Chico taxpayers are guaranteeing the stock and bond market returns of the well heeled, well paid city officials.

I got a great comment from BC today, I didn’t want it buried in the comments section. Thanks BC, for this spot-on analysis of what they’re trying to pull Downtown.

From BC:

As a general rule, I don’t spend much time worrying about how the failures of municipal government affect rich people. If you are rich, you are far less effected by the bad decisions of a ineffective and thoughtless municipal governing structure,

If you hit a pot hole, you simply go out and lease a new $125,000 BMW or Mercedes, or at least have your $1200 dollar alloy wheel straightened. ( And detail the car while you are at it) If they raise a use tax or add a bond interest, you just write the check-electronic bill pay is painless. It doesn’t matter that the One-Mile is a poorly maintained, unsafe, drug infested crime area, because you avoid it by taking your family to a private swim and tennis club. And why worry about the homeless camping in the park, when you vacation in Italy/Florida/Hawaii/Colorado/etc.

The folks I worry about are the population most effected by expensive municipal decisions. While municipal rule making predominately serves the civic employees who write the rules, the most significant negative impacts of poor municipal government are felt by minorities, people of color, the poor and disabled, and those who depend on City Services. Its not a stretch to say that in Chico (as in Sacramento and Washington) the political class makes decisions that impoverish the most vulnerable while insulating themselves from the impact of their decisions.

Which brings us to the inequity of municipal pensions.

One of the most important benefits of a municipal pension, is that the taxpayers insulate the pensioner from CalPers Investment loss. Start with the assumption that the city makes a “full” pension contribution to CalPers each year. (They don’t) A full contribution would be defined as that contribution, which if it earns the CalPers projected rate of return, would grow into a large enough sum to pay the retirement benefits earned by the employees for that initial year of contribution. And CalPers says that they will earn 7% per year, net to the fund, after fees and charges. And if they fall short, who pays? The taxpayers, that’s who! Chico taxpayers are guaranteeing the stock and bond market returns of the well heeled, well paid city officials. Chico taxpayers with an average income of $24,900, who dont own a stock or a bond and live paycheck to paycheck, are guaranteeing pensions for the city’s privileged employees.

If that makes your eyes glaze over, try this: Im going to take $100 million dollars ($100,000,000) go over to the local Indian Casino. Im going to gamble it in the hopes of making a $7 million dollar profit. If Im lucky, I get to keep the $7 million. If I lose, the taxpayers in the City of Chico will borrow that money, give it to me, and pay off their indebtedness over the next 30 years.

To use a credit card example: The City has run up so much credit card debt, that they cant even make the minimum payment. So while they keep spending at the same or greater rate, they mortgage the house to pay down the credit cards. It ends when you lose the house-Bankruptcy. Along the way the can’t pay to keep the house up (deteriorating municipal facilities), cant fix the driveway (potholes and streets), cant afford a security system (fire and police), and eventually can not afford to put food on the table for the family (homeless).

And the folks who will suffer are the people who depend the most on city cervices which can never be adequately funded because the spending on entitlements for the rich folks just never stop.