Howard Jarvis Taxpayers Association has successfully sued at least twice to stop POBs on the grounds that they must have voter approval

29 May
This article from the Howard Jarvis Taxpayers Association sheds some legal doubts on the whole POB scam.

On a tip from a reader, I found this article, originally printed in January 2020. Jon Coupal begins with statewide bond measures, but picks up with a warning about Pension Obligation Bonds. “...at the local level, taxpayers need to be aware of a recent resurgence in the use of pension obligation bonds, a risky financing method that fell out of favor during the recession but is now making a comeback.”

Coupal analogizes, “A POB is basically paying your Visa bill with your MasterCard,” adding, “Pension obligation bonds (POBs) are bonds issued to fund, in whole or in part, the unfunded portion of public pension liabilities by the creation of new debt.

Council members Andrew Coolidge and Sean Morgan, and other proponents of POBs, are denying that a POB is new debt, they chant it like a mantra, because they think they can hypnotize us into believing it.

Coupal continues, “The use of POBs relies on an assumption that the bond proceeds, when invested with pension assets in higher-yielding assets, will be able to achieve a rate of return that is greater than the interest rate owed over the term of the bonds.

Even Staffer Scott Dowell has used the word, “gamble“, even while he and city manager Mark Orme have pressed forward with this scheme. Council has given them permission to send this bond for judicial approval. The consultant told council and staff that this type of bond does not require voter approval. They said it would only take approval from a judge, which should only take a few months. The expect to implement this thing within the next few months.

If this seems odd to you, you’re not alone, the HJTA is on your side.

Back in 2003, the state of California attempted to float a statewide pension obligation bond without voter approval.

The Howard Jarvis Taxpayers Association sued to invalidate the bonds and prevailed in court.

That’s not the only lawsuit HJTA has pursued against POBs. The reader who tipped me to all this sent me the story of HJTA vs the city of Simi Valley.

The Simi Valley City Council voted 5-0 on April 6, 2020, to rescind a December 2019 resolution authorizing a $150 million pension obligation bond and future similar bonds, thanking the Ventura County Taxpayers Association for working with the City in avoiding what could have been a lengthy battle over legally questionable bonds. The rescission was part of a settlement agreement with the VCTA and the Howard Jarvis Taxpayers Association.

Apparently, the city asked for validation from the Ventura County Superior Court. HJTA and the Ventura County Taxpayers Association then “answered” the suit. And the city backed down, but I’m not really sure why.

“In settling, the Simi Valley City Council recognized the constitutional concern in the VCTA/HJTA answer to the City’s lawsuit — whether the California Constitution requires two-thirds voter approval of any such bond. Agreeing to wait for legal clarity, and with each side bearing its own costs, the City agreed to dismiss its lawsuit with prejudice, and rescind the bond authorization resolution.

recognized the constitutional concern” ? ” Agreeing to wait for legal clarity” ? I’m not sure what has happened since then – has the court given any further ruling on these bonds? Any legal clarity? I’ll have to look into that. But I think that’s a good question for Staff at that POB forum.

DAY: Tuesday, June 8, 2021
TIME: 2:00 P.M.
PLACE: City Council Chamber – 421 Main Street

6 Responses to “Howard Jarvis Taxpayers Association has successfully sued at least twice to stop POBs on the grounds that they must have voter approval”

  1. Scott Rushing May 29, 2021 at 6:30 pm #

    Dear Juanita and Taxpayers: Does the HJTA have counsel? Is a lawsuit the only action the Chico CC will respond to? Good luck. Scott Rushing

    On Sat, May 29, 2021 at 1:11 PM Chico Taxpayers Association wrote:

    > Juanita Sumner posted: ” > https://www.hjta.org/california-commentary/bonds-are-a-risky-way-to-deal-with-pension-woes/ > This article from the Howard Jarvis Taxpayers Association sheds some legal > doubts on the whole POB scam. On a tip from a reader, I found this article, > origin” >

    • Juanita Sumner May 30, 2021 at 6:08 am #

      Thanks for asking Scott. The HJTA does have counsel and often goes to bat for the taxpayers. I’m not sure what it might take to stop Chico Staff and Council members from taking this action. I’m not sure if the state legislature has already taken steps to legalize court validation of POBs. I’ll have to see what HJTA says and get back to you.

  2. Mims May 30, 2021 at 8:56 am #

    You’re wonderful. I hope members of our group are going to speak to this at the next city council meeting.

    • Juanita Sumner May 30, 2021 at 10:33 am #

      Thanks Mims, I hope so too. This POB thing is a picnic on the railroad tracks.

  3. Cecilia June 1, 2021 at 12:39 pm #

    Juanita, thank you for sharing all this! This information about HJTA is a ray of hope–how can the Chico CC go forward with these POBs without voter approval!? It’s frustrating! When the city manager expresses that it’s cost prohibitive to get out of CalPers, how does one respond? We know from the case of Irvine as shared here on your blog that it is possible!!

    • Juanita Sumner June 1, 2021 at 3:23 pm #

      I think the city manager needs to resign, possiblythe Administrative Services Director as well. If it were legal to issue the POB without voter approval, I believe Simi Valley would have gone forward. In fact, HJTA has always been very careful, I don’t believe they would pursue a suit if they weren’t sure of legality. I also believe Orme is holding us off by the forehead regarding CalPERS – at the very least, council can negotiate more realistic contributions from staff. I know this is true because every agency has different agreements with their employees, with different shares.

      We’ve got them red handed Cecilia, we can’t back down. Please write to council and send a letter to the ER.

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