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Budget workshop lacks financial transparency

Don’t Let A Charade Fool You Into Believing Ventura’s Financial Transparency

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Fool Me Once, financial transparencyFool me once, shame on you. Fool me twice, shame on me.

THE ILLUSION OF FINANCIAL TRANSPARENCY

Ventura is holding a Budget Workshop on Monday, March 17, 2014. It may be a meaningless exercise, however, unless the City applies integrity and common sense to the process. Otherwise, the process is rife with budget manipulations owing to a lack of financial transparency.

FORCE THE CITY COUNCIL INTO FINANCIAL TRANSPARENCY

If you have questions or concerns about what you read in this month’s newsletter, address them directly to one, or all, of the City Council members. Click on a photo to send an email:

Cheryl Heitmann, Mayor

Erik Nasarenko,
Deputy Mayor

Neal Andrews,

Jim Monahan

Carl Morehouse

Mike Tracy

Christy Weir

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Busting Ventura’s Budget Myths And Fantasies

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Winston Churchill

THE TRUTH IS IN- CONTROVERTIBLE, MALICE MAY ATTACK IT, IGNORANCE MAY DERIDE IT, BUT IN THE END THERE IT IS
—Winston Churchill

PENSIONS BUST BUDGETS
[Grappling with Money and Economic Reality]

The City Council race concluded with the reelection of Councilmen Andrews, Monahan and Tracy plus a new councilman, Eric Nasarenko.  Our new Councilman was elected as Deputy Mayor at the last Council meeting and will serve in that capacity next year.  We congratulate each member of the Council.

During the election campaign these candidates asked to be elected so that they could help to bring about changes in City policies to:

  • improve the development of business
  • create and maintain parks
  • seek to improve streets
  • finance libraries
  • find ways to provide housing for lower income citizens
  • improve the gateways to Ventura on the North and South of Highway 101
  • create a more favorable regulatory structure to encourage development of housing
  • improve services to our citizens.

One thing that stood out for all four of these Councilmen was their plea that if the voters returned them to office and elected Mr. Nasarenko then a newly constituted Council could and would be more cohesive, and bring about the promised changes.

Their promise of change is laudable, but nothing can or will be accomplished without the money and revenue to realize those changes. That objective requires sound financial planning—an accurate and realistic budget with realistic income and expense projections.

From Where Will The Money Come In This Year’s Budget?

On June 17, 2013 the old City Council was presented with a Proposed Budget for 2013-2014. They were shown a power point presentation, explained by our City Treasurer, which was based upon a printed 569 page budget book submitted by our City Manager, Mark D. Watkins, on April 23, 2013. This budget was approved on a vote of 6 to 1 after a 30 minute hearing.  Nobody from the public appeared to comment.

It’s hard to overcome a $1.6 million deficit, if this year’s budget has no new revenue items.

Council members asked few questions, but did make statements “for the benefit of the television public” concerning their views on this budget.  Nobody asked any questions about the projected income, or questioned the expenses in this complex document other than Councilman Andrews.  He voted “no” on the motion to approve a budget projecting a deficit of $1.6 million in our next fiscal year (July 1, 2013-June 30, 2014).  He explained his no vote – “We have cut too far and we need to look at public safety costs (police and fire pension benefits)”, meaning that the Council needed to look at ways to address the enormous pension costs before considering anything else such as new taxes.

Two Council members made statements that the general fund be unburdened by shifting some costs from the general fund to special tax assessment districts — taxes on real property.  Councilman Morehouse wants to shift a $500,000 public lighting cost to property owners, although conceded, when asked by Mayor Tracy, that this might also be funded by increasing sales taxes.  Councilwoman Weir commented at length about the special assessment costs imposed by other cities, such as Camarillo and Oxnard, for street repair, landscape maintenance, parks, public safety and libraries.  It was clear from these comments that their solution for our City deficit is to tax our way out of it.

Where’s The Transparency In The Budget?

This published budget is long, complex and difficult to read.  It consists of real number-clots, number slabs by department and sub-department(s) with pages of swimming line items in minute detail. It is difficult to read, interpret or understand as a financial planning document.   For example, members of VREG tried to determine how the projected income was calculated, and what the public pension costs (the largest item in the entire budget) would be for the next fiscal year.  The income information could not be found.  The pension data was sprinkled throughout all 589 pages and explained by esoteric line items and number for every department. The City Treasurer was asked about the complexity of this document.  He conceded that this was the equivalent of a “data dump”. A good management tool for a City Council it is not.

Focusing first on the income side.  The City Treasurer at the June hearing projected income of $86.7 million. This is $4.3 million more than was collected in 2012-13, an increase of 5.2%, twice the estimated U.S. Gross Domestic product estimate of 2.5%.

No explanation has been given on where this new source of revenue will come from.  That question was put to one candidate during a candidate forum in October.  A citizen asked, “What plan does the city have to grow their revenue by that amount of money?”

The answer was revealing (click on the quote to see video of his answer):

Ventura City Budget

There is a $1.6 million deficit in this year’s budget. As a higher percentage of Ventura’s General Fund is spent on police and fire pensions, less revenue is available for other services.

 

The projected deficit of $1.6 million and sagging income expectations are bad  The annual cost of  salaries and benefits  for public safety — police and fire —  is bad, and will grow to fifty-two (52%) of the total general budget  in the next fiscal year

Unfunded Pension Liability Is Staggering

Then there is the matter of how much will have to be paid to CALPERS to pay the unfunded pension obligations of City employees, police and fire personnel in addition to the annual operational costs.  In 2008 those unfunded obligations totaled $48 million.

In October, 2013, CALPERS reported that the market cost of those unfunded liabilities have increased by 360%, and  as of June 30, 2012, totaled $173,412,464.  CALPERS also added a note in that report that if the City wanted to terminate our contract with CALPERS it would cost us $600,421,434.

This is only going to get worse because CALPERS has announced it will consider adjusting (lowering) its expected rate of return in 2015 by 1/4%, and that the actuarial life of public safety personnel is not shorter than the average person, as previously assumed, but is the same.  That means these pensioners, starting at age 55, will get paid benefits over a longer period of time.

Cities nationwide are grappling with the growing retiree-benefit pension costs which are eating up more of city general funds.  That leaves less money to spend on parks, libraries, maintenance of trees and parkways, street lights and an asundry of public service projects.  Ventura is not alone. As a higher percentage of a City’s general fund is spent on police and fire pensions, less revenue is available for other services and projects.  Detroit, Stockton and San Bernardino are models of cities that refused to accept economic reality.

If the total unfunded obligation cost does not get the attention of our new City Council, then perhaps the most recent CALPERS Actuarial Valuations predicting our annual payment obligation will get their attention.  In 2013-14 the required annual contribution total will be $8,530,730.  In 2014-15 the required payment will increase to $9,489,593.  That is more than $1 million more to be paid out of the General Fund

  Editors’ Comments

Why there are no protests by the citizens of Ventura for changing the pension plan of public safety personnel?  What will it take to get Venturans excited and concerned about this problem?

When the question of pension reform was presented to our City Council members in the past the traditional answer was that this problem could only be addressed on a statewide level; Ventura will not be the “lead dog” and venture out into this new territory; and, as unfounded as it may be, that Ventura would no longer be competitive in hiring the best employees.

This unfunded obligation to public safety personnel is a budget buster.  Nobody wants to make a decision.  In the meantime, Ventura will reduce services, charge more fees (or taxes) from its citizens and ignore the obvious “train wreck” that is ahead because it either lacks the leadership or vision to act responsibly for the future of this City

All the campaign promises in the world are worthless unless and until this new Council establishes a realistic budget, and finds real solutions to our public pension obligations.  Trying to tax ourselves out of debt is not a solution. Requiring greater employee contributions to their own retirement (8 – 10%), and creating a defined contribution plan for new hires will solve the problem in time.

That is why you were elected!

Editors:

R. Alviani      K. Corse      T. Cook

J. Tingstrom  R. McCord   S. Doll

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Ventura's bad economic policy

Economic Illiteracy, Indifference And Denial Plague Ventura Finances

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IF SOMETHING CANNOT GO ON FOREVER IT WILL STOP
—Herb Stein, Economics Professor

DETROIT – A HAUNTING SPECTRE

[The Consequences of Ignoring Economic Reality]

Most people are now well aware of the economic news. The City of Detroit filed bankruptcy under a cloud of $18 billion in debt. Crippling problems with corruption, unfunded benefits and pension liabilities, nepotism, and cozy political relationships between public unions and elected officials served to bring about their demise.

Detroit's bad economic policy

Detroit’s bad economic policy led to bankruptcy

These problems were enormous, but it was allowed to happen because of an attitude of denial.  Elected officials and citizens continued year after year to look the other way despite mounting evidence that their City was rushing towards bankruptcy – the debt continued to mount and the income continued to dwindle.    The official cause of death – no money.

How would you feel if you learned that someone you know was spending more than he was earning and having to dip into savings to keep going?  You might think at first blush that it’s because of the Great Recession.  But, what if you then learned that in the 4 years since the Great Recession the same person had not changed his spending habits as well as not earning enough income to support their profligate spending?  To explain this as being due to anything other than bad judgment, or reckless fiscal mismanagement, is to engage in the same type of denial that led the citizens of Detroit into bankruptcy.

California Cities In Bankruptcy. Will Ventura Follow?

San Bernardino went bankrupt because of bad economic practices

This news follows the similar fate of cities closer to home like Stockton, Vallejo and San Bernardino.  The City Council in San Bernardino decided to file a Chapter 9 municipal bankruptcy.  That city was running a $5 million deficit on a $130 million budget and did not have enough cash to pay its vendors, workers and retirees.  In the last 4 years the tide has gone out and were are now finding out who was swimming naked.

So, good reader you ask – “What do the financial problems in Detroit or these other California Cities have to do with Ventura?”  The answer lies in the fact that over the last 4 years City Government has used “budget gimmickry” to make it appear as if the City Council had balanced our budget each year.  Solvency was the stuff of fiction for our then City Manager, Rick Cole and Mayor Bill Fulton.  They are gone and we are left with economic reality – not enough money to pay our obligations, an economy that is not recovering and unfunded public pension obligations that have doubled.

CANARY IN THE COAL MINE

[Bad Economic Policy In Practice]

On June 17, 2013, our new City Manager presented a Budget for 2013-14 to the City Council for approval.    The budget is not balanced.  In the last 4 years revenue decreased from $94.1 million to $82.4.  The Council was presented with the following historical and projected income and expense comparisons (numbers in millions of dollars):

Fiscal Year Income

(millions)

 Expenses

(millions)

 Shortfall/Gap

(millions)
2008-09 $94.1 $94.1 0
2009-10 $85.1  $96.5 $11.4
2010-11 $88.1 $80.4 $7.7
2011-12 $ 81.0 $81.5 $0.5
2012-13 $82.4 $84.4 $2.0
2013-14 $86.7

(est.)

 $88.3

(est.)

 $1.6 

(est.)

 

Our new City Manager outlined, in a kindly manner, the efforts that had been made in the past to try to “balance the budget”, which had not been successful:

“In the past 5 years the City of Ventura has experience a decrease in general fund revenues of $16 million dollars.  During the same period, budget and service cutbacks have eliminated more than 100 positions, increased employee contributions of both medical costs and retirement costs, reduced landscape  maintenance and park service levels, reduced street repairs and resurfacing, discontinued the Crime Prevention Program, and reduced the Police Department Gang Unit, eliminated the Neighborhood Traffic Calming Program, temporarily closed Fire Station 4,  reduced sidewalk repair program, reduced hours at the Senior Centers…just to name a few.  While these efforts were extensive, they simply have not been enough to balance our budget.  This is evidenced by the continuing decline of our fund balances, which have been decreased by approximately $10 million dollars over the past 5 years.

“Utilizing fund balances, or living off your savings accounts, is not an uncommon practice for municipalities during times of economic challenge but it is only a short term solution that is undertaken with the optimistic view that economic conditions will soon change for the better.”
—Mark D. Watkins, new City Manager

Too Much Data, Not Enough Information Muddles Economic Policy

This 569 page budget provides detailed expenses of $89.5 million dollars, but it totally lacks any information on how this year’s revenue of $82.4 million dollars can be increased to meet our projected expenses of 88.3 million dollars in 2013-14.  Where will that additional $7,100,000 be generated?   If true we are asked to accept that our City will increase our income by 8.6% next year, more than twice the U.S. Gross Domestic Product of 2.5%.  What makes our City officials believe our rate of growth will be more than twice the national average?

On the liability side the facts frightfully demonstrate that we are on a financial cliff.  Not only are we facing a deficit of at least $1.6 million or more in our General Fund Budget, there are the off the books debts.  First, there is the matter of the unfunded pension obligations to City employees, policemen and firemen.  In 2008 those obligations totaled $48 million.  In our August, 2008, edition we argued that the Council should take steps to change the pension structure because those benefits were not sustainable.  Today those obligations total a minimum of $96 million upward of $350 million, depending on the assumed rate of investment from CALPERS.

“If we do not find a way to restore these funds in the next 5 years we will have serious financial difficulty.”

In spite of these looming long term commitments and with an urging that the City Council not increase the Firefighters pension entitlements to 3% at age 55, the Council did it anyway.  Nobody on the City council could identity where the funds would come from to pay for this increase.

Second, there is the $12 million in reserve that we have had since 1992.  Not only was the income from this reserve used by the City Council as a source of income for the General Budget over the last 20 years, but we learned in March, 2013, from our interim City Manager, Johnny Johnson that $7.5 million dollars in the Public Liability Fund, Workers’ Compensation Fund and Information Technology Fund had been moved to other areas in the budget to make it appear as if our budget was balanced.  In his words, “if we do not find a way to restore these funds in the next 5 years we will have serious financial difficulty.”

POST SCRIPT
INCLUSIONARY HOUSING ORDINANCE

Inclusionary housing bad economic practice

Inclusionary housing continues Ventura’s bad economic practices

In our last issue we reported that the City Council, on July 15, 2013, would consider a request from the Community Development Director to cancel the Ventura ordinance requiring builders and developers to donate a percentage of their development to low income people. His reasons were clear, there is no housing being built in the City of Ventura.  His view was shared by the State Department of Housing and Community Development, which had concluded that such ordinances “are a constraint to the development of housing”.

The Council room was flooded with the homeless, low income folks and their children, all prepared to tell their story and urge denial of the request to cancel the ordinance.  This was orchestrated by CAUSE. Their organizers were in the hallway handing out bottles of water and signs that read ‘HOMES FOR EVERYONE”.  A group organizer actively moved in an out of the group with clip board in hand.

Councilman Andrews quickly presented a motion to defer a decision on the measure and for the appointment of a Blue Ribbon Committee to study the matter further.  Councilman Brennan, joined by Councilman Morehouse, pointed out that when they came up with this idea for this ordinance in 2006 “we knew we were going to have to massage it because we did not know where it was going.  We expected we would have to come back and look at alternatives”.   The three of them voted to table the matter and appoint a special committee of “experts” to make recommendations.

“This 2006 ordinance was a half baked idea”

Councilwoman Weir painted a more candid view of this ordinance.  In her words “this 2006 ordinance was a half baked idea”, and that “it was no surprise to anyone it is not working”.  She also observed that a lot of those people in the audience who spoke against cancellation were homeless and would never qualify under the program anyway.  Ms. Weir favored an “in-lieu” fee to help the homeless transition.  Mayor Tracy and Councilman Monahan joined her in urging an “in-lieu” fee.  They voted against the motion by Councilman Andrews to postpone and appoint a committee.

Deputy Mayor Heitmann provided the decisive vote to table and appoint a Blue Ribbon Committee.  She seemed somewhat confused by the discussion, did not profess to have any knowledge on the subject thus voted to table the matter because there were “a lot of unanswered questions”.  A perplexing comment given that the Council and been provided with a lengthy and detailed report from the Director of Community Development explaining why this ordinance had failed.

Nobody knows who will be on the Blue Ribbon Committee.

Editors’ Comments

Economic illiteracy is not recommended as a qualification for the Ventura City Council. We urge you to choose your Council Members wisely come next November.

Editors:

R. Alviani      K. Corse      T. Cook
J. Tingstrom  R. McCord   S. Doll

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Eliminate Inclusionary Housing Oridnance

The Inclusionary Housing Mirage

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Winston Churchill

Some People regard private enterprise as a predatory tiger to be shot. Others look on it as a cow they can milk. Not enough people see it as a healthy horse, pulling a sturdy wagon. —Winston Churchill

ELIMINATION OF THE INCLUSIONARY HOUSING ORDINANCE

[A PRO-GROWTH PROPOSAL ]

The Ventura City Council, at their meeting on Monday, July 15, 2013, will consider the recommendation of our new City Manager, Mark D. Watkins and Community Development Director, Jeffrey Lambert, “to eliminate (cancel) both the Citywide and Downtown Inclusionary Housing Ordinances (IHP)”.

 This ordinance was adopted in August, 2006. The author was Councilman Brian Brennan. The idea was that there are people in the City who “need housing”, and cannot afford to buy or rent housing unless they received financial assistance. So, on a vote of 5 to 2 it was decided that if a person or company wanted to build 15 or more residential units “for sale” or “for rent” then that developer, at their expense, was required to donate a percentage of the living units to low income people. The units had to of the same quality and disbursed throughout the project.

“The adoption of an inclusionary housing requirement in conjunction with the Housing Approval Program, will provide a mechanism for all residential development containing 15 or more units to provide ‘their fair share’ of affordable housing…” Resolution No. 2006-058         

Now, 7 years later, it is clear that the concept is not working. The “developers” have not stepped forward, they have declined to invest and build the projects in the City and new construction has stalled. Our new City Manager and the Community Development Director are recommending that this ordinance be cancelled. The full report can be read on line as agenda item 14 for the Council meeting of June 17, 2013.

“It is staff’s recommendation… based on the State Department of Housing and Community Developments conclusions that IHPs are a constraint to the development of housing. In addition, staff believes imposing this obligation to provide affordable housing units on market rate developments places an undue burden on these developments and increases the cost of market rate units…”

—Administrative Report, May 29, 2013

THE SOCIAL EQUITY ARGUMENT

 [EVERYONE IS ENTITLED TO AFFORDABLE HOUSING]

Protesting Inclusionary Housing Ordinance

Some will protest eliminating the Inclusionary Housing Ordinance.

Opponents to the proposal to eliminate this ordinance will be very visible and vocal in their opposition at this City Council meeting. They will demand that the council reject the staff recommendation, because everyone is entitled to affordable housing, and that housing “for sale” or “for rent” can be provided to those in need without spending public money. Their logic is that tax payers will not have to pay anything because the developer will have to pay. Alternatively, they ask that if this is not acceptable then the developer should pay an “in lieu of fee” of $200,000 or more.

This argument will find a sympathetic ear in Councilman Brennan. No surprises. He authored the original concept, proselytizes “social equity”, and is strident in this view that affordable housing for all (free or pay what you can afford) is an unassailable truth – if you cannot afford housing then is somebody else will have to pay.

A READER’S VIEW

[THE BURDEN WILL FALL ON PROPERTY OWNERS]

A reader and property owner, who expressed a desire for anonymity, stridently supports the efforts of the City Council to abolish or severely restrict the current inclusionary housing program. In our view “we can think of no other program which so seriously restricts private developer efforts to build housing in Ventura as well as seriously impacting our revenue base of property tax”.

Affordable housing mandates have had an unintended consequence: they have discouraged home building, and the diminished supply of housing has driven prices up.

The opponents of the change ignore the fact that almost 40% of Ventura’s housing stock is already dedicated to some form of subsidy for affordable housing, leaving 60% to pay the bills of the City. Advocates of affordable housing seem to have no concept of economics, and feel that someone else should pay for their housing costs.

In 2008 the Independent Institute published an article on the subject http://www.independent.org/newsroom/article.asp?id=2225 which is instructive. Extracts from that article are quoted below.

“We recently analyzed how inclusionary zoning laws, requiring builders to set aside a given percentage of new construction for low- to moderate-income individuals, have affected both new home prices and the quantity of new homes over time.

We compared the changes in housing prices and supply in these cities to those without a similar ordinance. The cities that adopted inclusionary zoning laws saw a 20 percent jump in housing prices and a 10 percent decrease in the number of new units built. This is the basic law of supply and demand at work. Affordable housing mandates have had an unintended consequence: they have discouraged homebuilding, and the diminished supply of housing has driven prices up.

Despite the nice-sounding name, inclusionary zoning is still a price control that leads to a decrease in the amount of housing. Economic theory and evidence demonstrate that imposing price controls and taxes on housing is one of the worst ways of encouraging the production of housing.

The real problems causing the affordability crisis are regulations that prevent increases in the supply of homes. Eliminating restrictive zoning regulations will give consumers more choice and make housing more affordable. For those who truly care about making housing more affordable, price controls are not the answer.”

ANOTHER PERSPECTIVE – THE ARCHITECT/PLANNER[1]

Architect against Inclusionary Housing

One architect expresses concerns over the Inclusionary Housing Ordinance

The real challenges I encounter regarding inclusionary housing ordinances are around the issue of for-sale homes and financing. For the developer, inclusionary housing requires them to write down or subsidize the cost of the affordable units. The ordinance assumes that the project has enough profit margin to allow this to happen, but as demonstrated in the last several years, there is no guarantee that this will be the case.

From the low income buyer qualifying for a the low income housing is problematical. The IHP assumes that the low income home buyer can qualify for the loan, of even a subsidized amount. That is an enormous hurdle, but even if they can qualify such projects will have association fees of hundreds dollars per month. These costs cannot be written down as they must be paid by every member-owner of the association.

The intent of the IHP is positive – trying to keep new development from overwhelming existing smaller scale neighborhoods. But the matter of affordability works in direct opposition to this intent. The City has recently been trying to meet these challenges and has been moving to adjust interpretations to make the situation more workable. Not everyone knows or appreciates that effort.

Problems notwithstanding finding ways to provide affordable housing in the Downtown area, for both rental and purchase housing,  is a laudable goal. To provide smaller more affordable market-rate dwellings, such as studio and loft-type apartments, ranging from 400 sq.ft. to 600 sq. ft. will meet a real need. These can be very nicely done and are popular dwelling-types for our younger Venturans, who are drawn to the downtown as a place of social and cultural interest. Many are employees of the variety of businesses – restaurants, retail shops, professional and service businesses.

Editors’ Comments

The State of California Department of Housing and Community Development, our City Manager and Community Development Director advise that this ordinance should be cancelled because it is not working. We should listen. This ordinance has not only failed in its stated objective, but has in effect stalled housing growth.

Your letters and comments on this issue are extremely important. Send emails to Ventura Mayor, Mike Tracy mike.tracy@cityofventura.net

Editors:

B. Alviani             K. Corse          T. Cook

J. Tingstrom       R. McCord       S. Doll

[1] Opinion provided by a longtime Ventura architect.

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Pension Redux

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“Stupidity is also a gift of God but one mustn’t misuse it.”
—Pope John Paul II

PENSION OBLIGATIONS REVISITED

On March 11th the City Council was informed that the $12 million reserve that we have had since 1992 isn’t available as we had been led to believe. Although the General Fund has about $28 million, including this $12 million dollar reserve, by the end of the 2012-13 fiscal year had been “committed” or “promised” to someone or something. This includes such things as a $5.4 million dollar loan to the Ventura Redevelopment Agency or the $2.4 million set aside for the Jobs Investment Fund.

These promises are in fact liabilities, money we that we owe. If all of the promises are fulfilled and the RDA successor agency is unable to pay back their loan, the General Fund would only have $4.3 million. Not discussed or mentioned at this Council meeting were the other debts and liabilities, in particular the unfunded public pension debts. Those obligations have increased 97.4%. since our report to you 4 years ago.

The Comprehensive Annual Financial Report (CAFR) is an annual financial report detailing the financial condition of our City.

We start with the Comprehensive Annual Financial Report (CAFR). This is an annual financial report detailing the financial condition of our City. These numbers are accurate, but bear in mind that by the time we see the reports the data is 18 months after the fact. Further, you have to look in the footnotes to discover those debts which are “off the books” like the City pension program, which is administered by CALPERS.

What follows is an extract from the 2008 CAFR, as it related to the status of the City pension plan then. The third column reflected how much we owed to employees and retired employees as of the date of the report. The category of “safety” covers police and fire pensions and all other employees are carried in the “Miscellaneous Employees group”. Our unfunded liability totaled $48,673,594.

In the same year the revenue collected by the general fund totaled $88.7 million, of which $47.1 million (53.1%) was spent exclusively on police and fire departments. The percentage of our general budget paid to police and fire has increased dramatically whereas other employee costs have remained relatively stable. In 2009 59.9% of our total budget was allocated to public safety, 57.7% in 2010 and 53% in 2011. That did not include the “unfunded pension obligations”.

CalPERS increases unfunded pension liability costs to Ventura

In 4 years UNFUNDED PENSION OBLIGATIONS INCREASED 97.4% and now total $96,099,169.00.

These unfunded obligations accrued interest year after year, at the rate of 7.75%. CALPERS did not recover the substantial losses (reported by some news sources as 50% )as a result of the 2008 recession. They also did not earn the 7.75% annual projected investment returns until just recently. On the Legislative side efforts at the State and local level to move from a defined benefit plan to a 401(k) plan for new hires failed. Our City did try to address the problem by requiring current employees to contribute 4% of their compensation toward their own retirement plan, but it was piteously short. In 4 years UNFUNDED OBLIGATIONS INCREASED 97.4% and now total $96,099,169.00.

CALPERS is quick to point out that over a 20 year period the” return for each fiscal year ranged from -24% to +21.7%., and if we let them continue to manage our pension plan they “assume” we will get a return of 7.50%. But, if we want out and want to run our own program they use a 4.82% rate of return. We really owe $350,848,292. (See attached Hypothetical Termination liability for each plan).

 

PUBLIC PENSIONS OR BOND HOLDERS – AT RISK

[WHAT IS GOOD FOR THE GOOSE IS GOOD FOR THE GANDER]

Last year the Governor’s office and legislature announced that they had achieved “pension reform”. The reality is that they did not change any of the current pension benefits. They did this mainly for political reasons, but also because it is widely assumed that employees in the public pension system are protected by the constitutional ban on “impairing the obligations of contracts”.

Public employee unions have stridently asserted that they are different and thus bullet proof. This attitude was displayed clearly when the City of Stockton filed bankruptcy. That City told their bond holders and/or their insurers to take less, but refused to reduce the $29 million it pays each year to CALPERS for the employee benefits.

Assured Guaranty Ltd, which insured the Stockton bonds, stood to lose $100 million. They filed a complaint in the bankruptcy court claiming that Stockton had targeted the bondholders to take a loss, but continued to pay CALPERS without any reduction or did not seek any benefit reductions from the public labor unions.

Another insurer, National Public Finance, added their voice to the controversy, supported the Assured Guaranty position, but also alleged that the City of Stockton “rather than face the hard realities imposed by its unbearable liability to CALPERS (decided) to take a pass” – in short, that it was easier to sacrifice the bond holders than face the political wrath of the public employees or CALPERS.

So, the bond insurers asked the bankruptcy judge, Christopher Klein, to declare the City’s bankruptcy plan as inadequate because it ignores the pension debt, and they seek to compel the City to reduce its pension payments. The CALPERS reaction was to argue to Judge Klein that the pension payments have a higher priority over bonds. CALPERS lost.

In December, 2012, Judge Klein rejected the CALPERS constitutional inviolability of contract argument and ruled:

“While a state cannot make a law impairing the obligations of contract, Congress can…the goal of the bankruptcy code is adjusting the debtor-creditor relationship. Every discharge impairs contracts”.

So, what will happen to the benefits of the public pension contracts or the bond holders? CALPERS, those in the Stockton pension plan and the bond holders may both lose. This chapter is soon to be written.

EDITORS’ COMMENTS:

A 97.4% increase in unfunded liabilities over a 4 year period is setting Ventura up for failure. Most citizens don’t realize that Ventura will pay $13.3 million to CALPERS for 2012-2013. This is over and above salaries and other benefits. As more employees choose to retire early (50-60 years of age) this only gets worse.

Call it what you will, but the City Council thus far has adopted a profligate fiscal plan of doing nothing to pay this unfunded obligation. Hoping that the economy will rev up, that inflation will chip away at the obligation, or that somehow our pension assets will produce magnificent returns is foolish.

When the Council considers its new budget in June we urge them to set aside a percentage of our annual revenue to add to our reserve and/or apply to the unfunded pension obligations, and to release some of the commitments it has made to the General fund cash balance.

 

Editors:

B. Alviani         K. Corse             T. Cook

J. Tingstrom    R. McCord        S. Doll

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Budget Manipulation Using Fiscal Sleight Of Hand

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Fair is foul, and foul is fair: Hover through the fog and filthy air”
—Shakespeare, Macbeth

STATE OF THE CITY TREASURY

[TRANSPARENCY THROUGH FOUL AND FILTHY AIR]

History continues to remind us that to get to the root of any act of wrongdoing, malfeasance or wrongdoing, you need only follow the money to find the culprit(s). Eventually the truth and they are revealed. That again proved true at the City Council meeting on March 11, 2013.

Shell game balanced budget

Balancing the budget through financial sleight of hand

Our acting City Manager, Johnnie Johnson, in collaboration with the Chief Financial Officer, informed the City Council that those in charge of the budget in our City had adjusted [manipulated?] the GENERAL BUDGET to make it appear that we had achieved a balanced budget. In fact just the opposite was true.

The previous City Manager, Rick Cole together with Mayor Bill Fulton continuously publicized the fact that “we were living within our means”, that “we had balanced our budget” and that our “financial affairs were transparent”. On this Monday night the Council learned otherwise.

What the Council learned is that the $12,000,000 in financial reserves, created in 1992, and still in existence as of 2007, was now in fact only worth $4,300,000. The explanation provided is that Internal Service Funds (noted below), which contained money budgeted and set aside to meet real and specific future costs and potential liabilities, had been reduced so as to make it appear as if the budget had been balanced:

  • ($2m) Unassigned.
  • ($2m) Unfunded Workers Compensation liability
  • ($3m) Potential liability claims reserve Information
  • ($700,000) Technology

The explanation offered is that this was a way to make it appear as if our budget was balanced. As stated by Mr. Johnson, “we have not borrowed it from strangers, but we did borrow it from ourselves… (and) if we do not fund this within five years we will be broke”.

Mayor Tracy, at the conclusion of the presentation stated:

“Based on the way I look on the information we received here tonight we have probably been deceiving ourselves and therefore the general public. There is nothing illegal done here, we did not participate in any conspiracy, but I don’t think it (this) was clear to us”.

—Mike Tracy, Mayor and Retired Chief of Police

He then added that that the Council needed to put more oversight controls in place to prevent this from happening in the future. A new budget will be presented to the Council on May 1, 2013.

Editors Comments

Mayor Tracy and Councilman Heitmann were not on the City Council when these budget “adjustments” were made. For those council members and supporters of the former City Manager, this should be a lesson that the public was deceived and there was not total transparency during Mr. Cole’s administration. To have an interim City Manager, in 6 months time, bring to light that the $12.0M reserve was really $4.3M shows how gullible our leadership has been.

THE NEW CITY MANAGER BUSTS THE BUDGET

Mark Watkins’ higher salary and benefits strain Ventrua’s budget

On March 4, 20013, the City Council met to consider the employment contract for the new City Manager, Mark Watkins. On a vote of 4 to 3 the Council approved the employment contract. He will receive the following salary and benefits plus 6 weeks paid leave:

Base Salary $222,000.00
Annual Cost of Living Increases (1/2% of annual CPI)
Annual Performance Bonuses (3%-7%) $15,540.00
Auto Allowance $6,000.00
City Contribution to 401(K) $12,000.00
Employer Pension Pickup (2.5%) $5,500.00
Total Before Benefits $261,090.00

When invitations for applicants were first published the City Council set the salary rate range of $160,000 to $214,000. The previous City Manager received a salary of $174,000.

The Ventura County Taxpayers Association spoke against approval of the contract because the starting salary was simply too high for an entry level Manager, that the salary should be started lower and then increased to provide performance incentives and the contract provided automatic annual Cost of Living Adjustments (COLA) during the 3 year term of the contract. They also warned against the COLA adjustment because of the precedent it would set when other public union contracts came up for renewal.

Mayor Tracy, Councilman Monahan, Councilwomen Weir and Heitmann approved the contract. They stated that Mr. Watkins was a long time resident of Ventura, that he had worked in the City during his career, that he was an Assistant City Manager in Thousand Oaks and that this was what needed to be paid to attract a qualified City Manager who would focus on the basics of operations of city government. Councilwoman Weir commented that any increase in the salary level could also be justified because “that we have already found savings in the City Manager’s budget to make up the difference”.

Our present acting City Manager commented that Mr. Watkins was a good choice, that this pay increase really only involved “pennies” in the total scheme of things, and that if he did not work out he could just be terminated and given a severance package.

Councilmen Andrews voted against the contract. Councilmen Brennan and Morehouse, after extolling the virtues and accomplishments of the former City Manager, Rick Cole, also voted no.

Editors Comments

Mr. Watkins will cost us an additional 26,102,700 pennies per year. He will earn all of that in dealing with our budgetary issues. We hope that the majority of the Council is right in saying that the additional expense can be justified by the savings that this new Manager will bring to our City.

In the meantime we must be diligent and continue to remind our elected representatives that if they we do not watch how they spend our pennies “we” will have no dollars left.

Editors:


R. Alviani K. Corse T. Cook J. Tingstrom R. McCord S. Doll

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WAV Condos in Ventura

A WAV Of Financial Trouble Traps Ventura

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“When everybody owns something, nobody owns it, and nobody has a direct interest in maintaining or improving its condition. That is why buildings in the Soviet Union — like public housing in the United States — look decrepit within a year or two of their construction…”
—Milton Friedman, Nobel Peace Prize economist

 

THE WAV CONDOS – A FAILED PIPE DREAM

[The Proof is in the Pudding]

Our former City Manager, Rick Cole and former Mayor, Bill Fulton, sought to implement their visions for Ventura. They have moved on but they left the citizens of Ventura with financial problems.

Each arrived from the LA area with populist visions, advocating for a community with less cars, more public transportation, more public housing all driven by the concepts outlined by the New Urban Congress. Their visions were embraced by a vocal minority – the art community, architects and low income housing advocates and special interest builders and planners that could live off the Redevelopment Agency dole. Their visions were a financial disaster. Mr. Cole’s contract was not renewed. Mr. Fulton packed his suit case and moved to Washington. Most citizens “waved” goodbye. A few are still awaiting Mr. Fulton’s new book on how the New Urban experiment worked in the City of Ventura, particularly the 69 residents of this subsidized housing units in this project that has cost taxpayers $985,072 per living unit.

The WAV Condos. Ventura’s attempt to build an “arts” city.

In January 2012, we treated one aspect of this project – the 13 market rate condominiums and 6,100 sq.ft. of commercial space along Ventura Avenue at the corner of Thompson Boulevard. The sale of these units and the lease of the commercial spaces were supposed to provide a source for repayment of construction loans to CHASE and the City of Ventura.

Chase holds the note on Ventura’s WAV Condos. The city stands to lose $2.5 million if the WAV condos do not sell by 2016

To make the market rate condos and commercial space development work, the City loaned $2,000,000 to the developer ($2.5 million now due with interest), and subordinated that loan to a first trust deed in favor of CHASE in the sum of $4,000,000.  Those loans were scheduled to be paid on the sale of the 13 condos, or by March 1, 2012. They did not sell and the commercial space did not lease. Facing foreclosure, and loss of our money, the City entered into a contract with CHASE to extend the due date to December 1, 2016.

This was not the result the City planned when this project was started. The City selected a person named Chris Velasco to “develop” the project, using our taxpayer dollars of course. Mr. Velasco signed the contracts, operating as a Minnesota non-profit company called PLACE. He gushed about the project. Here is one example:

“WAV’s market rate condominiums (priced from $625,000 to $875,000) are now for sale…WAV’s forward thinking configuration comes with an up market price tag. The average price per square foot for condominiums in the same zip code is $274; WAV’s pricing is $368 per square foot; however, buyers will be living green and helping underwrite WAV’s community. Besides the artists, and the public who flock to Ventura’s Art Walks and galleries, it includes those at 15 section 8 apartments”

So how reliable was the original plan? Not, by all accounts. The realtor involved with trying to sell the WAV units and lease the space recently shared his thoughts with us:

“These condos could only be sold for cash, or with a portfolio lender, due to Fannie Mae guidelines restricting the lending side. Its what I was up against for the three years. I had the listing together but was faced with the fact that the City refused to recognize that the condos were priced almost 1/3 higher than the market would bear. They would not entertain lowering them to market value.

“The condos were never worth $850K, at the most somewhere in the mid-$600s But even then the economy was turning down with buyers running for the hills. Add to THAT the fact they let my listing run out because I didn’t sell any. They said they wanted to take ‘another direction’.

“Now, perhaps they’re worth $479 tops – but you can’t use a traditional bank. Portfolio lender rates are usually at least 2 points higher, but a cash is the only way. Once one sale exists, there is a comp. Until then, its a big guessing game…”

            —Jerry Breiner, Realtor

 

Editors Comment:

Dump the WAV Condos as fast as possible.

Our City stands to lose $2.5 million if the WAV condos do not sell by 2016. It is likely they will not sell. An objective person cannot avoid the obvious problem in marketing these condos — bad views (freeway), bad location, no parking, low income neighbors and bad design. Our goal should now be to sell them for what we can to avoid a potential total loss through the foreclosure process. In other words, forget the cheese and just get out of the trap.

 

BANKRUPTCY LOOMS FOR CITIES

[The Good, The Bad and The Ugly]

The election is over but the business prospects for California cities remains dismal. Moody’s, a business rating service has placed the debt of 30 California cities, under review for downgrade. With the rating downgrade each of these cities will have great difficulty in raising money to operate essential government functions by borrowing municipal bonds.

THE BAD

On the list for downgrade are Oakland, Fresno, Sacramento, Azusa, Berkeley, Colma, Danville, Downey, Fresno, Glendale, Huntington Beach, Inglewood, Long Beach, Los Gatos, Martinez ,Monterey, Oakland, Oceanside, Palmdale, Petaluma, Rancho Mirage, Redondo Beach, Sacramento, San Leandro, Santa Ana, Santa Barbara, Santa Clara, Santa Maria, Santa Monica, Santa Rosa, Sunnyvale, Torrance and Woodland.

The rating examinations will potentially affect $14.3 billion in lease-backed and general obligation debt on the books of these cities. Why? Because these cities did not address their internal cost structures, did not reduce personnel costs in the face of looming debt and used accounting gimmicks in the hopes that the economy would change. It has not changed. Add their unfunded pension and debt obligations to their itemized costs and they are in trouble.

THE UGLY

The cities of Vallejo, Stockton, San Bernardino and Mammoth Lakes filed for bankruptcy. Their revenues from real property taxes and sales taxes dropped precipitously while fixed costs, such as public safety pensions remained high.   Public safety personnel refused to modify their benefits to help with the budget issues of their city. The fight between public safety unions, who refuse to modify their pension contracts, and the bond holders who loaned the cities money, looms large.

THE GOOD

 At the beginning of the recession the City of Ventura lost $5 million when Washington Mutual (WAMU) collapsed and $5 million when Lehman tanked. Tax revenues plummeted from $100 million to $82 million currently (estimated).   The City has tried to adjust for this 18% revenue reduction but the unfunded pension benefits for police and fire departments increased from $43,496,873 in 2008 to $68,385,380 in 2011. That is an increase of 57% for public safety. Add to that the $21,327,225 in unfunded benefits for all other City employees and we owe $89,712,605.

The positive news is that in the last four years is that the City has recovered $1.5 million of the WAMU investment. The City Council has also been trying hard to adjust their expenses and live within their means. Standard and Poor provided our City with a rating of AA.

One of the key individuals in achieving the S&P rating and urging fiscal restraint is our Chief Financial Officer, Jay Panzica. He has been instrumental in guiding the City through this difficult economic period. He was the driving force behind the Budgeting for Outcomes.

Chief Financial Officer, Jay Panzica, wasinstrumental in guiding the Ventura through this difficult economic period.

Mr. Panzica was also instrumental in setting the stage to help refinance the bonds owed for past water and waste water building projects. The first step was to seek an increase of water rates. This step, reviewed by a citizens committee in the fall of 2011, resulted in increased rates for all water users. The counsel prudently adopted those rates, on the recommendation of the citizens committee, thus setting the stage for a major refinance effort in 2012. Increased rate (revenue) by users provides the security for payment of the bond premiums in the future.

To take advantage of today’s lower interest rates, to refinance existing debt for Water and Wastewater projects and to obtain new money for new projects he asked our interim City Manager, Johnny Johnston, to seek approval from the City Council authorizing the issuance of $52 million in Water Revenue Bonds and $23 million in taxable Series A and tax-exempt Series B Waste Water bonds.

On October 8, 2012, the Council approved the request to:

  1. Refinance the existing water bonds ($27,410,000 issued in 2004)) and issue new bonds for additional $25,000,000 for future projects.
  2. Refinance the existing waste water bonds ($25,075,000 issued in 2004) for $23,000,000.

The bonds sold. As a result of a substantially reduced interest rate our City will save $1.8 million on the old water bonds and $2.3 million on the waste water bonds that we otherwise would have had to pay under the terms of the 2004 bond issue. A savings of $4.1 million plus financing costs, and another $25 million in new money for future water improvements is a very positive step forward.

Editors’ Comments:

Good is a relative concept. Creating a basis from which we can build infrastructure and thus create a solid foundation for future economic growth is the right course for government.

“If you put the Federal government in charge of the Sahara Desert in 5 years there’d be a shortage of Sand”

As for government trying to engage in business and compete with private enterprise the words of Milton Friedman says it all “If you put the Federal government in charge of the Sahara Desert in 5 years there’d be a shortage of Sand”

 

Editors:

B. Alviani           K. Corse             T. Cook

J. Tingstrom      R. Mccord         S. Doll

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Ventura City Council Ignores Practical Issues. Instead Focuses On Trivial Matters.

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William Ellery Channing

“The office of Government is not to confer happiness,
but to give men opportunity to work out happiness for themselves”
—William Ellery Channing, 1780-1842

VENTURA CITY COUNCIL– CREATING A BIOSWALE BY THE SEA

[WILL SOMEONE GIVE US $400,000,000?]

Our City Council has many practical and immediate things with which to be concerned, but with so many planners they are not known to miss an opportunity to “visualize”. The latest project is to direct city staff to prepare a corridor down California Street and across Highway 101 – to connect the City and the beach.

Capping Highway 101 occupies Ventura’s City Council.

The City Council’s “design team” envisions a project of “covering or ‘capping’ the freeway to connect the downtown area with the promenade along the ocean. Here it is in their words.

“Due to the lack of connection to the beach area for so many years, development has been limited to one parking structure, one hotel and a bunch of parking lots adjacent to an un-activated waterfront promenade.

         In attempt to correct the lack of historical vision for the use of this area the design team has studied the possibilities of extending the current city grid all the way to the beach, thus taking the ‘urban experience’ from the foothills to the shore and also capital­izing on opportunities to improve connections with the natural environment. With the potential reloca­tion of the existing parking structure and removing cars, from parking lots with ocean views to new on-street parking, the development potential of the beach front could be dramatically increased. With a reconsideration of current beach-wall and storm water drainage strategies, new development could create beach-friendly dune-based bios wales to soften the transition from building edge to natural beach and also naturally treat storm water.”

 

 “If we don’t dream, we’ll never get there.”

—Jeff Lambert, Ventura Community Development Director

 

Click here to see the plans and artists rendition.

 

A CITIZEN’S VIEW ABOUT THE CITY COUNCIL’S PLAN

[How About a Monorail?]

Forgive me for my simple approach to a very complex project but let me get this straight.

City Council fixates on connecting the beach to downtown.

The major reasons to covering the 101 freeway, is connecting the beach community to the downtown and making Ventura more pedestrian friendly. Estimated costs are in the neighborhood of $400 million. I am told that Ventura is going to “lobby” the state to find funding for this project. When you talk about funding, state, Federal, county or city, you are talking about yours and my “wallet”. Just because it is State or Federal funds does not change the fact that it is not “free money”, and it is yours.

Then balance a $400 million project with the benefits. How long will it take to generate $400 million in NEW (tourist, sales tax, etc.) revenue to cover the costs? Other than the Crown Plaza and downtown merchants, does the harbor, Pierpont, midtown or east end really benefit? Does the state even have the funding to build this project? We understand that limited city resources have gone into this project and Southern California Association of Governments funded a $160,000 study but once this is spent, the community will continue to feel committed to continue this project.

So, how many more resources and money will continue to be committed? Will it really be a tourism draw or just another “feel good” pipe dream that someone wants to place their name on a dedication plaque? Will it become another “beautiful downtown golden mall” project that Burbank built in the 60s and demolished 22 years later?

If you really want to be a visionary, build a monorail from the Harbor to Pierpont to downtown. Improve the transportation over a much larger area, become a tourist attraction, generate new permanent jobs and save millions in the process. Just look at Seattle. Built in 1962, the monorail draws over 2 million riders a year. Truly, if you want to spend millions, bring in something that will cover a much wider area of Ventura, something that will attract visitors and something that will add jobs.

 

THE BLUE BELCH

[THE DOG POLICE STRIKE –WHERE ARE YOUR PAPERS ?]

 

Ventura City Council is more concerned with dog licenses than it is with fixing roads.

A local radio station, AM 1520, recently went on the air concerning the subject of “chickens, Planning Commission and the City Council”. During the program a Ventura citizen called in to report his animal experience. The report is noted below. The folks at Ventura Animal Control earn the coveted BLUE BELCH AWARD from VREG.

The caller reported that the dog police knocked on his door early Sunday morning and demanded to see a license and rabies vaccine papers for his pooch.  The dog owner was shocked and taken by surprise.  So he allowed the official to come inside and see the papers.  As it turned out, the dog owner had the rabies vaccine papers but not a license and he bought one on the spot.  The dog owner did not say that the enforcement officer advised him of his 4th amendment rights.  When the officer left the home, the dog owner said “You know, this reminds me of pre-war Germany, people knocking on doors and demanding papers”.

 

Editors’ Comments

To state the proposition that our City might find a stray $400,000,000 from a bankrupt state government is to demonstrate its absurdity.

 

Editors:

R. Alviani            K. Corse             T. Cook

J. Tingstrom       R. McCord         S. Doll

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Grand Jury and City Code Enforcement Abuse

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John Locke talks about code enforcement tyranny

WHEREVER LAW ENDS TYRANNY BEGINS
—John Locke, 1632-1704

CODE ENFORCEMENT AS A REVENUE STRATEGY FOR VENTURA

This edition of Res Publica is not a typical VREG topic on City finances because it pertains to a recently published Grand Jury report; however, since the report addresses the aggressive collection of fees and charges by Code Enforcement, motivated by the need to raise more revenue, it is important to bring the details of that report to your attention as a citizen.  It is also extremely important for all of our citizens to know how others in our community are treated by the City Manager staff, who constantly remind us of their transparency, fairness and a sense of partnership with all citizens.

GRAND JURY INVESTIGATES CITY OF VENTURA

[THE SHERIFF OF NOTTINGHAM IS BACK]

Bully is the byword of Ventura Code Enforcement officers.

The 2011-2012 Ventura County Grand Jury opened an inquiry into the practices and fee policies of the City of Ventura and its Code Enforcement group regarding second dwelling units and non-dwelling structures for the period of 2009 through the present time, and have issued a report condemning the Code Enforcement practices.

 

The investigation started numerous citizens complained of:

  1. Aggressive enforcement actions
  2. verbal threats from code enforcement officers
  3. unauthorized searches
  4. threatening documents
  5. preferential treatment
  6. unfair appellate system
  7. arbitrary enforcement decisions holding current or successive property owners responsible  for permits not obtained for work done prior to their ownership
  8. City Council and City Manager trying to raise more revenue through fines and higher permit fees to balance their budget

CODE ENFORCEMENT HISTORY

The backdrop for this started in 2008-2009, when the City began experiencing the financial impact of declining revenue, including revenue losses in Building & Safety and Planning.   Faced with reductions in sales tax revenue, like all cities, this council compounded our revenue problem with a spending problem.  Those spending decisions have come back to haunt us.  As a reminder here are a few examples:

  • $1,000,000 for a study to narrow Victoria Avenue
  • Council enacting a 911 tax that had to be reversed
  • A failed election effort to raise sales taxes
  • Council’s waiver of $1.5 million in payment of permit fees, which should have been paid to Building & Safety for the WAV construction project
  • Lending $2.5000,000 to the WAV developer, and then subordinating that loan to a CHASE loan on the same property. If CHASE elects not to extend their note again and forecloses on the 13 condos in this project that money is gone
  • Unfunded pension liabilities for police and fire of $42,288,412. That does not include the cost of the unfunded benefits for all other employees, which is approximately $20,000,000
  • In 2014 the City will have to pay CALPERS another $19,488,000, on top of payroll costs of $48,000,000, for a total of $67,488,000. That is 80% of our total annual general fund income

CODE ENFORCEMENT – A SYSTEM OUT OF CONTROL

Intimidation is code enforcement's tool in Ventura

Ventura Code Enforcement officers use intimidation, according to the Grand Jury.

The Grand Jury pursued an active investigation of interviewing citizens, government employees and reviewing historical documents.  The evidence and testimony of witnesses in such investigations is, by law, privileged and cannot be disclosed.  This report is an indictment of a system out of control. Here is an even dozen out of 44 facts which the Grand Jury found to be true:

  1. The Code Enforcement officers were aggressive and used intimidation to gain authorized and unauthorized access to properties in the City
  2. Code Enforcement badges are designed to look similar to the Ventura Police Department badges. Code Enforcement officers are not peace officers
  3. Code enforcement bullies Ventura residents

    Ventura Code Enforcement officers intimidate and bully property owners

    Code Enforcement officers claim to have more power than police officers relative to property matters

  4. Code Enforcement has acted on complaints that appear to be retaliatory in nature against neighbors
  5. The Chief Building Officer made recommendations and reports to the City Council to increase inspections, adopt regulations and programs to increase fees
  6. The City Community Development Department (Jeff Lambert) and Code Enforcement (Herr Stauffler) hold current property owners liable when no permit is found, for any work performed, even for work prior to ownership
  7. City permit and inspection record keeping responsibility is placed on the property owner by Code Enforcement staff.  There is no legal requirement for property owners to retain such permits or maintain records
  8. The City lost and/or misfiled permit(s) and inspection records
  9. The City has some damaged and unreadable permits
  10. The previous Code Enforcement fees are arbitrary and have little monetary relationship to the cost of services
  11. The City considers the new code enforcement fees are not a tax.  The Building & Safety Department permit and inspection process had been funded by the General Fund.  The same inspection activities are now performed, except the funding comes from the new permit fees — charged to property owners that build or modify structures
  12. The City stated that finding more code violations does not have a direct financial impact on the Code Enforcement group, but does significantly raise the permit fees for Building & Safety, and likely saves Code Enforcement jobs

Read the full text of the Ventura Grand Jury report here. For more, click here.

CITY OF VENTURA RESPONSE TO GRAND JURY REPORT ON CODE ENFORCEMENT

[LET THEM EAT CAKE]

The City administration published the following response:

“The City of Ventura and its City Code Enforcement staff are committed to preserving and promoting the safety of all who live, work and visit our community. City Manager Rick Cole has reviewed the Grand Jury’s report and acknowledges their suggested policy recommendations.

It should be noted that the report includes no specific example of the problems cited, nor any new information beyond the complaints publicly aired before the City Council and the Safe Housing Collaborative going back several years. Those concerns have been the subject of extensive Council and staff discussion and action, which have already resulted in changes to the City’s approach in promoting and enforcing the health, safety and zoning codes. It should also be noted that despite the public play of a few complaints, the City’s approach to code compliance is compassionate and patient in working with property owners.”

 

Editors Comments:

The response by the City to this report clearly demonstrates their lack of understanding, or constitutes a brazen and irresponsible attempt to obfuscate the truth when they state “the report includes no specific example of the problems cited” –  in other words it is ”vague”.

  A grand jury’s historic function, serving as a quasi-judicial body is to determine if there is probable cause to believe a crime has been committed and to protect citizens, including the obligation to “investigate and report on the operations, accounts, and records of a city’s officers, departments and functions…”   They also have the duty to “inquire into the willful or corrupt misconduct in office of public officers of every description”.

Code Enforcement Sheriff of Notingham

Alan Rickman as the Sheriff on Notingham

The specific evidence and the identity and testimony of witnesses during a Grand Jury investigation are privileged and cannot by law be disclosed to anyone unless and until an indictment is issued.  Their proceedings are conducted in private, and their reports are reviewed by County Counsel, or the District Attorney.  For the City to now suggest that the report is without merit because it does not mention specific examples of wrongdoing or names of witnesses interviewed is ludicrous.  Does the City staff really believe they are entitled to know the names of the people they are accused of intimidating, or whose properties were the subject of an illegal search?

City government and Code Enforcement officers serve a valuable and important service to our community, until they start acting like the infamous Sheriff of Nottingham, of Robin Hood fame, who was notorious for his use of force, intimidation, abuse of power and excessive punishment of the citizenry.

Editors:

B. Alviani          K. Corse          T. Cook

J. Tingstrom    R. McCord       S. Doll

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$850,000 Players Club Loan by City

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It will be of little avail to the people that the laws are made by men of their choice,
if the laws are so voluminous that they cannot be read, or so incoherent that they cannot be understood; (or) if they…undergo such incessant changes that no man who knows what the law is today can guess what it will be tomorrow
—James Madison, Federalist Number 62

VENTURA THE ART CITY, OR IS IT THE GAMBLING CITY?

[The $2,000,000 bet on Players Club]

Ventura is financing Players Club Casino’s move to the Auto Mall.

The City Council has failed in their last two efforts to increase the taxes of the citizens of this community; however, our City Manager and the Council continue, facing another $2,000,000 shortfall in the next budget, are exploring new ways to raise money – without your vote but using your tax money.

The latest effort involves an $850,000 loan to The Players Poker Club, aka The Players Casino, now located at the old Volvo dealership in the auto mall area, at 8% interest.

The City is borrowing $850,000 from Rabobank at 4% interest, using tax revenue in our general fund as security for the loan.

The City is borrowing $850,000 from a foreign bank – Rabobank – at 4% interest, using tax revenue in our general fund as security for the loan.

The justification for this unusual step by a municipality is set forth in and administrative report authored by Jay Panzieka, the Chief financial officer for our City. You can view that report on the City of Ventura website by scrolling down, click on “public meetings”, and under City Council click the March 19 Council meeting.  It is agenda item number 9. The Council approved the proposal.  Here are the verbatim key points:

  • The City faces severe revenue constraints due to the lingering impact of the recession.
  • The Players Club pays a 15% tax on their revenue. This was approved by voters in 2005.
  • The Players Club wants to add two more gambling tables, a restaurant and lounge that will be serving beverage (alcohol).
  • In 2010 the Players Club was allowed to expand their operation from 6 tables to 18 tables.
  • Until the recent move the Club was paying $250,000 a year in taxes, however since the move to the new site in July, 2011, they have paid $261,066 and $262,696 in the first and second quarters respectively. They estimate they will pay a similar amount in taxes in the final two quarters.
  • This tax revenue of an estimated $1,053,773 per year is based on 16 tables. The addition of two more tables is estimated to return another $65,000 per year per table plus revenue from the sale of food and alcohol.
  • There is a risk of failure should the Players Club not meet their obligation; however because of their history of success during difficult economic times the benefits outweigh the risks.
  • The loan is to be paid off over a two year period during which time the City will earn $37,000 in interest. Payments to start May 1, 2012.

Players Club relocates to the Auto Mall.

So why did the City take this unusual step in financing a gambling casino?  The arguments in favor of the loan goes as follows: the City has a monopoly on gambling tables until 2020, that it is the only gambling establishment in our county, and that due to the dismal prospects for new tax revenue this loan may result in more tax revenue.  The entire model is predicated on the assumption that if they build it “they will come to gamble”.

Calwatchdog had this to say:  “California redevelopment agencies may have been phased out. But cities are getting into the business of loan sharking to offset a decline in sales and property taxes.

This is a version of a “buy low” and “sell high” strategy. Only in this case it is “borrowing at a low interest rate” and “lending at a higher rate.” It’s called arbitraging in finance.

Arbitraging is expressly forbidden with tax-exempt bonds. That is because local government is a tax-exempt organization. It could potentially borrow cheap money at tax-exempt rates and re-invest it at a higher market rate. It thus could reap a profit with the public’s cheap money. All this is illegal under Regulation 1.148-0(a) of the I.R.S Code.

This explains why the city of Ventura used a private lender in the Netherlands to borrow money from instead of using bond funds. It is not illegal to arbitrage bank funds. The way the City of Ventura spins it: it is “restoring confidence and lending to a casino.” The city also denies that the city itself is a “bank.”

But if these loans are not a high risk why is the interest rate doubled? Interest rates serve as a substitute or indicator of risk. In fact, they are often called a “risk rate.” The higher the risk, the higher the interest rate and vice versa. A loan for double the normal interest rate would indicate a loan with double the risk. Eight (8%) percent would be a “junk bond” interest rate in the private sector today.

But if the risk in fact is low, as Mr. Panzieka and the City Council suggest, then the city is engaged in arbitrage, a form of speculative investing, and they are doing it with public money.  Thus, it appears that City government, deprived of their redevelopment money and dismal tax revenues are venturing into very dangerous waters.    Calwatchdog said – “redevelopment agencies are getting into the loan sharking business. A loan shark is informally defined as “one who lends money at exorbitant interest rates…”

But probably the bigger questions are:

  1. Was the Players Club Casino not able to secure a loan of their own in the market place?
  2. Should City Councils be doing the job of private enterprise using the public treasury as the guarantor?
  3. Should the City be risking public funds as collateral for a loan to a gambling enterprise?

Given that at least 85% of the current budget is used to pay salaries, health care and pension to employees, of which 58%  is devoted to police and fire, it is pretty obvious where these hoped for new sources of revenue will be spent.

Players Club represents a new revenue source for Ventura.

Now consider if you will the current proposal of Mayor Tracy to hire 6 more police officers and the City Council decision to pay $1 million dollar for a new fire truck, and it becomes crystal clear that the City is more interested in finding any and all sources for new revenue, fees and pursuing innovative revenue schemes rather than pursuing effective cost controls or reforming pension plans that are absolutely not sustainable.

This Council can talk about reforms and pretend that they made great strides in reforming the police and fire contracts, but the reality is that between 2008 and 2011, the unfunded obligations for police and fire alone increased from $43,496,873 to $68,385,380.  That represents an increase of 57% over a 4 year period during which no officers or firemen were added.

Look for cities to start using their permitting powers together with loan arbitraging to create or enlarge more businesses that don’t create real wealth or increase overall productivity, but instead only generate short term tax revenue.

Editors Comments:  

We do not share the view of CALWATCHDOG in its entirety. Mr. Panzieka has presented a logical means for increasing tax revenues.  It is a legitimate function of our City to help, and encourage local business to grow even if it is gambling, however doubling the interest rate to 8% is troublesome, because it does reflects there is  greater risk in the transaction,  and it is in effect state sponsored and financed capitalism.   If the Players Club succeeds, as we hope, then the gamble will have worked. If they fail then we will suffer a triple whammy – pay off the $850,000 loan to Rabobank, loss of $1,000,000 in tax revenue and then have to shop for someone else to acquire the gambling license.  That is a $2,000,000 bet.

 

Editors:

B. Alviani        K. Corse          T. Cook

J. Tingstrom  R. Mccord       S. Doll

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