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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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Measure A omissions, half-truths and falsehoods

29 Feb

Here’s a post from Chico Taxes

https://chicotaxeshome.wordpress.com/2020/02/29/measure-a-omissions-half-truths-and-falsehoods/

Measure A Omissions, Half-Truths and Falsehoods

If Measure A passes CARD will take on $36 million in new debt and two of
every three dollars of the new tax will be spent on debt service. CARD
failed to mention this in the ballot measure. Don’t voters have a right
to know this before they vote themselves a permanent tax that increases
every year?

In his pro-Measure A argument in the Chico ER police officer Jim Parrott
tells us the state, not CARD, created the unfunded liabilities. This is
not only untrue, it’s absurd and it’s particularly disturbing coming
from someone sworn to uphold the law and tell the truth. It wasn’t the
State of California or CalPERS that approved the contracts that resulted
in the unfunded liabilities. It was CARD’s board. And to this day the
Chico ER has not set the record straight on Parrott’s untrue statement.

Moreover, one of CARD’s board members who put up $6,000 to pass Measure
A receives a six figure pension from CalPERS and has every incentive to
insure money that CARD should spend on maintenance, programs and new
facilities continues to get diverted to CalPERS so CalPERS stays afloat.
There ought to be a law that prevents such a conflict of interest.

Despite what CARD and its supporters state there is no guarantee how the
money is spent. In the ballot measure no amount is dedicated to any
project and CARD uses conditional words such as unless and intends.

It would be foolish for voters to approve a measure backed by over
$60,0000 from special interests that would result in a regressive,
permanent, perpetually increasing new tax and tens of millions in new
debt from a governmental agency whose leaders and supporters do not tell
voters the truth. And it’s shameful the local media does not set the
record straight.

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The Big Lie: none of the A advocates will talk about the $36 million bond

29 Feb

Here’s an interesting “yes on A” letter. This letter was written by one of the people behind “Yes on A”, local realtor and investor Bill Brouhard. 

For me and my family, Measure A boils down to some very simple truths.

If Measure A passes, Chico’s parks and recreation get way better.

If Measure A fails, Chico’s parks and recreation deteriorate.

If Measure A passes, I’ll be paying $85 a year, that’s less than 25 cents a day.

A gumball costs 25 cents.

If Measure A passes, all those gumballs add up to roughly $3 million per year, 100% of which by law must be spent on local parks and recreational facilities.  CARD has a list of those projects on their website.

When a gumball a day can make and help keep Chico a better place, seems like a thing we all can and should support.  Let’s do the right thing this time. YES on Measure A.

— Bill Brouhard, Chico

First of all, I find this argument insulting – he’s calling our concerns cheap and petty. A gumball a  day? No mention of the $36 million dollar bond, or the $2 million a year in debt service.

He’s also threatening us.

“If Measure A passes, Chico’s parks and recreation get way better.

If Measure A fails, Chico’s parks and recreation deteriorate.”

Sounds like a bully – give us the money or the parks die!

But you know the most interesting thing about Bill Brouhard is, he’s a realtor.

A Chico State graduate and resident since 1979, Bill Brouhard has been involved in the planning, entitlement and development of many of Butte County’s largest mixed use residential, office and industrial real estate projects.

Brouhard is also with Every Body Healthy Body. They are the folks who pitched CARD and the city for a gi-NOR-mous sports facility to be located south of town.

He also represents a property owner who is having trouble selling his land because it has all these environmental restrictions on it. When Brouhard came to a CARD meeting a couple of years ago, he was trying to get CARD to buy that land to build the facility. 

https://chicotaxpayers.com/2016/08/19/dolan-accuses-card-of-brown-act-violation-aquatics-group-wants-nance-canyon-taken-off-protection-list-so-they-can-locate-their-mega-center-there/

Folks,  Brouhard doesn’t care about Chico or our future, he just wants to sell his client’s doomed property. 

A gumball a day, my ass. I’m sure Blowhard is expecting to get a lot more out of it than a gumball a day. 

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NO on A: these letter writers made my day

18 Feb

The other day I noticed THREE YES on A letters in the Enterprise Record. You know what – I didn’t even bother to read them, the titles said it all. One person cited the $85/year base as “tiny”. When the YES people rebutted my Arguments Against in the ballot guide, they said MY arguments were misleading. Hah!

I find the letters written by the NO crowd to be a lot more interesting. Here’s one I like – short, sweet, and to the point.

By  |

Back in 1998 the voters of Chico approved Measure A, which at that time was to build a new high school. Well 22 years later we are still paying for that and the new high school was never built.

That is the problem with these things, once we give them the money they don’t have to fulfill the promises they made. CARD has a history of irresponsibility spending our money. Why trust them with more money?  No on Measure A.

— Jim Matthews, Chico

Yeah, thanks for bringing up School Bond Measure A Jim, people should still be pissed about that. That was a classic bait-and-switch.  I hope the voters remember that when the district brings their next bond around – I’m predicting they will put a measure on the 2022 ballot, we’ll see.

Now here’s another short one, but not so sweet – this guy thinks we should all have to pay for his pickle ball courts.

By  |

We need more recreational facilities and more pickleball courts.

— Ted Bryson, Chico

Pay for your own pickle ball courts Ted! The following letter-writer brings up a point I have not had time to address – CARD is subsidized by the taxpayers to keep their fees down. I think it’s way past time they update their user fees to be more in line with local businesses who don’t get bailed out by the taxpayers for making poor business decisions. Read what this next writer has to say.

By  |

There’s a lot of talk about Measure A.  I have heard statements such as “this is a unique opportunity,” “we need to pay it forward for future generations,” “it costs less than $10 a month.”  I challenge every voter, parent and grandparent to think about these statements.

Measure A is a continuous parcel tax on your property that has no end date. It continuously increases every year, billed on your property tax bill, tied to the Consumer Price Index. This is a tax, folks, that has no oversight or auditing mechanism. There is no budgeting for a tax increase that you have no control over, but are required to pay.

This tax will leave a huge debt and burden to our children and grandchildren.  If they are lucky enough to buy a piece of property, how much do you think your $85 tax will be for them?   Do you think they will thank you for leaving them a huge tax liability?

If CARD needs more money, let people that use the facilities pay for it. Isn’t that reasonable. Pay for what you use.

Please join me in voting no on measure A, so our future generations will not be burdened.

— Lorna Andreatta, Chico

Lastly, here’s a kick-ass letter from Ray Schimmel. I’ll never forget Ray Schimmel, because he spoke at a CPUC water rate increase hearing back in 2013, and told us all about “defined benefits”, which are the basis of our problem. He also grew up in Chico, raised his kids in Chico and Durham, and supported our kids’ rec teams when CARD would not include our league in plans for DeGarmo Park. We had to rent an old warehouse and build our own facility with our own money. It was a great experience, but I have never forgot how CARD turned us away, while giving special favors to their friends who wanted pickle ball and  bocce courts.  

Here Ray takes them on for closing Shapiro Pool – I know he speaks for a lot of people.

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I was 11 years old in 1956 when, a hundred yards from my home, the new neighborhood Shapiro Pool opened its doors to me and a huge crowed of ecstatic kids. It was a wonderful facility with changing rooms, showers, two diving boards and organized programs. It’s where I learned that water polo was the name of an activity which allowed your opponents to drown you.

My home was in our family for 60 years and is still in great condition because it was always well maintained but Shapiro pool was closed in 2016. Why? CARD’s consultant,  in 2015, said it had been long neglected.  What?

From a young age I had reasons to appreciate our parks and places like Shapiro Pool, but I am dead set against Measure A, the parcel tax CARD is trying to cram down our throats. Why? In part because it has no sunset provision (never ends) and it is tied to the CPI (probable yearly cost increases).  In addition CARD has not been honest with us about why they really want this measure to pass. That beautiful mailer they recently sent out promoting the parcel tax said nothing about existing unfunded and unsustainable  pension obligations. And yet they continue to promote a grandiose “aquatics center” while history shows they stood by and allowed Shapiro Pool to die.

Simply put CARD does not to deserve to see this parcel tax approved.  Please vote no on Measure A, it stinks,stinks, stinks!

Raymond Lee Schimmel, Chico

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NO ON A: “Who carries the burden for this tax?”

5 Feb

From a guy I have seen at many meetings, THANKS RANDY!

I received a very nice mailer today indicating major funding from SEIU Union 1021 in support of Measure A, the CARD parcel tax proposal.

Just to encourage you to contemplate the issue, this is a parcel tax, not a tax related to the value or number of residences on a parcel.

The proposal is for a single family home to pay $85 per year plus cpi increases, a 100-unit apartment complex will pay a total of $85 per year also, not 100 times $85.  Again, this is a parcel tax.  Who carries the burden of this tax?

I have been told that the CALPERS annual pension contribution is a major line item for CARD.

— Randy Coy, Chico

Letter: Your tax hike went to raises, pensions

1 Jan

I saw in my stats that somebody read this old post – and I realized, it was worth a re-run. 

In 2012, Chico voters rejected Measure J, the cell phone tax proposed by council member and former mayor Ann Schwab. I didn’t take a poll, but something I heard from people when I spoke to them about it was outrage – “what does the city of Chico have to do with my cell phone service?”

Good question. Answer: NOTHING, it was just an outright grab into your wallets.  I hope people are still asking good questions, because what Joseph Neff is saying here, in a 6 year old letter, is still true. The majority of our budget goes toward salaries, benefits, and now, the employees’ pension liability.

http://www.chico.ca.us/finance/documents/2019-20CityAnnualFINALBudget.pdf

Below Joseph Neff reminds us, even well paid private sector positions do not usually include pension, but we are all forced to pay outrageous benefits to public employees.  And he offers a solution – I bold-faced the last paragraph, cut it out and send it to Chico City Council, and then you might want to send a copy to your county supervisor. 

This letter still stands, so I’m running it again. Thank you Joseph Neff, wherever you are.

Letter: Your tax hike went to raises, pensions

Chico Enterprise-Record

POSTED:   12/06/2013 10:41:12 PM PST

Conservative voters realized that Gov. Jerry Brown’s sales tax increases would not be used to benefit taxpayers but to provide lawmakers a raise and to protect the golden pensions of public employees.

As a 45-year career employee with bachelor’s and master’s degrees in engineering and an MBA, my two private-sector pensions are $15,000 yearly. Only two of six career employers had pensions during the past 50 years of plant closures from union strikes, global competition and company moves to right to work, more business friendly states.

None of my wife’s 30-year employers, including 11 as a teacher and 20 as either a degreed hospital medical records administrator, or as an advanced degreed nuclear medicine technologist supervisor, had pensions. Only one had a 401(k) plan. That is typical of the private sector for degreed private sector employees since the 1950s.

Public employee pensions should be halved to civilian levels, delayed to age 65, never adjusted for inflation, and based only on the first $50,000 of pre-retirement income. A $25,000 maximum annual public employee pension would be fair since savings and Social Security will provide the needed additional two-thirds of retirement spending.

— Joseph J. Neff, Corning

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What I’ve learned from my dog – don’t take a screwing without a fight

10 Nov

Almost four years ago, my dog got so sick we thought she was a goner. We stayed up nights plying her with water and rice paste, going to various vets to find out what was trying to kill my dog.

Eventually we learned, she’d got pancreatitis, somehow, and was diabetic. After working for months to get her health back, we got her onto a medical routine that has been the center of our life ever since. We have good vets, and they continue to work with us to keep her healthy without driving us into the poor house. 

My husband said right at the get go – when the quality of her life is gone, we’re done. It’s been almost four years, and while she’s slowed down almost to a stop, she’ll still bite the hell out of you if you try to take a soft ball away from her. As long as she’s a bitch, she’s stayin’. 

And that’s what I’ve learned – don’t take a screwing without a fight. Death came at my dog like a big bully, and we put his ass dooooowwwn!

Of course every day is a new day, up and down, up and down. She gets up happily to eat, so wobbly, wagging her tail almost knocks her off her feet, but don’t get your hands in that food dish. She takes her shot with a grimace, and then she just keeps shoveling in the kibble. She demands a good walk, a chance to sniff the smells, take a good dump. This has been good for my husband and I too – we’ve found many good trails around Chico and in the hills above town, we walk a few miles most mornings. 

Then we go back to the house and she lays in bed for hours. At about 10:45 am, she shambles out of her bed, sniffing for her midday treat. I can put my hands right into her mouth with a bit of chicken and she takes it as gently at a baby.  A quick walk out to pee, and she’s back in her bed, or situated in a bright spot in the yard.

At about 4 pm, she wakes up and gets weirdly frisky. Ever play catch with a blind dog? Watch your fingers! It’s pretty amazing how fast she can react when she thinks somebody is trying to take something from her. 

And that’s what I’ll say about myself – watch your fingers, especially if you are planning to put them in my purse.  The tax measures coming to the Chico ballot in March 2020 – a sales tax increase from the city and a parcel tax from Chico Area Recreation District –  are nothing but stealing. We’ve paid taxes for years, and $taff has diverted our money into their own pockets. Time to call them on their filching. Time to nip some fingers. 

You’d be surprised how much power is contained in the word NO.

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Joe Azzarito: It’s very easy to vote ‘yes’ when somebody else will pay the bill

2 Nov
I’ve been hoping more people would get involved and speak up – here’s Joe Azzarito, a guy who went to those CARD “informational” meetings and asked questions, and now he’s writing a letter to the editor about it.

CARD programs should pay  for themselves. Remember Off The Wall Soccer? A local business that was driven out by CARD, using tax dollars to undercut OTW’s fees. One day we have a business that’s filling a need and paying taxes, and the next minute they are replaced by an agency that devours tax dollars. You figure it out.

Why should the public pay for programs that don’t serve the entire district? Pickle ball? We pay for that. Corn hole? We pay for that. Participants in CARD programs should pay the true cost of these programs – the outrageous salaries and benefits at CARD. Then we’d find out how many people are truly willing to support this agency.

Thanks Joe, great letter! 

By  |

John Dennison’s letter on CARD’s parcel tax is spot on. At one of the listening meetings, I told Ann Willimann nearly the same point — users only should be the ones paying, although John suggests all should pay.  It’s very easy to vote “yes” when someone else will pay the bill.

My suggestion was to price a user utility fee so that those using a facility pay its cost.  My current year’s property tax bill shows $802.02 in voter approved special assessments, due predominately to bonds passed in 1998, 2002, 2012 and 2016.  Where will it end? This new one will indeed be tied to a CPI and, therefore, always adjusting mostly upwards and, to make matters worse, it will be permanent unless voted out — most unlikely.

Add this proposal to the city’s sales tax measure and you are asking for economic trouble.

Both government entities are pitching their proposals to the least educated, most vulnerable and most easily brainwashed amongst us. Hold these folks accountable and vote “no” on both when presented.

— Joe Azzarito, Chico

David Crane: tax increases are proposed across the state to fund retirement promises never approved by voters

8 Oct

Bob sent me the following link, and I think this article is worth discussion:

View at Medium.com

“Imagine you are a donor to a non-profit organization whose board members receive gifts from employees to whom the board, without your consent, promises retirement benefits. Now the organization is asking you for larger donations to cover surging retirement spending but not disclosing the real reason more money is needed.

That describes the current situation in California as tax increases are proposed across the state to fund retirement promises never approved by voters and made by elected officials who receive donations and other political support from beneficiaries of the retirement promises.”

This is exactly how I  feel about the pensions – I was never asked, and I never approved this scheme, but now they hold their hand out to me.

Furthermore, “The state already spends 60 percent more on servicing never-voter-approved retirement obligations than on voter-approved debt obligations…”

I already knew that CARD, for example, spends over half of it’s $8 million budget on salaries and benefits, more if you add in payments made toward their pension obligation. The voters/taxpayers have never been asked to approve the contracts, the benefits, or the “side fund pay-off’s”. Now we are being asked to approve a parcel tax which will be used to float a bond. We are not being asked to weigh in on the bond, the board can decide to go for a pension obligation bond and tie all the parcel tax proceeds up in paying the pensions. 

I think this whole process amounts to embezzlement – they’ve admitted to deferring maintenance while making the payments on their pensions. They have their hands in our cookie jar, and we need to slam that lid down good.

“State legislators should require state and local governments, school districts and other public entities to submit retirement obligations to voters for approval and to provide truthful and full disclosure of the real reasons behind proposed tax increases.”

This would only happen if the taxpayers shut down these tax measures and show state legislators we are not going to pay for their mistakes. That is why it is so important to defeat the measures being brought forward locally by Chico Area Recreation District and the City of Chico. We have to stop the gravy train.  

Write those letters now. You can write to the CARD board via Ann Willmann and city council via Debbie Presson and ask that your email be forwarded to your elected leaders. Ask that your comments are put on the record. 

  • letters@chicoer.com
  • chicoletters@newsreview.com
  • annw@chicorec.com
  • debbie.presson@chicoca.gov

More from David Crane:

View at Medium.com

Will Stone be removed as mayor? Are the voters informed enough to vote? You tell me

17 Sep

Tonight I’m going to try and watch Chico City Council on my laptop – Sean Morgan wants to agendize, for a future meeting, a discussion of removing Randall Stone as mayor. Stone was really rude and kinda acted a little crazy at a recent meeting, may have even broken the law when he refused to let a citizen bring up a topic during “comments  from the  floor portion of the meeting. I watched the tape, Stone was his usual self – I watched him stand up in his chair to attack a citizen at a finance committee meeting last year, I thought he was going to climb over the table and punch the old broad myself. He has acted irrational and hostile toward me and in front of me on several occasions, I don’t think he’s fit for office, but he sure keeps getting his ass elected. 

I have to wonder, are the voters informed enough to vote? Do they just keep electing him because he’s got a competent sounding name? Do they ever attend or watch the meetings? 

Oh well, I don’t think Morgan will even get this discussion on the agenda, but if you haven’t seen Stone run a meeting, this would be a good meeting to watch.

Voters should attend more meetings, that’s the only way a voter is  going to get informed. The media only tells us what $taff wants us to hear. So, I attended those “informational” meetings CARD ran regarding their parcel tax proposal, and I think I caught General Manager Ann Willmann in a fib – you tell me. 

I sent the following letter to the Enterprise Record.

I’ve attended three of five “informational” meetings hosted by Chico Area Recreation District General Manager Ann Willmann. At the first session, a man brought up the pension deficit. Willmann told the gathering that CARD pays a total 14% toward employee pension cost and that she pays 8%, which she said is her share plus 1% of the “employer share”. 

When I attended the last session September 10, I asked Willmann why the city of Chico pays between 21% and 31% of their pension cost while CARD only pays 14%. She told me she couldn’t answer at the meeting, not wanting to spread misinformation, and said she’d get back to me via email later. 

Via email, Willmann explained that the agency actually pays 17.127%. She pays 8% of that, which is not “half plus 1%”. Furthermore, “parks and unrepresented staff” only pay 5.50%, which is less than a third of the agency’s total payment. Only employees hired after January 2013 actually pay half of the agency cost, but CARD only pays a total 13.735% for those employees.

This is how CARD has garnered more than $2,800,000 in pension liability, which has  grown by over a million dollars since 2014, even while they made “side fund pay-offs”. This is the kind of information the public needs to make an informed decision.   Willmann said she didn’t want to misinform the public – why did she tell us she paid half plus 1% when she does not, in fact, pay half plus 1%? And why didn’t she correct herself in front of the public instead of answering me privately?

 

 

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