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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

CANCELLED: City hosting an interactive forum to discuss POBs

27 May

I got this notice from Dave – thanks Dave!

I also got the cancellation notice from Dave – thanks again Dave!

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


The City of Chico’s employees and retirees participate in the CalPERS retirement system. CalPERS has
determined that the City has an unfunded accrued liability (UAL) of over $140,000,000 which carries an
interest rate of 7%. As such, the City Council is researching all options on reducing this liability. One
possibility is to issue pension obligation bonds (POBs) at a lower interest rate than 7% and use the
proceeds to pay down the CalPERS UAL.


The City is hosting an interactive forum to discuss POBs including the benefits and risks associated with
their issuance. The consulting firm of NHA Advisors will be conducting the forum on June 8th starting at
2:00 pm and concluding by 4:00pm. This forum will be interactive and participants are encouraged to ask
questions and provide feedback to the consultant. Attendees are encouraged to join in person at the City
Council Chambers or watch online. There is no cost to attend this educational forum.

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!

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  

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. 

Why we need to dump collective bargaining – to end the union domination of California – and Chico! – politics

17 Mar

Thanks Dave, for this great article from David Crane:

https://www.hoover.org/research/bipartisan-opportunism-blame-californias-high-tax-rate

Crane gives us the history of collective bargaining in California, “which endowed police and other local personnel with the power to bargain collectively with the governments that employed them, handing political power over local budgets to government employees who were the principal beneficiaries of those budgets…”

Established by Ronald Reagan in 1968, this agreement “created a piggy bank to help finance GOP legislators.” But of course, it works for whichever party is in power, son when he became governor in 1975, Jerry Brown extended this agreement to school teachers and employees. This has resulted in elections controlled not by the Russians or the Iranians but by the public employee unions.

In Chico the biggest contributors in every election are the SEIU (management) and the CPOA (cops), with the IFFA (firefighters) coming in a close third.

In my opinion, this relationship is completely inappropriate – council approves hires, salaries, and benefits, sets staffing levels, and then accepts huge campaign contributions from the very people who benefit from their actions. I can’t believe the voters don’t see the conflict of interest in this system, but I’m guessing, most people don’t know. Everybody’s got their panties in a knot over the notion that Russia and Iran have influenced elections, but they don’t see corruption that is as plain as the nose on their faces. 

So City of Chico and County of Butte, both of whom have outrageous pension deficits, are considering Pension Obligation Bonds. This action would forever place the burden of the pension deficit – created by the ridiculous salaries, overly-generous benefits, and completely unrealistically low employee contributions approved by our “local leaders” – on the backs of the taxpayers. 

Instead, I suggest we dump collective bargaining – this could be done by city ordinance, and could be accomplished by a petition of citizens. Another option would be a city ordinance that cut the union PAC donations down to the same level as individual donations – about $1,000 per candidate. 

Crane agrees on point #1 – “The antidotes are to repeal collective bargaining rights for government employees or to offset these voters’ power with persistent support of our political parties from donors who care about the general interest (full disclosure: Govern for California provides such support), not to whine about one-party dominance.

Right now, as Doug Ose has said, “we are going backwards” as a state. Over-taxation has made housing too expensive, while infrastructure all over the state is failing. Chico Mayor Andrew Coolidge acknowledges the poor condition of streets in Chico, but advocates a POB, which would suck all the money out of the General Fund, which is made from allocations out of all the other funds – the streets fund, the park fund, the sewer fund, etc. You get the picture every time you drive or bike around town, or open your new sewer bill. Did you get the picture last night when council voted to INSTITUTE A FEE FOR USE OF UPPER PARK? 

Wake the hell up Chico, and write a note to your mayor – that’s andrew.coolidge@chicoca.gov

Intergenerational equity in the pension system, or, stealing candy from babies

15 Mar

A popular topic among academics is “intergenerational equity”. One explanation, taken from a box of laundry detergent: “Iroquois philosophy says that the decisions we make today should result in a sustainable world seven generations into the future.”  

Here’s a good article from wikipedia:

https://en.wikipedia.org/wiki/Intergenerational_equity

An old example of intergenerational equity would be  “debtor’s prison”. 

“Since the first recorded debt issuance in Sumaria in 1796 BC,[10] one of the penalties for failure to repay a loan has been debt bondage. In some instances, this repayment of financial debt with labor included the debtor’s children, essentially condemning the debtor family to perpetual slavery.”

Can you even imagine your kids being dragged off to jail because you can’t make your house payments? Apparently it still happens in other parts of the world.

“While slavery is illegal in all countries today, North Korea has a policy called, “Three Generations of Punishment”[11] which has been documented by Shin Dong-hyuk and used as a moral paragon of punishing children for parents’ mistakes.”

You think Americans are any better? 

“Stanley Druckenmiller and Geoffrey Canada have applied this concept (calling it “Generational Theft”[12]) to the large increase in government debt being left by the Baby Boomers to their children.”

And part of that debt is the retirement system. Here they are talking about Social Security, which we’ve heard for years is failing because it is not funded adequately. “What?” you say. “Anybody who has a job pays into it, it must be funded!” Hold onto your hat for this declaration.

“The U.S. Social Security system has provided a greater net benefit to those who reached retirement closest to the first implementation of the system. The system is unfunded, meaning the elderly who retired right after the implementation of the system did not pay any taxes into the social security system, but reaped the benefits.”

Sound familiar? Well, maybe you didn’t know – our former city manager, Tom Lando, receives about $155,000/year in pension,  for which he paid NOTHING. Until 2013, when Mark Orme agreed to pay a paltry 6%, the city made the “employer paid member contribution”. Meaning, the taxpayers footed the bill for pensions in excess of $100,000 a year, for people who paid nothing. And now, those people, including Orme, only pay 9%. Their underlings – those hired after 2013 – are required to pay more. It’s a big pyramid scam – the members at the top of the pyramid get the money paid  by the bottom rung. Here’s an analogy of the Social Security system that is also true for the public pension system.

“Professor Michael Doran estimates that cohorts born previous to 1938 will receive more in benefits than they pay in taxes, while the reverse is true to cohorts born after. Further, he admits that the long-term insolvency of Social Security will likely lead to be further unintentional intergenerational transfers.”

Just substitute “CalPERS” for “Social Security” and there it is – the “intergenerational transfers“. A nice way to say “stealing candy from babies.” A nice way to say, “condemning your children to debt, poverty and enslavement to the system.” 

It’s time for young people to realize what is going on. The pension system is not only a pyramid, it’s an upside down pyramid. There are too many taking out that never paid in, and too few paying too little.  The system will collapse within the next 10 years unless older pensioners agree to take less, and younger pensioners agree not only to take less but to pay more. The taxpayers cannot sustain this system. Like ex Chico city council member Randall Stone said – this burden should be born by the employees, not the taxpayers, who have nothing to gain. Especially since all the money is going to the pension deficit, leaving nothing for services. 

But I’m not too worried – I heard about this concept from my son, who told me, the biggest problem facing young people today, “is the pensions…

Teach your children well. 

 

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

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

No on Measure E; and there will be a quiz later today about that Finance Committe meeting!

16 Oct

Wow, who would have guessed Measure E – city council districts – would be such a hot topic. Looking at the stats the last week or so, that’s what people have been hitting – “Measure E – Divide and Conquer”.

In the music business, they would call that a “throwaway piece.” I was just annoyed and frustrated over the response I got from the city clerk when I asked about this measure. The clerk is like a sphinx, you could know her 30 years, and I almost have, and never know what’s on her mind. She states the facts, she answers a question as you ask it. Never opines. But, this time she seemed genuinely confused – it’s a stupid measure. And it makes a person think, council pulled a fast one – like the cell phone tax they collected illegally for years – and they need the public to approve it.

I hope that’s what other people are thinking, and I hope it fails. Districts are not only unnecessary, they are a ploy by both the liberals and the conservatives, who both seem to think they can manipulate this system.

Prepare to be manipulated!

And if somebody feels like emailing city finance man Scott Dowell, scott.dowell@chicoca.gov, they could ask him how much it is going to cost to REDRAW THE DISTRICTS after the upcoming CENSUS.

I’m also shocked to see how interested people are in the school board race. I’m sure glad, and I’m sorry I don’t have anything better to offer than “vote for people who aren’t/haven’t ever been school district employees”, but that’s my story, and I’m standing by it.

But I’m sincerely grateful to those of you who have downloaded and watched the video I posted –

https://gofile.io/d/zqp5BI

with big THANKS to DAVE for that link. Since I posted that last Friday, almost 100 people have seen it, and, as committee member Sean Morgan agreed, that’s a helluva lot more people than actually attend those meetings.

So, after I finish my chores this morning, I’m going to make a QUIZ! We all love a quiz, don’t we? I’ll try to make it good and tough. And yeah, I’ll probably allow cheating. The teachers I learned the most from were the ones who allowed open book/notes tests. And that’s the point here, I want more people to see how the city operates behind closed doors.