City wins partial victory in DROP lawsuit

SAN DIEGO (CNS) – The City Attorney's Office and San Diego Police Officers Association both claimed at least a partial victory today in an appellate court decision involving a deferred retirement program.

The city and POA sued each other over the program known as “DROP,” developed in 1997 to allow employees to officially retire but remain on the payroll for up to five years while pension benefits accumulate in a special account. City officials at the time billed it as a way to retain experienced workers.

DROP, which was not supposed to cost the city extra money, was blamed for rising pension costs and eliminated for new hires in 2005. The city also lowered interest rates and raised the eligibility age for the program to reduce costs.

Two years ago, Superior Court Judge David Oberholtzer denied a preliminary injunction request by the POA and, without ruling on substantive issues, ordered the two sides to negotiate.

The POA, which also wants DROP to be defined as a vested benefit that cannot be taken away, appealed, but Tuesday's ruling for the most part was a rejection of its arguments.

A three-judge panel of the 4th District Court of Appeals did say that the city made DROP permanent in 2002 and reiterated that position four times in subsequent memorandums of understanding with the POA.

POA President Brian Marvel said the appellate panel “expressly noted” that DROP was a retirement benefit made permanent by the city.

City Attorney Jan Goldsmith opined that the ruling left no more need for litigation.

“This appellate decision reaffirms our advice that the city has the ability to make the DROP program cost-free by reducing the interest rate, requiring participants to contribute toward the pension costs and changing salaries,” Goldsmith said. “The City Council is empowered to solve the DROP problem.”

The appellate justices ordered the case returned to Superior Court for a determination of the substantive issues surrounding DROP.

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