Thursday, October 27, 2005 | Former police Chief Jerry Sanders continued a decidedly negative campaign Tuesday against Councilwoman Donna Frye, accusing her of lying and not doing enough to rescind an addition to a personal pension benefit she purchased in 2003.
The move came even as a poll released Tuesday showed Sanders ahead in the race.
Sanders contends that Frye should have known that the city was losing money with a program – known as the purchase service credit – that allowed employees to invest in its pension system and that she shouldn’t have participated in practice herself. He went on to say her commitments to back out of the program were not good enough. He called her statements that she had a “fib.”
But questions immediately arose about whether the City Council, including Frye, knew the cost of the program. And even some critics of the fund who sympathize with Sanders say most employees – including the City Council – probably didn’t know the city’s pension system suffered because of the benefit. Finally, undercutting his claim that she has not done everything possible to wash her hands of the benefit, Frye recently proposed an ordinance that would roll back all pension benefits enacted in 1996, which includes the city’s purchase of service credits.
Sanders still pushed the issue.
“The truth is, despite her numerous claims to the contrary, Donna Frye has not given back her discounted pension credits,” Sanders said. “She’s been caught telling the voters a fib.”
At his campaign headquarters in Bankers Hill, Sanders enumerated his charges.
They focus on what happened in October of 2003 – nearly a year after whistleblowing Pension Trustee Diann Shipione first publicly revealed concerns about the health and structure of the city’s retirement system.
It was then that Frye contracted with the retirement system to purchase five years of credit toward her own pension. Many employees did the same thing because more years of service credited to their pensions mean higher overall pensions upon retirement. Frye paid off 1.83 years of that purchase immediately with a lump sum payment, and agreed to have her monthly salary deducted until the rest of the benefit was completed.
Around that same time, there was a “glut” of applications for a similar arrangement by city employees hoping to take advantage of price for the service credits, as they are known, according to the system’s former actuary.
When news of the benefit’s cost became controversial in April of this year – before former Mayor Dick Murphy resigned, provoking a new election for mayor – Frye said she would ask that her personal benefit be rescinded or that she be required to pick up its full cost.
“She did put in the request and anyone who said she didn’t is not clear on the facts,” said Rebecca Wilson, spokeswoman for the San Diego City Employees’ Retirement System.
But Frye may not be able to undo the October 2003 transaction entirely. Wilson said that although Frye could unravel the payments she’s made since then, Frye’s initial purchase of the service credit could not be refunded because it had come as a “rollover” from a personal retirement account. And that personal account – from the investment arm of American Express – would not accept the return of the funds.
Frye has said that the moment she learned that there was trouble with the pension system, she began a campaign to learn about it and reform it. She says that epiphany came when Shipione first appeared before the City Council to warn against passage of the now notorious Manager’s Proposal 2 prompting Frye to vote against part of it – the only dissent on the City Council.
Shipione has supported Frye’s campaign and she said Tuesday that Frye’s record on it was admirable.
Sanders said that if Frye was such a critic of the pension system, she should not have purchased the extra benefit so long after first learning about the problems the retirement fund faced.
Accountant April Boling, the former chairwoman of the Pension Reform Committee and an advisor to Sanders’ campaign, said it’s not such a clear-cut case.
“It’s true that the council members were not connecting the dots that the purchase of service benefit could be part of the pension problem. It seems obvious to us today,” Boling said. “But it wasn’t so obvious back then. And they were not specifically told to connect those dots.”
In a previous interview on the topic in June, Retirement Administrator Larry Grissom said that city staff had directed him to communicate retirement issues like the cost of the purchase of service credits to them and not to the City Council directly.
Frye purchased her benefits in October 2003 only days before a change in the cost of the benefit more than tripled. Prior to November 2003, City Council members were allowed to purchase a year of retirement credit for 15 percent of their salary. The next month it cost 50 percent.
A campaign aide told reporters at Sanders’ event that any “reasonable person” would have been suspicious of such a hike and reluctant to participate in the program.
It was later determined that the process of allowing employees to purchase service credits had forced the retirement system to subsidize the benefit, which further burdened an already troubled fund.
But Sanders’ himself was unclear on why Frye should have known better.
Asked about what evidence Frye had that the system was suffering because of the practice, Sanders said she had been warned by the city’s Blue Ribbon Committee on City Finances.
But the Blue Ribbon Committee report had contained nothing about the practice of allowing employees to purchase retirement credits.
When a reporter pointed that out, Sanders said he would need help from his aides but that “it was general knowledge” that the practice was a bad one.
“I remember that conversation going back some time,” Sanders said.
A report from the polling firm Datamar said Sanders leads Frye by a 14-point margin, 53 percent to 39 percent.
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