Police Chief Millionaire at 43

Are you living the American dream? Or are you funding it? If you’re a taxpayer in Westerly, Rhode Island, you’re funding it. In this case, it’s recently retired Police Chief Ed Mello who’s living the dream—retired at age 43 with a $54,000-a-year pension. In the private sector, with interest rates so low, that equates to 401(k) savings of around $1,350,000.

Westerly’s police chief contract has a 30-year mandatory retirement for chiefs. Why not simply change it or hire from outside to avoid the years of service? The Westerly Sun points out, “Union officers likely would cry foul if the town hired from outside, but must take responsibility for putting the town in this position as a result of their contract.” Mello is now the fourth chief getting a pension from the town.

Towns need to get out of the pension business altogether. Union leadership has turned what is supposed to be an incentive to retain employees—and yes, chiefs are employees—into an incentive to retire. Towns should not have to own their employees for life.

Based on a report from 2009, the Westerly police pension plan had a 45% unfunded liability. It’s far from safe and is in worse shape than the state-run plan. The creation of a “Mello Rule” could get rid of the 30-year mandatory retirement. But better yet, shift over to a 401(k) and put the responsibility back on the employee. As for Mello, are you wondering if he’s off to the beaches? He’s not. He’s back to work as the new police chief for Jamestown, Rhode Island.

Utah’s Pension Plan Works
Rhode Island Treasurer Gina Raimondo’s pension reform bill should have mirrored Utah’s. Raimondo’s plan calls for existing employees and new employees to enroll in a hybrid 401(k). The major thrust behind the move is to make sure contributions flow to the already retired. But she could have accomplished much more by offering a choice between a pension or a 401(k), not a silly, half-baked hybrid.

Utah offers new employees a choice. The state, meaning the taxpayer, contribution to the pension is no longer open ended. It’s capped at 10% of employee salaries. Now Utah taxpayers are protected. In Rhode Island, the state continues to see its portion go up mostly due to weak investment performance.

How to Attract Jobs
In 2010, former Red Sox pitching ace Curt Schilling got a $75-million loan from the Rhode Island Economic Development Corp. (RIEDC) for his gaming company, 38 Studios. RIEDC viewed it as a way to support companies with hard-to-collateralize assets. “We’re one of the first states to do this,” says Keith Stokes, REIDC director. “Our goal is to create high-skill, high-wage jobs.” 38 Studios employs 300. Not including interest payments, if it pays any, the Rhode Island cost per employee is $250,000. And they’re not all Rhode Island jobs, I’d guess.

No one ever questioned Schilling’s ability to outsmart his opponents. If Rhode Island were more welcoming to businesses, it wouldn’t have to offer these one-sided deals. What’s more, legislation passed this year taxes downloaded games. It may apply to 38 Studios’ Kingdoms of Amalur: Reckoning, set for an early 2012 release. Haven’t taxpayers put enough money toward 38 Studios? Leave it to a gamer like Schilling to come out on top.

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E.J. Smith - Your Survival Guy

Preparing your investments and family for when disaster strikes.

E.J. Smith is the Founder of YourSurvivalGuy.com, Managing Director at Richard C. Young & Co., Ltd., a Managing Editor of Richardcyoung.com, and Editor-in-Chief of Youngresearch.com. E.J. graduated from Babson College in Wellesley, Massachusetts, with a B.S. in finance and investments. In 1995, E.J. began his investment career at Fidelity Investments in Boston before joining Richard C. Young & Co., Ltd. in 1998. E.J. has trained at Sig Sauer Academy in Epping, NH, where he completed course-work in Practical and Defensive Handgun, Conceal Carry Pistol, Shotguns, Precision Scope Rifle and Kidnapping Prevention. E.J. plays a Yamaha Recording Custom drum set with Zilldjian cymbals. His first drum set was a 5-piece Slingerland with Zilldjians. He grew-up worshiping Neil Peart of the band Rush, and loves the song Tom Sawyer—the name of his family’s boat, a Grady-White Canyon 306. He grew up in Mattapoisett, MA, an idyllic small town on the water near Cape Cod. He spends time in Newport, RI and Bartlett, NH—both as far away from Wall Street as one could mentally get. The Newport office is on a quiet, tree lined street not far from the harbor and the log cabin in Bartlett, NH, the “Live Free or Die” state, sits on the edge of the White Mountain National Forest. He enjoys spending time in Key West and Paris. Please get in touch with E.J. at ejsmith@youngresearch.com. Sign up here to receive all the best content from Richardcyoung.com each week.