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Staff trying to get their pensions bond under the wire by end of January

31 Dec

Next Tuesday city council will hear a presentation on a Pension Obligation Bond. They are trying to slide it under the wire as “restructuring debt,” which is really deceptive – they don’t mention the part where they take on millions in NEW DEBT.  This is really dirty and sneaky, and you need to let your council members know, you know what they’re up to. You can contact them directly through the clerk’s office – debbie.presson@chicoca.gov – or you can go to Chico Engaged. I’d recommend both.

Here’s the link to the agenda:

https://chico-ca.granicusideas.com/meetings/351-1-slash-5-slash-21-city-council-meeting/agenda_items

And here’s the POB presentation:

https://chico-ca.granicusideas.com/meetings/351-1-slash-5-slash-21-city-council-meeting/agenda_items/5fe748e0f395e716e400a434-5-dot-1-calpers-pension-costs-and-ual-restructuring-p

I also wrote a letter to the editor. Staff is trying to  get this thing done within the next two meetings, let’s stop it in it’s  tracks. 

Also, get a load of Coolidge’s request for a “streets bond”! 

https://chico-ca.granicusideas.com/meetings/351-1-slash-5-slash-21-city-council-meeting/agenda_items/5fe748e1f395e716e400a439-5-dot-6-mayor-coolidge-request-bond-for-improvement

Here’s my letter about the POB:

January 5, Chico City Council will consider Pension Obligation Bonds. Staff calls it “restructuring pension debt/Unfunded Actuarial Liability”, but it’s really millions in new debt. A new twist on the old Shell Game, Staff will invest borrowed money in the stock market, hoping to make enough to pay both the pension debt and the new debt. If their investments fail,  the taxpayers will be forced to pay not only the pension debt but the new bond debt, at the expense of city infrastructure and basic services.

Over the last couple of years,  surveys, letters to the editor, and comments on social media have demonstrated two main concerns: lack of law and order, and lack of maintenance to public infrastructure.  While Staff has claimed they don’t have enough money for either, they’ve continued to appropriate more money each year from city departments into the Pension Stabilization Trust – this year, $11.4 million, roughly 20% of tax revenue.  

Furthermore, even with 10’s of millions a year paid through payroll and the PST, the UAL has still grown, up from $126,000,000 only a few years ago to $146,000,000. Staff has recently revealed another $140,000,000  interest. This is the result of insufficient  contributions from employees, and poor returns from CalPERS investments. 

The Government Finance Officers Association says POBs are dangerous without a plan to manage pension costs. Instead, our city has increased pension costs through new hires and overly-generous salaries, without demanding more from Staff. 

The GFOA also determined POBs were the cause of bankruptcy in San Bernardino and Stockton. 

Juanita Sumner, Chico CA

 

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David Crane: “POBs are meritless products deliberately misnamed by bankers in search of fees. Just say no.”

7 Dec

Thank Dave for sending me this “5 minute read” on Pension Obligation Bonds from David Crane. It’s certainly worth more discussion.

https://davidgcrane.medium.com/pobs-bankers-as-pushers-f0963bf853b8

David Crane

David Crane

LecturerLecturer in Public Policy

About

David Crane is a lecturer in Public Policy at Stanford University and president of Govern for California. From 2004-2010 he served as a special adviser to Governor Arnold Schwarzenegger and from 1979-2003 he was a partner at Babcock & Brown, a financial services company. Crane also serves on the board of the Goldman School of Public Policy at the University of California and formerly served on the University of California Board of Regents and as a director of the California State Teachers Retirement System, Environmental Defense Fund, and the Volcker-Ravitch Task Force on the State Budget Crisis.

While I have no formal background in finance, I think it’s obvious that POB’s are a scam that is only going to benefit pensioners and bond holders. But maybe people would rather hear it from a guy with many degrees and respectable credentials. Crane puts it very simply, “Pension Obligation Bonds (POBs) do NOT reduce pension obligations.”

“POBs would be a truthful title if the bonds actually reduced pension obligations. But they don’t. All they do is increase pension assets, which produces an accounting benefit (more assets — the same liabilities = a lower unfunded liability). Economically, a POB is no more than a “carry trade,” which is borrowing at a low rate to bet on hopefully-higher-yielding assets (e.g. stocks, private equity, hedge funds, etc). Not surprisingly, Wall Street also sells and manages those products.”

And here’s an important point – these bonds are SOLD to public agencies by bond managers, people who make a lot of money selling and managing these bonds. Read on. 

“When the smoke clears, a POB issuer has (i) the same pension obligations it had before, (ii) more debt, (iii) paid investment banking fees, and (iv) gambled the proceeds on products that beget even more fees for bankers.”

That seems pretty clear to me, even a housewife can see what’s going on here. You must wonder, are there kickbacks to city staffers? 

Crane concludes, “POBs are meritless products deliberately misnamed by bankers in search of fees. Just say no.”

That’s right, say it loud, and say it now. Besides sending emails to your newly elected “fiscally conservative” council, you can comment in the consent agenda at Chico Engaged:

https://chico-ca.granicusideas.com/meetings/349-12-slash-1-slash-20-postponed-to-12-slash-8-slash-20-city-council-meeting/agenda_items/5fbdb04ff395e7fe1d013e64-2-consent-agenda-all-matters-listed-under-the

And, Mike Wolcott is looking for “Pro vs Con” writers to argue issues like this – you can reach him at mwolcott@chicoer.com

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While our town struggles with financial insolvency and sagging infrastructure, the staffers responsible skip off to another town, at a higher salary, with their pensions intact

3 Dec

A few points I’d like to make clear about POBs:

  1. amount to millions in new debt, with interest
  2. success dependent on the stock market, just like CalPERS investments
  3. don’t need voter approval but the voters/taxpayers will be on the hook for the payment
  4. POBs are guaranteed – that means, the payments come out of the General Fund at the expense of infrastructure and services
  5. without true pension reform POBs will lead to insolvency and bankruptcy – as was the case in Stockton and San Bernardino

Here’s a shocking article about San Bernardino, 

San Bernardino deficits grow after bankruptcy

What I get from this article, is that the police unions are the biggest threat to financial solvency facing California cities. They demand higher salaries and refuse to pay a sustainable share of their pensions costs. Instead of asking for concessions from the highest paid public employees in the state, “Stockton said from the outset pensions are necessary to be competitive in the job market, particularly for police.”  Vallejo backed down from pension reform after being threatened by CalPERS. 

Chico City Council has done same. When I asked my district rep Kasey Reynolds why such a high salary for the new police chief (higher than the departing chief), she responded, “ I just looked at other communities that are like size and their Chiefs are 20-40k higher.”  I sent her the publicpay.gov records for Chico and Sacramento – yeah, Sacramento salaries are a little higher, but city of Chico pays more of the pensions. If we are going to continue to offer these crazy salaries, Chico cops need to pay more toward their pensions. I never got any response from Reynolds.  They hired the chief above the old salary and just recently approved a new contract for CPOA without asking any concessions. 

So, letter writer Steve Wolfe is correct – our elected officials are complicit with our city employees in driving our town into the financial abyss. He’s right again when he predicts the city will pursue a new revenue scheme.  A POB would be just the vehicle to take us down! Here’s my response. 

Steve Wolfe is right – the city is seeking a new revenue measure. At the Finance Committee meeting September 23, a consultant was asked to pitch Pension Obligation Bonds to the full Chico City council. Staff said the bond could be implemented as early as January 2021 because POBs don’t require voter approval. 

POBs are a way of borrowing money to pay bills, while hoping to re-invest the borrowed money, producing a profit used not only to service the bond but to pay off the pension liability. If this outright gamble doesn’t work out, the taxpayers are on the hook not only for the unfunded pension liability, but the additional bond debt. POBs put Stockton and San Bernardino into bankruptcy.

This bond will not appear on your property taxes, it appears in the form of sagging infrastructure and service cuts – these bonds are guaranteed, bond holders take priority over our streets, our parks, our sewers and even public safety needs. 

Instead of taking on new debt, we must reduce the long-term cost of public pensions for future employees. That’s not happening.  With emergency powers, the city manager hired three new positions this year at $100,000+ salaries. New hires are paid more than predecessors.  There’s no accountability for these decisions.  While our town struggles with financial insolvency and sagging infrastructure, the staffers responsible skip off to another town, at a higher salary, with their pensions intact. 

Contact your new, “fiscally conservative” council super majority, and tell them what you think. 

 

 

 

 

 

 

 

 

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Have you seen the new CPOA proposal?

17 Nov

Tonight is the last meeting of the current city council. The next meeting will begin the new “conservative” SUPER MAJORITY. I just like writing that in all caps, because I don’t know if people realize what it means.

Simply put, it means the five “conservatives” can do whatever they agree to among themselves, and the new “infinitesimal minority” of Brown and Huber will have to sit on their thumbs the next couple of years.

Of course I expect Huber to ingratiate himself with the conservatives.

https://www.youtube.com/watch?v=W4jWAwUb63c

But tonight, the last “elected at large” council will be discussing new contracts for Chico Police Officers Association, the old contract set to expire in December. I’ve been trying to look over the proposals since last week when I got the agenda, but they are onerously huge files that I can’t open with my dinky little internet connection. Why they aren’t displayed at the Human Resources page alongside the expired agreement is beyond me – well, no it’s not, they obviously don’t want us to see it. So, I have not seen the new proposal that will be discussed, in closed session, at tonight’s closed council meeting. 

Have you?  Cause if you go to the city website and direct yourself to the “minutes and agendas” page, look at tonight’s agenda, and then scroll down and open the reports and hit the links, here are some specific items I wish you would look for:

  1. Mandatory overtime
  2. STO
  3. CTO

And then go to this link, below, and re-read this post, because I don’t have time to go over all this again.

https://chicotaxpayers.com/2020/07/10/take-a-cup-of-ot-and-add-a-cup-and-a-half-of-cto-pour-in-some-sto-and-you-get-an-iou/

I tried to have this conversation with my district rep, Kasey Reynolds, but she played dumb. I just wrote the following note to the city clerk and asked her to forward it to the full council:

Dani, I know how hard you work, but I can’t download or even preview these documents. 

This is a problem – the public obviously isn’t let in on this conversation. Most people in town don’t have time to look at this stuff – I got it late Thursday, and staff was out of office by Friday noon.  Most people probably wouldn’t understand it if they did read it – they are purposely written in onerous language. I always wonder how many council members really read or understand these contracts. I’m a landlady, I know people just sign stuff without reading it, I often wonder how many council members do that. 

But council continues to agree to stuff like “CTO”, and “STO”, and all the other perks and benies that make these people outrageously over paid. According to Scott Dowell, public safety, especially CPOA, make up over half our UAL. And only pay 12 – 15% toward pensions of 90% of salaries over $100,000, plus perks like getting paid for not working (CTO, STO).

I’m including Mike Wolcott in this email because I’d like to see more about the contracts in the newspaper. This is why our town is tanking. And Staff’s only solution is to put our town over our heads in debt with a Pension Obligation Bond.

Other towns are talking about switching to 401K’s – Chico has already given Orme a 457 Plan in addition to his pension, an extra $20,000 year, while Orme claims no employees have had raises? Orme also got a raise when he agreed to pay his own “employee share,” previously paid in full by the taxpayers. 

Meanwhile, our park is a wreck, our streets are shredded, and crime is outrageous. This is on the “conversative” majority. You guys can’t blame this wreck on the liberals anymore. If you approve the CPOA contracts without any concessions from the union you are putting another nail in our town coffin. 

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Good question Bob: Why do we need to replace Constantin with anyone?

14 Nov

One last word on the departure of Chris Constantin – from a comment Bob left the other day:

Why do we need to replace Constantin with anyone? The truth is the City is over its head in debt and we can’t afford a replacement.

Besides, why should we continue to pay hundreds of thousands of dollars every year for a bureaucrat who does nothing but scheme how to raise our taxes and get us deeper in debt with things like POBs while letting our streets and everything else fall apart.

Wow, good question Bob! So I wrote a letter to the ER about it.

When departing Chico administrator Chris Constantin was hired in 2013, he spoke to the Tea Party. He said our previous finance director was “Loosey Goosey”, bragging about his qualifications to “straighten out the mess” she’d left. He told us, once he fixed things, “you can hire someone cheaper, with less initials behind their name.”

Seven years later, I see a bigger mess. Constantin himself has told us, staff deferred maintenance on streets and other infrastructure while they continued to make bigger payments toward their pension liability (UAL) – this year $11,000,000. But the UAL continues to increase –  this year, the city manager created three new management positions with $100,000+ salaries.

When Brian Nakamura was hired, he went on a firing spree, gutting lower level staffers and bringing his own friends in for management positions – Mark Orme and then Constantin. Since then the assistant manager’s salary has gone from $142,652 to over $189,000/year. Orme and Constantin have also garnered themselves 457 Plans worth an additional $20,000/year each.

From a 2018 report to the California League of Cities: “City pension costs will dramatically increase to unsustainable levels.” Their first suggestion – make more aggressive payments to CalPERS. Meanwhile, “Change service delivery methods and levels of certain public services.” Meaning, squeeze the taxpayers for more money.

Top heavy management and perpetual demands for higher salaries and more benefits has our city upside-down. Constantin’s position should be eliminated, along with other unnecessary management positions, so we can hire the lower-paid workers we need to get this town “straightened out.” 

Juanita Sumner, Chico CA

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Chico since Nakamura, Orme and Constantin – do you feel “healed”? Or “heeled”?

12 Nov

Chico disaster timeline – rough montage of the last 8 years of city management, or, mismanagement?

Sept 2012 – Nakamura hired from Hemet – Hemet was shocked, said Nakamura had not told them he was looking for another job

https://www.pe.com/2012/08/15/hemet-city-manager-accepts-chico-job/

Jan 15 2013 – Asst City Manager John Rucker’s “sudden departure” https://www.newsreview.com/chico/content/sudden-departure/8827217/

Mar 7 2013 – Nakamura hires his former asst mgr from Hemet Mark Orme – from the above article – “This week the Chico Enterprise-Record reported the story and also published in its classified section an ad for the position. The ad says the salary offered for assistant manager is $142,652 per year with the potential to reach $172,382 based on performance. The ad refers to the city website for more information.”

[EDITOR’S NOTE: 7 years later, as of his resignation, Constantin was making $189,000+ as Asst City Mgr. Let’s see what council intends to pay his replacement]

Mar-Apr ? 2013 – Jennifer Hennessy resigns as finance director – “As the city’s finances worsened, Hennessy was often the target of sharp criticism from some council members and agenda-driven citizens. ” CN&R article link below

April 16 2013 – Nakamura hires former Hemet employee Chris Constantin from an auditor position in San Diego “

“In an interview prior to the council meeting, the 37-year-old Constantin talked about his decision and the controversies he is escaping in San Diego, where he’s served as assistant auditor since 2010.”

https://www.newsreview.com/chico/content/money-man/9619285/

“I made a three-year commitment in San Diego that was up in February,” he said. “At about that point I wasn’t really happy because I wasn’t feeling appreciated.”

[EDITOR’S NOTE: Read the N&R article – Constantin left San Diego with a shit storm at his heels.]

May 28, 2014 – Nakamura leaves https://www.newsreview.com/chico/content/so-long-nakamura/13622217/

““It caught us a little bit off guard,” said Mayor Scott Gruendl, who received Nakamura’s resignation letter last Wednesday (May 28) during a breakfast meeting.”

“When Nakamura arrived in September 2012, the city was in a bad place financially and it was his job to fix it. About six months into his time in Chico, Nakamura laid out his three-part plan to Gruendl. Part one was to identify the problems. Part two was to put a team in place to remedy those problems. Part three was to step back and allow the town to heal.

“He pulled the covers back on stuff, and also came up with responses on how to deal with it,” Gruendl said. “That meant a lot of layoffs, unfortunately. What was devastating for a lot of people is how many people we had to let go. Each time, it was more seasoned and experienced people, and it got harder. There was no good way to reconcile that.”

“He’s the lightning rod for the hard decisions that were made—the significant number of layoffs that we did, the collapse of 11 departments into five, the actual moving out of key management people who, for no better explanation, blatantly fucked up,” Gruendl said. “We had people who had good intentions but really didn’t know what they were doing. Brian dealt with it.”

“But the drastic reorganization of city departments has certainly left some with a bad taste in their mouths. Layoffs included many employees who had dedicated years—decades, even—to the organization, and key positions were eliminated, leaving things like the city’s trees untended.”

June 3 2014 – Orme appointed interim city manager

Same article – “Looking forward, Mark Orme—who was promoted from assistant to interim city manager at the City Council meeting Tuesday (June 3)—said he’s excited to work with Chico to begin the healing process.

“There’s been a lot of pain and heartache. That takes time to heal,” Orme said. “There are also external challenges. There’s been a lot of impact on the community financially as it relates to community organizations and a lot of the norms Chico was used to.”

[EDITORS NOTE: “the norms Chico was used to…” What the hell did he mean by that? If you lived here before 2013, let me ask – do you feel “healed”, or “heeled”?

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Dear San Dimas – here’s a few things Chris Constantin probably doesn’t want to talk about

10 Nov

This is an old website, now defunct. But, the woman who put it up did a lot of research about Chris Constantin’s history before he was hired by the City of Chico in 2013. She quotes news sources from San Diego, so you might be interested in seeing what he was up to – including harassment of employees who complained about him.

http://savechiconow.weebly.com/constantin.html

Thanks Jessica, I’m glad your research will go to some good end.

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SURPRISE! Assistant City Manager Chris Constantin seeking a manager position in San Dimas CA – $220,000/year!

8 Nov

Dear Chris Constantin,

So you are off to San Dimas? I heard it through the Grapevine. (ha ha, get it? Through the Grapevine? Old trucker joke)

It seems like just yesterday you bragged to a Tea Party gathering about all he “initials” after your name. You bragged about the consulting positions you held with agencies all over the state. You told the assemblage that our town was in a terrible financial shape, because our former Finance Director was “Loosey Goosey”. But you bragged about your credentials and promised that you would fix everything, adding, “then you’ll be able to hire somebody cheaper, with fewer initials behind their name…”

Wow, looking around myself, I don’t see that. I see our town is a bigger mess than it was when you got here, while you’ve done very nicely for yourself. You’ve garnered almost $200,000/year in salary and about a $50,000 package. You paid little to nothing for not only a 70% pension but a $20,000/year 457 Plan (special 401K for public workers). Now you’ve used Chico to step along to an “Annual salary of $220,000” as city manager in a rich Southern California town.

I realize you’ve paid the price. I remember when you bragged and bragged about your gorgeous young wife, showing her off around town like a trick pony. Then you left her at home to pop out kids like a popcorn machine.   When you told me about your first child, I told you, “Quit your job, or you’ll miss the best years of your life.”  You should have listened to me Bud. Instead you made an ass of yourself at the podium, whining like a bitch about our town causing your divorce?

That’s on you! Jesus Christ Chris, look what YOU’VE done to our town! 

Good Bye, and Good Riddance Chris Constantin, and please, don’t let the screen door hit you on your ass on your way to San Dimas. It’s already had enough abuse.  

To the people of San Dimas – GOOD FUCKING LUCK with this guy. Here’s what you can depend on – your town is about to get more expensive!

Juanita Sumner

FROM THE SAN DIMAS CITY COUNCIL AGENDA FOR THIS TUESDAY

CITY COUNCIL MEETING AGENDA
TUESDAY NOVEMBER 10th, 2020 7:00 P. M.
SAN DIMAS COUNCIL CHAMBER
245 EAST BONITA AVENUE

a. Consideration of Appointment of Chris Constantin as City Manager, with a start date of January 4, 2021, and approval of City Manager Employment Agreement

RESOLUTION 2020-61, A RESOLUTION OF THE CITY COUNCIL OF THE
CITY OF SAN DIMAS, COUNTY OF LOS ANGELES, APPOINTING CHRIS
CONSTANTIN AS CITY MANAGER AND APPROVING A CITY MANAGER
EMPLOYMENT AGREEMENT
RECOMMENDATION: Adopt Resolution 2020-62, Appointing Chris Constantin as
City Manager and Approving the City Manager Employment Agreement.

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Who will pay the unfunded liability? Taxpayers living on a median income of $43,000/year, or well-paid, well-heeled, entitled public employees making over $100,000/year?

5 Nov

It’s been said, the campaign begins the day after an election.  I like to hit the ground running. Here’s a letter I just sent to the ER. 

Butte County, like the city of Chico, is considering a Pension Obligation Bond.

POBs are a financing scheme that allows state and local governments to get the taxpayers to pay unfunded pension liabilities by issuing a bond guaranteed by tax revenues. Like CalPERS, POB proponents claim investments will pay for both the bond and the retirement fund. According to Oregon PERS manager Mike Cleary, “Some people call this arbitrage, but it’s not, it’s really an investment gamble.”

In fact, in 2013, Stockton and San Bernardino went bankrupt. According to the court, “Generous pensions awkwardly propped up with ill-timed POBs contributed to both debacles.”

In recent years, returns on POBs have often fallen below the interest rate paid by agencies to borrow the money, digging the liability hole even deeper. Nonetheless, they remain popular because they are instant money without voter approval.

Chico’s Unfunded Pension Liability has grown enormously over the past year – from $123,000,000 to $140,000,000, with another $146,000,000 interest – because of unrealistic employee contributions. Chico employees pay, at most, 15% for pensions that run from 70 – 90% percent of hundred-thousand-plus salaries. Meanwhile, taxpayers not only contribute a payroll share, but the annual “catch-up” payments come at the expense of city services – this year $11,000,000.

Who will pay the unfunded liability? Taxpayers living on a median income of $43,000/year, or well-paid, well-heeled, entitled public employees making over $100,000/year?

Let your elected representative know what you think of this scheme to leave the taxpayers holding the Pension Deficit Bag.

Juanita Sumner, Chico

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Letter to the Editor: City services will never be adequately funded until employees start paying their fair share

28 Oct

Dave was reminding me the other day (thanks Dave), elections come and go, but the suits are always working on  tax increases. It’s true, elected officials are here today, gone tomorrow, but The Song Remains the Same – City of Chico Staff is always trying to  find a way to  get us to pay their outrageous salaries and  benefits, without providing us with any services. 

I thought BC really wrapped it up good when he said, “Chico taxpayers… are guaranteeing the generous salaries and benefits of well heeled, well paid, privileged city employees.”

So, I wrote a letter to the editor about it! I borrowed generously from BC’s remarks made a week or so ago here, I hope that’s okay BC! I did change your comment about “average income” to “median family income” because that’s the only statistic I could verify. Still works. 

At my blog, chicotaxpayers.com, we’re discussing the Pension Obligation Bond currently being considered in closed door meetings Downtown.

CalPERS promises to fund the pensions with a 7% investment return, but have not met that target, forcing city of Chico to dip into the General Fund to make increasing payments. That’s right – Chico taxpayers, with a median family income of $43,000/yr, are guaranteeing the generous salaries and benefits of well heeled, well paid, privileged city employees.

A Pension Obligation Bond must  be paid ahead of everything else, at the expense of city services. In the event of a bad return, the bond holders can take our entire General Fund. 

To use a credit card analogy: The City has run up so much credit card (pension) debt, they can’t even make the minimum payment. So while they keep spending at the same or greater rate (hiring three new management positions this year), they mortgage the house to pay down the credit cards. They can’t afford to keep the house up (deteriorating municipal facilities, parks and public areas), can’t fix the driveway (deteriorating streets), can’t afford a security system (fire and police), and eventually can’t afford to put food on the table for the family (homeless).

City services will never be adequately funded until employees start paying their fair share.

Tell Mayor and Finance Committee member Ann Schwab what you think, at ann.schwab@chicoca.gov

Juanita Sumner, Chico CA

POST SCRIPT:  I’d also like to see Mark Orme fired, but maybe if we apply enough heat to the seat of his pants we can just make him quit. 

 

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