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While John Keane negotiates the Jacksonville Police and Fire Pension Fund, personal pension plan under scrutiny

City lawyers, task force and others are critical of the retirement plan the pension fund leader created for himself

Posted: May 3, 2014 - 10:59pm  |  Updated: May 4, 2014 - 9:58am
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Assistant Chief Bobby Deal, chairman of the board of the Police & Fire Pension Fund, makes a point as John Keane listens during a meeting last month. Of Keane, Deal says, "I think he has done an admirable job under the toughest of conditions."  Bob.Mack@jacksonville.com
Bob.Mack@jacksonville.com
Assistant Chief Bobby Deal, chairman of the board of the Police & Fire Pension Fund, makes a point as John Keane listens during a meeting last month. Of Keane, Deal says, "I think he has done an admirable job under the toughest of conditions."

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When pension-reform negotiations begin in earnest, the lead negotiator for the police and fire unions also will be negotiating for his own pension, a special, multimillion-dollar retirement that is unusual in several respects:

■ He helped create it.

■ The city concluded it was created illegally and demanded that the millions already spent to fund it be repaid.

■ It is a senior executive retirement plan, something common in private business but rare for public servants. Unlike the union pension fund he oversees, his is also pre-funded, which is far from common in business.


READ/SEE MORE COVERAGE AND DETAILS ON THE PENSION ISSUE:

Read: Shorter careers and longer lives scrambled the math and multiplied Jacksonville's debt to pension fund

Slideshow: Top 20 Jacksonville public pension payouts

Read: While John Keane negotiates the Jacksonville Police and Fire Pension Fund, personal pension plan under scrutiny


Despite the city’s cease-and-desist order, the money not only has not been repaid, but more than $250,000 in city money has been added to the plan since the city’s objections. Now his pension is fully funded.

The plan is paid for at the expense of the dangerously underfunded Jacksonville Police and Fire Pension Fund.

And his personal pension has grown following a succession of five-figure pay increases that have elevated his annual salary to more than $300,000. That puts him in a league with the leaders of the vastly larger Jacksonville Port Authority and Jacksonville Transportation Authority for his stewardship of the six-employee Police and Fire Pension Fund.

That man is John J. Keane.

Keane is hoping that his special pension — worth more than $2 million — doesn’t come up in negotiations at all.

“This [his pension] has nothing to do with pension reform for police officers and firefighters,” said the man who has earned the increasing loyalty of thousands of union members and the admiration of his board of trustees over the 23 years since he became the Pension Fund’s first executive administrator.

Hundreds of millions of dollars are riding on upcoming negotiations, and one person’s pension should not come into play, Keane said.

Not so, say his critics, who are outraged by Keane’s accumulation of wealth and power since leaving his $56,000-a-year job as a rank-and-file member of the fire department.

“As far as I am concerned, it is an illegal pension plan courtesy of the pension plan board of directors,” City Councilman John Crescimbeni said. “And you know what, it doesn’t surprise me. For some reason [Keane] always seems to get what he wants, including that ridiculously high salary considering that he manages only a handful of people.”

“He squandered the pension fund for his own personal benefit,” said Curt Lee, a citizen watchdog who worked for a private pension fund. “My fear is that the city is going to continue to allow John Keane to harm the Police and Fire Pension Fund and the taxpayers.”

Lee demanded that State Attorney Angela Corey review the inner workings of the overriding Police and Fire Pension Fund, which Keane oversees as the executive administrator.

Corey never responded to the request, Lee said. But Lee, who is considered a gadfly in city government circles, doesn’t intend to back down.

He said he’ll be among others in the public closely monitoring the upcoming negotiations between the city and Keane.

In the weeks leading up to negotiations, few who wield power in Jacksonville were willing to talk about Keane’s personal pension plan.

Not members of Mayor Alvin Brown’s staff, who were asked why they had not pursued the city’s demands for repayment, and whether they would make Keane’s pension an issue in the new pension talks.

And not the pension fund board of trustees, who would not explain why they would approve such a pension crafted by its beneficiaries.

Two trustees said they were not authorized to speak about the pension package the board approved. One sidestepped the issue and wanted to talk about Keane’s virtues. A fourth said he feels confident that the matter of a private pension and the credentials of the next administrator will work itself out in pension reform. A fifth could not be reached for comment.

PENSION GREW UNNOTICED

For 12 years, few knew of Keane’s special pension.

That changed in 2012.

That’s when a routine actuarial study of the Police and Fire Pension Fund revealed the separate pension deal that was created in 2000 to cover Keane and then-assistant administrator Dick Cohee, a former city treasurer. Keane said he and Cohee created the plan. Until then, Keane had been covered by an investment account worth $72,000.

The custom pension plan, which now covers Keane, Cohee’s widow and former pension fund Financial Services Manager Donna Wamsley, has grown in value to about $4.2 million.

The new arrangement attracted official critics swiftly once it came to light.

In succession, a city ethics investigation concluded in 2012 that the Keane-Cohee-Wamsley pension plan was improper. Subsequently, Cindy Laquidara, the city’s chief lawyer, attacked the arrangement and demanded the money spent to fund the pensions be repaid. Then a city auditor’s report made public in 2013 found several flaws with the plan.

The audit questioned whether the plan was properly authorized, since the City Council had not approved it. The audit said the plan had not been disclosed to the state until 2011, despite laws requiring actuarial reports every three years. Instead, the audit found, the money to pay for the Keane-Cohee pension had essentially been invisible, lumped in with the assets of the larger Police and Fire Pension Fund.

“The mayor’s office and the city council need to continue to pursue changes in the state law to address the unconscionable structure of the police and fire pension board of trustees,” wrote City Council Auditor Kirk Sherman in a report issued in July. “Stated simply, the board controls the pension assets while the city retains the liability to fund the pension payments.”

Keane took issue with the findings, saying the fund had no obligation to disclose the separate pension plan until Wamsley retired in 2011 and began drawing her pension.

By the time the audit was released in July 2013, Keane and the city had agreed in secret negotiations over broader pension reform that he could keep the pension, but funding was to cease by early August 2013.

But the deal was rejected by the City Council, which said the larger pension-reform settlement didn’t go far enough.

A lawsuit by Times-Union Editor Frank Denton challenging the secrecy of the negotiations claimed the agreement should have been hammered out in public.

A state judge agreed with Denton.

With no deal, Keane’s pension continues to grow.

And now it is Round 2 for the city and Keane as they sort out a way to either lessen the burden on taxpayers when it comes to funding the Police and Fire Pension Plan — which is more than a billion dollars in the hole — or endorse a plan where both workers and taxpayers pay more.

If Keane gets his way and his pension is not an essential part of the new negotiations, Crescimbeni and others will be more than upset.

But Keane makes no apology.

He deserves a pension like anyone else, he said. Everything done to compensate him was something the city knew about — or should have known.

That’s a point of contention, too. But Keane says if anyone is looking for someone to blame for the overriding problems of the Police and Fire Pension Fund, it’s not him.

“Before [the city] starts rationing out bullets,” he said, “you’d want to know where your enemy is, wouldn’t you?”

BIG PAYDAYS

Keane’s type of pension is called a SERP (Special Executive Retirement Plan). But unlike most SERPs, which are designed to be incentives for high-achieving executives to work harder and stay longer, this one was pre-funded.

“It’s rare and aggressive to have a pre-funded SERP,” said Jonathan Trichter, a pension expert and principal at MAEVA Municipal Solutions, who was part of a city Pension Reform Task Force assembled last summer. “And I’ve never seen it in the public sector.”

Keane said it is too early to be talking about a pension, because his contract does not expire until 2017.

But should the 71-year-old have a change of heart and retire by early next year, Keane can expect to collect $278,565 in the first year alone. That includes about $65,000 from his firefighter’s pension.

The overall package is $23,214 a month, more than five times the monthly pension the average police officer or firefighter would collect today.

Once a rank-and-file firefighter, Keane never earned more than $56,000 in that job. Now, more than 20 years later, Keane is paid more than $300,000 annually. That’s roughly the combined salaries of the two police and fire pension fund administrators overseeing pension plans in Fort Lauderdale and Miami.

Keane’s current annual salary is so much higher than his pension-fund peers because the board members of the Jacksonville fund decided Keane should be paid on par with the leaders of the Jacksonville Transportation Authority, the Jacksonville Port Authority and the Jacksonville Aviation Authority.

Brian Taylor, who oversees 152 employees as chief executive officer of the Jacksonville Port Authority, makes $320,000 a year. Steven Grossman, who oversees 244 employees as the executive director of the Jacksonville Aviation Authority, makes $297,052 a year. Nathaniel Ford, who oversees 749 employees as the chief executive at the Jacksonville Transportation Authority, makes $280,000 annually.

Keane, who has six people under him at the pension fund, is No. 2 in this group at $300,497 annually.

When the pension board gave Keane a nearly $45,000 raise in 2012 to bring him in line with the other Jacksonville leaders, it was saying that such prior raises as the $23,000 raise Keane received in 2005 — from $174,000 to $197,000 — and the $16,000 raise he received the next year were not enough.

Keane’s salary is now $87,000 higher — an increase of 41 percent — than it was eight years ago, despite a three-year salary freeze from 2009-11 during the recession.

Unwilling to discuss the way they compensate Keane, the pension fund board members left unexplained why Keane is not paid like his counterparts in Miami ($179,000), Fort Lauderdale ($123,000) or Tampa ($99,000).

But Keane’s supporters say he is worth it.

“I think he has done an admirable job under the toughest of conditions,” said Bobby Deal, a police officer who has been on the pension fund’s board of trustees since 1997. “He is the face of the pension plan. He is the public information officer for the pension plan. He also takes the time to make sure that there is some hand-holding. … He goes to funerals. He goes to hospitals. There is just a lot that it encompasses — a lot people don’t see. He has such a passion for this city and doing the right thing.”

Fellow pension fund trustee Nat Glover said Keane’s commitment to the beneficiaries of the police and fire pension fund has been outstanding.

Glover, the former sheriff and longtime law enforcement officer, is one of those beneficiaries. Deal will be when he retires in July.

UNION BENEFITS

While Keane has the admiration and gratitude of many police officers and firefighters, he has detractors who question his credentials and his oversight of the Police and Fire Pension Fund.

“He never held an office. He was never a chief. He was a nobody. He was public information officer. He was not a lieutenant or a captain, or a division chief,” said Joe Strasser, who worked with Keane at the fire department many years ago. “Man, I just don’t know how he does it.”

Strasser admits he is not a fan of Keane and thinks it is time for him to leave the administration of the pension fund.

“I really don’t dislike the man. But the bottom line is we have got to change the whole thing and everybody has to share [the burden].”

While Keane says he represents pension-fund members, not the unions, the overlap is substantial.

The terms he has negotiated with the city benefit the unions. Neither Keane nor the union leaders call what Keane does for them collective bargaining. By law, only the unions can bargain collectively.

“There is no legal authority for the PFPF to collectively bargain with the city for pension benefits on behalf of the police and fire unions,” former city General Counsel James C. Rinaman Jr. wrote last October to the head of a pension-reform task force appointed by Mayor Alvin Brown. “There is an inherent conflict of interest for the pension trustees to bargain for pension benefits. Their duties are limited to administering and managing the pension funds, and negotiating for new or increased benefits conflicts with performance of that duty.”

Citing the linkage between the pension fund, the unions and Keane’s authority, Rinaman likened the issues to a “Gordian knot” that cannot be undone without severing it.

If not, “we are headed for spending a third of the city budget on pensions, which will result in bankruptcy,” Rinaman concluded.

There is no dispute that the pension fund is seriously underfunded at just 43 percent. At that level, the city is risking a lower credit rating, which would multiply its financial problems.

That is, unless big changes come out of the upcoming negotiations between Keane and the city.

All told, the city must pay down a $1.65 billion debt it owes the Police and Fire Pension Fund to restore its financial health.

The funding problem is exaggerated by a unique 30-year agreement Keane negotiated with then-Mayor John Delaney 14 years ago.

Tired of dealing separately and often with both unions and the pension fund, when he was an assistant to Mayor Ed Austin, Delaney had agreed that Keane would be the go-between for all.

“The pension fund moves in lock step with the unions and the unions move in lock step with the pension fund,” Delaney explained.

Since then, Keane has negotiated numerous benefits for police and firefighters that include the ability to retire after 20 years on the job, regardless of age, and a lucrative deferred-retirement option that allows police and firefighters to work for up to five years while also drawing pension payments. The 30-year agreement with Delaney, which solidified annual 3 percent cost-of-living allowances, has deepened the city’s debt to the pension fund.

Until then, the pension fund had been adequately funded at 86 percent.

“This is the only city in Florida where the city negotiated benefits with the pension fund as opposed to the union,” attorney Bob Dees said. “There is no other place in Florida where a city is purportedly bound for 30 years for specific benefits.”

The 30-year deal “is an illegal agreement,” Rinaman said.

Keane points out that recessions and city leaders’ decisions on how much to pay into the fund also were key factors — the main factors, he says.

Blaming Keane or the union members for the city’s economic plight is unfair, he said.

All of the union benefits “were enacted by the City Council,” he points out. Looking for a new scapegoat now “is just revisionist history.”

But that truth is a tough sell, he suggested.

“The people that know, know,” Keane said. “The people that don’t know, most of them don’t care. And the ones that don’t know and do care, they don’t see it that way.”

FIRST — AND LAST?

Keane is a man of many firsts.

He was the first in his immediate family to attend college. He was a member of the first fire department recruit class when the city and county formed a consolidated government.

He was a member of the first board of trustees overseeing the Police and Fire Pension Fund. Keane then became the first official administrator over that fund.

He has become a leading advocate on police and fire pension issues statewide and nationally.

In return for Keane’s commitment, he’s been rewarded with more than money.

The pension fund board voted to name the One Adams Street pension fund administrative building after Keane.

“Some of the board members thought it would be nice to recognize the significant number of things that happened while I was here,” Keane said.

But he may be the last rank-and-file worker to head the pension fund.

A blue-ribbon task force, assembled by Mayor Brown before the City Council rejected the initial pension-reform agreement, wrestled with various solutions to the pension-funding crisis.

One of its recommendations said the next administrator of the fund should have a solid financial and or pension background. Another recommendation said there should be no more pension deals such as the one Keane created.

Keane and others who compliment the work he has done say he fits that bill now.

Keane has an associate’s degree in fire science and a bachelor’s degree in workforce education and training.

He obtained the latter degree after spending a year at a Southern Illinois-Carbondale satellite branch in Mayport in 1996. That was six years into his job as executive administrator of the Police and Fire Pension Fund.

Keane’s power to negotiate deals commonly left for collective bargaining between union leaders and the city is largely unheard of.

“That is a very unusual situation,” said Carol Weissert, a professor of political science and the director of the Florida State University Leroy Collins Institute, whose extensive study on municipal pension plans gave Jacksonville’s Police and Fire Pension Fund an F grade for its low-level funding. “I think yours [Jacksonville Police and Fire Pension Plan administration] is the most powerful.”

Weissert said Jacksonville’s pension problems are a classic example of people not watching the store.

“If no one’s watching, then it is easy to give more and more and not think of the implications,” she said.

 

Eileen Kelley: (904) 359-4104

Comments (25)

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Howard
9213
Points
Howard 05/05/14 - 09:12 pm
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0
Premium Member

John Keane is a dirty crook.

John Keane is a dirty crook. Every new poster on here is a present or retired JSO or Fire union guy just bashing the T.U. and trying to get their propaganda out there.

John Keane is a criminal playing with illegal money, but hey guys, he's your crook.

I hate that this is the type of people who citizens think protect us. Crooks.

johnctaughtme
13451
Points
johnctaughtme 05/05/14 - 06:08 pm
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0
Premium Member

"Lie Detector", I don't know

"Lie Detector", I don't know if you will see this before they drop the article off, but if you get a chance, see the letter regarding the "High-Risk Hype" of pensions investments, regarding the General Employee Pension. One of the only times in which they have even mentioned that pension.

Mister Nice Guy
2644
Points
Mister Nice Guy 05/05/14 - 08:30 am
0
0
Premium Member

Michael, your post almost has

Michael, your post almost has to be meant as total sarcasm as any person with ANY intelligence could never take that garbage seriously. Actually there's more of a chance that you are just another incredibly clueless "genius" right-winger.

Congratulations!

RetiredJSO
511
Points
RetiredJSO 05/04/14 - 10:02 pm
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0

I see the TU has printed not

I see the TU has printed not 1 but 2 pension stories, but has not even taken time to report all the other news worthy things happening in our area. You know the ones I am referring to, the failure of the NAACP, Jessie Jackson, Al Sharpton and all the other Afro-American Leaders coming to town to stop them from killing each other, but wait a minute, that did not happen as they do not care if blacks shoot blacks. They only care if the whites are doing the shooting. Looks like it will be a rough month.

Lie Detector
2925
Points
Lie Detector 05/04/14 - 07:31 pm
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0

True.

True.

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