THE SPECTRE OF BANKRUPTCY
[T.E.A. PARTY ANYONE?]
In the August 2008 edition of this newsletter, we suggested that Ventura “may” be following the missteps of the City of Vallejo right into bankruptcy court. After you read this you will realize that our unfunded pension debt and contractual obligations are staggering. We as a community owe $150,000,000 alone on the City’s pension debt, which is $1,500 per person in a community of 100,000. Incredulous? We’ll explain.
Remember, the pension statistics are based on numbers as they existed on June 30, 2007, These CAFR reports are published 18 months after the fact. At page 15 it reflects that our long term debt, labeled “total non current liabilities” totals $135 million dollars ($134,984,820).
You might recall that the City financial types reported to the Blue Ribbon Tax Committee that we have $10,000,000 in our general operating fund — that’s our reserve, which has not changed since 1992. All investment income from that reserve was spent. They also reported that we have $145,000,000 in other investments (after marking down the $10,000,000 lost to WAMU and Lehman Bros. investments), but we can’t touch this money because the funds are committed due to previous contractual commitments of the City Council. So we owe $135,000,000 and have $155,000,000 in investments, ignoring the contractual obligations for the moment. On the face of it we have $20 million more in assets than debts, so we are looking good right?
Let us take a closer look at the City of Ventura’s Pension Plan. Turn to page 70 of the CAFR (page 102 of the PDF file) of the City’s 6-30-08 Comprehensive Annual Financial Report, which lists the “off the income statement” underfunded obligations — money we owe as of June 30, 2007, for which we have no money. The total Actuarial Asset value for the City pension plan investments is stated as being $313,847,955, the actuarial accrued liability is $362,521,549. The unfunded accrued liability for regular employees is $5,176,721 and for Safety Employees (Police and Fire) is $43,496,873, or a total of $48,673,594.
This liability ($48.7 million) accrues interest at the rate of 7.75% per year on the amount that is owed as an “unfunded liability”. Remember again this was 18 months ago. Then move to the end of 2008 and add to this the fact that CALPERS devalued our actuarial asset value by 35%. The result is that the actuarial asset value went down by $109,846,784 ( $110,000,000), thereby increasing our liability by the same amount thereby reducing the value of our pension assets to $204,001,171. —we lost the money in the market. The following is the real financial picture right now:
|True Financial Picture|
|(1) June 20, 2007 unfunded debt||$48,673,594|
|(2) Interest 6-30-07 to 12-31-07 @7.5%||$ 1,825,259|
|(3) Interest 1-1-08 to 12-31-08 @7.5%||$ 3,650,519|
|(4) Loss of pension value 35%||$110,000,000|
|Total Unfunded Liability of City||$164,149,372*|
Now go back and add in what IS shown on the Comprehensive Annual Financial Report(CAFR) for 2007 (page 15 of the document, page 33 of the PDF). This is what is owed by the Citizens of this community — right now, and getting worse each year!
|(1) Long Term “noncurrent” Debt||$135,000,000|
|(2) Unfunded pension benefits||$ 164,149, 372|
How would you view our current financial posture? We owe $294,673,595 and we have $10,000,000 in the bank. Any suggestions for our City Manger or City Council?
Consider that the City of Vallejo decided to file bankruptcy when their obligations amounted to $730 per person. To further add to your perspective, Orange County, California filed the largest municipal bankruptcy in the history of the U.S. at a cost of $600 per resident. Ventura’s obligation is approximately $1,500 per person.
If you were in charge, what would you do?
THE CEMETERY PARK PROPOSAL
[FINDING THE MONEY IS A DEAD ISSUE]
The City has spent $40,000 for the architectural renditions of a plan to create a memorial place at Cemetery Park.. This $4,000,000 Plan includes a memorial to commemorate those buried at the cemetery, memorial gardens, refurbished landscaping, veterans’ memorial walk and flagpole, and repairs to the historic WPA rock wall, 3,000 bronze grave site markers, and the retrieval and display of existing headstones. The City acknowledges there is no money, but assures the proponents that over time, with a combination of city funds and outside grants, perhaps they can find the $4,000,000 million dollars.
Then there are the opponents. One group, the restoration folks, want the park restored as a cemetery, and claim the City plan does not go far enough. They want it like it was headstones and all. Another group contends that the decision to make this into a park was made forty years ago when the City was forced to do something because those responsible did not maintain the cemetery. The park has been serving the community as a passive park and a memorial since and is used daily by local residents. This is a 7-acre park serving the mid-town community.
As an interesting aside the City code enforcement folks have stepped up a campaign to issue expensive citations to owners of dogs that are not on a leash in Cemetery Park.
Perhaps the question we all should be asking instead is why our City Council is so willing to spend $40,000 to placate a vocal minority by voting to pay for a study to formulate a plan to restore an old cemetery site when we have so many other pressing priorities. How about – No!
THIS FROM A READER
We receive many emails from our readers which have been very positive. This concerning our March issue:
“Thank you so much for this current issue. One of the many things I like about your report is that it stays on course and is not distracted by all the non-issues brought up by the City for dodging the bullet. The concept of public employee’s being exempt from the reality’s of this economy really, is the height of arrogance”.
Until the Citizens of this community solve the systemic problem, by electing city leaders who are “qualified” to manage a municipal corporation, with a operating budge approaching $500,000,000, and in electing leaders who will make the hard (not political) decisions to solve the pension and unfunded debt issue, the taxpayers and citizens of this community will always be at risk and a target for more taxes and more fees.
B. Alviani S. Doll J. Tingstrom
K. Corse R. McCord T. Cook
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