I got an excellent email today from a member of the Fire/Police Retirement Board for the City of Fresno.
I had some wrong calculations in my Monday blog on DROP -- the Deferred Retirement Option Program.
I thank the board member and apologize for my errors. I’ll deliver the right calculations.
And I’ll suggest that the right calculations underscore my main point: Fresno’s unique Deferred Retirement Option Program puts immense pressures on City Hall leaders trying to properly manage their departments for the people’s benefit -- yet those managerial challenges apparently are ignored by those who should know better because the money involved is so big and the demands of self-interest so powerful.
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In my first blog I used the example of a deputy police chief who joins the force at age 20 and enters DROP as a 30-year veteran at age 50. This deputy chief at age 50 has a pensionable income of $160,000 a year.
I said the deputy chief would get 75% of his pensionable income when he entered DROP at age 50. That would be a pension of $120,000 a year going into his DROP account for ten years.
The Retirement Board member said that’s wrong. The retirement/DROP formula is rather detailed, but the bottom line is that the deputy chief with 30 years experience and entering DROP would be eligible for a 55% pension -- $88,000 at age 50.
So, a deputy chief entering DROP at age 50 and staying in the program for the maximum 10 years would deposit $880,000, not $1.2 million as I said in the first blog.
Therefore, the nest egg that a deputy chief might enjoy (deposits and earnings) upon retirement at age 60 would not be in the $2 million range but, instead, would be in the $1.4 million range (by my math -- as the capitalists always note, actual returns may vary).
That’s still a lot of money. In my book, that’s a chunk of money that affects human behavior and, by extension, institutional behavior.
There are many other variables to how a deputy chief in this situation might tweak her retirement/career/DROP options. My point here is not to get into debates on rates of return. It’s sufficient to say rates of return over the course of American history generally have been good. That's another reason this is the best country there is. And it's nice to have $880,000 cash invested by experts in your name.
The essential point of my first blog was an issue connected to Deputy Police Chief Keith Foster.
Foster was arrested last week on federal drug charges. He was loved and respected by all at City Hall and in the Police Department for nearly 30 years. Yet, his arrest by the feds floored everyone at City Hall and the Police Department because no one saw it coming. In fact, everyone at City Hall and the Police Department says it was humanly impossible to detect that Foster was allegedly leading the life of a criminal when he wasn't wearing a Fresno police uniform. No one at City Hall or the Police Department ever saw any hints or red flags, even though Bee reporter Pablo Lopez in Tuesday’s paper used easily-retrieved public documents to report that Foster’s personal and financial life had been a mess for years.
My first blog asked: Is there something at Fresno City Hall and in the Fresno Police Department about the interplay of chief, deputy chiefs, ambitious young cops struggling to get to command positions, human psychology, office politics and the complexities of a DROP program that has a maximum of a stunning 10 years that would make it not just possible but highly likely that everyone would ignore obvious warning signs about Keith Foster because there was simply too much danger to everyone's life-changing financial self-interest in rocking the boat?
I was in the army some 45 years ago. I was stationed in Germany in the headquarters company of a nuclear missile command. I was an enlisted man, far, far down the olive drab food chain. Still, security was a big deal for everyone in the company. No need to explain why.
I think of internal security then. Then I think of Keith Foster. Then I think of the jaw-dropping shock at City Hall and PD.
There are reasons every person at City Hall and the Police Department was caught sleeping on duty.
DROP might be one of them.