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Kenneth E.

320 Yosemite Drive
Prosper, TX 75078

January 30, 2017

Representative Dan Flynn

Texas State Capitol
Room 1N.10
P.O. Box 2910
Austin, TX 78768

Dear Representative Flynn:

I wanted to write to you about my grave concern over the state of the Dallas Police & Fire Pension
System. My letter will be divided into four parts, and my hope is that while it is lengthy, you will
take the time to digest each point to give you a full understanding of the problems, the history, and
the possible solutions for an outcome that protects and is fair to the active and retired First
Responders of the City of Dallas.

My name is Kenneth Seguin. I am a retired Major of the Dallas Police Department with 40 years
and 3 months of service. My career lasted from April 1, 1976 until July 1, 2016, and Im one of
only 54 officers out of over 11,000 officers hired since the departments establishment in 1881, to
retire with 40+ years of duty. I am also a U.S. Air Force veteran of the Vietnam Era and my life has
been one of public service since high school graduation in 1969. Based on my lengthy tenure, I will
first relate to you the history of the shabby manner in which the City of Dallas has treated its police
officers and firefighters over the past 40 years. I know that you are looking for suggestions on
solutions but it is critical that you first understand the history which leads to todays pension crisis,
and why the City of Dallas is trying so hard to gain sovereign immunity and achieve the despicable
clawback provision to confiscate COLA, Benefit Supplement, and DROP interest already credited
to retired employees. It also fills the background for why the city has put together a massive public
relations campaign to convince the citizens of Dallas that it is acting in an altruistic and benevolent
manner. Its Save the Pension website is led by three former mayors, all of whom who failed to
address the pending Pay Referendum lawsuits during their own respective time in office, and
continued to kick the can down the road for future mayors and councils to deal with. That time
has now arrived with the first lawsuit finally scheduled for trial in May 2017. I believe the city is
terrified of the potential outcome. It also has a short memory of the ultimate sacrifice made by five
police officers in Dallas on July 7, 2016.

1. Summer 1978 - January 1979: While police and firefighters were grossly underpaid in
comparison to other DFW area agencies, and City Hall refused to give a substantial pay raise on 1
Oct 1978, First Responders took their plea to the citizens who called for a referendum vote on
January 20, 1979. In spite of city and business leaders claims that such a pay raise would bankrupt
the city, the referendum, which was approved by a vote of 57% to 43%, became a city ordinance. It
stipulated that First Responders receive an immediate 15% pay raise across-the-board, and granted a
5% differential between each pay grade that was to be maintained (with no limitation on time with
an ending date).
2. 1988 to 1994 to Present: City Hall was alleged to have violated the 1979 Pay Referendum by
giving a pay raise to the DFR Fire Chief in 1988, and subsequently extended the raise to DFR
executive ranks due to a complaint made by a DFR subordinate level chief. It is my understanding
that then-City Attorney Analeslie Muncy issued an opinion to the City Manager that the ordinance
was still in effect nine years after its original enactment. The 5% differential raise, however, was
not passed down to rank-and-file firefighters who complained of the violation. The city ignored
their complaint and firefighters were then forced to file a lawsuit in 1994. This lawsuit and a
second one by firefighters and a third one by police officers have languished in the civil courts for
the past 22 years because the city did not want to deal with them and attempted legal maneuvering
to escape the lawsuits. The price tag for a favorable judgment, with interest, is somewhere in the
$1-$4 billion price range. The city has refused to negotiate an-out-of-court settlement over the
many years since 1994, now claiming that the ordinance was for one year only, conflicting with City
Attorney Muncys previous opinion. These lawsuits are why the city is now so desperately trying to
gain sovereign immunity (retroactively) to protect it from a billion dollar pay-out.
3. Circa 1987-1988: The Dallas Police Association (DPA) successfully sued the City to require that
Temporary Assignment Pay (TAP) be paid to officers for performing the duties of a higher rank
officer who was not present to perform the duties.
4. The DPA successfully sued the City for ignoring state law that required all new police officers to
earn 15 vacation days per year. Until the DPA won that suit, newly-hired Dallas PD officers were
only given 12 days per year. (I cannot recall the specific year.)
5. 2016 Present: The billion dollar shortfall crisis with the Dallas Police & Fire Pension occurred
due to mismanagement by the former system administrator, and the failure of the 12 board members
at the time to properly oversee his actions. On that board are four seats for Dallas City Council
members who also contributed to the failed oversight. The Dallas City Council, led by the Mayor,
has had the opportunity to re-stabilize the pension fund but it refuses to do so. For the citys part,
action could be taken by a combination of three efforts: (1) infusion of money directly into the fund
from its financial reserves, (2) raising city taxes to a moderate degree, and (3) selling pension
obligation bonds. The city refuses to sell bonds because of a preference to use bonds for what are
termed transformational projects. Many of us believe that translates to more parks and bridges
for the image Dallas wants to project to its visitors. All of that cosmetic growth is meaningless if
there are severely depleted numbers of First Responders to guarantee public safety. This inability to
recruit to replace the rapidly growing attrition will occur because Dallas still lags behind such cities
as suburban Plano where police officers start at $16,000 more per year, and a pension fund that is
viewed as unsound and a city that wants to place the burden for stabilizing it on the backs of retirees
who have already earned their pension benefits. The City of Dallas bullying plan stands in stark
contrast to the City of Houston and its mayor which addressed its pension crisis in a collegial
manner with First Responders.

The Problems
The sticking points in the recent failed mediation efforts between the Pension System and the City
of Dallas, as I understand them, are the issues of sovereign immunity and clawback of monies
already earned and paid on both regular pensions and Deferred Retirement Option Plan (DROP)
accounts. Both reek of unethical and immoral behavior.
1. Sovereign Immunity. The sovereign immunity issue which the City of Dallas did not obtain
around the year 2005 when the cities of Houston and San Antonio were able to do so, is
essential to the city to avoid judgment in the three pending Pay Referendum lawsuits. The
complexities of it are adequately covered as Ive written above. My hope is that you would not
support any legislation that would grant this doctrine retroactively to protect the city from its
egregious act of attempting to secretly circumvent the will of the people as laid out in the 1979
Pay Referendum.
2. Clawback. The repulsive clawback concept relates directly to financial benefits already earned
and credited to police and fire retirees. It affects those who retired prior to DROP being
implemented on January 1, 1993, and those who elected to participate in DROP after its
a. The retired compensation plan for pre-DROP retirees consists of their base pension
amount (typically 3% for each year of service), their annual COLA (which is not
compounded), and their Benefit Supplement (to help with expected medical cost
increases). To strip this group of their COLA or Benefit Supplement money or try to
recoup those amounts already paid, would grievously harm them and send many into
financial ruin.
b. For those who participated in DROP, the City of Dallas devised this plan as a means
to retain 20-25 year police and fire veterans on their departments so that they would
not leave and seek second careers elsewhere. It was meant to slow the attrition rate
caused by low, non-competitive public safety pay. The plan was unanimously
approved by the 1992 City Council, as well as the State of Texas, and the IRS. The
plan succeeded in its aim of retaining tenured, experienced police and firefighters.
What are now termed overly generous interest rates for DROP accounts (in the
8%-10% range) were approved in healthy economic times by the City Council as an
off-set to the low wages. It should be noted that active First Responders voted to
decrease the DROP interest rate to 6% effective October 1, 2016, and to 5% on
October 1, 2017, as a way to sacrifice personal income and contribute to a solution of
re-stabilization. The City of Dallas benefited financially through its creation of
DROP. In virtually every instance, police and fire participants agreed to take a lesser
lifetime pension by freezing their pension percentage entitlement upon entering
DROP. This saved the city money in long-term payouts. As an illustration, I
mentioned earlier that I served 40 years. I froze my pension percentage at 78.5%
with approximately 26.2 years of service, and entered DROP on June 1, 2002. I then
participated in DROP for 14 years before retiring. In short, I saved the city from
paying me the maximum of 96% for my first 32 years of service. The savings to the
city amounted to 17.5% that it would have paid me in a higher pension for the rest of
my life, had I not entered DROP. Every DROP participant can tell a similar story of
the money he/she saved the city.
For several years throughout my career, I worked three jobs and my wife worked one, to
support our large family. Retirement for my wife and me after raising eight children,
and scrimping and scraping during our parenting years to get them all college-educated,
was planned based on the promises and guarantees stipulated in DROP which was
created by the City of Dallas. The city now wants to renege on its promises and seeks to
recoup all earned interest, all COLA, and all Benefit Supplement payments.

Possible Solutions
1. Compel through legislation, if possible, for the city to re-stabilize the fund through the
combination of direct money infusion, raised taxes, and sale of pension obligation funds
as I described earlier.
2. Refuse to grant sovereign immunity or clawback. Maintain all retirement accounts as
they are currently financially set and earned/credited to date.
3. Consider addressing the pre-DROP retirees and DROP retirees as two distinct groups.
a. For pre-DROP retirees, no reduction in COLA or Benefit Supplement which
would be devastating for most of them.
b. For DROP retirees, tie future COLA adjustments to the Consumer Price Index
(CPI), and link interest rates to those earned under Treasury Bills (T-Bills). Im
willing to live with those reductions as my way of being part of the solution. My
views may not reflect those held by other DROP retirees.
4. Going forward, require current active First Responders to increase their contributions to
the plan to 9.5%. (At one point, the contribution rate while I was active, rose to 12.5%
but was later reduced back to 8.5%.) That may not set well with active First Responders
but it is a way for all to contribute to a solution.
5. Consider reducing the vesting rate for new-hires once legislation is passed, from 3% per
year of service to either 2.5% or 2.75% per year of service.
6. Cap the number of years in which a person may participate in DROP whether it is five
years (as in Phoenix) or at 10 years as has been suggested in Dallas.
7. On an annual basis, cap the frequency and the amount allowed for rollovers into other
tax-deferred accounts or of taxable withdrawals. Any rollovers or withdrawals
exceeding these rules should be treated just as CD accounts are handled with penalties
for early withdrawals. This action would stifle future runs on the bank.
8. Add two professional money manager positions to the Pension Board and restructure the
remaining membership at four police (two active, two retired), four fire officers (two
active, two retired), and four City Council members.
Thank you for considering the views I have been allowed to express, and my hope is that my
ideas may be of help to you, and that the legislature will act in a Solomon-like manner in
rendering a just, fair, and equitable solution to care for the First Responders in the states
third largest city.

With sincere best wishes,

Kenneth E. Seguin