The DROP Triple Dip: Philly Officials’ New Maddening Way to Waste Your Money
Just when you thought the city’s controversial deferred retirement option plan couldn’t get more galling.
The first time he “retired” from the City of Philadelphia, Ruben David was project director for public safety in the department of public property, a job that paid him an annual salary of $83,063. Thanks to Philadelphia’s DROP program, which lavishly rewards municipal employees just for showing up during their last years on the job, David left his city gig in 2014 with a parting gift from taxpayers: a lump-sum cash bonus of $268,224, plus an annual pension of $61,320.
But for David, his initial retirement as a public servant was just a prelude to a far more lucrative career as a private contractor. One year after he retired the first time, David took a new position that would eventually pay him more than double his old salary, laboring as a private contractor for — surprise! — his old employer, the very same City of Philadelphia.
How’s that possible? Well, get this — it’s all perfectly legal. That’s because David (who couldn’t be reached for comment for this story) is part of an exclusive club at City Hall we’ll call “the triple-dippers.” And exactly how many members are in this club is a mystery.
How does one become a triple-dipper, you might wonder? First, you take advantage of the quite-legal double dip known as DROP — the Deferred Retirement Option Plan, which lets municipal employees earn both their salaries and pensions during four final years on the job, with the pension money ultimately coming in the form of a hefty cash bonus that averages six figures the day the employee walks out the door.
After collecting that big cash bonus and a generous annual pension, a triple-dipper must, in deference to the city ethics code, typically sit out for one or two years before becoming eligible to obtain — through competitive bidding, we’re assured — an exclusive personal-services contract. Armed with that contract, a triple-dipper can come back to work as a private contractor for the city after his or her initial lavish “retirement” under DROP, to collect even more money from unsuspecting taxpayers.
I first heard about these triple-dippers on a tip from a retired city employee, after I wrote a story last September for this magazine. “The Looming DROP Apocalypse” documented how in its first two decades of operation, the big giveaway showered municipal employees with $1.5 billion in cash bonuses, letting them retire in a fashion many of us can only dream about.
That tip began a nearly yearlong odyssey during which I attempted to find out just how many triple-dippers were on the books at City Hall. After more than five months of pursuit, the city divulged the results of an “informal survey” of a half-dozen city departments. While the survey was admittedly incomplete, it nonetheless publicly outed 20 members of this previously unknown sect.
Yet the answer to the question of exactly how many employees have “retired” with nice pensions and fat cash bonuses and then gone back to work for the city remains a mystery. City officials claim the exact number is unknowable — beyond the capabilities of its antiquated computer systems. However, several high-level sources say that excuse is B.S. — the city just doesn’t want to acknowledge that there may be dozens more triple-dippers hiding in plain sight down at City Hall.
The saga of the triple-dippers sheds some light on a long-running debate over the much-maligned DROP program. While critics have complained for years that the big cash bonuses paid to city employees under DROP are a waste of precious funds in a cash-strapped city, officials have continued to defend the program, including as recently as last year, by claiming it’s a management tool that actually benefits taxpayers because it gives the city four years to plan for orderly retirements.
But the management tool didn’t prevent at least 20 retired DROP-outs from eventually un-retiring and coming back to work, often to perform duties similar to their old jobs, on the government dime as private contractors.
For example, when Ruben David first retired in 2014, the department of public property “had properly planned for his retirement and had chosen a successor,” Mike Dunn, a spokesperson for Mayor Jim Kenney, explained in an email.
And then disaster struck.
Just one year after David retired, his designated successor, the new project director for the public-safety team, “abruptly left” for a higher-paying job, Dunn said. “Concurrent with that, two other members of the safety team also left.”
David wasn’t “brought back to be rewarded for anything,” Dunn wrote. Instead, with the city facing a “sudden shortage of both manpower and expertise, particularly in an area that focuses on public safety,” he was retained as a contractor, and then provided services “far beyond the scope of the position he held while a city employee.”
Those services, according to Dunn, included “planning, programming [and] budgeting” projects not only for the public-property department, but also for many other agencies, including police, firefighters, the Art Museum and the Free Library.
While the initial reason for David’s return may sound reasonable, what happened next — he proceeded to stay on the job for the next three years — seems less so.
But for David, it was highly rewarding. In his new gig, he was paid $151,925 by the city in fiscal year 2016, $196,852 in FY 2017, and $193,830 in FY 2018. In FY 2019, David collected another $92,430 after his contract was terminated on June 29, 2018, and he retired a second time.
During his three-year stint as a private contractor, David was paid a grand total of $635,037 by the city — after he’d collected a DROP cash bonus of $268,224 to retire the first time, plus his annual pension, paid monthly, of $61,320.
Another triple-dipper, Mike Kauffman, initially “retired” under DROP in 2012 as deputy finance director for accounting, a job that paid him an annual salary of $106,283. When he walked out the door, he collected a cash bonus of $362,585 plus an annual pension of $82,896.
But just over one year later, in 2014, the city brought Kauffman back to work on the OnePhilly project, which is consolidating various data systems on behalf of city government. As a private contractor, Kauffman collected a total of $235,583 over the past six fiscal years, in addition to his DROP bonus and annual pension.
Because of his “institutional knowledge,” Kauffman told me, he thinks he “saved the city money” by coming back as a part-timer. Plus, he emphasized, “I didn’t ask to come back; they called me.”
The 20 triple-dippers outed by the city under DROP were paid as much as a total of $2.8 million in private contracting fees over the past 10 fiscal years, or an average of $138,000 each, on top of their DROP bonuses and annual pensions.
The theory of DROP as a management tool doesn’t make much sense to City Hall’s newest official watchdog. City controller Rebecca Rhynhart, the (first-ever) woman elected to that office in 2017, seemed shocked at my naïveté.
“Who told you that?” she wondered. When I explained it was city finance director Rob Dubow, just last year, she was blunt: “The way it works, I haven’t seen a management benefit to DROP. It’s an employee benefit, and believe me, a popular one.”
But, Rhynhart added, DROP “hasn’t been a good tool for taxpayers.”
As I reported last September, over the first two decades of the DROP program, from 1999 through April 2018, the city paid out $1.5 billion in cash bonuses to 12,411 municipal employees, or an average of $122,359 each. This river of cash was flowing out of a pension fund classified as “severely distressed” because it was only 46.8 percent funded and saddled with a $6.1 billion shortfall for which taxpayers are ultimately responsible. (For comparison purposes, the entire city budget for the 2020 fiscal year is $5 billion.) This at a time when other cities across the country are taking steps to freeze, eliminate or limit their similarly disastrous DROP programs.
But that’s not a full accounting of spending under DROP. During the 14-month period since that last story was written, 479 additional municipal employees have retired under DROP, collecting a total of $62,782,914 in cash bonuses, or an average of $131,070 each.
If DROP really isn’t a management tool, it wouldn’t be the first time city officials have lied about the big municipal giveaway. When the program was originally proposed in 1999, officials under former mayor Ed Rendell repeatedly claimed it would be cost-neutral. This was subsequently revealed to be untrue in one academic study and media exposé after another.
But that was how they sold us the double dip. When I first approached mayoral spokesman Dunn back on October 24, 2018, about getting a list of triple-dippers, he protested that such a task would be impossible, as the city’s contractor computer system doesn’t track former employees.
The only way to compile such a list, Dunn wrote on October 30th, would be to manually go through “thousands” of contractor files and match them up with personnel files of former employees — “a process that would undoubtedly require hundreds of hours” and still be incomplete.
Dunn was still singing that tune on March 29, 2019, when he finally sent along that informal survey of 20 triple-dippers. “Our contract system does not provide any way to identify former employees,” he wrote. “Therefore, the only way to come up with a more comprehensive list really is by matching up information in our contract system with information in the HR system — a time-consuming manual process.
“And even that list would not be complete because it would not include instances where a former employee contracts under a different name/company and different Tax ID Number, or where the former employee is an employee of the contracted/subcontracted vendor,” Dunn wrote. “In that latter instance, the former employee’s name wouldn’t appear at all.”
So rather than strain city government to the breaking point, the Mayor’s Office came up with a short-term solution in an attempt to mollify Philadelphia magazine.
“Therefore, we send this list only after an informal survey of selected departments,” Dunn wrote. “We provide this information with the caveat that we cannot guarantee those individual department lists are comprehensive.” (Emphasis his.)
Several high-level sources, however, say the city could easily track the number of triple-dippers by computer if it wanted to, or could ask city department heads for a full accounting of all the (typically high-level) employees they’ve brought back. It’s as if officials don’t see the issue of well-compensated employees retiring with fat cash bonuses and pensions and then coming back to work on the taxpayer dime as a problem for a city that can’t afford to adequately fund its public schools.
Sam Katz, a three-time former mayoral candidate who oversaw the city’s finances as chairman of the Pennsylvania Intergovernmental Cooperation Authority [PICA] board, thinks the city’s alibi is ridiculous.
“We live in an era of big data,” Katz told me — one where Amazon and every other online entity, as well as the government, are “constantly mining data.” What about the city’s alleged inability to fully account for its triple-dippers? “This is borderline incompetence,” Katz snapped. “This is a joke.”
Katz suggested that the results of the city’s informal survey might be the “tip of the iceberg.” He also advanced a theory about why city officials were being so evasive: The takeaway, he said, is “intelligent people left with no capacity to defend an indefensible position [such as DROP] get to tie themselves in convoluted knots instead of simply coming clean and saying we have to fix this problem.”
It’s understandable, however, that city officials are being so cautious about triple-dippers. The specter of municipal employees coming back to work after they got paid fat bonuses to retire under DROP ignited a political firestorm a decade ago.
In 2010, I wrote a story for the now-defunct Philadelphia City Paper that detailed how elected officials such as former City Council president Anna Verna were allowed under DROP to retire for a day, collect their cash bonuses — in Verna’s case, $566,039 — as well as their regular pensions, and then, after making a deposit at the bank, go right back to work.
In the ensuing outrage, Verna and three other City Council members who were also eligible for the double dip ultimately opted to make their retirements permanent rather than risk voter wrath at the polls; a fifth, former Councilman Frank Rizzo Jr., was defeated in his bid for reelection.
DROP wound up ending the careers of more city officials than Abscam. The state eventually closed the loophole that allowed elected city officials to sign up for DROP, but that didn’t stop a few retired, newly enriched DROP-outs from finding their way back onto the city payroll.
In 2016, the Inquirer reported on three former DROP-outs who took a total of $765,527 in bonuses and were then rehired to salaried positions that paid a combined $409,800 annually in their new jobs.
Two of those rehires were “oversights” who were “not properly vetted,” Dunn explained, adding that the third was hired under former mayor Michael Nutter. And he claims that under Mayor Kenney, this won’t happen again. “The Mayor is firmly opposed to rehiring individuals who retired under the DROP program,” Dunn wrote. Kenney has even implemented a formal policy stating that no former DROP-out may be “reappointed to a salaried, pension-eligible position in any area of government that reports to the mayor.”
But at City Hall, when one door closes, another opens. The city barred rehiring retired DROP-outs as regular employees, but it did bring them back as private contractors.
In defending that position, Dunn explained there was a big difference between triple-dippers and the trio of DROP-outs previously rehired by the city. Triple-dippers, Dunn wrote, are brought back to work under personal-services contracts “following a competitive bidding process.” And unlike the three DROP-outs rehired by the city, triple-dippers, as private contractors, aren’t eligible to collect additional pension credits, so their return to work has no effect on the city’s overburdened pension system.
This fixation on the pension system, however, misses the point. DROP was initially touted as cost-neutral but was proven not to be. It was touted as a management tool, but the triple-dippers, however many there may ultimately be, torpedo that claim. DROP seems to be little more than a lavish taxpayer-funded perk for certain city employees. Consider the other exclusive club at City Hall. We’ll call them the redshirts — a company of 201 DROP-enrolled employees who were granted an extra year of DROP eligibility due to “extraordinary extensions” after 2009. Of the 201, a total of 198 received this special dispensation during Nutter’s administration, thanks to events like the papal visit. The redshirts, who wound up spending five years in DROP rather than the usual four, have thus far cost the city a total of $54,386,147 in DROP bonuses, or $271,931 each, with that extra year in DROP upping their lump-sum payments by more than $10 million. (The last of the 201 is set to retire this month with an as-yet-undisclosed DROP bonus.) Nutter declined to comment for this story.
The redshirts include city records commissioner Joan Decker, who collected a DROP bonus of $491,257 in addition to an annual pension of $87,904; police captain Joseph DiLacqua, who collected a DROP bonus of $499,484 and an annual pension of $89,321; and police sergeant Joseph A. DiSpaldo, who collected a DROP bonus of $398,930 and an annual pension of $63,283.
Rest assured, Dunn says, this is a loophole that our current mayor is bent on using in only the “most extraordinary circumstances.” But isn’t it fair to wonder if there’s really an end in sight? Under the current rules of DROP, any future mayor can still hand out as many extraordinary extensions as he or she pleases.
And nearly a decade after the original public uproar over phony retirements under DROP, city officials can still recycle as many “retired” DROP-outs as they please as private contractors. Meanwhile, they avoid accountability by conveniently claiming that their antiquated computer systems prevent them from keeping tabs on triple-dippers.
Now that the triple-dippers’ secret is out, isn’t it time for the Mayor — who doesn’t have to worry about reelection — to demand a full accounting? That, of course, would require an act of political will. Or maybe the controller might have more incentive to flush out the warren.
In any case, here’s a proposal for a new management tool that would really benefit taxpayers: How about requiring any retired DROP-out who comes back to work for the city as a private contractor to return that DROP bonus? That would put a stop to the triple dip overnight.
Published as “The Triple Dip” in the September 2019 issue of Philadelphia magazine.