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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?

 

 

Measure K lawsuit successful in district court, will move on to appeals court (at the taxpayers’ expense…)

14 Sep

Sorry, busy busy – I received GREAT NEWS about the Yuba County Measure K lawsuit, and I forgot to post it. 

The judge ruled in favor of the plaintiffs – 

Accordingly, for all of the forgoing reasons, the Court grants judgment in favor of Plaintiffs on their first and second causes of action seeking to invalidate Measure K because it failed to garner the required two-thirds vote required for enactment of a special tax.

What happens next – later that day I received a note from my  friend Connie – 

“At a BOS meeting yesterday, they voted in CLOSED SESSION to appeal the ruling. That gave the voters and taxpayers no opportunity to voice their concerns etc.”

Yes, the Yuba County supervisors voted to spend MORE TAXPAYER MONEY to fight a court ruling. Like I told my friend Connie, studies show appeals don’t have a very high success rate, only about 17% of these lower court decisions are actually overturned, it seems most appeals are thrown out without hearing due to procedural errors. But the taxpayers will pay for all that – I hope they remember all this at election time. 

The city of Chico will not make the same mistakes Yuba County made. City Asst Mgr Chris Constantin has repeatedly warned city staffers, as well as elected and appointed officials, that the city can’t put any specific purpose on their planned sales tax increase because that would require a 2/3’s vote of the public.  And I think their surveys have shown very clearly that they will be lucky to get 51%. 

Their campaign so far, like CARD’s, has been to point out the failed state of our city infrastructure, the public safety concerns, and our growing population, telling us there’s not enough money to go on from here.

The answers to theses claims are as follows:

  1. our city infrastructure has been neglected while they’ve raised their own salaries and paid their pension deficit with our money
  2. public safety is at an all-time low because the city has declared a “shelter crisis designation” to get in on the gravy train of “the homeless industrial complex” 
  3. our population is growing because the city keeps approving development. And now they’re talking about buying water from Paradise to take the pressure off our ground water supply? Why do they continue to approve subdivisions for which there is no water?  Because if they stopped approving all this new development they’d lose all those developer fees and the resulting new property taxes. 

Our city staff are a bunch of junkies – money junkies. I know public workers – they tend to spend money just like the agencies they work for. The new job requires a bigger, fancier house and lifestyle (watch “Fun With Dick and Jane”, the old version). These people are as over their heads as the economy. They can’t stop making more money, they’re up to their necks in debt. 

So while we raise a glass to the folks who fought Measure K, we better be getting ready to fight our own battle. 

 

California League of Cities: local agencies cut maintenance because “revenue growth from the improved economy has been absorbed by pension costs”

6 Sep

Let’s have a good laugh, cause we probably need one.

 

 

I think that clip is a good analogy of the way public agencies spend money.

Seriously, I’ve been mulling over an article from Edward Ring, a financial analyst, co-founder of the California Policy Center. It’s a good read to get you ready for Halloween. See the link at the bottom of this post. 

Okay kids, turn down the lights and let’s sit around in a circle and see who pees their pants first.

In 2018, the League of California Cities released aRetirement System Sustainability Study and Findings.”

Key Findings”:  (1) City pension costs will dramatically increase to unsustainable levels, (2) Rising pension costs will require cities to nearly double the percentage of their general fund dollars they pay to CalPERS, and (3) Cities have few options to address growing pension liabilities.

According to CalPERSPublic Agency Actuarial Valuation Reports,”  over the next six years, participating agencies will need to increase their payments to CalPERS by 87%, from $3.1 billion in the 2017-18 fiscal year to $5.8 billion by the 2024-25 fiscal year.

And that, according to Edward Ring, is a “best case scenario”.   This guy could scare the shit out of Stephen King.

“Bartel Associates used the existing CalPERS’ discount rate and projections for local revenue growth. To the extent CalPERS market return performance and local revenue growth do not achieve those estimates, impacts to local agencies will increase.”

Now remember, the actual authors here are CalPERS and the League of California Cities, Ring is just the storyteller, and I’m just repeating what he says. Here’s what I’ll add – Chico is a member of the LCC, in fact, Mayor Randall Stone has held office in the League. So this story is about Chico.

Ring continues his analysis, “The report from the League of California Cities includes a section entitled “What Cities Can Do Today.” This section merits a read between the lines”

You can go ahead and read his full article yourself, at least he’s got a sense of humor, but I’ll tell you what the league said, as it relates to the city of Chico, as well as Chico Area Recreation District.

1 – “Develop and implement a plan to pay down the city’s Unfunded Actuarial Liability (UAL): Possible methods include shorter amortization periods and pre-payment of cities UAL. This option may only work for cities in a better financial condition.”

Both the city and CARD have already done this. For example, in 2015, CARD ignored a consultant’s report that Shapiro Pool could be saved for about $550,000, instead making a $400,000 side fund payoff to CalPERS.  The city of Chico has also been stepping up their payments, we’ll get to where that comes from in a minute.

2 – “Consider local ballot measures to enhance revenues: Some cities have been successful in passing a measure to increase revenues. Others have been unsuccessful. Given that these are voter approved measures, success varies depending on location.”

The city of Chico and CARD have been hiring consultants to pursue tax measures since 2012. The common factor is former Chico city manager Tom Lando, who has sat on the board at CARD for over 4 years now, and who has also managed the Feather River Park and Rec District in Oroville. Lando is a pensioner, and receives one of the biggest pensions paid out to a city of Chico employee since the death of his predecessor Fred Davis. Of course Lando Man wants CalPERS to be funded.

https://chicotaxpayers.com/2012/01/30/heres-why-lando-wants-to-raise-your-sales-tax/

Lando was the guy who floated an MOU in the early 2000’s to attach city salaries to revenue increases “but not decreases“. Ring discusses such measures.  We’ll discuss that later.

3 – “Create a Pension Rate Stabilization Program (PRSP): Establishing and funding a local Section 115 Trust Fund can help offset unanticipated spikes in employer contributions. Initial funds still must be identified. Again, this is an option that may work for cities that are in a better financial condition.”

Back to #1.  Despite claims that they are in poor financial condition,  both local agencies have established such programs, and have been siphoning money that should have gone into maintenance and capital projects to “step up their payments” into their pensions. That leads to # 4.

4 – “Change service delivery methods and levels of certain public services: Many cities have already consolidated and cut local services during the Great Recession and have not been able to restore those service levels. Often, revenue growth from the improved economy has been absorbed by pension costs. The next round of service cuts will be even harder.”

That’s where I had to stop reading for about a week, I felt like my blood pressure was going to blow my eyeballs out of my head. This is the evidence, I mean, we all knew it. This is where they admit it.  ” revenue growth from the improved economy has been absorbed by pension costs.”  We’ve been lied to – the economy has been improving but the public employees have been stealing all the money for their pensions. And now, as Chico Assistant Manager Chris Constantin has been threatening in his presentations, “The next round of service cuts will be even harder.” You know it and I know it – they’ve been screwing us on purpose. Think Bridgegate.

5. “Use procedures and transparent bargaining to increase employee pension contributions:  Many local agencies and their employee organizations have already entered into such agreements.”

Ring says,   “(reading between the lines) – MAKE BENEFICIARIES PAY MORE. Good idea. The League of California Cities might expand on the feasibility of this recommendation and provide examples of where it actually happened (cases where employees agreed to pay more towards their pension benefits but received an equivalent pay increase do not count)”

Yeah, cases where employees agreed to pay more towards their pension benefits but received an equivalent pay increase do not count.  Ann Willmann of CARD and city of Chico management have all been given raises to more than cover their “extra shares”. And now, only now, “classified” CARD employees (management) pay 8%, and PEPRA (essentially, non-management employees) only pay 5.5% of the total agency contribution of 14%. City employees pay confusing shares, covered below.

The Public Employee Pension Reform Act (PEPRA) supposedly requires all employees pay 50% of agency costs. CARD “classic” staff has agreed to pay 1% more. I don’t know why CARD PEPRA employees are only paying 5..5%, they may still be phasing in.  

City of Chico employees have a totally different set-up, which confirms that the individual boards and employees have a lot more to say about this arrangement than either Chris Constantin or Ann Willmann will admit. 

I asked City Finance Mangler Scott Dowell (formerly with CARD, there’s just so much footsie in local government) what the shares were.  According to Dowell, the city pays different amounts for “miscellaneous” (everybody who is not a cop or  firefighter) employees and “public safety”, as well as “classic” and “PEPRA”.  Pay attention.

While CARD pays 14% total on all employees, City of Chico pays a  total of 21% for miscellaneous classic  and 20% for PEPRA.  For public safety employees (CPOA, IAFF), the city pays 31% for classic, and  33% for PEPRA. The employer/employee split is as follows:

  • miscellaneous employees: classic – employer cost  10.235%,  employee cost 11%;  PEPRA –  employer cost 10.235%   employee cost  9.75%
  • public safety: classic – employer cost 18.843%, employee cost 12%;  PEPRA – employer cost  18.843%, employee cost 15%

Dowell says the figures above include a 3% share of “employer cost” paid by employees. That’s confusing. That would make the “employee share” less than half the total cost. According to PEPRA, shouldn’t they just be paying half? Why say they are paying 3% of the employer’s share, and it only amounts to half? And, management (classic) make big yaya about paying 1% of “employer cost” – but PEPRA pay less than the employer share? What the heck?

Dowell also said that CPSA (public safety) employees pay 6% of “employer cost”. What? He says that is included in the figures above. You see, both classic and PEPRA public safety employees pay less than half.  And that includes 6% of the “employer cost”? What? Look – fire department classic members are paying 12% to the city’s 18.843% (19%). That’s not 50% of total costs. Do they think we don’t know the math?

So that all leads to the POB – pension obligation bond.

 6 – “Issue a pension obligation bond (POB): However, financial experts including the Government Finance Officers Association (GFOA) strongly discourage local agencies from issuing POBs. Moreover, this approach only delays and compounds the inevitable financial impacts.”

Both the city of Chico and CARD have said they will use the proceeds from their proposed tax measures to secure a bond. What kind of bond they have not specified, but I don’t know if they need voter approval to do this. Constantin has suggested issuing bonds for road and street maintenance. Whether or not Contantin is lying, here’s Ring’s analysis:

6 (reading between the lines) – GO INTO DEBT TO PAY OFF DEBT. Pension obligation bonds are at best a dangerous gamble, at worst a deceptive scam. The recommendation itself (above) dismisses itself in the final sentence, where it states “this approach only delays and compounds the inevitable financial impacts.”

Yeah, going into debt to pay off debt. I think the old people called that “robbing Peter to pay Paul.”

Ring makes an interesting observation. “Not everyone wants to blow up the defined benefit system,”  referring to the CalPERS’ model of guaranteed payouts.

“I think defined benefit is a tremendous opportunity. It can be sustainable. It was sustainable. And then they jacked up all the benefits by 50 percent and made it retroactive — basically doubled liability overnight. Now, they’re not sustainable. Make them sustainable again.”

Look back to #2 – that’s where Tom Lando, in the early 2000’s, pushed through a “memo of understanding”, getting a weak and stupid bunch of council members to sign off on attaching salaries to revenue increases “but not decreases”. That guy is the head of a very foul smelling fish.

Ring is a good read, he’s written extensively on this crises, how we got here, and how he thinks we can get out. 

https://search.yahoo.com/search?fr=mcafee&type=E2 LLP11US105G10&p=Edward+Ring+-+how+to+make+CalPERS+sustainable+again

 

How to Restore Financial Sustainability to Public Pensions

Dave Howell: Do they take us for fools?

29 Aug

I’ve seen some interesting letters to the Enterprise Record lately. A lady wrote the other day saying Chico streets are in such horrible condition she hates driving her car around Chico. I hear that – we just traded our son our F-150 for his tiny Chevy Cavalier. The F-150 sat higher off the ground, I could see the potholes but I didn’t feel them so keenly. The little Chevy feels like a Radio Flyer headed off Dead Man’s Hill, every crack in the road goes right through the seat covers, and sometimes there’s the sound of metal on asphalt as we hit a particularly bad hole. 

And of course, my 1956 Raleigh Superbe has seen her days, those skinny tires tooling along the park and neighborhood streets. I hit a pothole Downtown one day coming home from a meeting – ha ha, I was looking at another pothole instead of watching the street in front of my wheels – and CRASH! My bike basket flipped off the mounts and landed in the street. My feet slid off the pedals, which caught me right across the shins. And my bike seat stuck me one right in the small of my back. God I was so pissed off. 

There’s potholes on my street that look big enough to eat a stroller, complete with attached mom. But if you want to see something that looks like a third world country, head over to the neighborhood bordering the freeway off East Avenue, behind the old McDonalds and the abandoned For Kid’s Only Store. Check out the South Campus neighborhood, imagine out-of-town college parents seeing that for the first time.  

Sure everybody knows Chico streets are a mess – but do they know why? The city is going to tell everybody, in their campaign for a sales tax increase, that the streets are horrible because there aren’t enough revenues. But you know, if you go to meetings and listen to Constantin and Orme, they’ll admit that maintenance has been purposely deferred, while the city has been making, as CARD’s Ann Willmann likes to call them, “aggressive payments” on their pension deficit. 

So it’s good to hear from letter writer Dave Howell, who has it right – it’s the pensions. 

Howell asks, “will the people be fooled?” Well, he seems to be doing his best to prevent that. And thanks for the shout out Dave, I appreciate it.

Hats off to Juanita Sumner for shedding light on CARD’s tax increase measure. CARD has been considering a tax increase for years and has spent over $100,000 of our tax dollars on high priced consulting firms in an effort to get a tax increase measure on the ballot.  One consulting firm they paid openly brags about its ability to help get tax increases passed.  Yet CARD’s attorney claims these consulting firms are merely involved in informational surveys.  Only a fool would believe that.

The fact is that CARD, like the rest of local government, has made unsustainable compensation promises to its employees, especially regarding pensions. These promises are devouring money that should be going for infrastructure.  Like CARD, the City Council has used our tax dollars to hire a high priced consulting firm for a proposed tax increase.  The push for tax increases from our local government is all about unfunded liabilities that are unsustainable.

Without true reform we will face endless rounds of tax increases in a futile effort to fund unsustainable liabilities.  Scores of cities and counties raised taxes in the last several years and not one has solved their unfunded liabilities problem.  All passage of the latest round of proposed tax increases will do is kick the can down the road a couple of election cycles, but our local politicians and bureaucrats will never admit this.

Will the people be fooled?  We will find out next March when CARD’s tax increase will be on the ballot.

Dave Howell, Chico

Pension Tsunami, Part 1: How we got here…

7 Aug

In the late 1990’s, Governor Gray Davis and other union-friendly legislators set up the current pension system, agreeing to “defined benefits”.  Public employees had previously been given a “defined contribution” system. The difference being, with a “defined contribution” system, the employer agrees to pay a certain amount, with a “defined benefit” system, the employer agrees to provide specific benefits, no matter the cost.

About 2006 an “MOU” – memo of understanding – was approved by the sitting Chico City Council, with the recommendation of then-city manager Tom Lando, to “attach salaries to revenue increases but not decreases…”  Read that again – “but not decreases…”

Does that sound right to you?  Think about that – give them raises when we’re flush, but no “adjustments” when we’re bust, just lay people off and cut services. That’s been the pattern in Chico for 15 years now. After Lando floated that turd, his salary went from about $65,000 a year to over $150,000 within a couple of  years. His successor came in at $190,000/year.

Council handed out raises of 14%, 19%, 22%, until that memo was outed to the public and the taxpayers started to howl about it. But too late –  City of Chico salaries had progressed well over $100,000  for management and public safety, and other salaries were not far behind. Council approves automatic raises in the contracts so the salaries just keep going up. Even though former city manager Dave Burkland agreed to take a lesser salary than his predecessor, our current city manager now makes over $200,000/year. Add his benefits package and he is taking almost $300,000.

When the public found out about this scheme the city dumped that revenue-based raises mechanism, but came up with something better – “the employer paid member contribution.” That meant, the city not only paid a share of the employee’s benefits, but paid a portion – in some cases the entire portion – of the employee’s share as well.

This finally ended a couple of years ago, when, under intense criticism, those staffers – public safety and city management – agreed to pay their whole portion. And, hold onto your hats – about a year ago, these people even agreed to pay 3% of the “employer share.” 

Excuse me, my hat didn’t even jitter on that, because that makes the employee’s total share less than 10 percent. Anybody who has been a member of CalPERS for 15 years is a “classic member” and pays only 6%, plus that extra 3% – 9%, for a pension of 70 – 90 percent of their highest year’s salary is absolutely RIDICULOUS.

Meanwhile, the employer share has increased and increased, not to mention, the employer is making altogether separate payments toward the deficit, by way of the newly established “Pension Stabilization Trust.”

So, I imagine you saw this article in the paper recently.

Number of California public retirees in $100K Club skyrockets, but they’re just part of the burden on state pension system

This article gives a good historic overview of how the pension deficit has grown. I call it “rabbit math” – first they based the contributions on the employees’ salaries, and then they jacked up employee salaries.

I wonder how many other cities in California used Tom Lando’s ploy of attaching salaries to city revenue increases and then going on a development binge. When overdevelopment finally tanked the local market a few years later and revenues plunged, the salaries, benefits, and automatic raises, stayed in place. Salaries got higher no matter how revenues dipped for Chico. And the pensions and city contributions are based on the salaries. 

Getting dizzy yet? Maybe a little pissed off? Well this is where we’ll close and pick it up again tomorrow. 

 

Assistant city manager takes his tax “offering” to the commissions – these unelected boards have too much influence on city policy

3 Aug

I just heard bad news – the Chico Planning Commission has rejected Payless Building Supply owner Frank Solinsky’s appeal of Simplicity Village. SV is a “tiny home community” for transients, “senior citizens”, that is to be placed  adjacent to the PBS yard. Solinsky is partly concerned for his own interest – rampant thefts by transients to build their shanties at neighboring camps has always been a problemfor PBS.

As landlords my husband and I depend on PBS to keep our rentals affordable. We’ve long-realized that Salinsky’s problems are our problems, because the cost of enhanced security is passed along to the consumer. But my biggest concern is that Solinsky, given this latest turn, might just decide to throw in the towel and sell the property. That would leave my husband and I paying a lot higher prices at the box stores, and that pressure would matter-of-factly be passed along to our tenants. I’m not Mother Theresa,  neither is my mortgage lender, nor is the Butte County Tax Collector.

I don’t know what happens now. But I think it’s time to have a long overdue conversation about the amount of influence these unelected boards, commissions, task forces and ad hoc committees have on local public policy.

Look at the city of Chico agendas page here:

http://www.chico.ca.us/government/minutes_agendas.asp

There are 20 listings. Some are “interagency”, meaning they have representatives from all the local agencies, including the county, CARD and the school district. Some of these people are elected, some are agency employees, but many are appointed. The city boards, commissions, and the task force are  made up entirely of members of the public who’ve been appointed one way or another.

Don’t ask me to explain the appointments process, it’s all over the place. Each new city council decides how they are going to make appointments, and I’ve lost track of how they are doing it now. Some commissions have requirements for the make up of the group. The rules might specify that at least some of the members have certain qualifications, such as professional expertise.  It’s gotten complicated since the days when each council member got to appoint a member, for nothing more than campaign donations.  All I know for sure is they are not elected by the voters.

I don’t think the Planning Commission should exist – it’s always been way too political. We have a planning department, made up of professional planners, we pay them a good chunk of money, why we need a bunch of political sycophants sticking their foot in the process is beyond me. We have public hearings at the council level, but it’s a fact – the commissions have more sway with the council than the public. And, these commissions require dedicated staffers, more $$$$$. The airport manager position is really just a glorified secretary to the airport commission, and she’s not even very good at that.

Right now Assistant City Manager Chris Constantin is using the influence the commissions have to rubberstamp his sales-tax-to-secure bonds scheme. He’s been reporting to each commission in turn, leading them to believe the money would benefit their particular interests.

Monday I attended the Park Commission monthly meeting. You just have to go to one of these commission meetings to believe it. The lack of professionalism is astounding. These commissioners are appointed, not elected, but they act as though they’ve been given the keys to the town.

Here’s something I’ve seen at just about every meeting I’ve attended over the last 15 or so years – council, committee, commission – there’s always somebody who doesn’t read the staff reports. Oftentimes, several of them. At the BPPC meeting the other night one commissioner asked questions that were answered directly in the reports, and I could tell Constantin was  getting kind of testy when he told her that. These people add hours to meetings, and that means $taff Time (=$$$,$$$.00)

In Constantin’s case it’s over $100/hour to sit in a room waiting through other agenda items, including the time it takes each commissioner in turn to make the same stupid observations. They seem to think every thought skittering across their brain like a jack rabbit in the headlights is SO IMPORTANT! Even if it’s completely off topic. At that same meeting I had to sit there while they thanked staff, each commissioner in turn, and told them what a FABULOUS! job they do. They thanked Constantin twice. That’s all nice and stuff, but even Constantin seems to get sick of it.

Nevertheless, he takes full advantage of their helplessness, leading them the way he wants. It was amazing to watch. One minute he’s convincing them they should recommend forgiveness of the $169,000 Nature Center loan balance, and by the end of the meeting he’s telling them if the city doesn’t pass a sales tax increase measure we’ll be laying off cops and fire by 2021.

This guy also negotiated himself a special type of retirement account available only to public workers, a 457 plan, IN ADDITION to his CalPERS pension. City Manager Mark Orme gets the same plan.

“Effective from the first pay period in January 2017 considered in calculating the maximum IRC 457 plan limit and annually, City agrees to contribute nine thousand dollars ($9,000) , to Employee’s IRC 457 plan. Additionally, effective October 5, 2017 the City agrees to contribute four and fifty-two hundredths percent (4.52%) of base salary to Employee’s IRC 45 plan.”

These guys have a vested interest in this tax proposal, they’re determined that we will pay their outrageous pensions. They need to go, in fact, every “classic” employee needs to go. We need young people who are willing to pay at least 50 percent. Which sucks, because they will just be paying for the old farts to live in luxury.

 

 

 

 

Will the taxpayers be left holding the Pension Deficit Bag?

31 Jul

Have you been “left holding the bag“?  This expression is generally used to describe a situation wherein a person or persons create a problem and then leave others to deal with it.  According to Grammar Girl,  there are different shades of meaning – “this idiom grew out of an earlier expression from about 1600: to give one the bag. That expression referred to someone being left with an empty bag after everyone else removed the good stuff.”

We all know what it’s like to be left holding the bag – empty or full – but I wonder, how do you all feel about the bag being handed to your children? This is what City of Chico staff are trying to do – hand their pension deficit bag to our kids.

The other night I took in a Chico Parks and Playgrounds Commission meeting to hear a pitch for a sales-tax-to-secure-bonds scheme that Ass City Mangler Chris Constantin has been pitching for months. Constantin describes a trick by which he can use the additional sales tax revenue to secure bonded debt. What it amounts to is trying to convince us that it won’t be that painful to pay this tax, because it will be stretched out over years. But when I looked into this scheme I found, that means our kids and their kids will be paying this debt, and it’s very unlikely they will see any benefit.  The bag we will be leaving for our children will be full of debt, crapped out infrastructure, and public salaries and benefits still spiraling out of control.

From the Tax Policy Center –

“State and local governments issue bonds to pay for large, expensive, and long-lived capital projects, such as roads, bridges, airports, schools, hospitals, water treatment facilities, power plants, courthouses, and other public buildings. Although states and localities can and sometimes do pay for capital investments with current revenues, borrowing allows them to spread the costs across multiple generations. Future project users bear some of the cost through higher taxes or tolls, fares, and other charges that help service the debts.”

At a meeting I attended earlier this year, Mark Orme admitted that the city had “kicked the can down the road” on street maintenance for many years, instead paying millions toward their pensions. This included payments toward the actual deficit, instituting a “Pension Stabilization Trust” that siphons money from every fund, even funds “dedicated” to capital maintenance. Through the PST, staff has tricked us into believing we only pay a certain “employer share” of the pensions, in reality, we pay most of their pension cost. This has created what I’m going  to call “the Pension Deficit Bag“.

If we  don’t get a handle on the public employee compensation now, we are handing our kids a disaster. This is the dilemma – the public employees want crazy salaries of as much as 4 and 5 times the median income, AND they want 70 – 90% of those outrageously inflated salaries in retirement,  BUT they don’t want to pay for it.  Years ago CalPERS promised they would make up the difference with investments in the stock market – but their investment strategies, including a bribery scandal, have only deepened the divide.  Now they want the taxpayers to take the bag. In fact, Constantin is trying to convince us that it’s okay to let our kids pay for his ridiculous lifestyle demands.

With groups like Pension Tracker shining a light on this grab, CalPERS and the unions have agreed that “new hires” (our kids) be asked to pay 50%. But top heavy management employees, “classic employees“, are only paying 11%. That is not sustainable. Sounds like a classic Ponzi scheme to me!

“Future project users bear some of the cost through higher taxes or tolls, fares, and other charges that help service the debts.”  But will they receive any benefits? That’s uncertain, in fact, I’d say it’s not going to happen. According to Constantin, we need hundreds of millions to bring existing streets up to safe standards, but the sales tax increase will only bring in a couple million a year. He explains enthusiastically that’s why we will use those proceeds to borrow money (bonds). That sounds nuts to me.

At that Finance Committee meeting earlier this year, Constantin also warned us that the economy is about to tank. If you’ve been paying attention over the last 35 years, as I have, you’ve seen that pattern of boom and bust.  Chico just enjoyed a giant BOOM, despite the poormouth complaining about the Camp Fire refugees. Contrary to the city’s claims, those refugees not only caused a short term blip in the price of housing, meaning MORE PROPERTY TAXES, but those who have remained are still providing a boost to our local sales tax revenues. This will dry up as the retail sector in Paradise recovers, and people start moving back to the Camp Fire burn area. The resulting correction will be tough times for Chico.

Constantin admitted there is such a downturn on the horizon, telling the Finance Committee that his scheme will “shore us up“. What? Who would borrow money in the  face of economic downturn?  The bonds he’s proposing have to be paid no matter what happens in the economy – just like Constantin’s “defined benefits“.

Throwing a sales tax increase onto people who are already experiencing uncertainty is another nail in our coffin. Studies suggest that when people find out there’s a sales tax increase on the agenda, they start hoarding, buying the bigger ticket items ahead of the sales tax increase. This of course creates a bubble. The same studies show that people develop different shopping habits, such as buying online.

Here’s my anecdote – when Tom Lando first suggested a sales tax increase in 2012, I started shopping out of town and online. Of course these purchases are still taxed, but here’s the message – local businesses lost my money, and they won’t get it back. Local businesses need to realize what they stand to lose. It’s not the box stores that are stealing your business, it’s the sales tax rhetoric coming out of the city of Chico.