STATE OF FLORIDA

DIVISION OF ADMINISTRATIVE HEARINGS

CITY OF NORTH MIAMI AND SPECIAL ) POLICEMEN'S FUND OF THE CITY OF ) NORTH MIAMI, )

)

Petitioner, )

)

vs. ) CASE NO. 78-1361

) INSURANCE COMMISSIONER OF THE ) STATE OF FLORIDA, )

)

Respondent. )

)

RECOMMENDED ORDER

Pursuant to notice, the Division of Administrative Hearings, by its duly designated Hearing Officer, James E. Bradwell, held a public hearing in this case on June 22, 1979, in Miami, Florida. During the hearing, the parties presented a proposed stipulation and thereafter the parties were permitted leave to file findings of fact which incorporated the stipulated facts. The Proposed Findings of Fact were received on July 13, 1979, and have been considered by me in preparation of this Recommended Order.

APPEARANCES

For Petitioner: Willard K. Splittstoesser, Esquire

City Attorney of North Miami 776 Northeast 125th Street North Miami, Florida 33161

For Respondent: Donald A. Dowdell, Esquire

Legal Division

Office of Insurance Commissioner and Treasurer

428-A Larson Building Tallahassee, Florida 32301

ISSUE

At issue herein is whether or not the City of North Miami or the Special Policemen's Fund of the City of North Miami is entitled to participate in the distribution of the tax fund established pursuant to Chapter 185, Florida Statutes, for calendar years 1976 and 1977.

The parties have stipulated to the following facts:

1. The Wyatt valuation as of 1-1-73 required payments of $517,011 from all sources and $419,554 from the City of North Miami (City) in order to fund the normal cost and actuarial deficiency of the North Miami Employees Retirement System Pond (Fund) for the Fund's 1974 calendar year. The City contributed

   $328,275 for that fund year. Due to the underfunding, the State tax revenues for the 1974 calendar year derived from Chapters 175 and 185, Florida Statutes, were withheld by the Department of Insurance.

   
   

2. The Wyatt valuation as of 1-1-75 indicated that $919,430 was due from all sources and $743,653 from the City to fund the normal cost and actuarial deficiency of the North Miami Employees Retirement System Fund for the Fund's calendar year 1975. The City paid $282,187 for the fund year. Due to the underfunding in 1974 and 1975, the calendar year 1975, Chapter 175 and 185 funds were withheld by the Department of Insurance.

   
   

3. The Wyatt valuation as of 1-1-75 again indicated that $919,430 was due from all sources and $743,653 from the City in order to fund the normal cost and actuarial deficiency of the North Miami Employees Retirement System Fund for the Fund's calendar year 1976. Due to the adoption of a fiscal accounting year by the Fund, no funds were contributed by the City to the North Miami Employees Retirement System Fund for the first nine months of 1976.

   
   

4. The Wyatt valuation as' of 1-1-75 also indicated that $743,653 was required to be paid during the City's 1976-1977 fiscal year. The City budgeted and paid $755,000 to the North Miami Employees Retirement System Fund during the City's 1976-1977 fiscal year.

   
   

5. In November of 1976 the Department of Insurance released tax revenues for calendar years 1974 and 1975 which had previously been withhold.

   
   

6. The Coopers-Lybrand valuation as of 1-1-77 indicated that the City was required to contribute $765,006 to fund the normal cost and actuarial deficiency of the North Miami Employees Retirement System Fund for the Fund's fiscal year 1977-1978. That amount was budgeted by the City of North Miami for payment during the City's fiscal year 1977-1978.

   
   

7. In addition to the stipulated facts, evidence reveals that the valuation for North Miami Employees Retirement System Fund performed by The Wyatt Company as of 1-1-75 was based on financial data up to December 31, 1974. That valuation added all previously required amounts which had at been paid into that Fund prior to December 31, 1974, to the actuarial deficiency of the Fund and indicated that if the City paid a total of $743,653 into the Fund during its 1976-1977 and 1977-1978 fiscal years, the underfunding which had previously occurred could he remedied over the course of the years remaining in the forty- year funding period, October 1, 1972, to September 30, 2012. The Department of Insurance (Department) released the 1974 tax revenues derived pursuant to Chapters 175 and 185, Florida Statutes, on November 8, 1976, based upon proof that the City of North Miami had budgeted $755,000 for the North Miami Employees Retirement System Fund during the City's 1976-1977 fiscal year.

   
   

8. In addition to the release of the Chapters 175 and 185 revenues for the 1974 calendar year on November 8, 1976, the Department also released the 1975 calendar year revenues at that same time.

   
   

9. There was conflicting testimony as to the reason for the release of the 1975 revenues. The City contends that the Department of Insurance knew or should have known of the funding deficiency for the 1975 calendar year of the North Miami Employees Retirement System Fund and agreed that deficiency and any other required amounts which had not been paid prior to the 1976-1977 fiscal year of the City could be added to the actuarial deficiency of the Fund. On the other hand, the Department contends that it did not know of the funding

   deficiency for the 1975 calendar year of the North Miami Employees Retirement System Fund and agreed only that required amounts which had not been paid by the City to the North Miami Employees Retirement System Fund prior to January 1, 1975, could be added to the actuarial deficiency of the Fund inasmuch as the 1974 calendar year of the Fund was the first funding year after the commencement of an amended plan and new forty year funding period in accordance with The Wyatt Company valuation as of 1-1-73. The facts centering around the dispute are as follows.

   
   

10. Myles J. Trailins, Esquire, was the City Attorney for the City of North Miami, Florida, from September, 1975, through January, 1977. Based on a dispute between the State Insurance Commissioner, the State Comptroller, and the City of North Miami and the Special Policemen's Fund of North Miami concerning the funding of the North Miami Employees Retirement System Fund in June, 1976, City Attorney Trailins filed on behalf of the City, a petition for the issuance of an Alternative Writ of Mandamus against Gerald Lewis as State Comptroller to compel the release of warrants which had been cut and issued but which were being withheld by the State Insurance Commissioner. Following the issuance of the writ by the Supreme Court of Florida and after telephone and written communications between the parties, an agreement was reached that resulted in dismissal of the aforementioned litigation, Supreme Court Case No. 49,692, following the immediate disbursement of past due sums which the City contended were unlawfully retained by the Respondent and the Comptroller, Gerald A. Lewis. Additionally, the parties agreed to the following covenants:

    
    

    1. Beginning fiscal year 1976-1977 and successive years thereafter, the City of North Miami agreed to fully fund the North Miami Employees Retirement System Fund in the amount determined by the City's actuaries.

       
       

       1. For each year thereafter for so long as the City continued to contribute the full amount as determined by the City's actuaries, the Respondent, the State Insurance Commissioner, and the then State Comptroller, Gerald Lewis, would not withhold or prevent the disbursal of monies due Petitioners, the City of North Miami and the Special Policemen's Fund, in accordance with Chapter 185, Florida Statutes.

          
          

       2. Any and all monies then outstanding from the City of North Miami due the North Miami Employees Retirement System Fund prior to fiscal year 1976- 1977 would be amortized and paid in accordance with Sub-section 189.07(4), Florida States.

          
          

       3. That Gerald Lewis as Comptroller of the State of Florida (at that time) would forthwith prepare and forward warrants due the City of North Miami and the Special Policemen's Fund for 1974 and 1975 and the Insurance Commissioner would not block the release of said warrants.

          
          

       4. The City of North Miami and the Special Policemen's Fund would enter into a stipulation for dismissal with Gerald Lewis as the then Comptroller of the State in Supreme Court Case No. 49,692.

       
       

11. The agreement resulted in dismissal of the litigation which was initially agreed to verbally on November 4, 1976, in a telephone conversation between Attorney Trailins and James R. Vereen, acting on behalf of Philip F. Aschler, the then Insurance Commissioner and Treasurer. Said agreement was reduced to writing and the correspondence attached to an Affidavit dated November 2, 1976, and November 5, 1976.

12. The State Insurance Commissioner and Treasurer takes the position that an additional cash payment in the amount of $452,669 was required to be made by the City to the Fund for fully funding the pension fund for the fiscal year

    1976-1977. This position appears to be contrary to the agreement entered into by and between the parties on or about November 5, 1976. Evidence reveals that said amount was not budgeted by the City of North Miami nor was such amount due or required to be paid to the pension fund as calculated by the City's actuaries since the City had already contributed the actuarily determined amount required to fully fund the pension fund for fiscal years 1976-1977 pursuant to the stipulation and agreement between the parties. Additionally, it was noted that the Comptroller, apparently noting full compliance pursuant to Chapters 175 and 185, Florida Statutes, certified the City's full compliance for fiscal years 1974 through 1976 by disbursing all sums collected on behalf of the City from the premium excise tax for said years.

    
    

13. Section 185.35, Florida Statutes, sets forth certain requirements for cities to participate in the distribution of the tax fund establishing Sections 185.07, 185.08 and 185.09, Florida Statutes. Subsection (1)(j) of Section 185.35, Florida Statutes, provides in pertinent part that commencing on July 1, 1964 (the municipality) shall contribute to the plan annually an amount which together with the contributions from the police officers, the amount derived from the premium tax provided in Section 185.08, and other income sources will be sufficient to meet the normal costs of the plan and to fund the actuarial deficiency over a period not longer than forty years. Subsection 185.07(4) provides that the Municipal Police Officers Retirement Trust Fund in each municipality...shall be created and maintained in the following manner:

    
    

    (4) By payment by the municipality or other sources of a sum equal to the normal costs and the amount required to fund over a forty year basis any actuarial deficiency shown by a quinquennial actuarial valuation. The first actuarial valuation shall be conducted for the calendar year ending December 31, 1963.

    
    

14. Based on the above factors and since the City has recognized the above referred to actuarial deficiencies as legal obligations of the City and is amortizing the actuarial deficiencies over a forty year period in accordance with Florida Statutes, Subsection 185.07(4), I shall recommend that the Petitioners are entitled to the Chapter 185 monies for calendar years 1976 and 1977.

    
    

    CONCLUSIONS OF LAW

    
    

15. The Division of Administrative Hearings has jurisdiction over the subject matter and the parties to this action. Subsection 120.57(1), Florida Statutes.

    
    

16. The parties were duly noticed pursuant to the notice prod visions of Chapter 120, Florida Statutes.

    
    

17. The authority of the Respondent is derived from Chapter 185, Florida Statutes.

    
    

18. Subsection 185.35(1), Florida Statutes, establishes minimum benefit levels and other requirements which must be satisfied in order for

municipalities to participate in the distribution of the tax fund established by Chapter 185, Florida Statutes. The statutory requirements of Chapter 185, Florida Statutes, are satisfied when the benefits provided by the North Miami Employees Retirement System Fund are added to those of the Special Policemen's Fund. Based on the Petitioners' compliance with the agreement made between the Respondent respecting the actuarial deficiencies as determined by the actuarial valuations for the years in question, and since the City has continued to fully fund the North Miami Employees Retirement System Fund since fiscal year 1976- 1977, the Petitioners are entitled to the Chapter 185 monies for 1976 and 1977 based on the forty year amortization of the actuarial deficiency. Subsection 189.07(4), Florida Statutes.

RECOMMENDATION

Based on the foregoing findings of fact and conclusions of law, it is hereby,

RECOMMENDED:

That the Insurance Commissioner authorize the warrants for the Chapter 185 monies due the City of North Miami and the Special Policemen's Fund of the City of North Miami for the years 1976 and 1977 be cut by the Comptroller and remitted to the petitioners in accordance with Chapter 185, Florida Statutes.

ENTERED this 31st day of August, 1979, in Tallahassee, Florida.

JAMES E. BRADWELL

Hearing Officer

Division of Administrative Hearings Room 101, Collins Building Tallahassee, Florida 32301

(904) 488-9675

COPIES FURNISHED:

Willard K. Splittstoesser, Esquire City Attorney of North Miami

776 Northeast 125th Street North Miami, Florida 33161

Donald A. Dowdell, Esquire Legal Division

Office of Insurance Commissioner and Treasurer

428-A Larson Building Tallahassee, Florida 32301

Docket for Case No: 78-001361

Orders for Case No: 78-001361