by Mike Sharkey
Staff Writer
The City Council Auditor’s Office and the Florida Retirement System are at a $3.4 million impasse and neither side is willing to concede anything to the other.
At stake is a lot of money that is owed to former Jacksonville elected officials or their estates. The money owed isn’t in dispute; it’s who pays how much.
In November 2003, Florida Attorney General Charlie Christ ruled that all Jacksonville elected officials were indeed Constitutional officers and had been since the city and county consolidated in 1968. That ruling meant that every elected official since then was eligible for FRS membership and eventually state retirement benefits.
At the time of the decision, the City of Jacksonville was forced to pony up about $2 million to cover FRS contributions for dozens of former elected officials.
That contribution is not what has Council Auditor Richard Wallace perplexed: it’s the interest and delinquent fees that FRS is charging the City for former elected officials, living or dead, that has created the $3.4 million differential. Wallace contends the issue isn’t interest or late fees but the fact that interest and late fees exist at all thanks to the fact FRS denied the officials membership in their retirement system for 35 years.
For example, former Mayor Jake Godbold was admitted to the FRS after the ruling. The City contends that they owe $77,017.30 toward Godbold’s pension. However, due to interest and late fees, FRS says the total is really $311,136.13 for a difference of $234,118.83.
Another former mayor, Tommy Hazouri, was also admitted to FRS after the ruling. The City has offered to contribute $68,605.57 to Hazouri’s pension fund, but FRS contends the City owes $185,725.26 thanks to late fees and interest.
The breakdown of the most recent figures is as follows: FRS claims the City owes $5,226,613.45 in principal contributions on 63 current and former elected officials with another $278,056.45 in interest and delinquent fees for a total of $5,504,669.98. To date, the City has paid FRS $2,164,102.72, which Wallace expected FRS to apply to the principal of the 63 officials.
However, FRS applied that amount only to 14 of the officials, including Hazouri, Godbold, former Mayor John Delaney, former sheriff Nat Glover and others.
The $3.4 million difference wouldn’t exist, says Wallace, if FRS would apply the City’s payment to the principals and waive late fees and interest on officials who were denied FRS membership for 35 years.
“Under Florida law, they (FRS) say they can’t do anything,” said Wallace. “I believe the intent of the law may be right, but the application is wrong.”
Wallace is referring to Florida State Statute 121.081(2) which requires FRS to charge late fees and interest on all FRS contributions regardless of the circumstances or when the individual was admitted into the system.
“We are bound by the state statute,” said John Kuczwanski, a spokesperson for the Florida Department of Management Services which oversees the Florida Department of Retirement which runs FRS. “This is not a defense. We are doing it (charging interest and late fees) because of the statute.”
Wallace said he met with representatives from FRS on March 18 in Tallahassee in an attempt to plead his case in person and try to reach an agreement. The meeting didn’t go very well.
“They didn’t budge any,” said Wallace, who freely admits the City is, and should be thanks to the ruling, bound to make principal-only contributions. “Even if we have to contribute on a retroactive basis, we shouldn’t have to pay any penalty payments. For years, FRS was improperly keeping them out of the plan. According to the ruling, they were always eligible and if they had been allowed in, this would not be an issue today. We are willing to pay the base contribution for everyone.”
If paying retroactive penalties sounds ridiculous enough, it gets worse.
“We are at a $3 million difference of opinion and FRS also says we owe for several dead people and others we are currently researching,” said Wallace. “FRS says you have to apply for benefits. I can’t see where a dead person can apply.”
Both sides admit the dispute will take months to resolve. Wallace has been communicating through letters with Sarabeth Snuggs, the director of the Florida Division of Retirement, but hasn’t spoken to her since March meeting.
Snuggs refused to answer any questions related to the matter and referred all inquires to Kuczwanski.
Wallace and Kuczwanski said the next stage will likely include an administrative hearing in front of a judge. Should the City lose that hearing, there is an opportunity to appeal.
“We are not going to resolve this among ourselves,” conceded Wallace. “We will jump through all the hoops and continue to jump through the hoops until it’s resolved. It might end up in some type of resolution that has to work its way through the state legislature.”