Archive | March, 2021

Joe Azzarito: Council needs to “serve notice to all city employees that as of a determinable date they will be paying the full cost of their ‘silver spoon’ pensions”

30 Mar

Joe Azzarito is a retired accountant who lives in Chico. Here’s a letter he recently sent to the city of Chico regarding the Tax-a-rama council has embarked upon since a “conservative” Super Majority took over in January. Thanks Joe, I hope this email inspires other people to express their outrage with this obvious ploy to leave the taxpayers holding the Pension Deficit Bag.

To all Chico city councilors and Senior City Staff:

The topics of municipal revenue enhancements, namely a sales tax increase and pension obligation bonds keep surfacing in the course of discourse and analysis by concerned citizens such as myself. 

Now why would that be? Could it be that you all are not listening to your constituents demands that these disastrously wrong ill conceived options, for funding the massive unfunded pension obligations that this city has forced upon its citizens, be abandoned? Whenever I read or hear about these plans of enduring us to untold costs to fund city staff’s, be they unionized or not, exorbitant salaries and pensions, it makes my blood boil. Your dark of the night surreptitious intents, without transparency, to enact either of these programs is a dereliction of duty, maybe not to your sponsors, the unions, or your fellow colleagues, but certainly to your constituents – the people that pay your salary through taxes. 

I have heard that programs such as these can be implemented, without the consent of the voters. How dare you! It is not enough to seek input from us but for us to approve of these wild schemes fraught with danger. Given that the ruling class of Chico earns far and away much more than the median income of the people of Chico, you have the gall to push these down our throats.

 For those on the council, recently elected and those previously, you are not conservatives, in the slightest sense fiscally. You all seem to some how, symbiotically, look after each other’s tail. Unions give you campaign funds so that you can win elected office. In turn, you fulfill their needs by ensuring their members are well paid. Wherein do the citizens fit into your scenario? Oh, yes, we are to fill the city coffers with the funds you promised your benefactors. Our needs lay at the bottom of a very deep hole, somehow they are only minimally attended to. It shouldn’t be that way! We should come first as it is our sweat and toil that makes it all possible. 

I have spoken many times of the badly written about California Rule that keeps you from “doing the right thing” – that being to serve notice to all city employees that as of a determinable date they will be paying the full cost of their “silver spoon” pensions and that salary structures must be revised, downward, to allow the city to adequately meets its obligations to its citizens, first. Promises, previously made in prior eras when economic conditions were much more rosier than now, need to be upended. It would necessitate that pay scales, merit raises, benefits, including pensions, be approved by a body, inclusive of a citizenry board, and not by the likes of City Manager, his staff and/or City Council. To keep the decision making in their hands alone is why these financial problems came about in the first place. Those that pay the salaries should be the ones deciding, not so now. To have city staff analyzing, recommending and being on the receiving end of the decisions made is tantamount to “conflict of interest. 

At the very least a referendum should be devised and agreed to by vote of the electorate on all of the above. The unfunded elephant in the room must be sequestered and controlled. CALPERS should be informed of any changes and any separations be established. The pensions of all covered city employees would need to be renegotiated, with the stipulation that staff would be paying the full load of costs.  Any conflict with current law needs to be assessed and corrected. It is high time that city pay the piper his due!

 Respectfully, Joe Azzarito  

More on the business/rental tax conversation

26 Mar

Well, it was tough trying to follow that March 24 Finance Committee discussion via Zoom – I was afraid to open another page on my computer at first, afraid I’d lose the meeting. I’m no techie. So I tried to take notes by hand. Here’s what I got.

Scott Dowell – “We started this [business tax update] a year and a half ago… to update an old ordinance written in the 1970’s…” After a few more comments assuring us that the ordinance needed to be “updated,” Dowell turned the floor over to the consultant, HdL. According to their website, “The HdL Companies is a pioneer and leader of auditing, operations, and revenue … HdL’s ECONSolutions team provides economic development consulting …”

The consultant’s report begins, “In an effort to identify methods of generating additional local funds and to garner efficiencies of process by modernizing the code, the City commissioned the HdL Companies.” Please note that the first reason for this ordinance overhaul is to raise “additional local funds,” and Honey, wake up, that means TAXES.

Furthermore, “Each of the three options for modifying the tax structure provide increased revenues to the City while striving to create an equitable outcome for the business community by not placing the burden of increased rates solely on any individual category. ” If you read the report you see that’s a lie, they want to “place the burden” on landlords and tenants.

Josh from HdL told the group that currently Chico uses a “tax-based” business license, not a “regulatory” license. A regulatory license would allow the city council to decide which type of businesses, specifically, are allowed to operate in Chico. Of course a good example that we’ve been hearing a lot about is the cannabis industry, which came up later on the agenda. But the type of businesses allowed in town was not the only type of “regulation” the consultant brought up.

Josh the consultant went on to describe Chico revenues as “flat,” which didn’t make sense, given the report delivered at the end of the meeting by Finance Department staffers. I think what Josh really meant was that the revenues are not coming in far enough of expenses. Instead he said, “your business tax is not keeping up … it should follow your sales tax receipts.”

Let’s think about that. He’s saying what we already know from staff reports over the past couple of years – revenue streams like property taxes and sales tax are up, up, way up. At the end of this meeting the finance dept staff said we could expect other upticks in future, since property values in Chico are way higher than the surrounding county, and then there’s the stimulus check money. At the January meeting Dowell reported an “unexpected” $30 million uptick in sales tax revenues.

So the consultant is saying, businesses are making more money, let’s exploit that with a new business tax ordinance. He chastised the committee – Chico has the highest population of nearby cities and town, but the LOWEST per capita business tax revenue – $3.80 per person per year. His chart showed a list of local municipalities, with Chico on the bottom of the dog heap, under Yoooooba City! Disgraceful! Well, I don’t know – that almost sounds Business Friendly. Apparently that’s not what the consultant is shooting for.

Josh also reported that the burden of paying the business tax has fallen on the smaller businesses in town, but did not explain why. But, later, he suggested that the city could take the “burden” off retail businesses by adding rentals to their scheme.

The current business tax schedule is pretty interesting – you can see it on pages 12 and 13 of the consultant’s report. Most businesses are taxed based on the number of employees they have. Employee taxes have never made sense to me – do we not want jobs? Why would you penalize an employer for paying good wages? And besides, that option does not provide enough revenue to cover the salaries and pensions Downtown.

The consulting firm is pushing for a “gross receipts” option – and you heard that right – they want to tax businesses based on how much money they make. An income tax for businesses, that goes to a city that does not provide services, only penalties.

And this, “The City currently excludes residential property rentals where the total units are less than 3. The current ordinance also appears to exclude commercial property rental. Given the make-up of the City, this leaves many potential businesses without being taxed. The City could consider removing the unit exemption entirely requiring even renters of single family homes to pay the tax. Furthermore, the definition could be changed to residential and non-residential property, picking up any property rental within the City.”

Evil never sleeps. They are suggesting penalizing the people who provide housing as well as people who need housing, just because they can. That’s why I’d call it a “tenant tax,” which is a little easier to say than “a tax because you don’t own your own house...”

The three options the consultant laid on the table were

  1. increase the amount of Employee Tax
  2. go to a gross receipts model
  3. go to a gross receipts model and include all rentals in town, including all those backyard units the city was encouraging people to build, under the guise of encouraging more and cheaper housing

The third model included the language about rent control, but the consultant denied any such thing. I hope you will read that section again, very closely, I think you’ll see RENT CONTROL DUMMY! See Attachment A – Business Tax Analysis and Ordinance Review, near the very end of the consultant’s report.

I could talk about the consultant’s report for a week, but I hope you’ll read it too.

https://www.chico.ca.us/sites/main/files/file-attachments/3.24.21_fc_agenda_packet.pdf?1616179820

Instead I’d like to cut to the committee discussion to which you were probably not privvy. Andrew Coolidge recently accused me of taking his words out of context – well, I took notes as fast as I could during that meeting – if he wants to know who said what, maybe he should order the clerk to make a recording available to the public.

Scott Huber took the floor briefly to say that he favored the third option, which would include all rentals in the gross receipts model.

Sean Morgan reminded us that they are just trying to modernize this ordinance and “make it more equitable,” still insinuating that some businesses are not paying their way. He said that was why council made the Waste Hauler Franchise deal – the garbage tax – “because some were paying unfairly…” That remark did not make sense. Who was not paying fairly? The consumers are the ones who got stuck with the increase. And that’s who this burden will fall to – the consumers and the renters.

Coolidge surprised me, saying he did not like the gross receipts model, going so far as to claim, “I have stopped doing business in jurisdictions that use the gross receipts model...” He also said he knew business owners here that “make a lot of money but don’t pay…” He didn’t explain either remark.

The consultant quickly shifted gears to say the Employee Tax was the “most popular” in California jurisdictions, but opined that the gross receipts model is the “most equitable”. Again, I’m hearing, “let’s stick it to the landlords and the tenants!”

There were about 23 attendees hanging around on Zoom, I couldn’t see them all on my screen, but one was current Chico Chamber CEO and former CEO of the Jesus Center, Katy Thoma. For once she asked a good question: “Does this tax go to the General Fund?” To which Scott Dowell answered a very brief and almost inaudible “Yes.” Nobody had to explain that the General Fund is an almost unregulated cookie jar out of which Council and staff can withdraw funding for just about any whim.

At this point the audio began to cut out, I was “timed out”, and had to sign back in. From what I could understand, the committee voted to have the consultant make a report to the full council, but I can’t be sure about that. I did get back in time to listen in on the sales tax increase measure conversation, and I’ll report that – Next Time! On “This Old Lady Goes to a Zooooom! Meeting”

Finance Committee meeting shows how out-of-touch council members are with their constituents – they want to raise the cost of everything to secure the pensions

25 Mar

I had my 61st birthday recently, and I realized, I need to challenge myself more. COVID has put me back in my little cocoon, and I was getting too happy in there. Yesterday I tried something new – I participated in a Zoom meeting of Chico Finance Committee.

I hated it. Zoom is no substitute for in-person meetings. It’s hard to set-up, you have to sign in at least a half hour ahead. The quality of the feed is poor, and the idiots on the other end were no help. Andrew Coolidge talked while others were talking, including the expensive consultant, without turning off his microphone. That was like listening to old landline phones. On the other hand, Sean Morgan repeatedly spoke with his mike turned off, at least three times people had to tell him to turn it back on. When they were discussing the rent control measure, Andrew Coolidge said, “Here’s my opinion on the gross receipts model…” , and the microphone abruptly turned off. I missed his entire comment, I don’t know if anybody heard it.

When I complained that my sound was being cut off, Morgan, committee chair, laughed and suggested I had “weak internet“. Yeah, I’ll tell you what, Sean Morgan has weak internet, that guy is an entitled creep who has no connection with the struggles of his constituents.

No, it wasn’t my computer, or my internet, because within 15 minutes after the meeting was over, I e-filed my federal and state tax forms without a blip.

An attendee who identified himself only as “Taxpayer” repeatedly asked staff and the committee why the meetings weren’t being taped, but he was given only a standard response – “we have never taped the meetings…” And that was it.

When I told the committee they should open the meetings, Morgan told me that was up to the governor.

Well, Mayor F-Bomb, you are either stupid or lying (both, is what I’m guessing). In Shasta County, two supervisors out of 5 voted to open meetings. The other three members of the board voted NO, so that didn’t carry. But here in Chico, we have a “Conservative Super Majority” of 5 to 2. Those five promised they would bring down the liberal hold on our town. But now what, afraid of a governor who has had his testicles handed to him on a plate?

No, it’s easy to figure why they want the meetings, especially these poorly attended morning meetings, to remain unattended and unseen. Look at the agenda – taxes, taxes, more taxes, and taxes that don’t need any voter approval.

https://www.chico.ca.us/sites/main/files/file-attachments/3.24.21_fc_agenda_packet.pdf?1616179820

Read the staff report, and the consultant’s report. Read ALL of it. I could tell that neither Coolidge nor Morgan had read it (Huber stayed mostly silent, except to say he is firmly in favor of raising everybody’s cost of living to fund the pensions). No member of the group was familiar with the excerpt that referred to rent control.

No, they didn’t use the words “rent control” – they’re not stupid. But maybe you can tell me what this means:

Rental Registration/Compliance Programs

A rental registration program provides the City an opportunity to track and maintain rental property compliance separate to, or in conjunction with, business license requirements. HdL offers a wide variety of services designed to assist cities with managing varying aspects of property oversight. These range from implementing and managing a simple registration and information gathering program, to a more detailed rental program that tracks compliance with rent stabilization ordinances and the intricate requirements that go hand in hand with tracking compliance with local or state law.

Read the whole passage – this ordinance is setting us up for rent control, and the consultant is pitching for the job of enforcing it:

“Option 2 – Full Rental Compliance Program – is a turn-key program in which HdL (the consultant) monitors and enforces unit level regulations, responds to tenant complaints, and performs unit inspections for compliance. Each unit requires its own account to track individual units with the unit’s tenant, enforcement of rent increase, amenity offerings, and other ordinance requirements.“

And, is that a typo – “enforcement of rent increase…” – or what?

They all denied there was any attempt at rent control in this ordinance, which left me wondering, doubting, that they actually read any of it. They kept saying they wanted to make business license fees more “up to date” and “equitable”. But the wording in the report says “rent control”.

And of course, a “rental tax”, which they will use to keep other business taxes lower. That’s where they bring “equity” into the conversation. I like to call it a “tenant tax,” because that’s who is going to pay it.

The consultant explained that other businesses, particularly retail, pay their dues in sales tax generation. Well, who pays that sales tax? The vendor hands it over to the state, but it’s not coming out of his/her pocket, it’s coming out of the consumer’s pocket. The renter, and the landlord. We all pay sales tax. And landlords pay a butt-ton of property taxes. Sales and property tax are the number one revenues coming into the city.

By the way, according to the “comprehensive” monthly finance report made at the end of every one of these meetings (and available in full in the agenda), both sales and property tax revenues are up since the Camp Fire in November 2018. According to finance department staffer Barbara Mendes,

  1. there was a “minor dip” in sales tax receipts” at the beginning of the COVID shut-down, ” but we’re rebounding… 4th quarter 6.8 million… impact of COVID is levelling out...” That’s $6.8 for one quarter, the annual takings have actually been over projections. Remember how Orme cried poormouth about having to endure the Camp Fire refugees, but at the end of that fiscal year, July 2019, there was a $20 million surplus?
  2. the last two stimulus payments from the feds actually made a blip on the radar, and “next quarter we’ll see the impact of the upcoming stimulus payments…” But Orme still cries poormouth at every city council meeting – he even had the nerve to complain about the refugees from the more recent Berry Creek fire. As if those people aren’t living here, generating sales tax, and now spending their stimulus checks here.
  3. Here’s another after-effect of the California wildfires – home sales are up, prices are up, and Mendes reports this has been a nice little windfall for Chico finances. “We get a portion of property transfer tax with deed recordings – we get $5.55 from every $1000″ of the value of the sale. Furthermore, she reported that the average price of homes in Chico has jumped up quite a bit, “median price up 8%… we’ll see an increase in prop taxes again next year…”
  4. And then there’s the RDA – the city gets a portion of projected property taxes for all of Butte County – this year, Mendes reported, “ property values in the RDA area (city of Chico) raised higher than in unincorporated areas (the county) – 5% – so we got more RDA than we anticipated…”

Yes, housing prices and expenses are already way up, and all city staff is hearing is the “Ka-CHING!” ringing in their ears. At a time like this, to purposefully raise the cost of living for people struggling under onerous regulations is just unbelievable.

I’ll stop here, and come back later with more of the discussion from the committee members. Remind me to tell you about the conversation in which Coolidge admitted the sales tax increase would go to secure the bonds.

City of Chico Finance Committee to discuss Rent Control in closed meeting – “Finally, this action can be passed without going to vote. If the City chooses, it could initiate a rental registration/compliance program in preparation of expanding the business license tax to include all residential rentals properties.”

23 Mar

This rent control ordinance is being shuffled through as part of a total overhaul of city business license fees and a new “business tax”. This meeting is only available to the public via Zoom. Committee members –  sean.morgan@chicoca.gov  andrew.coolidge@chicoca.gov and scott.huber@chicoca.gov

From the agenda – 

https://www.chico.ca.us/sites/main/files/file-attachments/3.24.21_fc_agenda_packet.pdf?1616179820

Rental Registration/Compliance Programs

A rental registration program provides the City an opportunity to track and maintain rental property compliance separate to, or in conjunction with, business license requirements. HdL offers a wide variety of services designed to assist cities with managing varying aspects of property oversight. These range from implementing and managing a simple registration and information gathering program, to a more detailed rental program that tracks compliance with rent stabilization ordinances and the intricate requirements that go hand in hand with tracking compliance with local or state law.

Option 1 – Basic Rental Registration – tracks top level rental information on a per property/address basis and includes initial identification and education. An $18 fee would be collected per property/landlord account as well as summary
information used for basic inventory of rental properties, inspection tracking, and a first step to more detailed reporting. Under this option the City would receive an estimated $81,000 of registration revenue. For each subsequent period, a fee of $15 plus Consumer Price Index adjustment would be collected per account amounting to an estimated $67,500 annually.

Option 1 (Add on) – Detailed Rental Registration – dives deeper to tracking on a unit level. This option gives the City the ability to collect information such as unit amenities, tenants, rent collected, or any number of unique data elements. An additional fee of $3 per unit would provide an estimated $21,000 of registration revenue. If the City chooses to mandate online filing, the $3 fee can be waived. This option is set to enforce multiple aspects of regulation including stabilization requirements, inspections, tenant complaints, and a more detailed housing inventory data analysis program.

Option 2 – Full Rental Compliance Program – is a turn-key program in which HdL monitors and enforces unit level
regulations, responds to tenant complaints, and performs unit inspections for compliance. Each unit requires its own
account to track individual units with the unit’s tenant, enforcement of rent increase, amenity offerings, and other
ordinance requirements. A registration fee of $20 per account along with a $50 inspection fee would be collected to fund
the compliance program. Total estimated amount generated under Option 2 would be $490,000 in compliance revenue.
Rental registration/compliance programs are administrative fee-based programs that run independently of business
licensing. However, a City’s residential property business license can rely on the completion of rental
registration/compliance. Massage Therapist and Contractors are two examples of businesses that require compliance with
more than one program in order to conduct business in the City.

Finally, this action can be passed without going to vote. If the City chooses, it could initiate a rental registration/compliance
program in preparation of expanding the business license tax to include all residential rentals properties.

Tags: , , ,

Dave Howell calls out the imposters on city council – Morgan, Reynolds, Coolidge, Denlay and Tandon all ran on “conservative” platforms but now we find they are just a bunch of union toadies

23 Mar

Thanks Dave, for writing a letter to the editor about the Pension Obligation Bonds the city is considering.

No, there are no “conservatives” on council – maybe they’re “conservative” with their own money, but they treat the collective pot like a big cookie jar. They rode into office on money from public employee unions, and now they are trying to pay back their benefactors by roping the taxpayers into paying for the overgenerous pensions and “post employment benefits“.

Here’s Dave’s letter – take his example, and start writing your own letters and emails folks. 

Conservatives are supposed to stand for low taxes and fiscal
responsibility.  We are told we now have a conservative majority on the
city council.  But what we actually have is a council of impostors. They
plan to use the revenue from their proposed sales tax increase to take
on hundreds of millions in new debt. They also plan to take on an
additional hundreds of millions in new debt in the form of a pension
obligation bond.  It’s a dangerous gamble.  And on the off chance it
pays off, it WON’T make the pensions sustainable.  And if it doesn’t pay
off it could bankrupt the city.

Combined pension and other post employment benefit liabilities plus
interest are over a quarter billion dollars and growing.  It can never
be paid.  But our local politicians will raise our taxes and bury us in 
debt to keep the gravy train rolling a few more election cycles.  After
all, bureaucrats and other city employees must continue to receive
unaffordable compensation packages, including multi-million dollar
pensions.  And this in a county with a 21% poverty rate BEFORE COVID.
It’s unconscionable, especially at a time when so many businesses and
working people struggle to make ends meet.  But it is to be expected
when our local politicians are tools of special interests.

These politicians don’t represent hard working taxpayers and never will.
  Voters should remember this in the next election and defeat the sales
tax increase and those council members responsible for it.

Dave Howell, Chico

No, these people DON’T represent the average Chico resident, they represent the public employee unions. It’s time to start thinking about replacements. Kasey Reynolds, Scott Huber and Alex Brown are out in 2022, let’s find some decent hardworking taxpayers to fill their seats. Reynolds is the worst kind of faker, running as a “conservative” and then bringing in not one, not two, but THREE TAX MEASURES. And Huber and Brown pose as protectors of the poor – BULLSHIT people! At a time like this, they want to raise taxes? Tell them HELL NO! 

These people are all beholden to the union PACs. The employee unions are the worst kind of communist plot – the enrichment of the few, paid for by the many. Don’t fall for it, demand council bring employees back to the table to pay more of their own benefits, or throw these IMPOSTERS to the curb in 2022 and 2024. 

Kenny Rogers: You got to know when to hold ’em, and know when to fold ’em. Too bad we can’t get Kenny Rogers to run our city finances

19 Mar

The worst thing about Pension Obligation Bonds is that the proceeds would be gambled on the stock market. The assumption is that the investments would pay both the bond service and the pension deficit.  How nuts is that?

I’ve heard various analogies – taking a credit card to the casino, taking a second mortgage on your house to pay the first mortgage, paying your credit card with your other credit card, etc. Of course people do all these things, and we’ve seen what happens to them. We’ve watched neighbors, friends, even family members lose it all in gambits like that, and we’ve shaken our heads and wondered how they could be so stupid.  How is it suddenly prudent just because it’s a government agency doing the dumb thing? 

They will tell us they know what they’re doing, just like CalPERS told the governor and all the state agencies that they knew what they were doing. They don’t. 

The consultant who pitched this horror story in the making to the Chico City Council said the key would be to borrow the bond money at a rate of 3 – 4% interest. He speculated that money would make a good enough return on the market to pay that rate, and then some for the pension fund. But he made it clear, constantly, that a “downturn” in the market would be a very bad thing – then the city would owe both the bond money and the pension payments, both with interest. 

The difference between those two debts, as reported by the consultant, is that CalPERS won’t dump us for not being able to make our full payments, our “obligation”. As long as we pay SOMETHING, they will keep on paying out the crazy pension payments. In fact, each agency negotiates their own deal with CalPERS and sets the employee contributions.  Of course, if they don’t pay enough, the debt grows, with interest – that creates the Unfunded Actuarial Liability, or, the “pension deficit”. 

On the other hand, a Pension Obligation Bond has to be paid, in regular installments, or the bond holders can demand either the back payments or the entire debt, on the spot.  This means, they could empty the General Fund, and every other fund the city holds, except the Pension Stabilization Trust. The PST is the only truly, legally restricted fund the city has established. All other funds, from the streets fund to the park fund to the sewer fund and on, are available for allocation to the General Fund. 

The proponents keep trying to tell us this is a fool proof scheme. They won’t acknowledge the fact that the market can turn ugly on a dime. Really ugly. Pension systems around the country are making some really desperate, stupid investments, according to this article from the Reason Foundation. 

https://reason.org/commentary/with-interest-rates-low-us-pension-funds-make-risky-emerging-market-debt-investments/
 
In the United States, public pension funds, which have an average investment return target of 7.25 percent, will likely struggle to meet those investment targets and could be severely impacted by plummeting interest rates. Without changes to pension plans’ assumed rates of return, many public pension systems will see an increase in debt.

Unfortunately, many public pension plan managers are not interested in adjusting their investment return targets to realistic levels at this time. Instead, they are seeking riskier, potentially higher-yielding investments in an effort to make up for depressed interest rates and hit their targets.

What’s super frustrating is the double talk. Our mayor, Andrew Coolidge, acknowledges that CalPERS is doing horribly, but tries to assure us that our staff can pull of successful investments. In this market? 

According to this article, government agencies’ share of the UAL is about to go up again, due to risky investments. For example, “New Mexico’s Educational Retirement Board (ERB), which serves the state’s teachers, is one such plan that dedicates roughly a quarter of its portfolio to fixed-income assets. Within New Mexico ERB’s fixed income-investment allocation, 7 percent of funds go to emerging market debt, which is essentially sovereign bonds issued by countries classified by the World Bank as lower-to-middle-income to upper-middle-income. This includes countries such as Brazil, India, and Nigeria.”

“Even though emerging market debt carries much higher yields that are attractive to pension funds, those benefits can be outweighed by enormous risks since several of these countries have defaulted on their debt in the past. Due to this risk, public pension investment allocations to emerging market debt have historically been used sparingly in pension fund portfolios. However, in recent months, pension fund managers have signaled a growing appetite for allocating more assets to this asset class.”

As more pension funds take on these risky investments, more will fail, debt will increase, and be passed on to government agencies. In California, CalPERS has a horrible record of corruption, with various board members leaving in disgrace over manipulating the public trust to their own gain. Most recently an investments advisor left after he was found to be using CalPERS funds to buy stock in funds he owned. CalPERS is also floundering under huge board member salaries – here’s a thought – CalPERS has it’s own pension deficit.

Instead of screaming for investigations and reform, I think those public employees who stand to get pensions are getting desperate to make sure the pension systems are funded.  I just can’t decide whether our council members are being led by the nose or if they are coming to the table knowing exactly what they are doing. 

What do you think?

Why we need to dump collective bargaining – to end the union domination of California – and Chico! – politics

17 Mar

Thanks Dave, for this great article from David Crane:

https://www.hoover.org/research/bipartisan-opportunism-blame-californias-high-tax-rate

Crane gives us the history of collective bargaining in California, “which endowed police and other local personnel with the power to bargain collectively with the governments that employed them, handing political power over local budgets to government employees who were the principal beneficiaries of those budgets…”

Established by Ronald Reagan in 1968, this agreement “created a piggy bank to help finance GOP legislators.” But of course, it works for whichever party is in power, son when he became governor in 1975, Jerry Brown extended this agreement to school teachers and employees. This has resulted in elections controlled not by the Russians or the Iranians but by the public employee unions.

In Chico the biggest contributors in every election are the SEIU (management) and the CPOA (cops), with the IFFA (firefighters) coming in a close third.

In my opinion, this relationship is completely inappropriate – council approves hires, salaries, and benefits, sets staffing levels, and then accepts huge campaign contributions from the very people who benefit from their actions. I can’t believe the voters don’t see the conflict of interest in this system, but I’m guessing, most people don’t know. Everybody’s got their panties in a knot over the notion that Russia and Iran have influenced elections, but they don’t see corruption that is as plain as the nose on their faces. 

So City of Chico and County of Butte, both of whom have outrageous pension deficits, are considering Pension Obligation Bonds. This action would forever place the burden of the pension deficit – created by the ridiculous salaries, overly-generous benefits, and completely unrealistically low employee contributions approved by our “local leaders” – on the backs of the taxpayers. 

Instead, I suggest we dump collective bargaining – this could be done by city ordinance, and could be accomplished by a petition of citizens. Another option would be a city ordinance that cut the union PAC donations down to the same level as individual donations – about $1,000 per candidate. 

Crane agrees on point #1 – “The antidotes are to repeal collective bargaining rights for government employees or to offset these voters’ power with persistent support of our political parties from donors who care about the general interest (full disclosure: Govern for California provides such support), not to whine about one-party dominance.“

Right now, as Doug Ose has said, “we are going backwards” as a state. Over-taxation has made housing too expensive, while infrastructure all over the state is failing. Chico Mayor Andrew Coolidge acknowledges the poor condition of streets in Chico, but advocates a POB, which would suck all the money out of the General Fund, which is made from allocations out of all the other funds – the streets fund, the park fund, the sewer fund, etc. You get the picture every time you drive or bike around town, or open your new sewer bill. Did you get the picture last night when council voted to INSTITUTE A FEE FOR USE OF UPPER PARK? 

Wake the hell up Chico, and write a note to your mayor – that’s andrew.coolidge@chicoca.gov

Intergenerational equity in the pension system, or, stealing candy from babies

15 Mar

A popular topic among academics is “intergenerational equity”. One explanation, taken from a box of laundry detergent: “Iroquois philosophy says that the decisions we make today should result in a sustainable world seven generations into the future.”  

Here’s a good article from wikipedia:

https://en.wikipedia.org/wiki/Intergenerational_equity

An old example of intergenerational equity would be  “debtor’s prison”. 

“Since the first recorded debt issuance in Sumaria in 1796 BC,[10] one of the penalties for failure to repay a loan has been debt bondage. In some instances, this repayment of financial debt with labor included the debtor’s children, essentially condemning the debtor family to perpetual slavery.”

Can you even imagine your kids being dragged off to jail because you can’t make your house payments? Apparently it still happens in other parts of the world.

“While slavery is illegal in all countries today, North Korea has a policy called, “Three Generations of Punishment”[11] which has been documented by Shin Dong-hyuk and used as a moral paragon of punishing children for parents’ mistakes.”

You think Americans are any better? 

“Stanley Druckenmiller and Geoffrey Canada have applied this concept (calling it “Generational Theft”[12]) to the large increase in government debt being left by the Baby Boomers to their children.”

And part of that debt is the retirement system. Here they are talking about Social Security, which we’ve heard for years is failing because it is not funded adequately. “What?” you say. “Anybody who has a job pays into it, it must be funded!” Hold onto your hat for this declaration.

“The U.S. Social Security system has provided a greater net benefit to those who reached retirement closest to the first implementation of the system. The system is unfunded, meaning the elderly who retired right after the implementation of the system did not pay any taxes into the social security system, but reaped the benefits.”

Sound familiar? Well, maybe you didn’t know – our former city manager, Tom Lando, receives about $155,000/year in pension,  for which he paid NOTHING. Until 2013, when Mark Orme agreed to pay a paltry 6%, the city made the “employer paid member contribution”. Meaning, the taxpayers footed the bill for pensions in excess of $100,000 a year, for people who paid nothing. And now, those people, including Orme, only pay 9%. Their underlings – those hired after 2013 – are required to pay more. It’s a big pyramid scam – the members at the top of the pyramid get the money paid  by the bottom rung. Here’s an analogy of the Social Security system that is also true for the public pension system.

“Professor Michael Doran estimates that cohorts born previous to 1938 will receive more in benefits than they pay in taxes, while the reverse is true to cohorts born after. Further, he admits that the long-term insolvency of Social Security will likely lead to be further unintentional intergenerational transfers.”

Just substitute “CalPERS” for “Social Security” and there it is – the “intergenerational transfers“. A nice way to say “stealing candy from babies.” A nice way to say, “condemning your children to debt, poverty and enslavement to the system.” 

It’s time for young people to realize what is going on. The pension system is not only a pyramid, it’s an upside down pyramid. There are too many taking out that never paid in, and too few paying too little.  The system will collapse within the next 10 years unless older pensioners agree to take less, and younger pensioners agree not only to take less but to pay more. The taxpayers cannot sustain this system. Like ex Chico city council member Randall Stone said – this burden should be born by the employees, not the taxpayers, who have nothing to gain. Especially since all the money is going to the pension deficit, leaving nothing for services. 

But I’m not too worried – I heard about this concept from my son, who told me, the biggest problem facing young people today, “is the pensions…“

Teach your children well. 

 

Council rushing through closed meetings to forward the Pension Obligation Bond, Staff reports misleading – they want to ram this thing through before the taxpayers catch on

15 Mar

Last week Chico City Council and Staff confirmed my suspicion that they are using closed meetings to run Staff’s Pension Obligation Bond by the taxpayers. Without any notice to the public, and only 46 members of the public participating via Zoom, they combined two agenda items. The POB was supposed to be discussed as Item 5.12, but they summarily decided to discuss and vote on it during the Item 5.1 – Scott Dowell’s 5 year projection report.

While the POB was a small part of the 5 year projection, I don’t think it was appropriate to just move forward with the 5.12 discussion. Here’s the thing – I read the agenda ahead, and planned to participate in the 5.12 discussion. When I tuned in, there was no 5.12 discussion, and no explanation why. So, I got cut out. I don’t think that’s okay. 

So I asked the clerk what happened to Item 5.12.  She responded:

The POB was added to the 3/2/16 agenda (with items carried over from the 2/16/21 agenda). Because the POB was tied into with 5 year projection (Item 5.1.), staff discussed the items together.

Council took the following action:  A motion was made by Councilmember Morgan and seconded by Councilmember Denlay to authorize staff to continue exploring the CalPERS Unfunded Accrued Liability (UAL) restructuring including a legal validation process, applicable public outreach and analysis for possible pension obligation bonds, with it noted that this action does not commit the City to move in this direction. Staff was also requested to bring back more information to the Council regarding the process as it becomes available. The motion carried by the following vote:

AYES: Brown, Denlay, Morgan, Huber, Tandon, Reynolds, Coolidge    NOES: None”

I was just floored. Another smooth move under cover of COnVID. 

And of course the report is misleading.

“Staff is requesting approval to continue exploring the CalPERS Unfunded Accrued Liability (UAL) restructuring
including a legal validation process, applicable public outreach and continued analysis. This process would take
approximately four months and prepare the City should City Council decide to issue POBs in the future.”

It’s not a “restructuring,” it’s NEW DEBT. The “legal validation process” is completely administerial – no ballot measure, no voter approval. “Applicable public outreach“? Here’s what it says in the report: “Continued public education and information shared through reports to the Finance Committee and other public forums.” Really? There are no “public forums” right now, only Zoom meetings, with poor reception and limited participation. And that “continued analysis” is going to cost “$10,000 – $20,000”. That in addition to $25 – 30,000 for the “legal validation process“. 

Staff’s report also recommends “initiate a legal validation process” as Step 1, while “Continued public education” is Step 3.

Public education? Shouldn’t it be “public input”? 

So you see this whole thing is being ramrodded in as quickly as possible in closed meetings because they don’t want the public to find out what they’re really doing. 

Normally this is where I would tell you to write to or call your city council rep, but I keep hearing back from folks who have tried that, and got no  response. I can’t report any better from my rep Kasey Reynolds. And you see the vote above – unanimously idiots. So, I would say, don’t waste your time trying to contact them directly, write a letter to the editor of either the Enterprise Record or the News and Review, or both.

And if you really want to get your point across, you have to stick your neck out there a little.  Do your errands in a yellow vest, with “NO NEW TAXES FOR CHICO” scrawled across the back. Place a small sign in your car window saying same. If you have windows on your home facing the street, make 8 x 11.5 signs and post them in those windows. Get some blank postcards, write NO NEW TAXES FOR CHICO on one side, and send it to your rep via snail mail to their home. 

Arlo Guthrie said, “One guy is crazy, two guys are (bleeep!), but three guys – THAT’S a MOVEMENT. And he’s right.  They can ignore one or two of us, but I’m telling you, three, four, five more, and they start to pay attention. 

I will remind you until I’m blue in the face – if we let them sell these Pension Obligation Bonds, we are on the hook for the pension deficit FOR-EV-ER, not to mention, the new debt. Meanwhile, we will watch our streets and infrastructure deteriorate to 3rd World standards. As their investments fail, they will bottom out first the General Fund, and then all the other funds, to service the bonds and pay the still growing Unfunded Pension Liability. As you see in the report referenced above, Staff suggests “Projected costs [for the POB] are as follows and would come from the General Fund:  • Legal validation process: $25,000-$30,000.  • Public education and continued analysis by a municipal advisor: $10,000-$20,000.”

So don’t wait until it’s too late, and then complain – COMPLAIN NOW!

 

Tags: , ,

Is Andrew Coolidge stupid or a liar?

10 Mar

I know, Chico First is a more fun website. I know, Rob Berry is more the action type, chasing Scott Huber around with a camera. Unfortunately, that circus is distracting people from something they should be paying attention to – that boring old Pension Obligation Bond that Mark Orme is currently trying to end-run around Chico voters/taxpayers. 

Luckily there are other eyes on council right now, folks who are educated and number-savvy and also hip to this scam. A friend of mine recently contacted council to discuss his concerns about the POB, and he got a response from his district representative, Mayor Andrew Coolidge. My friend told me I could use Coolidge’s response for a letter to the editor, so I did. Coolidge is either stupid or a liar – you decide.

Chico Staffers are asking council to implement a Pension Obligation Bond.  Recently a friend expressed his concerns to Mayor Andrew Coolidge, who responded, “That bond is basically financing the city’s obligation (around $147 million to cal pers) at a lower interest rate so it can be paid off over the long term, rather than on Cal Pers rollercoaster payback schedule.”

That is not true. A POB is new debt. The consultant explained, the city would invest the borrowed money in the stock market, hoping for  return enough to pay both the bond debt and the CalPERS debt. The consultant speculated an interest rate of 3 – 4% on the POB, compared to 7% paid to CalPERS. But, the consultant was clear – if investments don’t do well, then we still owe CalPERS, and we also owe the bond holders.

Government Finance Officers Association says POBs are not worth the risk. But Coolidge, without really understanding what he is talking about, says, “I do believe faced with this huge burden the city may wish to pay it through a bank with minimal interest rather than to a state fund (cal pers) with an awful history of robbing from taxpayers.”

That is not how a POB works,  we will still have to pay CalPERS. I don’t think any member of council really understands POBs, they are trusting Staff, who have everything to  gain. Meanwhile, the taxpayers, who will be permanently on the hook for the pensions, are left out of the conversation.

Contact Coolidge, and your district representative.

← Older Entries