs. Gordon:
Mayor Ferre:
right here as
So it's 12:15
to take up.
ADJOURNMENT
I would recommend then, if it's all tight -
I can cone back again if you want to reconvene about 5:30.
I would recommend that we order some food
we can keep on going, otherwise we're not
. Now, before we get into the budget it's
either upstairs or
going to finish today.
a matter that we have
There being no further business to come before the City Commission,
on motion duly made and seconded, the meeting was adjourned at:
12:20 O'Clock P. M.
ATTEST: H. D. SOUTHERN
City Clerk
MAURICE A. FERRE
Mayor
RALPH G. ONGIE
Assistant City Clerk