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Time for “Truth in Accounting”

8 Apr

I’ve noticed lately this blog is getting alot of traffic from a really interesting website called “Truth in Accounting”:

https://www.truthinaccounting.org/

This website is operated by a well-credentialed group of individuals, out of Chicago – a city with big pension problems. It is a really good source of information about pension systems nationwide, including the federal government systems, which have driven our national debt for years. Didn’t you ever wonder how this nation could end up with such astronomical debt?

They are featuring the post I made the other day about the city of Irvine, California, and Defined Contribution Pension Plans. So, I must be onto something, these people are all financial big-shots. I don’t think they’d run it if I were shooting blanks at the moon.

We here in Chico, and all over California, have a big decision to make and we need to make it quick, before it’s made for us by a group of individuals who stand to gain substantially at our expense. If council approves the Pension Obligation Bond, it’s over Folks, we pay for these outrageous pensions. Why would Staffers who make enormous salaries care about our hardships – they want the fucking money.

Do you know how many members of council are either public pensioners or are married to pensioners? Andrew Coolidge’s wife teaches at Chico State. Sean Morgan is also employed by Chico State, as is Alex Brown. Kami Denlay (married name, Klingbeil) is married to a public safety worker.

And then there are the contributions from public employee unions – Deepika Tandon in the latest election and Kasey Reynolds in 2018 both received their biggest contributions from the unions. I’m not sure about Huber, but he’s already expressed his desire to add more taxes to your bills with as little public participation as possible.

I don’t believe people with such obvious conflict of interest should be allowed to make these kind of decisions. At the very least, they should have to declare their personal interest in furthering the POB and continuing to prop up CalPERS, an agency they all know has put us in horrible debt through mismanagement. At the last finance committee meeting, both Sean Morgan and Andrew Coolidge acknowledged that CalPERS continues to make bad investments. So you have to ask yourself why they won’t ask employees to come to the table with more reasonable contributions. And why they don’t make any effort to get out of CalPERS and ask new employees to take a Defined Contribution Pension Plan.

The main reason is that the voters don’t make it a very important issue. That’s probably because most people have no idea what’s going on. You can blame COVID, but I’d say, the public is very poorly educated as it is, and Staff does everything they can to obfuscate the issue. I’d bet my last $5 that most council members barely understand what they are doing, they are following Mark Orme into the swamp. As long as they have their fingers in each other’s belt loops, they will make it out okay.

But Chico is sinking, look around yourself. And then look at the city budget, millions of dollars that should be spent on streets and other infrastructure going to the Unfunded Actuarial Liability – their obscure term for the pension deficit. And then look at your property tax bill – if you’re a renter, ask your landlord about it.

I think there’s a letter to the editor here, I’ll have to work on it. You too.

It’s time for The Discussion: Who will pay for the pensions?

6 Apr

Last time we discussed a Defined Contribution Pension Plan offered by the city of Irvine California. The city of Chico uses a Defined Benefits Pension Plan. What’s the difference? Plenty. Here’s a good read from Investopedia:

https://www.investopedia.com/ask/answers/032415/how-does-defined-benefit-pension-plan-differ-defined-contribution-plan.asp

The operative words here are “Benefits” and “Contribution”. Defined benefits means, whether or not business is good, the employee gets the pension they were promised. ” Defined-benefit plans provide eligible employees guaranteed income for life when they retire. Employers guarantee a specific retirement benefit amount for each participant that is based on factors such as the employee’s salary and years of service. “

In California, the state retirement systems made “guarantees” they couldn’t keep – 70 – 90% of highest years’ pay with minimal to no contribution from the employee. ” Employees are not expected to contribute to the plan, and they do not have individual accounts. Their right is not to an account, but to a stream of payments.”

In the beginning, CalPERS even told employers they didn’t have to contribute much of anything – CalPERS said they would make wise investments, and that would pay for these crazy pensions. That didn’t work out, so the employers – cities, counties, and public agencies all over the state – are on the hook for the pensions. And they are turning to the taxpayers like Mack the Knife. See, the contribution was never defined in this plan, so it’s whatever CalPERS demands. Like a junky on the street corner, they want it NOW!

On the other hand, the most common kind of Defined Contribution Pension Plan is a 401K. “Defined-contribution plans are funded primarily by the employee. But many employers make matching contributions to a certain amount .”

In Irvine, the city put up a little over 12% of salary. The employee is allowed to contribute whatever they want, and to control the investments. An interesting notation in that agreement is that the employee must wait 5 years before they are “100% vested” in the plan, meaning, they don’t get a full pension until they’ve proven to be a good and loyal employee.

And a DCPP is less risk for the employer. “As the employer has no obligation toward the account’s performance after the funds are deposited, these plans require little work, are low risk to the employer, and cost less to administer. The employee is responsible for making the contributions and choosing investments offered by the plan. Contributions are typically invested in select mutual funds, which contain a basket of stocks or securities, and money market funds, but the investment menu can also include annuities and individual stocks.“

Both set-ups are risky for the employee. If CalPERS fails, and that’s looking more likely all the time, pensioners GET NOTHING. With a DCPP, the employee makes their own investments, if they aren’t market savvy, they stand to lose there too. But, given CalPERS’ track record, I can see where an employee would be wise to opt for a DCPP.

Why hasn’t the city of Chico (or the county of Butte, or any of the local gov agencies…) offered a DCPP? I think that’s a no brainer. The DBPP is more lucrative, as long as they can keep propping up the failing CalPERS. The most popular form of prop these days is the Pension Obligation Bond.

It’s time for The Discussion about who will pay for these outrageous pensions. Will the employees step up to the plate and do the right thing, or will council allow Staff to force the taxpayers to the wheel with new debt and higher taxes?

Next time, on This Old Lady and the POBs!

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While Mark Orme claims we can’t get out of CalPERS, Irvine California has switched to a Defined Contributions Plan and cut their UAL by 23% in 4 years

4 Apr

This Tuesday, city council will be looking at a number of “MOU’s” – Memos of Understanding – with various employee bargaining groups. I haven’t had time to read them, but I would be surprised if there’s any discussion of employees paying more of their pension and benefits costs.

When Dave Howell brought that option up at last month’s Finance Committee meeting, Mark Orme blurted out “we want pension reform, we’ve lobbied for it, we’ve met with Marcie, the CEO of PERS…” But no further discussion. I doubt we’ll ever be privvy to these conversations, and haven’t the faintest notion what Orme means by “reform”. What stuck out to me was that he knows the CEO of CalPERS by first name.

Marcie Frost, the current CalPERS CEO, has come under fire for allegations that she made false educational claims on her application for the job. But that didn’t stop the board from giving her a salary of $330,720 for the 2019 fiscal year and a 26.7% bonus of $84,873 in 2018. These people, including Orme, who makes a base salary of $207,000/year, are so out of touch with the people they are supposed to serve, I think Orme may really believe he’s doing his best, and that he fully deserves to get 70% of that salary in retirement, having paid less than 10% of the total cost.

But he’s not doing his best. The city manager of Irvine California is doing a lot better. While other cities are considering the high stakes game of Pension Obligation Bonds, Irvine is breaking away from the pack, and saving a ton of taxpayer money without throwing the taxpayers in front of the train.

As public pension costs soar, some Southern California agencies turn to controversial borrowing to fill deep holes

The authors examine the current abyss of debt that most California cities are now facing over false promises made by CalPERS back in the 1990’s. According to Stanford University’s Pension Tracker, there are two different “lenses” through which we can look at this situation.

  • The rosier one, used by California officials, assumes that investments will earn returns of about 7%. That puts unfunded liabilities at $352.5 billion statewide, or the equivalent of $27,187 per household.
  • The darker one, used by Stanford’s Joe Nation, a former Democratic state assemblyman and professor of public policy, assumes the much lower return rate of 3.25%. That pegs unfunded liabilities at nearly $1.1 trillion, or $81,634 per household.

In my opinion, scenario No. 1 is a flat out lie, the dark reality has set in, CalPERS hasn’t made their projected returns for years and years. “While the giant retirement system plans on a 7% return on its investments, it returned just 4.7% this year. ” But public agencies all over California have continued to wear their rose-colored glasses while they have handed out ridiculously over-generous salaries and benefits packages without requiring employees to step up with realistic contributions. That, says the author, has created a hole.

“If that hole isn’t filled up with meatier earnings and heftier contributions from public agencies and their workers, taxpayers will be called upon to fill it directly. Some argue that’s already happening. In 2020, there were at least 99 local sales tax measures on the ballot in California. None of them said, ‘We need more money, in part, to pay for spiking public pension costs,’ but they did say things like ‘for municipal services, including emergency response, public safety, clean drinking water, local businesses, street repair, after-school, youth, disabled and senior programs, and addressing homelessness’ and ‘for general city services.’”

Yes, while they didn’t exactly lie, they worded these measures in such a way as to leave the revenues open for general spending, and that means, siphoned into the pensions. POB’s have to be secured with a new revenue stream, and the consultant who came before the Finance Committee said sales tax measures are the easiest and most common way to do that.

For a change, I noticed, those measures did not do as well as they have in past. A good number of them failed, including sales tax measures in Tehama and Shasta Counties. The voters have started to figure out this trend, which I believe is why so many agencies are turning to Pension Obligation Bonds. POB’s don’t have to go on the ballot.

Our council members have all drank Mark Orme’s Kool Aid, they are telling us they’ve done all they can to rein in the pensions. No, they haven’t. First of all, they are doing nothing to control employee costs. Second, they will not ask employees to pay higher contributions. Orme created three new management positions last year, and council has rubber-stamped every new contract that comes in front of them without asking for more realistic contribution from employees, even when doling out raises.

But not every town in California is going along with the scam. While Mark Orme (and Ann Willmann over at Chico Area Rec Dist) says we can’t get out of CalPERS, Irvine started offering an alternative as early as 2003. This article explains how they’ve reduced their UAL 23% over the past four years without issuing Pension Obligation Bonds.

“Irvine continues its streak as the healthiest large city in America when examined through the lens of long-term fiscal soundness, according to Chicago-based watchdog group Truth in Accounting. It has curtailed spending, frozen vacancies and asked its vendors and contractors for price reductions — and most of them actually said yes, said Marianna Marysheva, Irvine’s interim city manager.

“The city has managed to shrink unfunded liabilities by 23% over four years, making millions of dollars in additional payments annually.”

Part of the savings was getting employees to volunteer to drop out of CalPERS and participate in the city’s Defined Contribution Pension Plan (DCPP). Read this, from the city of Irvine HR page:

 https://legacy.cityofirvine.org/civica/filebank/blobdload.asp?BlobID=18082

The provisions of this Section 2.1 shall apply to employees, as
of June 30. 2003. who elected to decline the CalPERS benefits.

  1. The City shall invest an amount equal to 12.448% of each
    employee’s base salary in the City of Irvine Defined Contribution
    Pension Plan (DCPP). Employees shall become fifty percent (50%)
    vested in such plan upon completion of the probationary period.
    Thereafter, such vested interest shall increase at the rate of five
    percent (5%) for every Plan Year in which the employee completes
    one-thousand (1000) hours of service. Once the employee has
    completed five (5) years of service, he/she shall become 100%
    vested in the retirement plan.
  2. The City will deduct an amount equal to 6.552% of each employee’s
    base salary to invest in the City of Irvine DCPP
    this payroll deduction shall be mandatory fo
    elected to remain in the City of Irvine DCPP.
  3. All employees who elected to remain in the City of Irvine DCPP shall
    not be entitled to any CalPERS benefits, past, present, or future, as
    provided under Section 2.1.B of this Resolution. Employees, who

elected to remain in the City of Irvine DCPP, shall continue
participation until the employee terminates his/her employment from
the City for any reason.

  1. The City will utilize retirement plan forfeiture funds to offset the City
    of Irvine DCPP administration and management costs.

In my next post, we’ll look at the difference between DCPP’s and “Defined Benefit Plans”, but I bet you could figure it out. Next time on This Old Lady and the POBs.

Coolidge admits the sales tax increase revenues would go toward the bond payments – “then it would fall away and it would just include public safety…”

1 Apr

Back to the March 24 Finance Committee meeting. I’ve already hashed over the Business/Residential Residential Tax conversation, the next item on the agenda was a discussion of the proposed sales tax increase and “road bond” measures.

Andrew Coolidge, mayor and FC chair, opened the meeting with comments about “the struggles of 2019“. What struggles? Did your house burn down Mr. Mayor? Did your town burn down? No, actually, the city of Chico rode out the Camp Fire with more than $20 million in surplus revenues by July 2020, mostly sales tax. Staff received “back fill” from the state for all “lost” tax revenues. And, the demand for housing went through the roof – according to the finance report at the end of the meeting, property values in Chico went up 5% more than the rest of the county in 2020. Currently home prices in Chico are up 8%. This windfall has resulted in more revenues from not only property taxes but an increase in RDA revenues.

But remember, Coolidge was setting the scene for not one but TWO revenue measures. Can’t tell people the real truth – revenues in the city have been more than staff predicted every year since the Camp Fire. The real reason Staff wants these tax measures is to secure the Pension Obligation Bond they are quickly implementing behind closed doors.

In fact, Services Director Scott Dowell informed the committee that any bonds, whether Pension Obligation Bonds or “road” bonds, would “have to have a revenue stream attached to pay for those bonds“.

Coolidge referred to the sales tax increase measure, commenting, “then it would fall away and it would just include public safety…” .

Yes, they intend to use the sales tax measure, which they’ve sold as a “special tax for cops and fire”, to secure the POB. The city is broke, where else we gonna get the money to make those bond payments, but a sales tax increase? The consultant who presented the POB said that most jurisdictions that implemented POB’s had to raise sales tax to cover it.

Coolidge would like us to believe there would be something left over for “cops and fire”, whatever that means, but let’s face it – with a $147 million pension deficit, and another $150 million interest owed on that deficit, there’s not EVER going to be anything left of the sales tax revenues. In fact, I’ll tell you what – they’ll take the bond money from the “road bond” too – there’s nothing to stop them from transferring those funds into the General Fund.

Well, I’ve had an incredibly hard time posting this. No, I don’t have the greatest internet, as observed by Sean Morgan during the meeting. I’ll leave it here – you got the point.

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.

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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?

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