Grand Jury 2019-20 – “The City of Chico needs to find additional revenue sources by March 1, 2021”

16 Aug

This Tuesday Chico City Council will discuss their response to the 2020 Butte County Grand Jury report.

Click to access 2019-2020%20Grand%20Jury%20Report.pdf

The BCGJ report is chock fulla nuts.  There are also interesting reports on the Sheriff’s Dept, the jail, the county clerk’s office, and the county Public Works Department.  But here I’ll try to focus on their findings and recommendations for Chico.

In order to make their report, the jurors did the following research:

Interviewed:
o The City Manager
o The Chief of Police
o Butte County Board of Supervisors Districts 2, 3 and 5
• Attended:
o City Council meeting
• Reviewed:
o 2019 annual budget for City of Chico

The problem with the GJ is that they are completely dependent on  staff for their research. Their report about Chico sounds as if it came right out of the reports Mark Orme has been giving for the last couple of years. The don’t question anything, they just repeat what the city manager has told them.

The City of Chico estimates post Camp Fire financial impacts at $500 million, largely due to a
20% increase in population. In the future, some financial offsets will be made to this cost.
However, this unprecedented fire added additional strain to issues Chico was dealing with pre
fire. California Public Employees Retirement System (CalPERS) payments limit Chico’s
revenue. The City of Chico continues to deal with insufficient revenue to repair roads, make
infrastructure improvements, and meet public safety needs, staffing levels, and pension
payments.

Again, we’re hearing about the financial impacts of the Camp Fire. $500 million? As you’ll see forward, this figure is a projection at least 10 years into the future. In the next paragraph they get to the real problem.

CalPERS
The financial situation facing Chico is problematic. The CalPERS unfunded liability, as of June
30, 2018 (latest available information from the state system) is $141 million.

This is a troubling – not quite a year ago, city finance man Scott Dowell gave me a figure of approximately $128 million. So, despite millions in annual payments toward the UAL – this report says it will be $11.4 million for 2020 – the UAL goes up every year. Here the GJ acknowledges same.

Unfunded accrued/actuarial liabilities are the calculated cost of promised benefits that are greater than the
current value of a fund’s asset. The yearly payments keep increasing along with the unfunded
amount. The 2019-20 budgeted payment is $11.4 million, almost 20% of projected tax revenue.
The State system gives the unfunded dollar amount to the city. This amount rises more than it
recedes each year even after the City makes multi-million-dollar payments. This situation is not
unique to Chico. Many other municipalities in California are facing the same issue, and some of
these municipalities have a higher unfunded amount and higher payments.

No mention of the payroll shares, now little the employees pay, they just write it off as a discrepancy in the value of the fund, as if that’s nobody’s  fault.

The fiscal year 2019-20 budget for Chico is $135 million, and the unfunded liability is more than
the budget. This problem cannot be solved locally. It will require either a change in state law or
judiciary changes through the court system if state law is not changed.

This is absolutely not true, the city has other alternatives, including switching to 457 Funds and getting out of CalPERS. Instead they began pilfering money out of every  department to pay the UAL. The Fund 903 is the only truly “restricted fund”.

To manage this difficult situation, the city of Chico has created a fund (903) to deal with CalPERS payments. As of fiscal
year 2019-20, the amount in the fund is $2.4 million which can only be used for CalPERS
payments.

The budget chart on page 106 shows the increasing payments made to CalPERS. And then this note, at the bottom of the budget – here’s why our roads and other infrastructure have suffered.

(1) Beginning in FY2017-28, each department will set aside a set percentage of payroll costs to fund the annual payment of the CalPERS unfunded liability. A target reserve of 10% of the annual unfunded liability expenditure will be retained in the fund.

With a UAL of $141 million, that would be a total of $14 million to be split among the departments. These are funds that would otherwise be spent hiring more employees and paying for street and infrastructure improvements/maintenance. 

And here they bring in the Camp Fire again. Remember, Orme claimed in the months following the fire that the city would lose money, but later admitted they brought in a windfall of over $3 million in sales tax, Utility Tax, and bed tax. But he continues to use the Camp Fire as an excuse for poor management.

The impact of the Camp Fire coupled with future and unfunded dollar amounts to CalPERS creates difficult fiscal decisions. The financial impact to the City from the Camp Fire is estimated by the City to be $500 million.

Yes this figure was given to them by staff. And, as you see here, these figures are projected over the next 12 years, and they were hardly necessitated by the Camp Fire. They were necessitated by at least 10 years of deferred maintenance. 

City staff estimate the $500 million Camp Fire financial impacts as follows:

 $196 million in personnel costs over the next twelve years to service the increased population

 $235 million for expansion of facilities
 $34.8 million for roadways
 $15 million for the sewer system

But the report also mentioned reimbursements of over $6 million, just in the first years after the Camp Fire.

The City received one reimbursement from FEMA in the amount of $7,302 to cover the cost of FEMA required high-efficiency particulate air (HEPA) filters for the offices. The City received $549,862 in property tax back fill from the State of California. The Office of the Butte County Auditor-Controller determined the dollar amount of the tax back fill. The City also received $3 million in relief from a State approved appropriation. Chico is using the bulk of the $3 million to implement technology upgrades and pay for a new
radio communication system.  

The report claims, “However, there is no guarantee of any more compensation coming to the City.”

That is not true – new residents always mean new revenues, new housing and higher housing prices drive up property tax, vlf, UT, etc. New residents generate new sales tax. 

The next subject is “Roads”.  No mention of deferred maintenance or figures given by Constantin last year – 10’s of millions to repair streets, many of which have slipped into such a state they will need to be reconstructed.

For fiscal year 2019/20, $2.5 million is budgeted for Capital Expenditures which includes road maintenance/repair. The Gas Tax Fund (Fund 307) funds road work/repairs. Fiscal year 2019/20 Fund 307 revenue is $4.8 million. 

$2.5 million for capital expenditures, which INCLUDES road maintenance/repair. $4.8 million more from the gas tax. But, when these funds are transferred into the public works fund, they are subject to the allocation mentioned above (1)  Here they report they’ve started a “Public Infrastructure Fund, but there’s no mention of this fund being restricted in any way.

The City of Chico staff, following the best government accounting practices, has set up a Public Infrastructure Fund (Fund 943), which is used for infrastructure projects and includes some of the waste hauler franchise fee. This revenue comes into the General Fund and is then allocated. The Fund 943 balance is $68,000.

“some of the waste hauler fee” – yeah, we all remember they said the “trash tax” would go toward fixing the roads, but it’s been emptied into the General Fund ever since. They don’t give a figure, why not?  Who are they kidding – this fund ($68,000?)  is far short of the costs projected by Chris Constantin for our streets and roads in coming years, long before the Camp Fire. 

 If you look at the budget chart on page 109 you see not of the money goes into actual street repairs. It looks like they’ve put about $40,000 into the “Bridge Plan of Action” and over $200,000 into “Pavement Management Asssement” but not much into the actual repairs. They spent $100,000 on the bike path extension to 20th Street Park – people don’t realize, not all the “street” money goes to improvements that facilitate cars. 

Another misleading statement in this report is that city staffers have not had “any pay raises in the last ten years”. That is not true. For one thing, when the city asked management to pay toward their own pensions (at that time, they paid nothing, the city picked up their share), Mark Orme and other staffers were given raises to more than cover their increased shares. Orme was also given a 457 plan, a special 401K for public employees. His contract states that he will get a fixed $9,000/year, plus 4.5% of his salary, which amounts to an extra $20,000/year. In addition to over $50,000 paid by the city toward his CalPERS benefits.

The report goes on to discuss the Police Department. Again, with the 2020 census still on the horizon, they claim fa 20% increase in population due to the Camp Fire.

The department consists of 158 employees and is budgeted for 168. Of the 158 on staff, 98 are sworn officers with a budget for 108 officers. With approximately 20% more residents in Chico post Camp Fire, more sworn officers and support staff are needed. However, officer recruitment
is difficult, largely due to low wages. After recruiting a candidate, another year to year and a half is required to complete the hiring process. This includes the Police Academy and department training. Technology upgrades such as automatic license plate readers and onboard computers
will help relieve some of the pressure for more sworn officers. However, revenue is needed for either to occur.

Earlier they admitted that the city received reimbursements that covered, spending at least $3 million on “technology upgrades and [to] pay for a new radio communication system.” 

Public safety (cops and fire) get over half the budget, and create over half the UAL because they only pay 15% toward their pension costs. They also as much as double their agree upon salaries with mandatory overtime and contract gadgets like “CTO”.  If public safety employees would agree to take more reasonable salaries and pay more toward their own benefits, we could hire more cops and fire. Period.

The report lists “challenges” – AB109, prop 57 and jail releases, NVHRC, the homeless. They need to talk to the sheriff’s department – the county approves the transfers and releases.  This report indicates a lack of cooperation between BCSO and CPD, and that’s another problem. 

I was very disappointed with the lackluster conclusions they drew, and their “findings” and “recommendations.

Conclusion
Chico faces several financial obstacles including insufficient revenues for CalPERS payments, along with the need for improved infrastructure, road repair/maintenance, public safety and staff salaries. Due to Chico’s growth, the infrastructure and roads need improving. To meet the safety
concerns of the growing population, public safety improvements need to be made. Both financial and personnel issues also need to be addressed. 

  • insufficient revenues for CalPERS payments – why not ask the employees to pay more?
  • need for improved infrastructure, road repair/maintenance – they act like that’s a new thing brought on by the camp fire, even though staff has been telling us fore years we needed to put more money into the streets 
  • more money for public safety and staff salaries if employees would pay more toward their benefits there would be money for more hires
  • They keep citing “growing population” as though that’s a complete surprise – the truth is, staff has looted our funds to pay down their pension deficit

The “Findings” page won’t cut-and-paste – so I’ve compressed it a little:

  1. CalPERS is putting ever increasing burden on the city’s General Fund, impeding the city’s ability to provide essential services
  2. the city is experiencing financial impacts and population growth from the Camp Fire
  3. the city roads need attention due to lack of maintenance
  4. city staff has performed well but has not received a pay increase for 10 years
  5. Chico PD is understaffed
  6. Chico Police department could face big changes with new chief
  7. the city has been fortunate “to receive 5 years of service” from outgoing Chief OBrien

I think this is one of the most pathetic, misled and misleading Grand Jury reports I’ve ever read. And here’s their even more ridiculous “recommendation” – hold onto your hats!

R1. The City of Chico needs to find additional revenue sources by March 1, 2021.

And there it is. That’s the result of months of “investigation” and “deliberation”?

The city will discuss their required response to this incredible stretch of logic at Tuesday night’s meeting. I’m going to make my own recommendations via Chico Engaged, I hope you will do same.

https://chico-ca.granicusideas.com/meetings

Keep it clean!

 

 

8 Responses to “Grand Jury 2019-20 – “The City of Chico needs to find additional revenue sources by March 1, 2021””

  1. Dave August 16, 2020 at 5:11 pm #

    The bureaucrats and other special interests are desperate so now they enlist the grand jury to recommend tax increases. Of course, they only tell the grand jury what will support their case.

    The city needs to go bankrupt. It’s the only way it can ever get out from under the pension and other post employment unfunded liabilities. The city council will never reform the pensions so there will never be enough money. The best they can do is get their sales tax increase and use it to leverage up to the hilt with that bond. But increasing the sales tax and taking on hundreds of millions more in debt can only at best kick the can down the road a few years when they will be back for more tax hikes. And leveraging up in this economic environment is playing with fire.

    There are cities in this state with sales taxes of 10.5% and none of them have solved their unfunded liabilities because the special interests won’t allow it.

    The same will play out here if the special interests have their way. The system is designed to take as much as possible from us to continue the unsustainable liabilities as long as possible. It is truly disgusting, especially at a time when so many have lost businesses and jobs. Let’s face it. We are tax slaves to these parasites.

    How appropriate the grand jury report has a blood sucker on the cover page and the grand jury foreperson’s last name is named Blood.

  2. Dave August 16, 2020 at 5:42 pm #

    This is absolutely not true, the city has other alternatives, including switching to 457 Funds and getting out of CalPERS. Instead they began pilfering money out of every department to pay the UAL. The Fund 903 is the only truly “restricted fund”.

    It is clear the grand jury was lied to or at the very least information was withheld from the grand jury in order to mislead the grand jury. And the same for your other “not trues.”

    Who can we report this to and how would we do that? The California State Attorney General? He’s just as or even more corrupt than our local bureaucrats.

    • Juanita Sumner August 17, 2020 at 5:42 am #

      Thanks Dave. You know, it’s not hard to mislead people who are too lazy to do any of their own homework.

      I don’t know who we could report this to – they all play the same tune. I do think we should comment on Chico Engaged, let council know what we think of Staff’s bullshit.

      And I don’t think bankruptcy is so crazy – you’re right, it’s our only shot at getting a federal judge to overturn the contracts that we never had a chance to approve.

  3. Scott Rushing August 17, 2020 at 12:07 pm #

    Another great article Juanita, with good facts to support your observations.

    Due to my lawsuit against Chico PD I have to stay out of political fray but I admire your tenacity.

    I am offended by the “we need more officers canard” the “public safety” trope. That is another half truth. Chico needs quality officers, not quantity. Read the police logs, most of the work CPD is reactive, not proactive. Rarely do cops stop a crime in progress. The cops are typically are following up with victims of various crimes. Most calls are for vandalism, theft, graffiti, domestic abuse, barking dogs, i.e., not crime fighting. The follow up work can be completed by modestly paid community service staffers with training in communication and writing skills, not target shooting. Many cities use these police department employees to investigate misdemeanors leaving the “action” and felonies for the expensive detectives.

    Scott

    On Sun, Aug 16, 2020 at 2:52 PM Chico Taxpayers Association wrote:

    > Juanita Sumner posted: “This Tuesday Chico City Council will discuss their > response to the 2020 Butte County Grand Jury report. > https://www.buttecourt.ca.gov/GrandJury/reports/2019-2020%20Grand%20Jury%20Report.pdf > The BCGJ report is chock fulla nuts. There are also intere” >

    • bob August 17, 2020 at 7:12 pm #

      And even though the cops will do nothing to catch the criminal who stole or vandalized your property they will sternly warn you against going after the criminals.

      They will do nothing to protect or recover your property and they expect you to do the same. They are worse than useless and might as well be working for the criminals.

      • Juanita Sumner August 18, 2020 at 5:54 am #

        I quit calling the cops after they told me they couldn’t help me on private property. We have and easement, and one neighbor’s teenager actually climbed on his roof to shoot at my dogs with a pellet gun. We weren’t home, so another neighbor called it in. The cops told her it is not illegal to shoot a gun (!) on private property, including an easement. When I called later, a cop recognized the kid’s name and described him as “a one-boy crime wave”. His name was legion at the high school. But, they still wouldn’t do anything about this kid shooting at my dogs with the pellet gun.

        Although, they showed up at the house routinely over the parents’ fighting. They’d always council them into saying they loved each other and then leave.

    • Juanita Sumner August 18, 2020 at 5:47 am #

      Yes Scott – frankly, the cops don’t serve very many people. They serve a very disproportionate segment of the population, but we all pay for it, in ways most of us don’t understand.

      My neighbor is having a mental breakdown, he’s threatening the rest of us, makes crazy claims. He refuses to acknowledge neighbors he’s known for 20 years. He sic’s his enormous German Shepherd on people walking past his house, and has walked out in front of cars, demanding people pull over and explain to him why they are driving down “his” street. He’s tried to deny my tenants access to their driveways. And when one of the neighbors got into a yelling match with him, he called the cops and claimed assault. So they came, at 5:30 at night, about 111 outside, and stood out in his shadeless driveway with him for half hour or so, getting him even more agitated. And then they just left him alone in his house. With no air conditioning, in this weather. Pissed off at all his neighbors.

      I believe this was a perfect example of the need for mobile BCBH teams, trained in de-escalating these situations. The old man obviously needs help, but none of us neighbors is equipped to deal with it, he’s so hostile. And the police do not seem equipped to handle it either.

      I think the only people the police are currently serving are themselves.

  4. bob August 17, 2020 at 6:53 pm #

    “Read the police logs, most of the work CPD is reactive, not proactive. Rarely do cops stop a crime in progress. The cops are typically are following up with victims of various crimes. ”

    If your property is stolen or vandalized in Chico you will find out real fast that the cops are useless. They do nothing. You have to go online and file your own police report.

    But that’s a complete waste of time because they will do nothing. The only point in doing that is to get a copy for your insurance company so you can file a claim.

    Yet the idiots of this city think they need more cops who do nothing and who cost a fortune. The fact is, this corrupt little city can’t even afford the cops it already has.

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