recruit and onetime cost is calculated but actually at the end of the probationary time? you see a considerable amount of drop-off. that might be more fair number potentially. >> i do not believe that is the case. for a fair side-by-side comparison, we need to evaluate retaining and older officer at retaining him for 12 months to the alternate, which is that officer retiring at having to incur the cost of a new recruit for 12 months which would be comparable to the 12-month officer plus the onetime costs associated with bringing the person on board and trading. >> -- supervisor mirkarimi: let me give you the logic applied -- knowing that academy class is are becoming less routine for us to fund, the theory was we save

on the front end by not having to invest in academy class is in the training, apprenticing of those new recruits because of voiding all of the training or everything you have here, background investigations, which was expensive -- i have gone through this so i understand. going through everything up through graduation would seem like that makes a sensible solution where we save by a seasoned officer because they don't have to go through it again. but on the fto portion, they still have a fair not to drop off. the city -- we still lose money for those officers who do not make it through probation. what did that also have been a useful calculations to show on the back and we keep those

officers who have already survived many years past their probationary tie? that is the figure i was looking for. based on what is before me, i do not think that is in the $55,100. >> these numbers are based on the successful recruit, including washout rates and field officer trading costs until their qualification. his we rolled all of those cost together to come to the averages. supervisor mirkarimi: this takes it to two years in the first two years we're talking about because i heard 12 months. your academy experience is seven months and then you are talking about almost 12 to 18 months thereafter. that was not the answer of fto.

>> maybe the time could be verified by the police department, but its base of the time to qualify at officer including training cost. supervisor mirkarimi: it does not say that here. it does not say anything about field training or a probationary time. i'm just trying to understand how the data -- >> it is an issue of labeling. it is rolled together to come to these averages. supervisor mirkarimi: that we can have the department and retirement health department can try to speak to this. the other question is on the actuaries. the scenario where i heard the term in determinable at times or inconclusive, were there any scenarios requested that if the

factor of age or length of service had been modified were there any service modifications to determine the cost of age or service modified in how drop is structured now? >> there were no questions about changes to the drop structure and how that would affect the cost. supervisor mirkarimi: so the three scenarios ask that you by the city, go through what those scenarios are, please. >> the first two scenarios assume drop is not renewed. the first scenario assumes nobody knew enters drop after january 1st, 2011. so we have actual date of who entered drop. the second scenario assumes anyone who is interested for dropped by june 30th, 2011

angers drop. the third scenario was more broadly -- its drop is made permanent and continues, you have to not just pay the cost of drop for the group that elected during these times but the fund for the ongoing cost of drop, what would that cost be? supervisor mirkarimi: was there any comparisons to other cities in california? >> there was not. comparisons to other programs are possible because the interactions of the design of the drop structure with the design of the retirement program make it necessary to look at each individual program separately. supervisor mirkarimi: it would

probably be instructive to us to get a better idea of how they are laid out. one of the promises that i think any one of us are prepared to speak to is that if this is exceeding our expectations with regard to the lack of savings for this program, any member of this board of supervisors is likely not to support it because you do not want to be supporting something that double dips taxpayers. was there any scenarios presented that eliminates that problem with regard to the question of age, increasing the age or length of service or maybe the fact that we ask those participants to contribute more

into the pension system? any of those particular variables, i did not see that in the data. >> we did not examine any potential changes to the system that might control those costs. we just looked at ranges of behavior at how those affect cost. >> to your question, fundamentally u.s. are their trade -- are there changes that can be introduced to achieve cost control of the in terms of the program design. it is a good question. we did not ask in our report or the other -- we have not provided that information, nor have we endeavored to do it because the charter is very clear. italy authorizes the board to extend or not extend the program. there is no allow -- it only authorizes the board to extend or not extend the program. >> -- supervisor mirkarimi: did the

language give a disservice because of the way the language was structure because it actually tethered -- the charter gave you a limited orbit to be able to look at and analysis that frankly we did not even look at. >> the voter initiative creates no ability for any of us, the board, the retirement system or others, to make a modifications to improve on that without a modification. supervisor mirkarimi: i get it, but it went unstudied nonetheless. yes or no? >> we did not study modifications to the program because their outside of the scope of what the charter requires us to report on. supervisor chu: are you finished with the presentation? >> yes. unless there are other questions. supervisor chu: idea of a question. from my understanding, the

report that has been laid out, primarily the savings is related to deferred recruitment costs or the cost of bringing someone to the police service in addition to the duplication at having to pay for other health care costs generally, right? in this situation, what we see is simply that concept is if you have a police officer or individual eligible for crop, if they end up enrolling in the drop program in advance -- eligible for drop, if they end up enrolling in the drop program in advance, it does not extend their length of service, that's a situation in which we would see no benefit. we would not be able to defer their recruitment cost and would have to pick up the additional health insurance cost of the person coming aboard about the different that if they had a net through a regular system without

drop. in that case, or someone is retiring, we see a cost to the program, correct? >> that is correct particularly with respect to the retirement system. >> -- supervisor chu: is someone as provided the opportunity to say i'm was going to retire at 55 now and going to retire at 58, if that was the practice, we would have seen three years of deferred recruitment costs and three years of savings from not having to pick up additional health-care benefit costs, correct? >> correct. supervisor chu: a question for the retirement system of your numbers of folks who are enrolled in the system. taking a look at the demographic and activity reports, it is different from the comptroller's report because that was done

based on january numbers and this is the most recent june 15th numbers. >> that is correct. supervisor chu: breaking the numbers down, we have 564 individuals who would be eligible for the drop program between july 1st through the end of this fiscal year. >> yes. supervisor chu: 94 of those have already retired, correct? >> yes. supervisor chu: 27 have completed the program at 49 have exited drop, so they are out. so the universe of people currently enrolled in the drop program we expect to retire between his zero to three years is about 190 people. >> yes. supervisor chu: we do know they're going to retire somewhere, but we do not know exactly when. >> that is correct. depending on their rank, patrol officers have up to 36 months

at a sergeant and inspectors have a 24. the tenants and captains have up to 12 months. anyone over that is not eligible for the drop. on the backside is the supervisor -- of the backside is the breakdown that is there. supervisor chu: of that 564, there are 204 individuals who have not yet enrolled in drop but would be eligible to do so? >> yes. supervisor chu: looking at the minimum and maximum as relates to the program over the next three years, if no further employees actually do enroll in the program, we would know there is 190 individuals who would retire in the next three years. on the maximum aside, if all of the remaining individuals actually enroll, we know we would have 190 + 2 metaphor

individuals who would retire. -- plus 204 retiring for a maximum of 394, correct? >> that maximum is correct. i would caution you that if you want to be realistic, he may want to consider backing out of 92 who have not contacted us. those are the projections i have to base on the business plan to make sure we can process. but that is the absolute maximum. supervisor chu: the reality is somewhere probably in between and the closest proxy that is perhaps the folks who have actually enrolled in the counselee section will be enrolling? >> yes. supervisor chu: thank you. there are no other questions from the committee.

why don't we open the item up for public comment? are there members of the public who wish to speak on this item? any members of the public who wish to speak? >> good morning. i worked for the pla and i have a copy of my testimony. i am an actuary hired to look at the drop program. i'll have three minutes so i will get right to the issues. i will be referring to the april 2008 study. let me start with a short description of drop. i know you have heard some of this before. if an employee elects drop, at

the employees s -- it is the exact same formula as if the employee has retired. the pension is not paid directly to the employee but crowded to the account. the employee does not earn any additional pension benefits during his time in drop. supervisor mirkarimi: you can slow down. i'm going to ask you to finish your response. >> thank you. i do talk fast. employees in drop are required to make contributions to the plan while they are in drop. what you have is a plan where the people are cause i-retired under drop are paying the city. if all please enter the drop at the same age they would have otherwise retired, in terms of pension benefits, the drop creates savings to the pension funds. why might drop cost money if it doesn't give any greater pension and if they retired the same

day? the primary reason would be if employes retiring sooner because of a drop. whenever someone retires sooner than they otherwise would have retired, they began to take 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