City Of Dallas Looks To "Clawback" Ill-Gotten Pension Gains From Police

Tyler Durden's picture

Almost exactly one month after taking the unprecedented step of suspending withdrawals from the Dallas Police and Fire Pension (DPFP), the Dallas city council is looking to "clawback" what it views as ill-gotten interest payments made to pensioners to the tune of roughly $1 billion.

Of course, we have followed the epic meltdown of the DPFP closely over the past several months after a series of shady real estate deals brought the fund to, in the words of Dallas Mayor Mike Rawlings, "the verge of collapse" and resulted in an FBI raid of one of the funds largest real estate investors (see "Dallas Cops' Pension Fund Nears Insolvency In Wake Of Shady Real Estate Deals, FBI Raid").  The discovery of the failed real estate deals led to a "run on the bank" as scared pensioners looked to withdraw as much as possible before the whole ponzi scheme collapsed (see "After A "Run On The Pension Fund" Dallas Mayor Demands Halt Of Withdrawals").  All of which culminated with the unprecedented decision last month to suspend withdrawals (see "In Unprecedented Move, Dallas Pension System Suspends Withdrawals") after nearly $500mm was removed from police accounts.

Now, according to a local ABC affiliate, the Dallas city council is frantically working with the DPFP board to close a $4 billion funding gap.  While the city has agreed to throw an incremental $1 billion of taxpayer money at the problem over the next 30 years, that additional funding comes with some strings attached, which includes a $1 billion "clawback" of what the city views as ill-gotten gains from Police DROP accounts.  The proposed "clawbacks" would come in the form of reduced future distributions for pensioners.

For those who haven't followed this story as closely, DROP, which was created in the early 90's, allowed police and firefighters in Dallas to retire while still on the job. Their monthly pension checks were then diverted into DROP accounts, which were guaranteed an 8-10% return regardless of how the overall fund performed.  Unfortunately for DPFP pensioners, the Dallas City Council now views those guaranteed returns as an effort to defraud Dallas taxpayers of billions...we would tend to agree.

The city has agreed to put in an additional billion dollars over 30 years, but they're proposing a series of bitter pills to make up the rest of the nearly $4 billion shortfall.

 

The bitterest pill: A proposal to take back all of the interest police and firefighters earned on Deferred Option Retirement accounts, or DROP. That would amount to an additional billion dollars saved.

 

The city is calling it an "equity adjustment." Retirees call it an illegal "claw back."

 

Whatever you want to call it, it's outlined in a draft legislation being hammered out by the city and pension fund leaders. Pension fund representatives and the city have been meeting almost daily to try to come to an agreement on proposed legislation that they can take to the state capital to fix the failing fund.

Of course, anyone with half a brain probably should have realized that this ponzi on steroids was doomed to fail from the start.  But, better late than never we suppose. 

To add insult to injury, for Dallas taxpayers at least, the City Council also notes that the DPFP's artificially high annual cost of living adjustments have resulted in pension checks that are 20% higher than they would have been had they been tied to actual inflation levels instead. 

News 8 obtained a copy of the legislation which says accounts would be "adjusted to zero percent of interest."

 

"It's very tough but the city wants to protect the monthly benefit," Kleinman said. "It's a restatement of their accounts."

 

The city is also seeking to "equity adjustment" on cost of living increases. The city says that pension checks are about 20 percent higher than they would have been if increases had been tied to inflation.

 

The city's proposing to freeze cost of living increases until it catches up to the inflation index.

 

DROP and the cost of living increases account for about half of the fund's liability, the city says.

 

For those retirees who have already taken the money out of DROP accounts, they'd garnish their future pension checks to recoup excess interest. Worried retirees have withdrawn in excess of $500 million from DROP accounts in recent months.

Meanwhile, all of these discussions have Dallas' police predictably upset.

"We used the rules they gave us now all of the sudden they're going to go back on the rules and say hey you don't get any of that," said Charles Hale, a retired police officer. "That's not fair."

 

Retirees promised they'd be suing if anybody tried to take back money they feel they've earned.

 

"It's acting like it was an underhanded Ponzi scheme that we pulled," said Joe Dunn, a retired police officer. "It's not fair."

Frankly, we too are shocked at the audacity of the Dallas City Council to suggest that public employees be forced to be compensated in a way somewhat more akin to private employees.  It's just outrageous.

 

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Grandad Grumps's picture

How about the SEC taking back money from Wall Street fraudsters, such as all past CEOs of Goldman Sachs, JP Morgan, Citi etc.????

The Dallas pension means a lot to a lot more people, but it is peanuts by comparison.

Heavy's picture

that is also a form of cop thief

greenskeeper carl's picture

While I certainly agree that these accounts are bullshit and should be ended, clawing back what you agreed to pay someone isn't a great idea either. End this nonsense, and tell them future increases will be indexed to inflation, but the city trying to fix their fuckup by getting money that they already paid out isn't going to fly.

 

In the end, its all a moot point anyway. This pension, and all the rest, are doomed to fail regardless of the tinkering they do with the math. This would amont to another can kick no matter which way it goes.

Handful of Dust's picture

"If you like your generous pension, you can keep your generous pension!"

SilverRhino's picture

The system stealing from the guards that were stealing from the citizens.  

 

From time to time, shit rolls uphill 

DownWithYogaPants's picture

The deal here is that Dallas needs to declare bankruptcy.  Then these guys get nothing.  That's how it would be in the private sector.

Or they can take the deal.

erkme73's picture

Protecting and serving the taxpayer... right until they don't.

jcaz's picture

We never promised you a rose garden, fucktards-  you damn well knew that your pension system was bent, and you were happy to collect ridiculous payouts,  assuming that someone in the future would cover for you-

Like every punk that robs a 7-11 and then thinks he can keep the money after he gets out of jail.....  Umm, no.

If you cops aren't happy, feel free to talk to the union rep that sold you this line of bullshit,  go all the way up to the mayor-  I have no problem with a little Frontier Justice here.....

August's picture

I'm so happy that America's federal, state, county and municipal governments still try to do the right thing for their hard-working employees. 

Generous, caring government is the lynchpin of a stable society today... and the key to a better tomorrow!

/s

rockstone's picture

That's all well and a good. But we know what's up next. A bailout. And not just by the Dallas tax payer. ALL of us are going to be asked to chip in. So.....thank you no. Stiff the fat fucks and let's be done with it. They know they should have never had it in the first place.

Sucks to be them.

Stroke's picture

" It'snot fair"......WWWAAAAAAAAAAAAaaaaaaWAaaaaaaaaWAAaaaaaa!

STFU!

Stalefarts's picture

Can't stop LMFAO! Taking a pension away from a cop is like taking a Big Mac away from Chris Chrsitie lol !

onthesquare's picture

Grandpa Grumps:

when I compare the number of down ticks with the number of up ticks I can see the ratio of crooks to honest people playing the system.

Out of the herd of Dallas cops that listened to all these promises of great times after work it would be hard to be the only one in the locker room raising questions about the 20% yeild and the intent of the DROP without being afraid of finding himself all alone waiting for back up in some dark dungy hole in Dallas's poverty part of town.

Against the wind.

knukles's picture

So them gubbermint pensions just ain't so secure anymore, are they?
So just about the time the state et al figured that financial problems would beset them, Hillary or whomever would bail them out.
Then along comes President Trump.
Nope, the taxpayers ain't up for footin' any nonsense bills like that now, are they.

Handful of Dust's picture

When my aunt retired from this huge medical system up north I told her quick, take out your pension ASAP in a lump sum and move it as far away as possible---which she did despite numerous attempts of her company to try to hold onto it by slowing every move down.

We finally got it out and three months later her corp went belly-up and pensions were drastically cut to I think about 10 cents on the dollar.

HRH Feant's picture
HRH Feant (not verified) Handful of Dust Jan 6, 2017 8:19 PM

People always think that their situation is special and nothing bad will happen. Serious type of cognitive dissonance. Good for you that your aunt listened to you. Great advice.

Handful of Dust's picture

She was very lucky. I was amazed at how hard they fought her to prevent her from taking her own money out despite the fact they had zero right to keep it. The way I did it was to call my lawyer who demanded immediate transfer or face various lawsuits so the lady there got scared and obeyed....finally.

boattrash's picture

HRH, I like to refer to it as "Normalcy Bias" like the people at the Batman Movie Theater Shooting, they thought they were getting the "special" treatment..."Oh, well isn't this great, look, a real actor, pretending to be a shooter, just to promote the movie for us"!

 

Draybin Deffercon III's picture
Draybin Deffercon III (not verified) Jan 6, 2017 8:09 PM

Want the money you were owed? Here, have this claw instead bitchez!

Croesus's picture

Coming soon, all over the country.

JustPrintMoreDuh's picture

He/she who panics first might get out with pennies on the dollar ...

Everyone else,  sorry about your luck ... thank you for playing.

techpriest's picture

So my in-laws took part in the Tiananmen Square protests (apparently the "tank man" was the exception to the rule - other "tank men" were simply shot), but what was more interesting than the protest itself was what happened afterward. Apparently the Party realized that people would literally rather die than pay any more taxes, so they eased up on the communism and laid off a shitload of public workers.

I'm imagining that this will have some similarities - quite a few people who literally did not know how to work in the real world either became destitute, or starved. Like it or not, plenty of low-to-mid level public workers are going to end up on the street when the cities go bankrupt.

Or, you can also check out the book "Detroit: an American Autopsy."

onthesquare's picture

I believe retirement is a 20th century term.  Prior to that you invested in family, worked until you could on the family farm, which your sons took over, then quietly slipped away in your sleep.  You went out with what you came with; nothing.

We have lived in the best of times.  Never gone hungry, played lots of golf, drank good whiskey, took trips around the world, have a loving wife and family, etc. etc.

and now i watch as the chickens come home to roost.  This is the real math.  Work for 20 years then lay around and collect a paycheck for the next 20, 30, 40 or more years????????????

the 8th wonder of the world; compound interest.  Albert Enstein.

Hulk's picture

Clawbacks !!! Its whats for Dinner !!!

itstippy's picture

There are real people hurt by this disaster.  How would you like to be a 26-year-old Dallas cop, wife and two kids, two years away from retirement, and now this?

Have a heart, man.

Hulk's picture

I can remember back when 26 yo cops looked old !!!

besnook's picture

thieves end up in jail without anything. don't tell me you are so naive not to know you were fucking the public for your own gain.

DemandSider's picture
itstippy Jan 6, 2017 7:15 PM

"There are real people hurt by this disaster.  How would you like to be a 26-year-old Dallas cop, wife and two kids, two years away from retirement, and now this? Have a heart, man."

 

My wife had filed tax returns and taken tens of thousands of dollars in refunds, while I was left to pay the tax bill. I had told the state and IRS about this situation, and that I could barely afford food for my family, despite being above the median wage, and working at least 10 hours overtime for years. It didn't matter to them at all. Both state and Federal deliberately garnished my wages just before Christmas, around $1,200.00 per month, twice. This is how ex liberal, Trump voters like me were created. Sorry, I don't a have heart for any outsourcing - dependent government employee pension plan. Government employees need to be down here with the rest of us, non union, non defined benefit pension workers, and maybe they'll start supporting American made, American brands wealth creators again. There will always be be a relationship between tax payers' potential income, and the potential income tax payer funded workers can make, that's just simple math. See Wisconsin.

Moe Hamhead's picture

You must mean your EX-wife!

DemandSider's picture

No. I would never allow my family to be broken up over this. She can't afford to get out much, now. No work, no play. She has basically the life of a cloistered nun, now, unless she can find a job during the times I'm not using the car, or within walking distance. The kids have their mom, still, and we all have a bad au pair. Whatever expense she incurs is paid by her, alone. I'm actually hoping she follows through and doesn't renew her license, then I can drop her from my insurance and save a little more. I love my wife, but our kids will come first, and she gets it, now; she's getting older. Women are so lovable; my daughter and wife are so incredibly decent, but I think most females have a predisposition to opportunistic gathering. I really don't think they mean to be cruel, it's in their DNA to ensure the survival of the species. Men should know that going into marriage, just as women should understand how men can be.

Yukon Cornholius's picture

In the immortal words of O'Shea Jackson....

 

FUCK THE POLICE!

TheEndIsNear's picture

26 years old and two years away from retirement???

blueberry100's picture

It'si kinda odd. I guess everyone in Texas retires at 28...... 28 is the new 65.

blueberry100's picture

It'si kinda odd. I guess everyone in Texas retires at 28...... 28 is the new 65.

Not My Real Name's picture

Looks like your satire detector is broken. Cops can't retire until 35.

rockstone's picture

Lots of hard luck stories everywhere. The only places where the police are held above the others are called Police States.

WillyGroper's picture

this is where it gets fun.

clawbacks are for peeps, not banksters.

pass the popcorn please.

DemandSider's picture

The nexus of unionism, anti - taxation, and the police state. What a nail biter!

LetThemEatRand's picture

Just watch.  The Feds will bail it out if all else fails, or federal judges will rule that Dallas must pay what was promised out of future taxpayer collection.  One thing history teaches is that feudal overlords ALWAYS pay their police and military until the very end.

techpriest's picture

When SHTF the governments will go into full-theft mode for sure, to maintain even the barest semblance of order.

GCT's picture

LTER i see property taxes going way up in Texas.  Funny how the crooked council members will bail out the fund with other peoples money.  No one in jail yet again.  Most large metropolitan areas are in the same boat anyway. 

Many thought a nuke would destroy these places when all it takes is the politicians and local officials making promises to public unions to garner their votes.  This will be the cause of their destruction as the ponzi cannot continue.

asscannon101's picture

Wait a minute-  Wait a minute! WAIT JUST A FUCKIN' MINUTE!!!! Are you implying that Law Enforcement Officers, FireFighters and other surly, entitled Municipal Employees would engage in unethical, self-enriching behavior at the expense of TAXPAYERS?!?!?!

DeathMerchant's picture

"To Protect, Serve and Bilk"

DemandSider's picture

DeathMerchant asscannon101 Jan 6, 2017 7:45 PM

"To Protect, Serve and Bilk"

Surprisingly, legal precedent has upheld that the police, legally are NOT required to, "protect", or "serve" the public. We should all be taught that in school but, oddly, we aren't.

Blankone's picture

Just a clarification.  The municipal employees are not part of this plan or the special guaranteed interest rate savings account (drop account).

I believe there are lessor problems with the muni employees pension but the cops had a plan with extra generous benefits.  Most likely including a quicker (fewer years of service) assent to 75% pension, and a much much quicker assent to 100%.  Some places the cops all claim disability and get a tax free pension as well.

Max Cynical's picture

In California...there are more retired CHP officers then there are active duty officers.

onthesquare's picture

No one would suggest that.  

I see the contracts coming up, union reps being told by negotiators to "work to rule", slow down, etc.  and when negotiations start council being bombarded with irrate citizens over crime running rampant.

Those councillors not bending to the demands of the police union are to blame for stalling negotiations.

OK OK OK, GIVE THEM WHAT THEY WANT JUST GET THEM BACK TO WORK!

This is the same story in many union run shops.

RagaMuffin's picture

Civil Asset Forfeiture is about to take on a whole new meaning...............

RafterManFMJ's picture

Retire while still on the job.

LMFAO!

rockstone's picture

That's the kicker. The one they can't explain away. "Ummmm ahhhh. Yeah. It was like this ummmm ahhhhhh. You know....we thought that ummmmm...."