money out of the pension fund sooner than they otherwise would have and for a longer time. this can result in additional cost to the pension fund. are people really retiring sooner because of a drop? by answer would be no one knows and no one seems to want to find out. i agree with they say there is no where to go -- no way to know for sure. at a basic level, if it is hard to know if employees are retiring sooner. i asked for specific detailed experience concerning retirements, but it was added to the plan. response to my request was we are unable to provide the data requested. the cost is based on the post- drop experience compared to the prior assumptions about prior experience directly. our problem is the valuation assumptions do not have a

special retirement rate after 30 years of service when the cap is reached. anyone should have difficulty believing that officer age 55 with a 90% pension as a way 12% chance of retiring during the year. imagine your 55 it can retire 90% of pay. is there a chance yuli that year -- [tone] supervisor chu: thank you very much. supervisor wiener: if you would please finish. >> if you think this assumption is right, drop has a cost. if you think is wrong, you should not eliminate drop. one should find the end on the funding method used by the plan. the cost of drop determined under a funding method does not meet the county rules that tied the -- that is not how the drop cost was determined.

we have three questions about the funding method. the first two were not answered. we're not clear on the third question, but i don't figure was a valid answer. we do not know if there is a cost to the drop and no one knows. it could be eliminating drop could cost the city money. there were a couple of things said by the prior speakers i would like to comment on. there are too few retirements to note the extra service being worked to the drop-in by would agree with that. the way the charter was written, it was an absolute test, did it cost money or not, could you keep it or not? i was testifying last week in philadelphia about the philadelphia drop where my client is the city council in philadelphia. he may have been referring to the philadelphia dropped where there was a cost estimate at a

small cost but because it was small enough, they were able to keep it. while i would agree we do not have the range the ordinance is written, this seems to be an absolute test. with the fuzziness seems to be is in the numbers because they say they are not sure. it could be a cost or a savings that i would like to have you keep that in mind. that is my prepared remarks. supervisor chu: thank you very much. supervisor mirkarimi: base of a conversation we had with our controller, i don't think the problem is competing data. we do not have much data as everybody seems to agree various scenarios seem to be indeterminable at the moment. the problem is the way proposition b was written is that it has not enabled the city based on the commentary by the controller's office to study the program.

in a way that presents a variety of scenarios. what is before us three very strict interpretation is the fact that this program buys, subsets by june 30th of laws were have -- -- it was we had something that gives us the ability to respond to. of not hearing what gives us the pliability. >> you do not have a report that says there is an absolute cost to drop. there is a range. there may be a cost, there may be a savings. my hope is that you give it more time and collect the data and get more experience. supervisor mirkarimi: but you have a charter amendment. you have a constitutional issue on charter. this was your strategy, meeting your clients strategy, one that many of us had supported. the city's strict interpretation

is the fact that this has to be qualified by june 30th, which is why we are hearing this now. in order to provide that statutory ability to apply in the way you just said, what's the tools that i think we're trying to figure out of life that gives ability? >> i am not the attorney. i think it will take an attorney to answer. you have to make a determination of whether or not there is a cost to this or not. i do not have enough information. it is possible that there is a savings to drop and it is possible that there is cost. i am is suggesting that maybe you cannot do this without knowing the answer to that question. supervisor mirkarimi: i do not disagree with any of that, but that is not at the heart of what is emerging here. the first question i asked of the comptroller -- that the

language in this conversation be a casualty of how this thing was written because of the strict interpretation that this thing sunsets at a particular time? i actually think there is merit here to continue to study drop and the effects. this data is inconclusive. therefore, i am not sure i agree with what is before us to drop drop at this stage. otherwise, based on what is before us, i see no other legal maneuver. >> again, my hope is that you would not come to the conclusion that drop is costing money. supervisor chu: thank you, supervisor. are there any the members of the public who wish to speak on this item? >> gary, president of the san francisco police officers association. it is that same waiver. i hope you can take care of me. i want to talk to some of

supervisor mirkarimi's increase -- questions and talk about the looming armageddon that we will see from a shared number standpoint if the drop is discontinued. we believe that if this drop is sunseted, we believe we will have another one had a 50 to 175 officers going into this in it the next week. that number will be approximately 325 officers that would then be in the drop program, with the clock running over the next one to three years. furthermore, we anticipate an attrition rate of approximately 50 to 100 officers over the next three years that will not take advantage of the drop. now we're talking about another 200 to 300 officers, or a total of 600 officers that will be leaving over the next three years. when you add the fact that there

are already about 150 officers below the charter-mandated minimal staffing level of 1971, we're not talking about having to hire 700 police officers over the next three years to comply with charter comply4.127 -- turner 4.127. now can make asses are budgeted for fiscal year 2011-2012, so we would have to hire at least 20 academy class is over the following two years to maintain the charter mandated number. i think we all understand in this room that that is not practical or fiscally possible. in addition, the mass exodus of police officers will coincide with san francisco's posting of the america's cup yacht race. we will be short of officers when we need them the most. in addition, we will be losing a vast majority of our supervisors the will be taking advantage of the drop program,

and it will be a critical blow to the efficiency of our police department. we're talking about possibly ending a program that both los angeles and san diego have continued to renew, because they have realized the devastating affect on the department if they were to abruptly end the program. that was spoken about at length in los angeles. you're talking about terminating a vital program based on what we believe is flawed and incomplete methodology that was calculated using an insufficient sample size, which even cheiron admits to. i ask that this body, and this goes directly to supervisor mirkarimi's the recommendation of what our options would be, the legislation, supervisor, it allows you to extend the program up to three years, but you can do less. you can extend the program up to 12 months or 18 months to realize a sufficient number of

participants in drop and to establish criteria to make such an important decision. supervisor chu: thank you. supervisor wiener: did you finish what you're saying? >> thank you. two other things. we're talking to cigarette -- supervisor mirkarimi's point. we have about a 25% failure rate in the police academy that do not make it through the program and probation. where is the accountability for the numbers and savings of losing those 25% to 30%? that is not factored in here. the other number that is not factored in is the cost savings to the health service system by keeping these employees in past the age of 55. there is definitive savings of these people continuing in service and now dipping into the retiree health fund by staying longer than 55. another answer to your question, supervisor mirkarimi, is in many

cities, the percentage of an up or down cost neutral is 4%. that is used in mesa, arizona, and i believe also used in san diego. it is considered a neutral to the cost neutrality of the program. i think that eliminating the program with such a devastating consequences when there is really not data to indicate whether or not this is cost neutral, i agree with supervisor mirkarimi that there should be ways to study this, and i think that the only alternative we have under the charter to study is to continue its for a shorter length of time to get a more realistic idea of, in fact, whether or not is cost neutral. thank you. supervisor chu: thank you. supervisor mirkarimi. supervisor mirkarimi: thank you. this is one of those rare moments where we actually find ourselves probably perhaps maybe

of some light mindedness here. i think that this is only attributed, in some respect, to the idea that what has been handed out to us does not necessarily serve the premise that when we arrived at this meeting that i think there had already been a preset idea that this program failed or this program fails the city in its savings. my conclusion so far is that we do not have enough information. based on the conversations i have had in talking to other cities, it seems that there has been a different yardstick used. i agree with the comments by the actuaries that it is not an apples-to-apples comparison. but there are some fixed knowns here. this data was handed out to us at the beginning of this meeting.

so from the controllers office. on city cost detail, what stood out to me is on the question of fto. do not believe that the 55,100 is reflected of the cost. when it record comes in and goes to the probationary period, and especially when we know what the salaries are of that particular recruits, that is in here. is that correct or not? >> that is correct. if 100 people go into an academy and a lease 75 of them ultimately make it, where is the cost savings of that pit the $5,000? supervisor mirkarimi: that jumped out to me, too, when we receive this information. the second is that i know, by talking to san diego, that they needed to tweak their program

because of lessons learned. they also looked at the question of age or length of service or was it the city's matching relationship is, so they have looked at those scenarios. if it appears that none of that has been entertained up here. whether that will work or not work, i have no idea, but the fact is we have not even advanced that discussion yet before we decide to let this program son said at all. >> there was an editorial page about a year ago saying that the san diego drop had been written and -- as the san francisco drop program, and it would not be talking about eliminating it. one of the things that just about broke san diego was promising a 9% interest return on the money for the drop. that is why we negotiated a 4% return on the money. the second thing is we have our office is continuing to pay their retirement contribution while they are in the drop.

under the current charter amendment that will be considered by the citizens of san francisco, that contribution will go up to about 11% or 12% for active police officers. that is, in effect, a free 11% or 12% going back into the system, and that has not been considered. those are all factors that have not been considered here. the other thing that we considered, and i want the supervisors to understand this, i initially wrote this. i tried to make this the most conservative drop program i could find. i tried to correct the mistakes of san diego, houston, and los angeles by making corrections. one of those corrections was clever example, that event of a surprise disability in our drop program, the clock stops. if they were going to recover that time, they have to stay the additional time while they're off disability. that does not occur. we also limited the drop program for one year for supervisors,

captains, and lieutenants. we did make a lot of changes. but you are right about something. there are amendments that can always get better. there are things we could have done to change this based on the mistakes we found. but i think the charter does not allow us to make some of those changes. supervisor mirkarimi: i just want to tie that circle of discussion -- and does that mean that if there were to be modifications to this program that because it was chartered- amended, we would have to go back to the charter to do just that? >> with the program design, yes. this, like all of our pension plans in san francisco, is in defined in the charter. the changes that kind of get to the mechanics of how the program works would have to go back. supervisor mirkarimi: that is why i said, could the language have done a disservice by not giving it that pliability on the back end?

ultimately, i think that part of this conversation rests on this. what we're up against is inconclusive data, no matter who you are talking to, and the fact that the language in the charter limits our ability to be able to modify much of anything on the fly without having to go back to the voters themselves. >> i think that is true. if we could go back in time, perhaps a caveat should have been added into the language to say we have the ability to make changes to the program at the conclusion of the three years. what we have tried to point out today is that nobody in this room, including ben or cheiron or anyone else, knows if there is a cost to this program. i do not think anybody would stand up and say they know for sure that there is based on future behavior. supervisor mirkarimi: when you think about it, in light dawned on you that you wished you gave

the board of supervisors greater flexibility. >> i did not think i had to do that, because i do not believe there is a cost to the program. but cheiron disagrees with me. it is good to know that you and i agree on something. we always try to meet a consensus somewhere. i think it is a tremendous step forward. supervisor mirkarimi: just on at this, i was expecting more economic gymnastics in this discussion. i do not think we have even mounted the bars. there is such an absence of the information. i was prepared to hear about why this program -- because this is what is going around in city hall, has failed. still, there's no data that supports the supposition whatsoever. >> i agree. thank you. supervisor chu: thank you. if there no other members of the public who wish to speak on this item, i am going to be closing public comment.

we can close public comment and you can ask a question. are there any other members of the public who wish to speak? seen none, public comment is closed. supervisor winner. supervisor wiener: i have a question for gary. i think we all assume universal consensus that we're going to have a major retirement and staffing level problem, whatever we do in terms of drop. >> correct. supervisor wiener: in terms of the officers were going to immediately run-down and enter the program, when we pass forward to, say, three years from now, it seems like those officers will probably be retired regardless. >> we have two things going for us here that can at least stem the tide of the exit. if you extend the drop for another 12 to 18 months, these 180 to 200 people would put off

their decision for another 18 months, which would buy as more time to get back to normal economy. the other people you have to consider here is you have a lot of people with 27, 28, 29 years in the waiting to see and would take advantage of the drop program button may retire early because the program no longer exists. so you'll lose a lot of those folks. we keep going back to the same argument that we're seeing the exit of post-vietnam hires countrywide. so when we're talking about 580 people that can go into this program, all we're doing is we're kind of trying to keep 200 to 300 people around for awhile. but the hiring of new cops is inevitable. this is something the city will have to deal with, regardless of whether the drop is renewed. supervisor wiener: can i ask the controller to respond?

if you want to. >> just a general comment? supervisor wiener: the opposing point of view has been articulated. i am curious to know what the controller thinks. >> we're dealing with a limited sample size, and that point is fair. that is made clear in both our report and cheiron's report. we're fundamentally trying to evaluate a pilot program based upon three years of data and a limited set up participants. the judgment relies on whether you think the program is keeping people launderer or whether it is encouraging people to retire earlier. it is always going to be very complicated to determine when you're looking at what someone's retirement date was and what the

motivating factor was for that and whether it had to do with wage increases or employment conditions are other dynamics. i think the point about a limited samples that is absolutely fair. however, we do have data from that limited sample size. and that limited data does indicate to us, as it does to cheiron, that is this -- that if this program is renewed in the behavior we see during those three years continues, it will bring additional employer costs to the pension system of about .25% of our payroll costs in the city. could behavior change in the future or could we benefit from more information from a longer time span to draw that conclusion? absolutely. however, what we know today, if continued, that cost would end, not in the coming fiscal year, but the fiscal year after.

and if we saw a change in behavior that led us to believe that officers were staying later, we might avoid some costs in terms of academy classes or the things. those costs will not outweigh the payroll costs. fundamentally, i agree with the point that the sample size is limited. i disagree with the point that it is based upon no information. it is based upon very detailed demographic and permission of every participant that has gone through the program thus far. supervisor chu: thank you, supervisor wiener. thank you to the controller for that explanation. as we think about what we're trying to do over the next five years, we have seen a number of different things come through. the five-year plan speaks to pension reform. many of the partners have been very instrumental in making sure we're moving in the right direction with regards to pension.

it is with great hesitation that we take a look at, potentially, a program that even know if there is limited data, it is going in the opposite direction, which is to increase our pension costs of $6 million every year. i take the points that are being made about the limited scope, a limited duration, and limited time in which the drop program has been in effect to heart. no one is disputing that fact. but there are certain things we should know. one, there was a comparison between other jurisdictions. but truly, if we wanted to make a true comparison, we would have to take a look at how those plans were designed and how those drop programs were created in order to see whether there are actually comparable. teselle los angeles and san diego has extended their drop and we should, too, i do not think is a fair thing to say because of the program incentives. the other thing is, given the general outline of what it is that we actually -- of what it

is that makes the cost neutral, it has to do with the fundamental behavior and trying to predict whether people are actually retiring when they were originally going to any way or if the program extends the time of service. my hesitation with extending this program is the fact that, even if we were to extend it for a year are two years, i do not think we would get any more conclusives or bigger evidence than we have during this three- year time span. if that is the case, why don't we really try to plan and, say, at the end of june 30, what is the problem we have to contend with? how many people have enrolled, and how does the city plan for that? whether it is looking at the academy classes or looking at other things to make sure we have the robust staffing we really need. if we were able to tweak this program in a way that actually did extend some once service -- for example, if it was not

automatic that someone would get a drop extension, but if someone said on their own decision that they want to retire now, and that it was discretionary for management or whoever is to ask if it would consider staying on for an additional two or three years, that would guarantee that we actually were extending someone's years of service. the way that the charter is written, we have no way of making that kind of tweak to ensure that we're receiving a cost savings. for me, my real hesitation in this is, one, we're moving in the opposite direction of what we're saying we want to do with pension reform and looking at our five-year financial, we know we need to make significant strides. second, i am not sure that even if we extended for 12 or 18 months that we would get more data that shows how behavior changes. i think the only way we really can say for sure how the behavior works is if we were to

actually change the way the program is structured, which we can i do, even with an extension. we would have to go back to voters. those are my thoughts about it. but i do appreciate the comments that have been made on all sides and the actuarial presentations. supervisor mirkarimi: i have a question. related to what supervisor wiener was speaking with you about and what has been referenced in some of the public comment -- has there really been any nexus to show that because of the attrition rates that we're projecting over the next five years and the probability that academy classes are not forthcoming in the next 12 to 24 months, how do we actually answer that question other than lateral hiring? >> iowa agree with supervisor wiener and hit -- i agree with

supervisor wiener and his comments. the city faces a democratic challenger in the police department that will need to be met through a mix of a number of different activities through the next five years. it will need to include hiring additional officers. it should include civilianization of certain functions within the department. that is true, frankly, whether we extend this program or not. if we were to extend and we did find that the extension that officers to stay longer, it would be marginally longer. fundamentally, we would still have the fundamental issue at the end of it that we have a large portion of our police department, like other pockets of our city work force, that are really going to be retiring in the coming five years, and we need to have hiring plans in place. supervisor mirkarimi: if it relates to us calculating the impact of what drop was about, it really was not a study that gives us juxtaposition to show this is what could help us in

lieu of us being able to not have to do academy class is over the next 12 months 24 months in dealing with the retirement rates. >> the limited data we have from the trial period would lead us to believe that drop is actually having a counter fact, that officers are actually retiring sooner than they would have without the program. that is the experience of the pilot period. but whether the behavior would continue in the future is in the conversation about how big the sample size needs to be before you are able to pull apart all these different factors that influence is someone's retirement. supervisor mirkarimi: if there was not any of the limitations that existed on that question of it having a counter of fact, what would be the response by the controlle