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'Pension padding' among city staff could cost Independence taxpayers 'tens of millions'

City overtime isn't a one-time payment
Overtime in Independence
Posted at 5:08 PM, Jul 20, 2022
and last updated 2022-07-20 19:19:13-04

INDEPENDENCE, Mo. — City staff members who pad their pensions by working overtime are costing taxpayers in Independence potentially "tens of millions" of dollars.

Dan Nelson, hired by Independence to investigate overtime within the police department, found the city has a widespread problem of unregulated overtime.

Nelson said, during his investigation, city staff admitted they work overtime as a strategy to bolster their retirement.

"People weren't hiding that they were trying to get as much overtime as they could while working their high threes," Nelson said.

"High Threes": How pensions work in Independence

Independence uses the Missouri LAGERS program to provide city staff with a pension.

The three highest earning years, over the last decade of employment, determines how much an employee's pension will be, which Nelsons said incentivizes staff to work large amounts of overtime during those years.

Nelson was hired to investigate after the I-Team first broke an Independence police officer logged more than 2,800 hours of overtime, which earned him an extra $169,000 on top of his regular salary in 2021.

The overtime went towards remodeling police headquarters and the jail, which is something the city, in part, signed off on, according to Nelson.

At least four other police officers worked overtime to contribute to the remodel, which cost nearly $400,000.

Nelson said the work was of good value for the taxpayers due to the fact the city would've paid more to hire skilled contractors.

The city also saved money by not insuring the project.

However, the overtime is more than a one-time payment for taxpayers.

"Police laborers who worked on the project will receive higher pension benefits down the road," Nelson said.

Longterm impact on taxpayers

The remodel at police headquarters has a minimal impact on the bill for taxpayers compared to the larger-scale issue of city-wide overtime.

"If dozens or hundreds of City of Independence employees are trying to work as much overtime as possible, and being allowed to do so by their supervisors in their last three years, or the three years they're calculating at their high threes, that would result in a much higher contribution for the taxpayers of Independence," Nelson said.

On a long-term scale, the unregulated overtime can cost taxpayers big.

"Potentially in the millions or tens of millions of dollars," Nelson said.

Cost of overtime

Nelson said staff has worked overtime to pad their pensions for years.

In February, the I-Team obtained salaries for all city employees from 2020 to 2021.

In two years, the city spent $12.9 million on overtime.

The police department and staff at Independence Power and Light (IPL), the city owned utility, earned the most in overtime.

In 2021, the police department spent $2.8 million on overtime, in part because of staffing shortages.

The department is down more than 30 officers.

For the same year, IPL staff earned more than $1 million in overtime.

Regardless of the reasons for overtime, the costs can be ongoing.

"Overtime counts towards salaries for LAGERS purposes," Nelson said.

No policies to stop it

City staff are not breaking any rules.

Employees can strategically pad their pensions without retribution.

That's because, in Independence, there's no policy that puts limits on overtime.

Nelson recommends a city-wide audit to compare Independence policies to other municipalities.

Costly decisions and a lack of money-saving policies is an issue that's led to complaints from residents, like Lucy Young, for years.

"The citizens are sick and tired of it and they want to address it," Young said.

Nelson provided the city with a list of recommendations to help monitor spending when it comes to overtime.

Zach Walker, city manager, said he would speak with the I-Team once he evaluates the findings.

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