When Chicago aldermen floated a proposal in 1987 to boost their city pensions dramatically, Mayor Harold Washington's administration dismissed it as an arrogant ploy that lacked even a cursory cost analysis.



Three years later, the proposal still didn't have a price tag. But records show that the new mayor,Richard M. Daley, helped push it through the state Legislature anyway.



Now a Tribune/WGN-TV investigation reveals how much those lucrative pensions could end up costing taxpayers.



An analysis of pension fund documents for 21 aldermen who retired under the plan shows they are in line to receive nearly $58 million during their expected lifetimes, though contributions and assumed investment returns are predicted to cover just $19 million, or a third of that sum.



The pension deal was inked more than two decades ago, but the costs began to kick in recently. Most of the 21 aldermen in the Tribune/WGN-TV analysis have retired within the past five years, and there are 53 more in the pipeline.



Former Ald. Thomas Allen is a prime example. After retiring from the City Council in 2010 at age 58, Allen went on to become a Circuit Court judge while also collecting roughly $90,000 a year from his city pension. During his lifetime, he stands to receive more than $4.2 million in benefits, though contributions and assumed investment returns are expected to cover only $1 million.



The inflated benefits for aldermen represent a small fraction of the municipal pension plan's $6.7 billion in unfunded liabilities. But they are a dramatic illustration of the structural problems lying at the center of Chicago's pension crisis.



The perk for aldermen also shows how the Daley administration leveraged city pension funds for political purposes rather than protecting the modest, sustainable retirement benefits promised to city workers.



Under the plan, aldermen and other elected city officials became eligible to receive up to 80 percent of the salary they earned during their last month of work. All other employees in the municipal pension plan — including top managers — receive 70 percent of their average monthly salary over the previous four years.



Aldermen can also reach the maximum benefit with just 20 years of service, compared with nearly 30 years for everyone else in the municipal pension plan.



Council members argue that they deserve to earn credit more quickly because they face re-election every four years. "Once you become (a city employee), you have to commit murder to lose your job. And an alderman can get tossed out in the next election," said Ald. Richard Mell, 33rd, who has been on the council for nearly four decades.



Data from the pension fund show that aldermen in the Tribune/WGN-TV analysis retired with an average of 25 years of service, roughly the same as the average retiree in the municipal pension plan.



The average payout to those aldermen is $81,000 a year. But because they can retire at 55 and their pensions grow by 3 percent compounded annually for the rest of their lives, the average amount will eventually increase to $165,000 a year.



The result is that many aldermen will end up making more in retirement than they did when they served on the council.



"I believe it's a bit too generous, yes, especially with the tough economic times for the city," said Ald. Nicholas Sposato, 36th, who is eligible for a higher pension benefit in a shorter amount of time as an alderman than when he served as a Chicago firefighter.



The aldermanic pension plan gained attention early this year when federal authorities indicted former Ald. William Beavers, who is alleged to have failed to pay taxes on money taken from his campaign accounts to buy into the aldermanic plan. Beavers is now receiving a city pension of more than $91,000 a year and is also eligible to earn a county pension based on his $85,000 salary as a Cook County commissioner.



Like many sweetheart pension deals, the origin of the aldermanic pension perk is murky. It's impossible to determine from public records who drafted it, for example. But new records unearthed by the Tribune andWGN-TVshow who blessed it: the Daley administration.



Without any public vetting, legislation creating the plan was slipped into a larger bill before it was signed into state law in January 1991. Last year, the Tribune and WGN-TV detailed how another provision added to that same legislation allowed many union officials to land six-figure city pensions. The investigation led to rewrites of the state's pension code, forced one top union leader to resign and sparked a federal criminal investigation.



The pension revisions came as Daley was running for his first full term as mayor. He went on to dominate city government for five more terms with frequent support from organized labor and the acquiescence of the City Council. During his tenure, Daley appointed nearly three dozen aldermen, many of whom went on to earn full aldermanic pensions.



As with other pension increases supported by the Daley administration, the required contributions did not keep pace with the higher payouts. Although City Council members must contribute an extra 3 percent of their salaries to receive the bigger pension, that isn't nearly enough to cover the benefits they receive.



Today, the municipal pension plan's massive unfunded liabilities are creating a burden for current and future taxpayers as well as city employees.



"There are several types of corruption in this city," said Jacky Grimshaw, Washington's former chief liaison to the City Council who helped torpedo the 1987 proposal to boost aldermanic pensions. "There are the types thatU.S. Attorney Patrick Fitzgeraldprosecutes — bribery, extortion, things of that nature. This is the hidden type, the piece of legislation that benefits a handful of people. You don't know where it comes from. You don't know whom it benefits. It's the most insidious kind of corruption."



A part-time job



When pension benefits for aldermen were boosted in 1991, their salary was $40,000 a year. Since then, it has grown to as much as $115,000 — rising at nearly double the rate of inflation.



That six-figure salary, and the large pension that goes with it, isn't even for full-time work. By law, the job of a Chicago alderman is part time.



Of the 50 current aldermen, 15 have other jobs, ranging from part-time consultant to full-time business owner. The chairman of the powerful Finance Committee, Ald. Edward Burke, 14th, has a private law firm. Ald. Thomas Tunney, 44th, owns the popular Ann Sather restaurant chain. Mayor Rahm Emanuel's floor leader, Ald.Patrick O'Connor, 40th, is in-house counsel for Foster Bank and also works at a private law practice.



Half of the aldermen who already retired under the inflated pension plan held outside jobs while serving on the City Council, according to financial disclosures reviewed by the Tribune and WGN-TV.



Some current council members say they spend long hours every week attending community gatherings and handling complaints and requests from constituents. Many of these tasks involve coordinating services, such as garbage collection, pothole patching and providing permits. Aldermen also involve themselves in administrative matters such as zoning decisions, which is unusual among major U.S. cities.



"It's not a part-time job, not if you're doing what you're supposed to be doing," said Ald. Walter Burnett Jr., 27th. "The definition of the job is part time. But I work 16-hour days twice a week. I work on Saturdays. You can't go to church without people asking you for things."



But those duties are not mandatory, and there are other avenues to city services, such as the 311 phone line. According to state law, the aldermen's only responsibility is to draft and approve legislation.



And Chicago's City Council, though among the largest and most expensive in the nation, rarely produces ordinances of substance. For years, the body has been derided as the mayor's rubber stamp.



"The bulk of meaningful legislation is introduced by the mayor or department heads," said former Ald. Dick Simpson, who now heads the political science department at the University of Illinois at Chicago.



The council takes roughly 7,000 votes a year on ordinances. Yet, since mid-2006, fewer than 100 votes were not unanimous, according to data compiled by the city clerk's office. During his entire 22 years in office, Daley used his veto only once.



One substantive ordinance introduced by an alderman came fromAld. Bernard Stone, 50th. Passed in 2006, it granted aldermen automatic pay raises pegged to changes in Chicago's cost of living.



Some City Council members have publicly declined to accept the raises. Yet documents show that at least seven of those aldermen have been allowed to contribute to the pension fund as if they were making the maximum possible salary. A private attorney for the municipal pension fund approved the maneuver in a two-paragraph opinion written in 1999.



Former Ald. Helen Shiller, 46th, declined her automatic pay raise of $6,455 for 2009, freezing her salary at a little more than $104,000. But when she retired in 2011, her pension was based on the salary she would have received: $110,556.



Shiller said she declined the salary increase — and also took unpaid days off work that further reduced her pay — "as a gesture of concern for and acknowledgment of the tough economic times the city was facing. I paid my full share into the pension fund."



The analysis by the Tribune and WGN-TV is based on pension fund documents that show the aldermen's initial pensions, their life expectancy and the value of their contributions and investment returns in the private market. The pension amounts were then extrapolated over their life expectancy, accounting for the automatic increase of 3 percent, compounded annually.



In Shiller's case, she stands to receive pension payments of nearly $2.7 million during her expected lifetime, of which her contributions and assumed investment returns are predicted to cover less than $800,000.



Quiet dealings



Aldermen have been eligible for pension benefits since at least the 1960s. But before 1991, the pensions were modest, and few aldermen bothered to participate in the fund.



Council members had tried for years to boost their pensions but couldn't get it done. That started to change in June 1990, when the council unanimously passed a resolution directing Burke to establish a subcommittee to "study and suggest recommendations to the City Council for the most efficient and cost-effective method" to provide aldermen better benefits. Burke declined to be interviewed for this story.



The subcommittee was supposed to report back to the full City Council within 45 days, which would have made the details public. But council records show that never happened. Instead, the pension deal was hashed out behind closed doors by trustees from the municipal pension fund and the Daley administration, records show.



In a letter to members, the municipal pension fund's executive director at the time described the legislative package that would be introduced in Springfield and said it "was developed during negotiations between the fund … and representatives of Mayor Daley's administration."



When the bill's main sponsor, Sen. Emil Jones, presented the final draft of the legislation to the state Senate, he assured his colleagues of Daley's approval. "It is provisions that mostly deal with the city of Chicago," he said. "And many other small benefits that have been agreed to by the administration, as well as — as the various systems. Also, it adds in there — the Chicago aldermen."



Then-state Sen. Roger Keats was the only legislator to question why aldermanic pension sweeteners were added. "The discussions were nonexistent," Keats said of pension bills in that era.



The bill passed both chambers of the Legislature on the last day of the session and was signed into law on former Gov. Jim Thompson's last day in office.



Pension fund records show two officials were handling pension matters for Daley at the time: Edward Bedore, a longtime confidant who was then budget director, and Walter Knorr, Daley's appointee on the municipal pension fund board. Neither returned phone calls seeking comment.



Through a spokeswoman, Daley declined to be interviewed.



$91,000 a year



The Tribune and WGN-TV examined more than 4,000 pages of pension documents relating to aldermen. But a few pages from the file of former Ald. Allen, 38th, are enough to reveal just how lucrative the City Council's retirement package can be.



Allen's family is connected by marriage to the Cullerton family, which has been a force in city politics since the Great Chicago Fire. Allen's brother-in-law, Timothy Cullerton, is the ward's current alderman. Daley appointed Allen as aldermen in 1993 to complete the term of Thomas Cullerton, Timothy's father, who died while in office.



Allen was able to retire on 80 percent of his $110,000 salary even though he served only 17 years on the council, fewer than the 20 needed to receive the maximum benefit. That's because the law allows aldermen to easily upgrade past service at a low cost compared with the benefits they stand to receive.



Just before retiring in 2010, Allen paid $21,000 to buy 51/2 years of pension credits for the time he spent as an aide to Cullerton. And because he didn't join the aldermanic plan until 1997, Allen paid an additional $24,000 to upgrade his prior years of service to the plan. That $45,000 in new contributions more than doubled his base pension from $41,000 to $88,000, records show.



Now he receives about $91,000 a year. In just seven more years, his city pension will be larger than his aldermanic salary.



Allen's contributions, those made on his behalf by taxpayers, and the assumed investment returns are expected to cover just a quarter of the $4.2 million he stands to receive if he lives to be 88. The other $3 million will have to be picked up by taxpayers as well as current and future city workers.



Allen notes that he has spent his entire professional life as a public servant, although he did work at a private law firm while on the City Council. "I don't pretend to be an actuary," he said. "I don't even know how it works. All I know is I got up every day and went to work and did the best I could. Whatever flows from that, I have no control over."



When he left the City Council and started drawing a city pension at age 58, Allen didn't really retire. His city pension comes on top of his $178,000 salary as a judge.



Appointed by the Illinois Supreme Court to fill a vacancy on the Cook County Circuit Court, Allen will be eligible for a second public pension from the Judges' Retirement System of Illinois when he retires from that job.



The judges' plan has a reciprocal policy that will allow Allen to transfer eight years of credit he earned as a county public defender back in the 1970s and '80s. If he does that and puts in 12 years on the bench, he will land a pension that's 85 percent of his judicial salary.



Asked if he thought Daley had manipulated the pension system to win the support of the City Council, Allen said he couldn't say.



"I don't really know what motivated anyone to add or subtract from pension laws in Springfield," he said. "I never liked Springfield. When I went there, I didn't like it."



WGN-TV producer Marsha Bartel, WGN-TV reporter Mark Suppelsa and Tribune database editor Alex Richards contributed.



jgrotto@tribune.com



hdardick@tribune.com



Twitter @JasonGrotto



@ReporterHal



Coming next: Deconstructing Richard Daley's big pension