Ventura Police pension mistake

Pension Spiking Approved in Police Retirement Contract

” We Must Hand Together Or Surely We Shall Hang Separately” —Thomas Paine

COUNCIL APPROVES PENSION SPIKING

[Fleecing Time – Again!]

At the Ventura City Council meeting on Monday, May 16, 2011, on a vote of 5 to 2 the Council approved to an employment contract amendment to the Ventura Police Officers Association (VPOA) and Ventura Police Management Association (VPMA) employment contracts.  Mayor Fulton and Councilmen Tracy, Brennan and Morehouse voted for the amendment.  Councilwoman Weir and Councilman Andrews voted against the measure.

Ventura Police negotiate with City Council to get pension “spiking”

New employment contracts for the VPOA and VPMA were approved on January 16, 2011. However, in May it was pointed out that a correction (amendment) was needed because  an important detail had not been treated. “They” forgot to include essential terms in the contract concerning who was going to pay the 4 ½% pension contributions.

Recall, good reader, that this contract was hailed as a masterful accomplishment, unique in California, and that it would save the community money in the long run (Mayor Fulton and City Manger Cole) because our policemen were now  going to have to pay something toward their own pension just like everybody else in the private sector.

A Pension Deal Too Good To Be True

At first blush this step was positive, albeit anemic, because in past years this Council had entered into employment contracts with the policeman whereby they entire 9% pension contribution would be paid by the taxpayer.   Our Mayor Fulton and City Manger Rick Cole extolled the virtues of this new employment contract because  the City of Ventura had tilled new ground by requiring the policemen to pay something toward their own retirement – 4 ½% we were told.  Councilman Andrews, Councilwoman Weir and fiscal conservatives in the community argued forcefully for a 9% contribution particularly in light of an unfunded pension liability of $250 million, but we digress.

Now we learn that with this amendment of the contract terms, unlike the SEIU employees contract, the VPOA and VPMA will be paying their 4 1/2% retirement contribution toward the employers’ portion (taxpayers portion) of that is sent to the CALPERS retirement plan. This accounting maneuver is specifically done to increase the total compensation of the employee, making the retirement payout amount higher for their lifetime.

The employee’s goal is to get one year of the highest possible salary so that his retirement for life is higher – called “spiking”.

Giving Context To The Problem The City Council Created With Police Pensions

To help put this into perspective, the employers’ portion of the total  annual retirement payment paid to CALPERS by the city (taxpayer) is counted as income to the employee for purpose of calculating the employees retirement benefit when they retire. The employee’s goal is to get one year of the highest possible salary so that his retirement for life is higher – called “spiking”.  Until now the city has been paying the taxpayers portion (100%) plus the employee’s portion (9%) toward the CALPERS retirement for a total of 109% yearly.  Now, with this contract amendment, we learn that while the 4 ½ % will be contributed by the police officer, from his salary each year, but it will be shown as a payment made by the employer (taxpayer)  to CALPERS.  The reality is that the employee’s annual salary will be shown as higher by 4 ½ % for purposes of calculating that police officer’s gross salary when they retire.  The policeman gives up 4 ½% as his contribution now but recovers it all at the time of retirement.  The taxpayer is in effect still paying 109% of what is required to be paid.

Ventura Police pension mistake

Ventura Police Officers put one over on the City Council in pension negotiations.

While some may define “spiking” as adding benefits to salaries in the last year of employment to boost up the retirement amount, this additional 9% accomplishes the same results, an inflated income for retirement formula purposes. It will even compound to a higher amount, should a three highest years plan ever be adopted.

So, why was this fact not made known publicly 4 months ago? Why was it not questioned or challenged at the May 18th meeting by any council member?  Why was the CALPERS representative not questioned about the effect of this decision at the time of the January meeting? There were no questions and there was no discussion about the long-term impact to the city.

Specious Defense Of The Pension Contract

City Manager, Rick Cole, defends the contract amendment by saying that the payment by the employee  into the employers’ portion of the retirement, which is then sent to CALPERS, was a non-negotiable item with the VPOA and VPMA. He also said it would make no difference because the current officers would receive retirement benefits based upon their “highest level” of compensation. That statement is true for the current workforce but what he failed to address, nor was he questioned, was how this would have affected officers hired in the future.

While the City Council remains concerned about the long-term effect of taking more general funds for street lighting, they continue to ignore the paying of 9% higher retirement benefits, which also comes from general funds in the form of payments to CALPERS, for years into the future. We can thank soon up for re-election Mayor Bill Fulton and Councilmember Carl Morehouse for this gracious contract approval.

EDITORS COMMENT

 If the City Manger concedes that this 4 ½% contribution, paid  through the employer’s contribution to CALPERS,  was not negotiable with the police officer unions (his words not ours), then what about the taxpayer’s non-negotiable rights not to overpay and provide lavish retirement benefits to these public servants?  Who then is protecting the interests of the taxpayer in this City when sitting at the negotiating table?  Better to reach impasse and let these folks scramble for a new job then render the community hostage to the potential of bankruptcy.  This unfunded obligation can and should be laid squarely at the feet of the council members who voted for this amendment; but, of course when it comes time to pay the bill they will be over the hill and the taxpayer will get the bill.

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Volunteer fire depertment may help Ventura's pension costs

Time To Consider A Volunteer Fire Department For Ventura

“Politicians in America exploit economic illiteracy” —Walter Williams, Professor Economics

PUBLIC EMPLOYEE PENSION TRANSPARENCY ACT

We previously reported that there is a bill is currently pending in Congress (HR567) and the Senate (S347) encouraging governments at all levels to switch from a “defined benefit” plan to a “defined contribution” plan by requiring public entities to reveal to the voters the true magnitude of the unfunded liabilities of the public pension plans.

In California CALPERS continues to portray a rosy investment return.  The staff at CALPERS recommended a change in the assumption of how much our City pensions investments will make in the future from 7.75% to 7.5%.  This went to committee on March 15, 2011.  This new direction, had it been adopted would have moved the pension fund on a path to solvency and economic reality. It didn’t happen. The CALPERS committee did not want to pass on the annual increased expenses to the cities that such a modification would cause given their current budget strains.  Ventura is of course content to ignore this. You know, “What is a poor mother to do”. In the City of Ventura we owe $67,488,000.  Twice that if a more realistic investment return of 3.50% is used.

These Federal bills, called the PUBLIC EMPLOYEE PENSION TRANSPARENCY ACT, would require States and municipalities to report their liabilities to the United States Treasury. The HR bill was sponsored by Representative Darin Nunes, Darrell Issa, and Paul Ryan with Congressman Elton Gallegly acting as a co-sponsor.

If adopted state and local governments will be “encouraged” to switch to defined contribution plans.  While they are being “encouraged” they will have to reveal the true magnitude of their unfunded liabilities to their citizens. No more off the balance sheet reporting.  This new legislation will require that they report liabilities to the U.S. Treasury using their own glowing investment forecasts as well as a more realistic Treasury bond rate.  If the City of Ventura is forced to use a Treasury bond rate of 3.5% our unfunded pension obligation would double to $134,976,000.

THE FIREFIGHTER BENEFITS CONTRACT

Volunteer fire fighters may help Ventura's pension problem

Considering a volunteer fire department hybrid may help Ventura’s rising pension costs.

In the fall of 2008 that Ventura fire fighter benefits and pension contract was modified by the City Council.  This was treated in our September, 2008 issue. 

  “In a vote of 4 to 3 the council  approved the Memorandum of Agreement and the new pension contract with the firefighters of this city giving them a pension equal to 3% of their highest salary  times the number of years in service plus all medical, dental.  The yeas were Councilmen Fulton, Brennan, Summers and Monahan.  The neighs were Mayor Weir, Councilmen Andrews and Morehouse.  It should be of grave concern to all when one councilman says, before he cast his “NO” vote — “I HAVE GRAVE CONCERNS TO COMMIT WHEN WE DON’T KNOW WHERE THE FUNDS WILL COME FROM”.

“I Have Grave Concerns To Commit When We Don’t Know Where The Funds Will Come From”.

Mayor Fulton and Councilmembers Brennan, Monahan and Summers were thus responsible for increasing the firefighter pension in the fall of 2008 so that these folks could retire with 3% at age 55[1]. Their actions increase our unfunded pension debt by $1.2 million or more annually.

Since then the pension contracts for all City employees have come up for renewal.  On Tuesday January 16, 2011, the Ventura City Council approved new labor contracts with the Ventura Police Officers, Police Management and the employees represented by the SEIU. The vote was 5-2 in favor of the agreements. Councilman Andrews and Councilwoman Weir voted against approval. The decision of the other five – Brennan, Fulton, Monahan, Morehouse and Tracy was in favor.

The agreement with the Fire Department union is still in closed negotiations, which, of course, are not made public.  Many criticized the past decision of the Council in approving the employment contracts for the Ventura Police Officers and Police Management, not the least of which was Council Member Weir, who rejected the proposal and stated “Fiscally, the city needs more than this right now.” and  Council Member Neil Andrews said the agreements “simply don’t go far enough.”  The SEIU, who agreed to a lower 2nd tier retirement plan (2% @ 60) also agreed to a salary average of the three highest years in calculating their pension entitlement for all new hires.  The Ventura Police Officers and Police Management stuck to 3% @ 55 and the single highest year for all new hires.

ANOTHER POINT OF VIEW

[The case for a volunteer Fire Department program]

Due to the present Firefighter negotiations, this next article is timely and worth greater consideration.

Municipal governments in other states are beginning to come to grips with bloated payroll and pension demands of public employee — fire unions and have handed these folks their walking papers in favor of a volunteer fire department.  There is a persuasive argument to be made in favor of such a step, or some hybrid of that concept so that the community becomes more involved and vested in community safety.  The following is summary of study performed by Bill Knox, former candidate for the Ventura City Council.  The complete 10-page report, complete with comparison charts and footnote links, is available upon request. (Simply email vregventura@gmail.com)

Solutions for Ventura’s Fire Department

[The Case For A Volunteer Fire Department]

Ventura is in the midst of an unprecedented reduction in public safety services.  Mounting overtime costs, enormous pension liabilities and shrinking revenue streams have resulted in the closing of a fire station and elimination of firefighter positions.  Using volunteer firefighters to assist professionals could save the city millions annually and dramatically improve public safety.

Response Times

Understaffing at Ventura’s fire stations has resulted in substandard emergency response times.  According to national standards, firefighters should respond to emergency calls within five minutes.  This time frame is critical in that resuscitation from cardiac arrest after five minutes typically results in brain injury, coma or death.  As a result of inadequate staffing, the department fails, on average, to meet the response standard over 62% of the time.  With the elimination of three firefighter positions and the fire’s department’s plan aimed at reducing sworn staff positions by nine, response times are anticipated to increase by an additional 30%.

As a result of inadequate staffing, the department fails, on average, to meet the response standard over 62% of the time.

Lack of Funds

The fire department’s budget for 2010-2011 is $14.5 million.  The city closed station No. 4 in hopes of reducing costly overtime pay. In 2009, the city paid $1,700,000, (nearly 12% of this year’s budget) in overtime payments.  Employees with one year of experience receive a compensation package well in excess of $98,000.  Senior-level employees cost exponentially more.  In addition, the city of Ventura has an unfunded pension obligation of more than $50,000,000.  Taken together, the fire department’s budget is stretched to the limit and the city simply cannot afford to maintain, much less expand, the professional force.

Volunteers

Volunteer fire department similar to Volunteers in Police

Ventura should consider a volunteer fire department program similar to Volunteer policing.

The Ventura Police Department uses 44 volunteers to supplement the professional force.  Volunteers have donated over 40,000 hours of their time to serve the city.  If 44 volunteers each donated 48 hours per month to the fire department the city could save more than $1.06 million in basic compensation costs.  If overtime was eliminated, the savings would amount to nearly $3 million annually!  If law enforcement supplements its professional force with volunteers to improve public safety, reduce costs and partially compensate for reductions in its budget, there is no reason that the fire department cannot achieve similar if not better results with a well crafted and executed plan.

If law enforcement supplements its professional force with volunteers why can’t the fire department achieve similar results?

Most US Fire Departments Use Volunteer Fire Fighters

According to the Federal Emergency Management Agency (FEMA), over 92% of fire departments in the United States use volunteer firefighters, either exclusively or on a supplemental basis.  California cities such as Chico, Fillmore, Santa Ana, Santa Clara, Santa Paula, Stockton, Compton, Rohnert Park, Turlock and many more successfully use volunteers to supplement their professional forces.  These communities receive outstanding results and substantial cost savings with their highly trained and dedicated volunteer forces.  If Ventura created a supplemental volunteer fire fighting force modeled after any one of these communities, it would save between $2.5 and $3 million annually. 

If Ventura created a supplemental volunteer fire fighting force, it would save between $2.5 and $3 million annually. 

Volunteer firefighters do come with a minor cost, but not a salary or massive pension obligation. The city would still need to cover costs of training and equipment; costs already incurred by the city for its professional firefighters.  To protect the city’s investment, the volunteer should be required to serve a minimum term or pay back the costs associated with certification and training.

Volunteers are a viable option to ensure a timely response to emergency calls, to reopen station No. 4 and possibly staff additional stations, like a much need station in Ventura’s harbor. Volunteers, like professionals, must complete mandatory training comparable to beginning professional firefighters.  Having more well trained first responders in our community will provide a broader measure of safety to the population in times of emergency. Furthermore, a well trained volunteer force will provide a quality pool of applicants from which to pick when the time comes to add additional professionals to our force.  By training and utilizing volunteers now, the professional department would have in-depth personal knowledge of a person’s character and fitness to serve as a member of our truly honorable and professional force.

The use of a volunteer force will help alleviate some of the burden on our professionals and allow them to reduce the amount of overtime currently required.  In addition, creating a volunteer force would provide adequate staffing and help reduce response times to emergency calls.  Not only will this help save lives but it may increase Ventura’s ISO rating (a figure used to determine the cost of homeowner’s insurance).  This could help lower the cost of homeowner’s insurance citywide.  A supplemental volunteer force is the right answer for Ventura.

 Editors’ Comments:

We all need to consider viable alternatives to what we have been doing in the past. Ventura’s police department has its Volunteers in Policing program.  It is time we gave a much needed hand to our fire department and help them to do what they do best: serve the public interest through ensuring public safety.

Editors:

B. Alviani           K. Corse        T. Cook

J. Tingstrom     R. McCord    S. Doll

[1] 3% at age 55 means 3% of a policeman’s or firefighter’s highest annual salary times the number years of employment.  For example, a 20year old works 35 years and in his last year his salary is raised to $80,000.  He will be paid $84,000 a year for the rest of his life.

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CalPERS costs Ventura piles of cash

CALPERS Increases on City Out of Control

Winston Churchill

“Americans always get it right, after they have tried everything else”
—Winston Churchill

HMS TITANIC

[Moving Deck Chairs to Avoid a Disaster over Pensions]

The story of the sinking of the HMS Titanic and the causes are known to all.  Had the ship not been traveling too fast, or had the officer on the bridge ordered a change of course earlier the collision with the iceberg  would not have occurred  The courses of action to avoid disaster were clear, but ordering the crew to move deck chairs to avoid  a cataclysmic event was not one of them.

Police salary negotiation victory jacks CalPERS

Ventura Police unions extracted concessions to pay for CalPERS contributions.

So it was on Tuesday January 16, 2011, when the Ventura City Council approved new labor contracts with the Ventura Police Officers, Police Management and the employees represented by the SEIU. The City Council vote was 5-2 in favor of the agreements. Councilman Andrews and Councilwoman Weir voted against approval. The decision of the other five — Brennan, Fulton, Monahan, Morehouse and Tracy was in favor.

The agreement with the Fire Department union is not due for another 6 months, but results are likely to be similar.  Recall that Mayor Fulton and Council members Brennan, Monahan and Summers were responsible for increasing the firefighter pension in the fall of 2008 so that these folks could retire with 3% at age 55[1], thus increasing our unfunded pension debt by $1.2 million or more annually.  Mr. Summers is gone but Councilman Tracy (retired police chief) will predictably follow in his footsteps on this pension issue. (See Res Publica, August, 2008 for a complete summary)

The City Manager’s “Victory Lap” Over Pensions

Below is an email from City Manager, Rick Cole, recently proclaimed by Mayor Fulton, conveying the news of this purported accomplishment. The email is upbeat and congratulatory for their success of having the employees start to pay towards their own retirement and the establishment of a two-tier system, where new employees will have to be older before they may receive full retirement.

Active citizens,

This week the Ventura City Council approved new labor contracts with employee bargaining units that will move the City toward a more sustainable pension program. The agreements are expected to save a net of $250,000 during the remainder of this fiscal year, $1.0 million in fiscal year 2011/12 and $1.3 million in fiscal year 2012/13, for an estimated savings of $2.6 million over the three fiscal years.

The new employee contracts require employees to pay 4.5% of CalPERS pension costs, resulting in a higher percentage saving for Ventura taxpayers than any other city or county labor agreement in Ventura or Santa Barbara County since the beginning of the economic crisis.

The agreements will also implement a second tier CalPERS retirement formula, based on a later retirement age for newly hired employees. Ventura is the first to do so in the two County regions for either safety or miscellaneous employees. The agreements approved by the City Council cover both.

Concessions were made on both sides to reach agreements that safeguard the delivery of quality services to our community. For the first time in several years, employees will receive additional employer contribution to optional benefits to cover a portion of the rapid rise in health care costs. A key part of the package was an increase of three days in paid leave time for employees who have been forced to take unpaid leave time during the City’s winter shutdown. Executives and managers are not eligible for the additional leave time.

Pension reform has been the subject of public debate across the State and beyond. Last year, the City Council set the goal of raising the retirement age for new employees and returning to employees paying their share of pension costs. Both goals were achieved in the agreements ratified by the Council this week.

Respectfully,

—Rick Cole, City Manager

Our City Manger and Mayor Fulton hail their accomplishment as a milestone and enormous accomplishment.  Or was it? Councilwoman Christy Weir did not think so.  She rejected the proposal and stated “Fiscally, the city needs more than this right now.”   Council Member Neil Andrews said the agreements “simply don’t go far enough.”

“Fiscally, the city needs more than this right now.”—Christy Weir, Councilmember

CalPERS extracts piles of money

New police salaries will cost Ventura taxpayers piles of money.

Here are some extracts from the reports of CALPERS, the folks who manage our pension money (or losses) dated October 10, 2010, based on data as of June 30, 2009. The Council members had these reports when they voted on these pension contracts.

First, the “employer contribution rate”, which is the percentage of total payroll that must be paid yearly to fund the pension plans. The rate for police and fire for example must be paid for policemen and firemen yearly in addition to their pay and medical costs:

 

FISCAL YEAR          EMPLOYER CONTRIBUTION RATE (Police & Fire only)

2011/2012                   35.190%

2012/2013                   36.4%

2013/2014                   40.6%

“The estimated rate for 2012/2014 uses the valuation assumption of 7.75% as the investment return. Member contributions are in addition to the above rates”.

CALPERS, report of 10-10-10

We next turned to page 5 of the CALPERS report which provides the following data about the police and fire retirement:

Funded Status June 30, 2008 June 30, 2009
Present Value of Projected Benefits $ 270,877,057 $303,536,023
Entry Age Normal Accrued Liability $ 223,938,241 $248,929,746
Actuarial Value of Assets $177,314,177 $184,660,390
Unfunded Liability $  46,624,064 $  64,269,356

 

An identical report was provided for all other employees with the following results:

Funded Status June 30, 2008 June 30, 2009
Present Value of Projected Benefits $ 205,128,033 $217,940,958
Entry Age Normal Accrued Liability $ 167,837,616 $184,806,501
Actuarial Value of Assets $157,529,148 $165,040,339
Unfunded Liability $  10,308,468 $  19,766,162

A 47.6% increase in unfunded liabilities in one year.

 What is to be gleaned from these statistics is that as of June 30, 2008, we as a City owed $ 56,932,532, and that as of June 30, 2009, we owed $84,035,518.  This represents an increase of $27,102,986 or 47.6%.   The data however gets worse when you look at the projected employer contribution rate between 2011 and 2013.  Apply those percentages against the current police and fire payroll of $48,000,000 and the losses are staggering.  In 2014 for example we will have to pay CALPERS another $19,488,000 on top of a payroll cost of $48,000,000, for a total of $67,488,000.

Discrepancy Between What CalPERS Reports And What The City Manager Reports On Pensions

Compare those numbers to the City Manager’s email about how much we will save in the same period.  The opportunity to achieve true reform and to attain a sustainable pension plan was now. The City Council was negotiating from a position of “impasse”. This means that if no agreement were reached, the Council would have been able to insist upon more reasonable terms to correct the lavish and excessive benefits conferred upon the public employees in the last ten years and achieve sustainability. The advantage was in the City Council’s favor of getting a “three year average salary” as the basis for calculating the amount of retirement, or lowering the percentage of retirement and/or increasing the age of retirement, or moving from a defined benefit to a defined contribution plan. Instead, the management team and the City Council settled for far less than what was fair to the taxpayers of this City. The SEIU contract was a good step forward.

The management team and the City Council settled for far less than what was fair to the taxpayers of this City.

A spreadsheet is attached to allow you to evaluate the decision.  These are real numbers.  Please note that the pension entitlements and amounts are fixed, but that the General Fund Revenue is not.  The income projection is based solely upon educated “guesses” by City officials.  The other assumption is that CALPERS is correct in projecting that the investment of City of Ventura pension dollars will yield 7.75%.  If our investment does not yield that return on our investment the losses get far worse.  If you want to determine how certain entries were calculated, such as percentage calculations, place your cursor over the number and left click once.  The formula for the calculation will appear at the top of the form.  For those who want the bottom line here you go:

  1. In 2008 income was $94,100,000 and the City sent CALPERS a check for $11,948,759.  This was 12% of our total income on top of the payroll cost of $48,087,281. Total spent on people and pension benefits totaled $60,036,040 or 63% of our actual income.
  2. In 2011 income is budgeted at $80,400,000 and the City will send CALPERS a check for $13,142,936. This is 16% of our total income on top of a payroll of $47,056,848. Total that will be spent on payroll and pension benefits will total $70,199,784, or 87% of our budgeted income.
  3. In 2013 income is budgeted at $82,000,000 and the City will send CALPERS a check for $13,929,524. This is 16.9% of our total income (*) on top of a payroll of $47,056,848. Total that will be spent on payroll and pension benefits will total $70,199,784, or 85.6%% of our budgeted income.

*The budgeted income (projected) for the City in 2012 is $80,800,000 and in 2013 $82,000,000.  If their guess at income is wrong then the percentage of payroll and benefits gets larger.

EDITORS COMMENT:

Bad negotiating increases CalPERS contributions

Bad salary negotiating increases Ventura’s CalPERS contributions

Had all of the agreements mirrored the SEIU contract this might have been a positive step toward solvency.  Instead Councilmen Fulton, Brennan, Morehouse, Monahan and Tracy decided to move the deck chairs on our ship of state in a token effort to avoid a looming financial disaster.  Such votes cause one to reflect and ask how this simple majority can continue to float above economic reality.   Are these five elected officials reading the financial reports? Do they truly believe and hope our local economy will rise out of the ashes like a phoenix in a nation with $15 trillion in Federal debt and a State that is broke?

Do not mistake, the SEIU contract was a positive step, however the police unions and this council majority used lavish benefits and entitlements as their starting point in negotiations rather than economic reality.    

Editors:

B. Alviani           K. Corse          T. Cook

J. Tingstrom     R. McCord      S. Doll

 

CALPERS 2008 2009 2010 2011 2012 2013 3 year net gain from employee contribution to CalPers increase
*Total Employee Payroll       48,087,281      51,240,487      48,940,168    47,056,848      46,685,947     47,287,512
* Percentage of Contribution by Employer 17.08% 17.88% 18.65% 21.31% 22.61% 25.78%
* Dollars of Contribution by Employer         8,211,264        9,162,430        9,128,522    10,026,168      10,555,745     12,190,178
* Percentage of Contribution for Employee Portion paid by City 7.77% 7.74% 7.89% 6.62% 4.57% 3.68%
* Dollars of Contribution for Employee Portion paid by City         3,737,495        3,967,333        3,863,616      3,116,768        2,131,282       1,739,346
* Percentage of Contribution by Employee 1.04% 3.16% 3.97%
*Dollars of Contribution by Employee         488,063        1,477,236       1,877,308
*Total General Fund Revenue       94,100,000      94,100,000      85,100,000    80,400,000      80,800,000     82,000,000
*Source is City of Ventura Finance Staff
Percentage of CalPers to Total General Fund 12.70% 13.95% 15.27% 16.95% 17.53% 19.28%
Total of CalPers Payment       11,948,759      13,129,763      12,992,138    13,630,999      14,164,263     15,806,832
Percentage of City’s payment to CalPers                   100                  100                  100 96.42% 89.57% 88.12%
Dollar Increase, year over year, to CalPers        1,181,003          (137,625)         638,861           533,264       1,642,569
$ of Contribution by Employee         488,063        1,477,236       1,877,308
Employee Portion over City’s increase        (150,798)           943,972          234,739            1,027,913

[1] 3% at age 55 means 3% of a policeman’s or firefighter’s highest annual salary times the number years of employment.  For example, a 20year old works 35 years and in his last year his salary is raised to $80,000.  He will be paid $84,000 a year for the rest of his life.

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2011 Election Results

The 2011 Election Brought Mixed Outcomes for Ventura

It’s an Ill Wind That Blows Nobody Any Good
—English Proverb

THE VENTURA UNIFIED SCHOOL TAX MEASURE

[MEASURE H – SOUR GRAPES IN BUNCHES]

In the November 2, 2010 election, voters in the City of Ventura were asked by the Ventura Unified School District (VUSD) to approve Measure H, a parcel tax, which if approved, would have imposed a cost of $96 per year per single family residence — unless you were over 60 and claimed an exemption.  Those with multiple housing units faced paying far more with no exemption.

The tax proposal failed to receive the 66.67% (2/3rds) majority required for passage.  There were 24,491 in favor (59.3%), and 16,767 opposed (40.6%).  The VUSD Board of Trustees might want to reflect on this result because the outcome was predictable.

Measure H For Against
Votes 24,491 (59.3%) 16,767 (40.6%)

On May 25, 2010, the Dale Scott & Company presented their commissioned survey results for a Parcel Tax Measure to the VUSD Board. The reported poll results were that the Parcel Tax Measure would receive 56.5% support. It was further reported that after a “push/pull” series of 15 more questions with this captive audience, the approval percentage rose to 62%, still 5% short of passage.

The Superintendent’s and proponents cry of foul amounts to sour grapes.

There are many positive steps this board can take notwithstanding this result:

  1. Negotiate to have the VUSD employees pay a portion of their health care cost(s).
  2. Reduce non-classroom personnel as much as possible.
  3. Reflect true health care cost in the annual budget, not costs padded by 11.5%.

The proponents now cry foul about the system .The VUSD superintendent and proponents were quick to point out that the vote was 59.3% for passage, indicating support from a majority of the voters, and from this result feel that the 2/3rds majority vote requirement is unfair and should be changed. That conclusion is ill conceived and would amount to an unreeling budget crisis that would make these current economic times appear minor. The Superintendent’s and proponents cry of foul amounts to sour grapes.

The public reaction to this result should be heard.  A letter to the Ventura County Star Editor on Nov. 5 suggested that the 24,491 who voted yes should donate the $96, thus giving the VUSD $2,351,136.

Editors’ Comment: 

The idea posited by the November 5th letter writer is a super idea and that should be where the VUSD should focus its next campaign.  The question remains—would those same voters contribute to an educational trust fund for defined purposes?  Hard not to be cynical and suggest that it is easy to vote for something when you are spending someone else’s hard earned money.

MORE ELECTION STUFF

[TYRANNY OF THE MAJORITY?]

California voters went rogue on November 2nd, bucking the national and Ventura trend toward electing fiscally responsible candidates.  Sadly, those working under the Sacramento Capitol dome will behave very much as those who preceded them.

In the Legislature, three-fifths of the members will continue to dance to the tune of their government employee union sponsors.  California government workers have become the highest paid in all 50 states, without much effort in electing candidates who will support their requests for ever higher pay and benefits.  This will spill over onto the City of Ventura.  Count on the Sacramento types to pursue all manner of fiscal mischief.

First the “Ill Wind” for Ventura citizens.  The passage of the government employee union sponsored Proposition 25 will have negative consequences for those who pay our state’s bills.  Proposition 25 lowers the threshold to approve a budget to a simple majority, down from the two-thirds vote requirement that has been in place since 1933.  Now it remains to be seen whether or not lawmakers will try to take the next step and try to impose a myriad of new taxes in the state budget with a simple 51% majority vote.  If history is any indicator they will try. Senate President Pro Tem Darrell Steinberg as well as government employee union leaders have stated that reducing the two-thirds vote for the budget is the first of a one-two punch that is designed to soften up taxpayers on the issue of the current requirement or two-thirds vote before taxes can be raised.

Proposition 22 For Against
Votes 5,709,050 (60.7%) 3,709,292 (39.3%)

But for Ventura and other municipalities this election has blown in a “lot of good”.  Proposition 22, the measure to stop Sacramento from taking City funds and tax revenue in the guise of “borrowing” passed  with a yes vote of 5,709,050 (60.7%) and no vote of 3,709,292 (39.3%). This taking by an out of control state bureaucracy has been stopped thanks to the efforts of our City Council, as a member of the California League of Cities, and in particular our own City Councilman, Neal Andrews.

 

Editors:

B. Alviani           K. Corse     T. Cook

J. Tingstrom     R. McCord

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Parcel tax arguments

What Will The Parcel Tax Do? Both Sides Of The Argument.

For and Against the Parcel Tax

Bellwether: “A male sheep which leads the flock, with a bell on its neck. A leader of a thoughtless crowd” —Webster’s New Collegiate Dictionary

THE VENTURA UNIFIED SCHOOL TAX MEASURE

[MEASURE H—A PARCEL TAX]

On November 2, 2010, voters in the City of Ventura will be asked to approve Measure H.  That measure, adopted by the Ventura Unified School Board, proposes to place a special parcel tax upon each parcel of real property in the City of Ventura.  This parcel tax, if approved, will impose a cost of $96 per year per parcel of real property for a period of four (4) years.  Seniors are allowed to claim an exemption.  If approved it is projected that this will raise $4.5 million.

The proponents argue in support of the measure:

  • Funding will be locally controlled, not state controlled
  • Money will be used for academic programs like math, science, reading and writing, music, technology and art. Allows the District to improve art and music programs, and fund computers and other classroom technology.
  • Class sizes will be smaller
  • It is limited to four years.
  • Senior citizens can claim an exemption.

The opponents urge rejection of this parcel tax measure and argue:

  • This parcel tax is being used to replace State of California revenue so that the schools can continue to pay 100% of employee health benefits, or inflated salaries of principals and administrators.
  • Over the last two years, the staff reductions have been more in the lower paid teaching positions and fewer in the higher cost administrative positions. The average teacher is paid $70,000 per year whereas the average administrator is paid $127,000 per year.
  • Class sizes will not be reduced. In the last two years 68 teachers have been let go but only 3.9 staff position have been terminated. We need teachers, not high paid administrators.
  • The school district pays 100% of employee health benefits. These employees resist any effort to require them to contribute to their own health benefits because they believe it is an entitlement. The budget is currently at $12 million, or 8.5% of the entire budget.
  • The School District has budgeted for zero cost increases for health benefits over the next 3 years. Health care costs are, in fact, projected to increase 20 -30%. The reality is that any new tax money will be used to meet these increased costs.
  • This new parcel tax is being sought at a time when Federal and State taxes are also increasing.
  • In 2009-2010 the School District reduced programs, increased class size and eliminated 45 positions. At the same time, only 1 administrative position was lost.
  • The citizens should not have to pay for more administration, more health benefits and less in the classroom.
  • A parcel tax is not deductible and many larger homes and business have more than 1 parcel. Some are on 5-6 parcels alone.
  • Many renters with children in school will never pay a penny of this new tax.

The Economic Facts Behind The Parcel Tax

So, what are the economic facts? Do they need more tax money, or not?  Here is economic and demographic data as published by the Ventura Unified School District.

BUT YOU BE THE JUDGE. Based upon the Ventura Unified School District’s own records, below are their numbers and our comments on what the numbers show.

 

Ventura Unified School District
Teacher Information – Number of Teachers
  2007-08 2008-09 2009-10
FTE
Unrestricted 656.284 659.372 612.369
Categorical 156.128 157.354 184.836
Total FTE 812.412 816.726 *797.205
* 19.521 fewer teachers 2007-10
Salary Cost 57,438,502 57,909,537 56,612,029
Retirement 4,677,014 4,714,642 4,621,021
Health Benefits 7,746,829 7,954,965 8,073,226
Other Statutory Benefits 3,435,244 3,160,245 2,845,827
Total Cost 73,297,589 73,739,389 72,152,103
1FTE= I person
1.5 FTE = 1 full time and 1 part timer at 20 hours a week

Highlighted added: with a reduction of 19.521 teachers (816 minus 797), Health Benefits increased 4%.

Now we’ll examine the administrators  (i.e. management):

Ventura Unified School District
Administrators & Confidential
  2007-08 2008-09 2009-10
FTE
Unrestricted 65.500 68.200 70.150
Categorical 32.350 32.968 30.000
Other Funds 7.900 8.000 8.000
Total FTE 105.750 109.168 108.150
Salary Cost 9,757,307 10,276,704 10,253,454
Retirement 904,152 955,303 952,694
Health Benefits 962,361 1,053,959 1,077,469
Other Statutory Benefits 698,092 679,990 686,978
Total Cost 12,321,912 12,965,957 12,970,594
Note: FTE means Full Time Equivalent.  
1FTE= I person  
1.5 FTE = 1 full time and 1 part timer at 20 hours a week.

 

Now we examine the data concerning Administrative personnel.  The number changed from 109 to 108, a decrease of one person in the same 2008-2010 period.  Health benefits for the administrative employees increased 3%.

 

Ventura Unified School District
Clerical
  2007-08 2008-09 2009-10
FTE
Unrestricted 115.029 118.450 124.138
Categorical 39.468 40.910 28.355
Other Funds 12.863 13.000 10.750
Total FTE 167.360 172.360 163.243
Salary Cost 7,101,778 7,285,435 7,070,254
Retirement 854,782 887,268 874,119
Health Benefits 1,406,694 1,461,656 1,486,686
Other Statutory Benefits 858,682 839,742 786,094
Total Cost 10,221,937 10,474,101 10,217,153
Note: FTE means Full Time Equivalent.  
1FTE= I person  
1.5 FTE = 1 full time and 1 part timer at 20 hours a week.

 

In the period of 2008 to date Clerical personnel was reduced by 9 people, from 172 to 163 people.  Health Benefits increased 7%.

The Ventura Unified School District balanced their budget for 2009-10, and with the reductions listed below balanced their budget for the fiscal year 2010-11.

 

Ventura Unified School District
 
2010-11 Budget Presentation
June 8, 2010
Staffing Changes – reductions
2010/00   FTEs Cost Saving  
Elementary K-3 from 21.44 to 23.44 (15.00)            (963,700)
Secondary Eliminate 9th Gr.Math & Eng. CSR (6.40)            (483,200)
Certificated, Other (3.50)            (309,800)
Classified Staff (12.50)            (269,000)
Administrative Staff (2.80)            (356,100)
(40.20)         (2,381,800)

 

To assist in interpreting this chart the highlights have been added to illustrate the results of the proposal. Yellow indicates the teachers that have or will be dismissed.  Pink indicates the number of administrative positions eliminated.

APPOINTMENT OF A LOCAL CITIZEN OVERSIGHT COMMITTEE

The appointment of the oversight committee would be made by the School Board.  Presumably, members of the board of the school administration would select candidates for the panel.  Once appointed this citizen committee will meet once a year, after the fact, to review how the money was spent.   This new parcel tax money, if approved by the voters, will go into a general fund.  It is not clear what this citizen committee is to do after the money has been allocated and spent?   There are no provisions in this tax proposal that tells us what the powers of this committee would be, or how they would take the School Board to task for an improper expenditure, or how they would recover the money if not spent properly.

EDITORS COMMENT:

The trend of local legislative bodies is to “appoint a citizen oversight committee” to act as a watchdog whenever a tax increase is sought.   On the face of it this provides our citizen-voter with the comfort of being told that their neighbor will be watching how the money is to be spent.  But is that the reality? Will the money to be used for the kids and the class room, as promised by the proponents? Or will the money be used to pay salaries and retirement benefits of highly paid school administrators as the opponents to this measure argue?  You must decide.

Misleading voters by local government in an effort to obtain approval for increased taxes from our citizens is not without historical example.  The promises  to use tax money for one purpose in order to get your vote,  and then switching to use the money for another purpose smacks of chicanery, at best.  In 2004 the Oxnard Union High School District Board of trustees promised Camarillo voters that if they would support Measure H to raise $135,000,000 the new tax  money would be used to build a new high school in Camarillo.  Not only did this not happen the Board reneged on their promise, and this week voted to use the money to build a school in Oxnard.  No wonder folks in Camarillo support their Measure U in the November 2nd election to separate from the Oxnard Union High School District.  Such antics are disgraceful, and does nothing more than further add to the dismal view of our government.

Editors:

B. Alviani           K. Corse     T. Cook

J. Tingstrom     R. McCord

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Fleecing taxpayers costs Ventura money

A Little Here. A Little There. Pretty Soon It Adds Up To Real Money.

For and Against the Parcel Tax

Bellwether: “A male sheep which leads the flock, with a bell on its neck. A leader of a thoughtless crowd” —Webster’s New Collegiate Dictionary

THE  SOUND OF THE BELL

[SHEARING TIME?]

Three years ago nobody in city government would pay attention to the voices of caution who warned the City Council about the money excessive public employee salaries cost and the unfunded pensions of public employees. Now, thanks to the City of Bell perhaps the citizens of this community will pay attention to their role in government, and the need for serious and drastic reform.

Everything went wrong in Bell.  It was greed in all of its glory, and it illustrated what is wrong with the arcane public pension system in this State, and in every city in this state, including Ventura.    Bell City Manager, Robert Rizzo, resigned after it was revealed he was being paid $800,000 to oversee a town with a population of 40,000.  Now the LA Times reports that the records actually show that he was paid $1,500,000 a year.  Included in that was 28 weeks of vacation and sick time at a cost of $386,000.  Well he is gone but he is not out because he will collect $600,000 yearly from his pension benefits with CALPERS.

fleecing taxpayers costs Ventura money

Ventura taxpayers get fleeced in Bell disaster. We will pay money to Randy Adams for life.

This example however is even closer to home.  Two people in the City of Bell used to work for the City of Ventura.  Angela Spaccia, Assistant City Manger for Bell was paid  $376,000 a year before she quit, and moved over to work for the City of Maywood.   She used to work for the City of Ventura. Then there is Officer Randy Adams who worked in Ventura for 23 years as a police officer.  He then gravitated through various jobs until he became the Chief of Police for the City of Bell.  He too resigned after it was revealed that he was earning $457,000 a year.  He can retire, as will Ms. Spaccia eventually, but whose money pays the pension?

Not the City of Bell.  They escape nearly all the costs of Chief Adams $411,300-a-year pension. Under CALPERS rules, the city is responsible for just 3% of that because he only worked there for one year. Taxpayers in Glendale, Simi Valley and Ventura would have to pick up the tab.

This happened because Bell hired Adams at more than double the money he was making as Chief in the City Glendale. That salary spike doubled his eligible pension amount under CALPERS, the state’s public employee retirement plan.  Add the state’s permissive pension laws and a host of variables that can dramatically affect retirement pay and we find a system that leaves you in a bleary daze

Other cities will be on the hook for Adams’ pensions costs even though their salaries were relatively modest. until he landed in Bell. When he resigned Chief Adams was making $457,000.  He will now get  approximately 90% of that sum.  Glendale will have to pay around 16% of Simi Valley 18%, and Ventura 63%. Ventura alone will have to pay this guy $259,119 per year for life. Remember, none of this has ever been funded.

CITY OF VENTURA’S RESPONSE

Ventura’s mayor, Bill Fulton, has written several articles on the subject.  You can go view the articles here.  He, like everybody else, condemns the excesses by employees and officials in the City of Bell.  His articles are well written and deserve a read, but how transparent is our city government?  Mayor Fulton answered this question in one article:

“…democracy only works, even in small cities, if people pay attention, and oftentimes people aren’t paying attention. But one of the most disturbing aspects of the Bell situation … is how hard it is to figure out what’s happening even if you are paying attention. In spite of the state’s vaunted Brown Act open-meetings law, California governments are still not particularly transparent”. 

HOW MUCH MONEY DOES THE COUNCIL MAKE?

The City Charter limits council members to $600 per month and the mayor to $700 per month, plus members are paid for participating on certain boards and commissions.  Here is the yearly total:

Councilmember Salary Boards Travel
Fulton, Mayor $ 8,800 $2,000 $1,200
Monahan $7,200 $3,800 $1,200
Tracy $7,200 $0 $1,200
Morehouse $7,200 $1,440 $1,200
Weir  $7,200 $0  $1,200
Brennan $7,200 $0 $1,200
Andrews $7,200 $0 $1,200

 

CITY EMPLOYEE COMPENSATION

Employee Salary Medical Pension Contribution Car
Ken Corney, Police Chief $195,153
Quinn Fenwick, Asst. Police Chief $160,012
Kevin Rennie, Fire Chief $187,000
Don McPherson, Asst. Fire Chief $170,014
Ron Calkins, Public Works Director $175,547
Jay Panzica, Chief Financial Officer $171,265
Rick Cole, City Manager $174,158
Mary Walsh, Asst. City Manager $171,265
Ariel Colonne, City Attorney $194,909
Jeff Lambert, Community Dev. Dir. $171,265
Elena Brokaw, Director, Parks & Rec. $167,088
Jenny Romey, Human Resources Dir. $159,037
Total $2,096,713

*In response to a VREG request for the full cost of each of these employees the City Manager, on August 10, 2010, provided the following response:

“Within the next few days, we (will) have calculations on the cost  of employees over and above regular salary (we’ve just posted those earning over $100,000 including gross pay and overtime) to be followed by the Box 5 W2 calculations (which also includes city paid deferred comp and the value of life insurance) to be followed by a total all-in of that plus city paid benefits and CalPERS contributions”—Rick Cole, City Manager

Editor’s note:

For detailed information on past or present Ventura city employees’ salaries, visit transparentCalifornia.com.

As for Ventura’s exposure to the Randy Adams pension claims, purportedly the City has sent a letter of protest and/or legal challenge to CalPERS to try and stop payment.  Good luck with that one!  Even Chief Adams will lawyer-up and argue we are a nation of laws and not men.

Editors’ Comments:

How many more Randy Adams types do we have out there? How much more  do we owe, over the amount funded through CalPERS, to those who are retired or about to retire in the future?  It is time for government to become proactive instead of reactive in the management of our tax money and find out before we end up in the shearing shed. Stop listening to the bellwether !

Editors:

B. Alviani           S. Doll

J. Tingstrom     K. Corse

B. McCord          T. Cook

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Failed Investment, Failed Policies Make Ventura Like Greece

“Rebellion to tyrants is obedience to God”
—Motto on THOMAS JEFFERSON’S seal.

CALIFORNIA: AMERICAN GREECE

Tim Cavanaugh of an on-line news company called REASON has written a good analysis of the dilemma facing California. He writes:

“What do Europe’s most bankrupt state and America’s most bankrupt united state have in common, aside from being bankrupt?

In what is undoubtedly a coincidence , noticed only by free-market fundamentalists, it turns out that Greece, that sun-drenched paradise on the Aegean, and California, that sun-warmed El Dorado on the Pacific, are the worst places to do business in their respective economic zones.”

VENTURA’S VISIONARY?

[Investment In People Too High]

The city Manager recently announced that we are in a “war for jobs”.   He is right, but know this. We will be competing with every city in the nation for those same jobs.  The winner will be the public entity that realizes that the jobs we lost in the 2008 depression are not coming back. We have to create new opportunity and new jobs.

The city needs private enterprise now more than ever, so please City Council when a new project developer or businessman comes through the door give him a hug, and not a bill for all of the costs and fees that you have piled onto such projects.  A happy face and lower fees, as an incentive to come to Ventura, will work wonders.

The Ventura City Council says they are going to “Live Within Our Means” and stay within their budget, but they wince when it comes to the thought of layoffs. The closing of a fire station proposed by the City Manager, as expected, has heightened the emotions of several adjacent neighborhoods and the Fire Department folk.  These citizens and the firemen need to wake up and realize that this is not about saving a fire station, but the financial well being of the entire City.  We must keep in mind that  City government has been entrusted to provide  “basic governmental services” to its citizens within its means, but does not have an obligation to keeping individuals employed so that they can retire with life with lavish pensions and benefits.

Any business owner knows that to reduce services diminishes their value. They also know that the single highest AND controllable expense is labor. Maybe the theme of “Living Within Our Means” needs to be better defined. Reducing services and programs should only come after a reduction of staff levels reached the bear minimum.

Five years ago, the claim was “we have cut expenses to the bone and there is no where else to cut.” Today, the City has reduced the workforce by 16% AFTER they made that claim. Sounds like the story of the “boy who cried wolf”. Enough on the budget for now. All we know is the reduction of services has long been a ploy to get the citizens to sympathize with public employees.

WAS IT $10,000,000 or $20,000,000 LOST?

[Monetary Investment Too Risky]

In March and April 2009, VREG discussed the loss of $10,000,000 in Washington Mutual and Lehman Bros. investments.

The City  father’s took refuge [seemed proud?] that they only lost $10 million in investments in 2008, they defend their loss by comparing the loss to the average citizen’s 401K losses.   Hardly a realistic comparison given that the investment policy for a municipality is and should be much be more conservative and restrictive.  Some at the City make it sound as if it is heresy to suggest that they should not have lost anything.

The City Attorney on the other hand is crying “fraud” on the part of Lehman Brother and WaMu — a distraction at best.  The decision to invest in these financial institutions was made by a committee of four. None of the four members of the Investment Committee has investment licenses, nor the experience and qualifications to oversee a $200 million portfolio in this current financial market. Months before the Lehman and WaMu debacle, the City had a prior warning of problems due to a potential $10 million loss they had invested with Bear Stearns.  It turned out that the Bear Sterns was acquired by JP Morgan and thus avoided bankruptcy, however at this writing we do not know how much JP Morgan is willing to pay the City of Ventura on that investment.

How is the recovery of the loss of $20,000,000 by the City of Ventura with their investment in Bear Stearns, Washington Mutual and Lehman Brothers going? We do not know. Was anyone fired for losing $20 million?  Nope. And we predict no one will not be fired.  What the Council should do is appoint people who are qualified AND do not have a potential conflict of interest in making investment decisions to insure that income from the investments will be available to feed the general budget.

THIS FROM A READER OF THE LAST EDITION

[CalPERS Investment Underperforming]

It is interesting that when I attended the PERS conference in Los Angeles at the Convention Center in February, the strongest criticism of PERS [CALPERS] came from the representative of the Governor’s office, who had been a former member of the CalPERS Board. His critique was focused on two  things:

  1. That PERS consistently and incorrectly utilized a projected return of investment (7.75%) that was grossly overly optimistic of their likely actual long-term results
  2. That PERS was virtually impenetrable and as dark as a lead lined coffin when someone attempted to secure information from it.

I reported this critique to both the Compensation Task Force and to Council Members…I have also reported repeatedly on the losses that PERS has incurred in their investment portfolio, that they are the subject of criminal investigations over potential fraud and kick-backs form their relationships with placement agents (former Board members using their old connections to get rich), and that at least several current Board members have incurred serious fines because of their consistent failure to report publicly on their investment holdings and sources of income as required by law… Needless to say, our union representatives constantly run with the official PERS line that PERS is sound and in good health.”

—Neal Andrew

EDITORS’ COMMENT: 

We have previously reported on the failed investment policies of PERS.  This organization invests our pension dollars using failed economic models and fallacious investment return calculations. It is easier said than done, but the sooner we can distance our City from this organization the sooner we can be on the path to economic recovery.

Editors:

B. Alviani           S. Doll                 J. Tingstrom

K. Corse              B. McCord         T. Cook

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City Council Lacks Financial Literacy

City Council Lacks Expertise On Pension And Budget Matters

Insanity: doing the same thing over and over again and expecting different results.
—Albert Einstein,

THE FIREFIGHERS PENSION INCREASE – A CONTRACT?

[ NOT!]

In previous editions we informed you that in 2008 the City Council, on a vote of 4 to 3, increased the Firefighters salary and retirement benefits.  They voted to increase those benefits from 2% to 3% even though they knew (were told) they did not have the money to fund it.  The vote resulted in an approval of a Memorandum of Understanding (MOU) with the union.

bad city council contract

City Council approves an 11% increase in firefighters’ pension.

The issue had to be revisited because of the failure of the City Council to obtain an actuarial report from CALPERS on what it would cost to increase these benefits.   To “try” to fix the problem the Council, at their regular meeting on April 26, 2010, was presented with a report from the CALPERS actuary, Bill Karch.  He informed the council that the “present value” of the cost of the increased benefits (in addition to what we are already obligated to pay) would be $5,047,760,  that the city would have to pay $548,271 this year, and a sum yearly thereafter to fund the $5.4 million increase.  He didn’t say how much we would have to pay beyond 2010.

An actuary is a specialized, mathematical expert trained to compute values for present and future events. Actuarial “present value” calculations convert future occurrences, such as retirement payments, to a present dollar value.   The “present value” of benefits represents the total dollars needed today at an estimated investment rate of return to fund future benefits for members of the pension plan.  The lower the rate of return (say 4.5%) the more you have to pay up front now to meet the future payment demands.  The higher the rate of return (say 7.75%) the less you have to pay now.

The CALPERS actuary used a rate of return of 7.75%.  Interesting choice given that CALPERS lost $55.2 billion (25% of its value) in 2008-09, and just billed the State of California f $600,000,000 this year to pay for unfunded pension liabilities, but we digress.  None of the Council members asked about the investment rate of return that was used to make his calculations and/or whether the 7.75% rate of return of interest was a reliable dollar estimate in today’s market, and/or whether we should use a lower rate of return, to predict how much our present pension obligations would have to be increased in order to fund and pay future pension obligations.

Subsequent to the Council meeting Mr. Karch was asked in an email from VREG if he could calculate what the present value of the increased obligation if 4.50% was used, and how much more Ventura would have to pay this year. That number was selected because actuaries today conservatively use 3% to 5% as the investment rate of return in making such calculations. Mr. Karch declined.  His response was that we could get that the data if VREG made a Freedom of Information Act request through formal channels; and, by-the-by send a large check to pay for the voluminous computerized report.  Well Bubba I guess we know who that fella works for!

So in a state of blissful ignorance Council members Fulton, Brennan, Monahan and Tracy voted yes.  Council members Andrews, Morehouse and Weir voted no.  The deciding vote was that of Deputy Mayor Tracy, who in casting his yes vote stated:

“…what is clear tonight is that we are not deciding on whether or not we give our firefighters an enhanced retirement program.  That decision was made two years ago.  We have received (a) very competent legal opinion that frankly we have no choice but to honor that contract…”

Bad city council contract

City Council negotiates questionable contract with Ventura firefighters.

What the Deputy Mayor was referring to was a letter from a law firm named Liebert Cassidy Whitmore of San Francisco, attached to the Administrative report for Agenda item #8, which concluded – “Once approved by the City Council, the memoranda of understanding (MOU) between the City and the Association (firefighters) became a binding and legally enforceable agreement…”.

Just prior to the vote the City Manger, Rick Cole, advised the Council that the reason for the public hearing on the actuarial valuation was to let the public know about the cost of the increase, referring everyone to Government Code section 7507.  Connect this reference with the Deputy Mayor Tracy’s statement and we arrive at the crux of the problem — was there a valid contract?

Read Government Code § 7507 and you decide.  That code provides:

“The legislature and local legislative bodies shall secure the services of an enrolled actuary to provide a statement of the actuarial impact upon future annual costs before authorizing increases in public retirement plan benefits…”

The future annual costs as determined by the actuary shall be made public at a public meeting at least two weeks prior to the adoption of any increases in public retirement plan benefits”.

The letter written by the San Francisco attorneys, LIEBERT, CASSIDY WHITMORE does not address this error. For reasons that are not apparent, these high priced legal types did not even discuss this issue.

A mutual mistake of law and/or fact is always a good defense to breach of contract action.  If both parties to a contract operate under a mutual mistake of fact that there has been compliance with the law, and in fact there has been no compliance with the law, there is no contract

Questions for our readers:

  • Why a letter, bearing the legend “CONFIDENTIAL—ATTORNEY CLIENT PRIVILEGED”, which does not discuss a critical legal defense, would be attached to a public document?
  • Why not a single firefighter asked to speak in support of the measure when the room was packed with the fire folk, who were straining at the bit to get more benefits?

Curious that , but we leave “that” to your speculation.

Editors Comments:  

An actuary report was NOT presented prior to the decision to increase benefits in August and October of 2009, thus was not enacted as required by the California Government Code. The attempt to finesse this critical error, by pretending it could be presented after the fact, on April 26, 2010,  ignores the underlying issue – THE RIGHT OF THE CITIZENS OF THIS CITY TO KNOW IN ADVANCE WHAT AN INCREASED PENSION BENEFIT WILL COST BEFORE THE CITY COUNCIL MAKES A DECISION.   The firefighters’ will of course dismiss this as a mere formality.   This contract should be rescinded and an accurate and reliable actuarial report provided to the citizens of this community.

 

FROM READERS OF THE MARCH EDITION OF RES PUBLICA

[THE PIPER WOULD PLAY A FAR DIFFERENT TUNE IF THREATENED WITH THE LOSS OF HIS PIPE]

This regarding the Pension Reform Committee appointed by the Ventura City Council:

“Very interesting news letter this time as always.  Only one public member appointed to the “ad hoc” committee. All the rest have a vested interested in the system. What would happen if the no guts council just plain and simple told the unions that from now on the fire and police will have to pay at least 1/2 of their contribution. Would the fire and police walk off?  If so I am sure they can replace the lot.  The problem as I see it is that all the cities have to ban together so that there will be a closed door to bouncing around of personnel.”

—K. Weber

THE COUNCIL ACCEPTS VENTURA’S NEW BUDGET

[A SORRY EXCUSE, AT BEST]

            Another letter concerning the current budget format mandated by the City Manger for use in 2009-2001 (called a Budget Book).  We mentioned in our last issue that the current “Budget Book” looked useless and appealed to you for help.

“Regarding the City’s budgeting process and the budget document itself, I spent some time looking at it after reading your latest publication and you hit the nail right on the head.  It is most assuredly not a decipherable budget document.  It lacks clarity and the detail required for the average lay person to begin to understand it, much less a person with a financial background.  I’m not even sure that it meets the minimum legal requirements, as promulgated by the State Controller’s Office.

I am a C.P.A., have a Masters degree in Public Administration, and have worked in government finance and budgeting for the past 29 years and, without a doubt, this is the most sorry excuse for a budget document that I have seen in my life.

In Santa Barbara County, we have developed a true program/performance-based budget that actually links dollar amounts with stated goals and performance measures.  Not only can you clearly and easily see the amount of money, staffing, and other resources allocated to each program area within each department of the County, but you can also see the performance and outcome measures associated with each individual program area.  In other words, as a taxpayer, you can actually see what you’re getting for your dollars.

The firefighter pension increase is just another example of the arrogance and disconnect with reality coming out of City Hall these days.  I certainly hope we can make some changes in the next election.  We definitely cannot continue down this path or bankruptcy becomes an inevitability”

—M. Gibson, CPA and 2009 candidate for Ventura City Council

 

EDITORS’ CORRECTION

Last month we reported that the Firefighters pension increase was 50% (2% to 3%). The City Manager corrected us and pointed out that it was ONLY 11%. .  After his response we received the CALPERS actuary report and confirmed that our report was in error. Under the current pension plan it is a 20% increase if the Firefighter retires at age 50, and an 11% increase if the Firefighter retires at 55.  That aside, this correction does not excuse the ridiculous statement by former Councilmember Ed Summers that it was only a 1% increase. It is still hard to believe he wants to be the County Treasurer.

 

EDITORIAL

The City Council is called upon to make many difficult and complex decisions concerning the financial welfare of this community, but one of the greatest decisions they will have to make concern the pension contracts with the public employee unions now and in the future.   Except for members of the public employee unions there is not a single informed individual in this society that would disagree with the conclusion that our pension system is bankrupt and unsustainable. The collective decisions of our City Council are costing the citizen’s of Ventura for decades in the future. Not to ask the hard questions, when asked to approve a new liability of $5.4 million dollars, such as the interest rate used for the assumptions of a pension increase, or to discuss if the right questions were asked and answered in a legal opinion statement, borders on malfeasance. It is not enough to say, “the report was too lengthy” or “we didn’t have enough time”. If decisions need to be delayed and other opinions sought, the City Council needs to control that process and remember the admonition of Jean-Jacques Rousseau to ”keep your experts on tap and not on top”.

 

Editors:

B. Alviani       S. Doll           J. Tingstrom

K. Corse         B. McCord    T. Cook

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Ventura Budget Lacks Transparency

As Ventura’s Budget Losses Grow, Budget Transparency Is Questioned

“The budget should be balanced, the Treasury should be refilled, public debt should be reduced, the arrogance of officialdom should be tempered and controlled, and the assistance to foreign lands should be curtailed lest Rome become bankrupt. People must again learn to work, instead of living on public assistance.” —CICERO – 55 BC

VENTURA’S CUPBOARD –IS BARE

[THE $15 MILLION PROJECTED BUDGET LOSS]

On March 15, 2010 Mayor Fulton invited community leaders to attend a BUDGET WORKSHOP to help decide where to make cuts in the 2010-11 budget to compensate for an $11,000,000 PROJECTED LOSS.   This statement was predicated on an estimate by the City Council that the City would face fixed expenses of $96 million with income of $85 million.  Well, it turns out that the income figures were wrong.  Revenues are below normal and the City will receive less than $81,000,000 for the fiscal year 2010-11 according to estimates provided by the Finance and Technology Department and the Deputy Mayor.

bad city council contract

City Council approves an 11% increase in firefighters’ pension.

Please recall good reader the words of Councilman Summers in the fall of 2008, when he, together with councilman Monahan, Brennan and Fulton voted to increase the fire department pensions from 2% to 3% at age 55, and stated “We are only increasing it by 1%”, and “we will only be paying 50% of our budget to the police and fire departments”.    An increase from 2% to 3% is really a 50% increase in retirement pay.

Here is a comparison of the 2008-09 adopted budget with the 2009-10 adopted budget as published.  Assuming we receive $81 million in revenue, which is improbable, 58.7% of the general fund revenue is spent on public safety, without factoring in the cost of the other employees.

2008-09 2009-10
Revenue $94,084,228 $85,489,560
Police Dept. Cost $31,478,979 $ 29,528,499
Fire Dept. Cost $19,259,971 $18,036,231

Editors note: 

Former Councilmember Summers lost his re-election bid to the City Council, and  now wants to be your County Treasurer?

MORE ON THE FIREFIGHERS PENSION INCREASE

[OOPS]

As mentioned above the City Council, on a vote of 4 to 3,  increased the fire fighters pension benefits from 2% to 3% even though they knew they did not have the money to fund it.  The vote resulted in an approval of a Memorandum of Understanding (MOU) with the union.  They received their increase, but nobody knew what it would cost.

city council bad conract

Firefighters receive a whopping increase in pension benefits from the City Council.

Then budget problems arose, negotiations began and the Firefighters agreed to postpone their increase for 15 months.  Of course, two of the Council members running for reelection (Monahan and Summers) acted as though pension increase had not been created, or did not exist, because it was not yet implemented.  Not implementing something is not the same as deferring it.   That deferral is up on July 1, 2010, at which time the increase will go into effect.

Now CALPERS steps into the picture.  They take the position that this MOU is not binding upon them, because there was no actuarial report on the cost of increasing the pension benefits when it was adopted by the City Council.  Somehow four Councilmen (Monahan, Fulton, Summers and Brennan) felt they could increase the benefits, which they knew were not funded, and push the cost of those benefits onto CALPERS without contributing any more money to the pension fund. Well, Duhhh!

This issue will be on the City Council Agenda on April 26, 2010, at which time it is expected that an actuarial cost report will be presented in order to meet the CALPERS requirements.  It is predictable that the City will have to increase their contributions significantly to meet the new cost of this increase, or figure how  to back out of the MOU with the firefighters.

EDITORS COMMENTS

Another fine mess you’ve gotten us into Ollie!  Are there ever any consequences when these costly errors happen?  Does anyone ever lose their job, or do the taxpayers just keep paying  the legal expenses to fix these problems ?

THE VENTURA BUDGET PROCESS

[CLEAR AS MUD]

            If you are a person interested in analyzing the budget for the City of Ventura you are in for a real experience in frustration.  Up until the fiscal year 2008-09 the budget prepared by Finance & Technology was in a classic format – a real income and expense statement – with supporting schedules and line item detail so that you could  make a reasonable determination of where we stood financially –  where our income was derived and where we spent the money.

Not anymore. The format for the fiscal years 2009-10 and 2010-11 is now different.   Starting with the Budgeting for Outcomes program, instigated by the City Manger, the Finance & Technology (F&T) department published a Budget Book which you can view on-line.  The format for that document, euphemistically called a “budget”, was a result of a directive to F&T to prepare an “All Funds Summary”.  Difficult now to determine what is in fact happening financially.  It is perplexing and confusing when the city mixes the general fund income and expenses with the enterprise funds and expenses.                 If you want to know the general fund income and expenses in detail for the current fiscal year, such as the specific costs of  public safety employees you cannot obtain that information. Perhaps our readers can help us interpret this “budget book”.

EDITORS’ COMMENTS:    

What happened to transparency?

Editors:

B. Alviani       S. Doll           J. Tingstrom

K. Corse         B. McCord    T. Cook

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Recession challenges Ventura budget

Budget and Pension Crises Throughout California Inflict Harm

“If there must be trouble, let it be in my day, that my child may have peace”THOMAS JEFFERSON

CALIFORNIA – A FAILED STATE

[THE “TERRITORY OF CALIFORNIA”]

You can watch the stock market successes, listen to the pundits braying out messages like “we have turned the corner”, but the  reality is that the State of California and the municipalities nationwide, including  the City Ventura, are in trouble.

Recession creates budget crises

The recession caused budget and pension crises throughout California.

The fortunes of the State of California are grim.  The S&P and Fitch Investors lowered the debt rating on General Obligation bonds to BBB. This rating  means that California bonds now are “speculative with major risk exposure”.   It is projected that the rating will be lowered to B (junk bond), which means “adverse business, financial, or economic conditions will likely impair capacity or willingness to pay interest and repay principal”.

During a VREG  forum at the Ventura Beach Marriott on February 24, 2010, the guest speaker, Chriss Street, of Orange County whistle blower fame, currently  serving as the Orange County Treasurer and Tax Collector,  put the State of California  with the debt problems of Greece, which imploded because of their governments “credit default swap” ventures.  They and the State of California are broke, but our state does not have a Eurozone to bail us out.  It is so bad that the Governor’s office is looking at bankruptcy.   By law, a state cannot file bankruptcy, but state government has been advised that bankruptcy is an option if they convert to a “territory”.

Mr. Street also was of the opinion that between July 21 and July 24 of 2010 the State of California will be in the position of being unable to obtain any financing to continue operations. Is he right?  We do not know but we have marked it on our calendars.

VENTURA’S CUPBOARD –ALMOST BARE?

[IN THEN JUST OUT OF THE  PICKLE BARREL]

The economic failure of the State will have a direct effect on municipalities including the City of Ventura.  Recall, that last year our state government, pursuant to Proposition 1A decided to “borrow” [take] our real property tax money. They can do that for two years with a promise to pay it back.  This served as a major argument by Mayor Weir, Councilman Fulton and the “TAX ‘EM” bunch to convince Venturans to raise the sales tax.  Didn’t work the first time in 2006 and it cost the citizens a bunch of money again in 2009.

budget crises created by recession

California withholds property tax revenue from Ventura to close budget gap.

Then, after the November election we learned that the City did get the real property tax money through a concept of “securitization”. Here is a hopefully simple explanation.  As part of the 2009-2010 budget, the California Legislature suspended the local agency protections of Proposition 1A and passed a provision to withhold more than $2 billion of property tax revenue from cities, counties and special districts.  Ventura’s share of that was $2,718,041.  So, in a plan equivalent to a “forced loan”, the State exercised the right to hold those funds to close the budget gap, with the intent to repay the money in three years. As an alternative, the legislature also permitted the establishment of a third-party securitization program for cities to use to avoid the loss of revenue.  A group called the California Communities Development Authority (aka California Communities) was appointed as the exclusive authority to offer a program to purchase the receivables due to local government agencies from the State.  They did that, $2 billion in bonds were sold in the market place and the property tax money due to each municipality was paid with all interest and costs paid by the State. View the amount taken from each city/county here.

The City of Ventura again faces the specter of losing this same amount of money in the 2010-11 budget. Given the deplorable condition of the State finances one wonders who would again loan the State another $2 billion.  On a positive note the City of Ventura has joined with the California League of Cities in signing a referendum petition to prevent the State of California from taking the real property tax money in the future.  Our city is sitting on the edge of the proverbial pickle barrel.

THE $11 MILLION PROJECTED BUDGET LOSS

employees largest budget item in Ventura

City employees are the largest budget expense in Ventura.

On March 15, 2010 Mayor Fulton invited community leaders to attend a BUDGET WORKSHOP to help decide where to make cuts in the 2010-11 budget to compensate for an $11,000,000 PROJECTED LOSS.    Liberally attended by policemen and fireman, due to invitations extended, by our Chiefs of Police and Fire, to “Friends of the Fire Department” and “Friends of the Police Department”, the participants came up with a variety of proposals.  The giddy report from Mayor Fulton was that it was a resounding success, with proposed solutions like – “muddle through”, “strategic layoffs”, “use of volunteers”, “delay projects” and “shift funds”.

One participant reported that during this conference the major budget item that needed to be addressed was all but ignored, which is the cost of people.  At least 80% of our expected income of $85 million will be spent for people and pension costs. Police and fire consume 56% of the total budget cost.

EDITORS’ COMMENTS: 

The original budget was based on a prediction that the City would have income of $97 million to cover their expenses.  It was a bad bit of guess work.   Realistically, the City could never have expected  more than $85 million in the first place, however now they want the citizens of the community to believe they have an $11 million shortfall.  Not true.  What they have is long-term expenses of $11 million more than their income.

THE PENSION DEBACLE

A few months before the November 3rd  election the City Council proudly announced that the City Council, in an effort to address serious budget woes, had appointed  a special committee to investigate potential reform of the salary and benefits paid to the City public employees, and particularly police and fire.   They did that and here are the folks appointed to come up with a recommendation:

Vern Alstot Fire Management
Neal Andrews Councilmember
Bart Bleuel Public Member
Eric Burton Code Enforcement officer
Benny Davis Fire Department
Ramon De La Rosa Maintenance Department
Quinn Fenwick Police Management
Randy Hinton Public Member
Sylvia Lopez City employee union representative
Frank Maxim City employee and supervisor
Ed McCombs Public Member (former City Manger)
Jim Monahan Councilmember
Richard Newsham Union representative
John Snowling Police officer
Mike Tracy Councilmember

This group did not come up with a recommendation. On Monday, March 22, 2009, they disbanded and submitted a report to the Ventura City Council. The report consists of a compilation of different views including position statements of the nine (9) union and employee representatives.

To their credit the City Council received the “report” then unanimously voted to adopt a  “policy” whereby in all future salary and benefit negotiations with the unions and employees the City Council would seek a two tier retirement  benefits system, plus ask the policemen, firemen and other employees to pay one-half of the pension contribution requirement.   Nothing was accomplished other than to state publicly that in future contract negotiations the City would seek to establish a two tier system.

THE  PUBLIC EMPOLYEE PENSION DEBACLE

[THREE CANARIES IN THE MINE]

 

A reporter named Ed Mendel wrote an article on January 25, 2010 for the San Diego Tribune. Here are few of his comments:

“A wave of higher pension costs is hitting California’s three major coastal cities, prompting proposals to shore up future budgets with ballot measures in Los Angeles and San Francisco and eroding progress in San Diego, once dubbed “Enron by the sea.”

The surge from an historic stock market crash, which punched big holes in pension investment funds, is creating concern that pension benefits approved in better economic times are not “sustainable” and need to be cut for new hires.

City council members in Los Angeles and San Diego have mentioned the possibility of “bankruptcy” in remarks to reporters this month, a path taken by the city of Vallejo two years ago when labor costs consumed most of its budget.

Labor unions, agreeing to benefit cuts in some cases, are trying to figure out whether current pension levels are unaffordable and should be reduced, or if city officials are overstating the problem to use the economic downturn as leverage for givebacks.”

bad budget management in Vallejo

Vallejo, CA delcares bankruptcy following bad budget management

The City of Vallejo filed bankruptcy because 70-80% of their general budget was devoted to paying police, fire and other public employee salaries and benefits.  When the old port city on the far side of San Francisco Bay filed a rare municipal bankruptcy in May 2008, there was speculation about whether bankruptcy would become a way for deficit-ridden cities to shed crushing retirement debts.  In a precedent setting ruling in the Vallejo case, U.S. Bankruptcy Judge Michael McManus in Sacramento decided that city labor contracts can be overturned in bankruptcy, and then dissolved the contract.

In the shadow of this decision the Vallejo firefighter union agreed to cut pensions for new hires to 2 percent of final pay for each year served at age 50, down from the current 3 percent at 50, a previous trend advanced by state legislation a decade ago.  They also agreed to a new two-year contract with no pay raise and increased their pension contribution to 13.4 percent of their pay, up from 9 percent..

EDITORS’ COMMENTS: 

Given the serious budget issues we hope the Ventura police, fire and public employee unions are paying attention, and do not continue to believe that they have found the golden goose. 

Editors:

B. Alviani        S. Doll           J. Tingstrom

K. Corse          B. McCord     T. Cook

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