Appellate court rules in favor of Minneapolis in pension dispute

A state appellate court agreed Tuesday that police and firefighter pension funds in Minneapolis overpaid retirees and need to recoup the money owed to the city.

The decision is the latest in a longstanding dispute between the city of Minneapolis and two pension funds -- the Minneapolis Police Relief Association and the Minneapolis Firefighters Relief Association. City leaders have complained the fund overpayments were straining city coffers.

The Minnesota Court of Appeals upheld a district court ruling that the associations miscalculated some of the pension amounts. The ruling means that retired police officers, firefighters, and their surviving spouses will have to pay back any extra money they received. The city could receive as much as $76 million.

Minneapolis Mayor R.T. Rybak hailed the rulings as a victory for taxpayers. "Simply put, the court agreed with us," he said in a statement Tuesday.

However, key details about the pension payments remain unresolved. The court sided with the police and firefighter associations on the question of whether the city needs to approve changes to pension calculations. The court reversed an earlier ruling and found that pension funds could make some changes to the benefit amounts without the city's approval.

Larry Ward, the president of the Minneapolis Police Relief Association, the group that manages police pensions, said he was "very pleased" with the court's decision, although he said the group might appeal some of the individual rulings to the state Supreme Court.

"We didn't do anything wrong," he said. "We followed the law, and the Court of Appeals affirmed that decision, although they did add that maybe some items were improperly calculated."

The Minneapolis Firefighters Relief Association did not respond to a request for comment.

Retired police officers receive $44,700 a year, on average, from the pension fund. Surviving spouses receive half that amount. The figure is calculated based on salary and years of employment. Police and fire associations create salary figures using a formula that takes into account other types of income, including vacation and overtime pay. A state auditor and Minneapolis officials have disputed the salary calculations.

The disagreement dates back to 1995, when the city sued the pension funds. The city and the funds signed a settlement agreement intended to clarify how pensions should be calculated.

The city sued the associations again in 2006, arguing that the pension amounts were incorrect and that the associations needed city approval to make certain changes to the benefits. A district court judge agreed with the city and required members to pay back the money, but the associations appealed the ruling.

City Council Member Betsy Hodges said the ruling shows that the city's efforts paid off. "I think the ruling reaffirms the city's decision to defend our taxpayers in court," she said. "Courts have consistently come to the same conclusion that the funds improperly overpaid benefits."

But the appellate court did not resolve all disputes over police compensation. City attorneys expect to go to trial in district court over specific objections to the compensation formula.

The decision comes as state lawmakers are deciding whether to merge the police and firefighter pension funds with a statewide public safety pension fund. The merger could save the city millions of dollars in future payments. Lawmakers didn't pass the deal before the regular legislative session ended, but they could approve it during a special session.

Hodges, the city council member, said it's too soon to say whether the ruling will impact the discussion about the proposed merger.

"What we have right now are some new and expanded options to protect our taxpayers," she said. "So we're going to be reviewing options with our legal and finance staff before we take any further action."