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“Retired” Ann Arbor City Employees Earning $100K+ While Collecting Taxpayer Funded Healthcare/Pension Benefits

Detroit Mayor Dave Bing, in his State of the City address, verbally slapped around Governor Snyder (who was in attendance) a bit about the proposed state budget which would, Bing said, do the “most harm to Detroit.” A few minutes later, Mayor Bing stressed that he is “…committed to change the way we deal with our labor negotiations. A culture that was rusted in place over a period of decades is now showing signs of progress and cooperation…The bottom line is that our current pension obligations are unsustainable and it is in no one’s best interest to allow that to continue.”

Amen.

In Ann Arbor, according to the retirement plan actuarial reports, on June 30, 2005 the city had an unfunded retiree healthcare liability of $121,568,000 million. Its pension plan was overfunded by $14.322  million (plan’s actuary said the assets were $14.322 million more than needed to make future pension payments).  As of June 30, 2010, Ann Arbor had a retiree healthcare debt of  $169,637,000 million and a pension debt of $45,496,000 million. In a single year, 2008-2009, the city’s retiree pension fund lost 27 percent of its assets ($80.5 million) due to investment losses. The same year, in order to keep the pension fund 93 percent funded, the city was required to increase its contributions to the pension fund by 100 percent, from $7 million to $14 million (money which comes directly from the same pool of revenue that funds citizen services). As of 2010, Ann Arbor taxpayers were supporting 834 retirees, and in 2010 the system was projected to pay out $26.2 million to those individuals, or an average pension of about $31,000 per employee. Health care costs are separate, and that fund is 87 percent underfunded.

As the chart below shows, the cost of benefits for city employees has risen sharply since Roger Fraser became City Administrator in 2002.

In just eight years, Fraser has plunged Ann Arbor almost half a billion dollars into debt, when debt for capital projects and the unfunded pension liabilities are combined. Under Fraser’s administration, the city’s debt load has quadrupled and debt payments have skyrocketed, as well. It’s not the total amount of debt that’s the problem. Ann Arbor could take on loads more debt, legally, as Third Ward Council member Christopher Talyor pointed out in an error-filled email “explaining” the city’s debt—a move that earned him an A2Politico Weekly Whopper award. It’s that the pension/debt payments must be made from the city’s operating funds. Fraser, with Council’s blessing, has taken the city into more debt than the city’s operating fund can accommodate. As a result, citizen services have been cut and backdoor tax hikes have been levied in the form of fee hikes for water, sewer, solid waste, etc….

While Council has played Twister to try to close short-term budget gaps, John Hieftje, City Council members, and City Administrator Roger Fraser have done next to nothing to curb the increasing pension gap. Well, they did something. On January 3, 2011, Council voted to change the language of the pension ordinance, with Fraser’s blessing, including a change that made cost of living (COLA) increases to city pensions mandatory. Prior to January 3, 2011 cost of living increases were discretionary.

When he ran for re-election, Fifth Ward Council member Carsten Hohnke told voters this summer the city’s underfunded pension was one of his “main” concerns. Six months later, Hohnke seems to to have stopped fretting; he hasn’t sponsored a single resolution to address the pension problems. John Hieftje did Hohnke one better while running for office. Hieftje assured voters he “had a plan” to address the pension woes. Now, six months later, Hieftje has not uttered a single word in public about his “plan.”

Ann Arbor’s future retiree health care obligation is 87 percent unfunded. If that sounds innocuous, think again: taxpayers are responsible for coughing up the money to pay that obligation. Even city’s that go under, financially, find themselves responsible for paying for city employee pensions and health care benefits. This future employee retiree mess is one of the most serious financial problems facing Ann Arbor. It’s a system that allows retirees to vest after just five years, and to collect healthcare benefits and full pensions from the City while working full-time elsewhere. In Ann Arbor, employees can retire with benefits at 43, and many do retire in their early 50s.

These former City of Ann Arbor employees demonstrate the serious flaws in the pension system, flaws that were identified by a Blue Ribbon Panel appointed by John Hieftje in 2005 to produce a report on the pension system. Hieftje never acted on the report. As a result, all of the following “retired” Ann Arbor city employees are collecting both pension and healthcare benefits while working full-time elsewhere. Two of the “retirees” are double-dipping (collecting money from the city as contractors, salaries from their new employers, as well as a pension and healthcare benefits funded by Ann Arbor taxpayers):


Ron Olson

Ron Olson served for 20 years as associate city administrator and superintendent of the Ann Arbor parks and recreation department, as well as filling in as interim city administrator on two occasions. He applied for the job of City Administrator in 2002, but the job was awarded to Roger Fraser. Olson became chief of the Parks and Recreation Division for the State of Michigan Department of Natural Resources in January 2005. He is responsible for operations, budgeting, planning and strategic management of the division that includes harbors, state parks, recreation areas, trails and boating access sites. Ron Olson earns a six-figure salary from the State of Michigan, and the City of Ann Arbor pays about $65,000 per year for his retiree healthcare benefits and pension, according to the Fiscal 2010-2011 information available from the City of Ann Arbor.


Gregory O’Dell

In his almost 20-year career with the Ann Arbor Police Department, Greg O’Dell, climbed the chain of command from patrol officer to deputy chief. He “retired” in January of 2008, and applied to receive his pension and healthcare benefits. On February 7, 2008 O’Dell was hired as the executive director of public safety at Eastern Michigan University, where he continues to work full-time earning a six-figure salary, while collecting pension and healthcare benefits worth almost $65,000 per year from the City of Ann Arbor, according to fiscal 2010-2011 information available.


Adrian Iraola

Adrian Iraola worked  as a project manager for the Downtown Development Authority, and the City of Ann Arbor for 25 years. He “retired” in 2005 and went to work at Washtenaw Engineering. In 2008, the DDA employed Iraola to oversee the demolition of the old YMCA building. In 2009, the DDA was charged by the City of Ann Arbor to build an underground parking garage. When the DDA began the underground parking garage project, Iraola left Washtenaw Engineering and launched his own company, Park Avenue Construction Consultants. It was Iraola’s company that was employed to oversee the Fifth Avenue parking garage project. Iraola is a senior project manager in charge of the underground parking garage project. The City of Ann Arbor charges Iraola’s retiree healthcare costs to the DDA. Not only does Adrian Iraola’s new company earn money from his former city employer, he is one of two double-dippers on this list. While he is being paid as a consultant on the underground parking garage project, Iraola is also collecting a pension and healthcare benefits from Ann Arbor taxpayers worth over $60,000 per year.


Michael Bergren

Michael Bergren was the City of Ann Arbor’s Assistant Field Operations Manager, the city’s “lighting expert.” He retired from the City in September of 2009, and is now working for Park Avenue Construction Consultants. Like Adrian Iraola, Bergren is a double-dipper. While he is being paid as a consultant on the Fifth Avenue underground parking garage project, Bergren is also collecting a pension and healthcare benefits from Ann Arbor taxpayers worth over $60,000 per year.


Jayne Miller

Jayne Miller Miller, 52, worked for the City of Ann Arbor for almost 22 years. At the end of her career, she was the community services area administrator for the City of Ann Arbor, which included Parks and Recreation Services, the Office of Community Development, Planning and Development Services, and the Open Space and Parkland Preservation Program. Miller ”retired” from the City of Ann Arbor in February of 2010. On March 1, 2010, Miller began retirement as the newly hired head of the Huron-Clinton Metroparks. Miller resigned from that post abruptly in September of 2010. In October of 2010, Miller was hired by the Minneapolis Park and Recreation Board as the superintendent of that city’s park system. While she is earning a six-figure salary from the City of Minneapolis, Miller is also collecting a pension and healthcare benefits from Ann Arbor taxpayers worth over $65,000 per year.


Roger Fraser

Ann Arbor’s City Administrator Roger Fraser will be eligible for a pension and healthcare package worth over $65,000 when he “retires” from the City of Ann Arbor after nine years of service. He will be “retiring” into a job with the state of Michigan that pays a six-figure salary. Roger Fraser sits of the Board of Trustees of the Employee’s Pension System, as does the city’s CFO Tom Crawford. The 2005 Mayor’s Blue Ribbon Panel report recommended removing Fraser from the Board of Trustees, as in his position as city administrator he would have little impetus to reign in the cost of pensions or make changes to the benefits offered. In fact, Fraser recommended to Council on January 2011 that pension COLA raises be made mandatory, and he will benefit directly from that recommendation. 

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Short URL: http://www.a2politico.com/?p=6032

10 Comments for ““Retired” Ann Arbor City Employees Earning $100K+ While Collecting Taxpayer Funded Healthcare/Pension Benefits”

  1. [...] Detroit Water and Sewerage Department Director Sue McCormick said Friday she “remains confident” in former Ann Arbor Police Chief Barnett Jones. Her department also sent  out a press release January 11th affirming confidence in Jones and pointing out his long background in police work. Flint, which is being run by an emergency financial manager, was paying Jones $135,000 a year as the city’s Chief of Police. The water department is paying him $138,750. McCormick, who started at the Detroit Water and Sewage Department in January 2012, hired her old Ann Arbor pal Jones in May 2012, just one month after Jones “retired” from his job in Ann Arbor—another former Ann Arbor city employee who “retired” with a fat pension and benefits, th… [...]

  2. [...] that pays six-figures, then collecting a pension and health care benefits from the city. A2Politico posted an investigative piece in May 2011 that identified six former Ann Arbor city managers who “retired” into new jobs, some [...]

  3. I followed the link at AnnArbor.com. Thank you for writing about this. We have been reduced to paying our property taxes a bit at a time because my husband was furloughed from his job. It makes me sick to know that while we struggle to make ends meet, and pay what amounts to a mountain of taxes, these people are taking advantage of Ann Arbor taxpayers taking advantage of our family! This needs to change and now.

  4. Is what Russ Miller is saying that the city is ignoring abuses of the pension system on purpose? If so, what can be done? It seems to me that Ron Olson and anyone else who is taking these benefits while working elsewhere should be made to repay the amounts with interest! This is shameful. I want to see city employees treated well. These people are abusing the system and need to stop. They obviously are not going to do it on their own.

  5. Are you sure all those folks are actually collecting health care benefits from the city? Looks to me like there is an perfectly good mechanism, albeit requiring some auditing effort, for avoiding some of those expenditures in chapter 21, part B of the municipal code:

    1:720. – Termination of benefits.

    Except as provided in 1:721, participation in the Plan shall terminate in accordance with the Plan and/or Insurance Agreement, applicable Collective Bargaining Agreement or City Personnel Rules and Regulations, on the earliest of:

    (8) in the case of a Retiree, if that individual assumes employment elsewhere and that employer provides health coverage to its employees which does not substantially differ from that offered by the Plan; provided that should the Retiree lose such coverage from the other employer for any reason, including voluntary or involuntary separation of employment, upon production of proof of such loss to the City, the City’s obligation to provide health coverage under the Plan shall recommence immediately upon the satisfactory production of such proof-of-loss; or

    (Ord. No. 41-98, § 1, 10-19-98)

    http://library.municode.com/HTML/11782/level3/TITIAD_CH21REHECABEPLTR_PTBHECABEPL.html#TITIAD_CH21REHECABEPLTR_PTBHECABEPL_1_720TEBE

  6. As council member Rapundalo said recently about the super-sized benefits paid to unionized employees, where do I sign up? It should be noted that several of these people are managers, non-unionized employees. So, council member Rapundalo, where’s your sarcastic comment and look of distaste about the upper-level employees soaking it to the city?

  7. [...] project manager for the Downtown Development Authority, and the City of Ann Arbor for 25 years. He “retired” in 2005 and went to work at Washtenaw Engineering. When the DDA began the underground parking [...]

  8. Robert C. Smith

    It’s obvious that the city can’t sustain this kind of expense, and ridiculous that it wasn’t dealt with sooner. The obvious answer is that the retirement age for city employees should be 65. Furthermore, early retirement should not mean that pensions kick in early. Lastly, if city employees retire at 65, they will be eligible for medicare, right? This would completely eliminate the need for Ann Arbor taxpayers to pay for health care at all. This is not a complicated problem. It’s just not convenient for those who benefit from the bloated benefits to fix the problem. After all Roger Fraser’s name is the last name one on the list above.

  9. The pension lost 80 million is one year and no one at the newspaper wrote about it?!?! So how come Hieftje put together a committee and then put the report in a desk drawer to gather dust? Anyone know?

  10. One has to remember that these employees, no doubt, made contributions to these pension funds and so I have little problem overall with the concept of taking the pension. The healthcare coverage which, if I’m not mistaken, would cost almost as much as the pension, is another matter entirely. This needs to end. It’s absolutely the wrong moment to have 52-year-old Jayne Miller collecting healthcare benefits while she works for the city of Minneapolis that, no doubt, pays her for not taking advantage of that city’s health care benefits.

    This is a very important investigation, and as a taxpayer I thank you for undertaking to bring this issue to the forefront.

    As for Christopher Taylor’s ‘explanation’ of the city’s debt that he neglected to include pension debt either signals that he is wholly ignorant of the serious nature of having retirees programs that are seriously (healthcare) underfunded.

    The other question I have is whether the 27 percent loss to the pension fund was the result of imprudent investing on the part of the companies employed to invest the money by the Pension Board Trustees. I know this is asking a lot from someone who must have other responsibilities, but I’m hoping this is where you might go next with this investigation. I know other cities that have experienced similar losses have sued their investment firms for making risky investments. Is the 27 percent loss above and beyond what could have been expected given the market’s volatility? I don’t know, but for heaven’s sake someone should be asking the question and not simply accepting that a 27 percent loss in a single year was unavoidable.

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