Posts

unfunded pension liabilities should force pension reform in Ventura

Latest Facts About Unfunded Pension Liabilities You Need to Know

Norman Vincent Peale on confronting Ventura's unfunded pension liabilities

Stand up to your obstacles and do something about them. You’ll find they haven’t half the strength you think they have.”

Dr. Norman Vincent Peale

Which leader will arise to address unfunded pension liabilities?

Ventura’s unfunded pension liabilities continued to grow in 2019 to $218.6 million. The City of Ventura continues to sink deeper into debt to pay for city employees’ present and future retirement benefits.

Unfortunately, the economic reality of the city’s current public pension liabilities is not receiving the attention it demands. We raised the warning flag about the growing unfunded pension liabilities debt in 2009, 2011, 2013, 2015, 2017, 2018 and 2019, yet the problem continues to grow unabated.

Revised Unfunded Pension Liabilities Figures

The new unfunded pension liabilities figures come from the 2018-2019 Comprehensive Annual Financial Report (CAFR). Ventura added $3.5 million to its unfunded liabilities. Simultaneously, the market value of Ventura’s assets held by CalPERS dropped to 66.7%, a multi-year low.

A chart of how bad Ventura's Unfunded Pension Liabilities have become

 

A Political Hot Topic

Discussions about pensions get emotional because we’re talking about people’s future and security. Let’s be clear. We respect the work city employees do. There is no denying that fire and police perform a vital job that is both dangerous and requires a high level of training and responsibility.

Our concern is not about their work. We’re uneasy about how the city structures, accumulates and pays retirement benefits.

Neglecting Pension Liabilities Doesn’t Make Them Disappear

Unfunded Pension Liabilities don't calculate well for VenturaFor ten years, Ventura has done little to remedy its unfunded pension liabilities. During that time, there have been four different City Councils. Yet, they made only a modest effort to solve the problem. Then-Mayor Bill Fulton and City Manager Rick Cole claimed in 2011 that the City of Ventura had tilled new ground by requiring the city employees to pay something toward their retirement – 4 ½%.

Yet, closer scrutiny showed employees pay their 4 ½% retirement contribution toward the employers’ portion (i.e., The taxpayers’ portion) of what Ventura sends to the CALPERS retirement plan. This accounting maneuver explicitly increases the employee’s total compensation, meaning the “contribution” counts as the employee’s income to calculate the employee’s retirement benefit when they retire.

What Ventura Can Do About Its Unfunded Pension Liabilities

The City Council made this one attempt to improve the current system but did not address the problem in a meaningful way. Since there are no proposals from the Council, the League of California Cities and Government Finance Officers Association recommended these actions to confront unsustainable pensions.

  1. Reduce the unfunded liability by making annual catch-up payments even more than CalPERS instructs you to pay—if you can afford to pay more.
  2. Raise taxes
  3. Reduce services
  4. Require voter approval of any pension obligation bond or POB. (Click to learn more about POBs)

These are terrible choices for the public.

Suggestions For Addressing Unfunded Pension Liabilities

There are two other choices for our City Council to consider if they have the political will.

  1. City workers' pensions are creating large unfunded pension liabilitiesMake beneficiaries pay more. With the city covering 100 percent of the unfunded liability, the problem will continue to grow. There will be minimal reforms because the actuarial losses fall on the taxpayer. Capping the employer contribution at a fixed percentage of salary would cut pension costs for the city. As pension costs increase over the years, the employees will pay all the growing costs.
  2. Change when retired city employees may begin collecting pensions. This alternative solution applies to new employees only. What if police and fire could vest their generous pensions in full by age 50 or 55, as they do now, but the payments did not start until age 65? Why would that help? The reason is that even if the city makes no further contributions, the fund will have ten more years to grow. At current official pension growth rates, that would more than double the fund’s value over those ten years. Also, the retirement payment period would be ten years shorter, given the same life expectancy. Such a system would still offer retirement security, but it would start at what most of us consider average retirement age.

Public sector employees may resist the changes but this solution makes sense. Private sector employees don’t get their full social security until 65 or even 67, depending their birth year.

Examining How Much City Employees Make

In 2019, 92 of the top 100 salaries on the city payroll are police officers and firefighters. Every one of the Top 100 earns more than $216,762 in pay and benefits. For perspective, the average family in Ventura earns $66,000 per year with two wage earners.

Raw Political Power Behind Unfunded Pension Liabilities

Ventura’s city employee unions negotiate higher and higher salary increases disregarding any concern that the money may not be available to pay their pensions once they retire. Union negotiators believe a virtually ironclad guarantee exists for the workers to whom the city promised the pension benefits. So, many Councilmembers accepted the same thing, although it’s no longer valid. A Federal Bankruptcy Court ruled otherwise in January 2015.

CALPERS argued that the California Constitution guaranteed the union contracts and thereby pension benefits from cuts. And if the court didn’t agree, they pleaded that they enjoyed sovereign immunity and police powers as an arm of the state. And if the court still disagreed, they argued that they have a lien on municipal assets.

The Federal Bankruptcy Court effectively threw them out of court, saying, “It is doubtful that CALPERS even has standing.   In his opinion, Judge Christopher Klein writes “It does not bear the financial risk from reductions by the City in its funding payments because state law requires CALPERS to pass along the reductions to pensioners in the form of reduced pensions.”

Judge Klein further stated, “CALPERS has bullied its way about in this case with an iron fist” and “that their arguments are constitutionally infirm in the face of the exclusive power of Congress to enact uniform laws on the subject of bankruptcy…”.

The impact of this decision is that CALPERS cannot stop cities from modifying pensions. Yet, the Ventura City Council appears unaware of the findings.

Editors Comments

Past retirement pension negotiations were based on union bargaining and raw political power, creating a gap between what politicians promised and what cities can really pay. We offer some solutions, but it will take political will to bring the retirement benefits back to reality. Changing the system is the only way these promised benefits can be sustainable and dependable for retirees. It’s also the only way that taxpayers can afford to pay for them.

Write Directly To Your City Councilmember To Insist They Address Ventura’s Unfunded Pension Liabilities

Below you’ll find the photos of our current City Council. Click on any Councilmember’s photo and you’ll open your email program ready to write directly to that Councilmember.

Sofia Rubalcava hasn't addressed unfunded pension liabilities Doug Halter Needs To Address Unfunded Pension Liabilities in Ventura
2021 Ventura City Councilmembers Erik Nasarenko hasn't addressed unfunded pension liabilities
Jim Friedman hasn't addressed unfunded pension liabilities Lorrie Brown hasn't addressed unfunded pension liabilities
Joe Schroeder Needs To Address Unfunded Pension Liabilities in Ventura

For more information like this, subscribe to our newsletter, Res Publica. Click here to enter your name and email address.

 

 

Will governing change with the next City Council?

How Will Governing Be Better With A New City Council?

Tom Daschle on governing.

The election is over. It’s time for the work of governing to begin.

Sen. Tom Daschle

President Reagan on governing.

 

The 2020 City Council election marked a new beginning for governing Ventura. The newly elected Councilmembers campaigned to drive change at City Hall. Now, the emphasis for the newcomers will be to shift from campaigning to governing.

Three New Councilmembers

2020 is the first election for Ventura Districts 2, 3 and 7. The city shifted from citywide to district elections in 2018 when voters elected four City Councilmembers.

Doug Halter defeated incumbent Christy Weir in District 2. Mike Johnson won an open seat in District 3 vacated by Mayor Matt LaVere, who voters selected as a County Supervisor. Voters selected Joe Schroeder in District 7 to replace retiring Councilmember Cheryl Heitmann.

Campaign Spending

This year’s candidates raised a record amount of money. Campaigning was in districts instead of citywide. One would think the amount of money needed would be less, but that has not proven to be the case.

The price to pay for governing Ventura

The candidates raising the most money were Nancy Pedersen, $57,531; Aaron Gaston, $54,195; and Doug Halter, $54,161. Of the three top fundraisers, only Doug Halter won his district. (These numbers will increase. The final campaign finance report is due January 31, 2021)

To put this year’s spending into context, the total amount raised for three districts was 7.9% higher than in 2018 for four districts ($216,684 vs. $200,811).

Voter Turnout

High numbers of voters turned out in each district. All three districts had more people vote than even District 4, with the highest voter in 2018.

The districts were more competitive this year than in 2018. Only one candidate received more than 3,000 votes compared to three out of four winning candidates in 2018.

Platforms For Governing

Each candidate presented his top priorities for the city to the voters. Here’s what each promised.

Doug Halter, District 2

Halter's Priorities for Governing

Mike Johnson, District 3

Johnson's Priorities for Governing

Joe Schroeder, District 7

Schroeder's Priorities for Governing

Priorities In Common

There were some commonalities between the priorities. Yet, the candidates missed the mark on one crucial issue.

All three candidates promised to deliver economic vitality while governing. Improving the economy is the most specious of any City Council candidate’s priorities. Candidates offer this promise during each election cycle. Yet, the Council has little control over Ventura’s economic prospects. Councilmembers can’t control which businesses move to Ventura. Nor can they determine which existing companies should expand. When the Council does meddle in selecting companies, the city has experienced catastrophes. One only needs to remember the Brooks Institute debacle.

There is one area over which the City Council can control the business environment. They can make it easy for businesses to start-up or expand. Easing regulations and reducing approval time can stimulate business. We’ll see if this freshman class of Councilmembers will enact changes in this area. Their predecessors have not.

What All Three Are Missing

All three winners failed to mention one opportunity to reduce regulations and cut bureaucracy. Not one of them prioritized recovering from the Thomas Fire. It’s been three years since the disaster, and the city has not recovered economically. Victims have rebuilt only 190 of the 535 houses destroyed in the fire. That’s 35% of the buildings in three years. The City Council promised quick response and expedited procedures. The city waived some fees and added extra city staff to handle the influx of building plans. Yet, it’s hard to argue that Ventura’s response has been quick.

Another glaring omission is addressing the unfunded pension liability deficit. Retirement pensions are the city’s number one problem. Ventura currently has a $215.1 million obligation. That number continues to grow. CalPERS (the California Public Employees retirement fund) demands rapidly increasing contributions from Ventura. We will have permanent increases of at least $2 million per year for five to six consecutive years.

Issues

Newly-elected Councilmembers now have to shift their focus. The entire campaign focused on convincing district voters their interests came first. Once elected, they must change that focus to represent the whole city.

The top issues facing the City Council continue to be water, homelessness, budget deficits, pensions, economic stability and growth.

Two of the three new Councilmembers list water as a priority, but none of them has a stated water policy. Without alternative thinking, water ratepayers will have no choice but to surrender to Ventura Water’s strategy for VenturaWaterPure. Citizens should balk at this policy for both health & safety reasons and millions in unnecessary cost.

Homelessness is a priority for two new Councilmembers. Homelessness is an intractable problem showing all the signs of a failed paradigm. Ventura continues to spend more money on the homeless, yet the outcomes continue to worsen. What’s more, the COVID-19 recession will make more people unsheltered in the future. Court rulings and voter initiatives have made it increasingly difficult for public safety to help. Ventura needs a collaborated effort and some creative thinking to make any headway against the problem.

The One Issue Plaguing Ventura’s Long-Term Vitality

The incoming City Council will have to sharpen their pencils to impact the budget deficits and pension liabilities. The economic impact of the pandemic makes this challenge even harder. The city will have reduced sale tax revenue from the business shutdowns and diminished disaster support from Sacramento. Together, it will be harder to meet expenses.

The new Councilmembers must acknowledge that growth, jobs and water availability are inseparable. They also need to recognize the opposition to more houses (the NIMBYs) by some in the community. Forward progress on growth means accommodating, integrating and compromise.

Editors Comments

We have been through two election cycles now, and districts have elected all of the City Councilmembers. While it’s still too early to evaluate the impact of moving to district voting entirely, some things are becoming clear.

First, campaign spending is increasing unabatedly. In the last two elections, spending has reached record levels. It used to be that a candidate for City Council had to spend money throughout the city to get voters. Under district voting, candidates spend money to influence their 15,000 potential voters. On the surface, one would think it would take less money to reach a smaller group of people, yet spending is skyrocketing.

Second, some of the campaign spending is money spent by Political Action Committees (PACs) to support candidates they favor. The chief PACs are the fire and police unions and the Chamber of Commerce. This year PACs spent over $104,000 to support Aaron Gaston, Doug Halter and Nancy Pedersen.

Governing Ventura is determined by PAC contributions

 

 

In 2018, PACs spent over $84,000 to support Kevin Clerici, Jim Friedman and Erik Nasarenko. The year-over-year increase in PAC spending is 30.7%.

What We Learned About PAC Spending

The PACs supported six candidates, only three of whom were elected. What does this tell us?

  • Voters don’t always vote for the candidate spending the most money— good news in an era of rising campaign expenditures.
  • The PACs’ record for getting the candidates they want into office is only partially successful. In turn, it may also mean that the PACs’ influence over the City Council may not be as strong as it has in the past.
  • Candidates are willing to spend large sums of money for the chance at governing. Voters should scrutinize from where their preferred candidates receive their funds.
  • Citizens United determined that money spent in political campaigns is free speech. The PACs know this and contribute more to campaigns than any individual contributor. Who will the Councilmembers listen to when there is a crucial decision to make?

Third, if diverse representation is the reason for voting by districts, then the 2020 election contradicts that intent. All three elected Councilmembers are old, white males. Two of the three replaced women on the Council. It’s too early to draw any conclusions from two elections, but it appears that voters are electing candidates that revert to the old norm to govern them.

Fourth, voter turnout was unprecedented for the City Council election. The overall numbers, and the percentage of eligible voters in each district, were the highest recorded. Strong voter turnout is good news. Democracy works best when voters engage.

Finally, it’s up to each individual to hold our elected officials accountable. The commitments they make during the campaign must translate into action while they are governing. Otherwise, they’re just empty promises. It’s up to you to make sure the Councilmembers live up to their commitments.

Here’s How You Can Write Directly To Your City Councilmember

Below you’ll find the photos of our current City Council. Click on any Councilmember’s photo and you’ll open your email program ready to write directly to that Councilmember.

Councilmembers
Councilmembers
Councilmembers Councilmembers

For more information like this, subscribe to our newsletter, Res Publica. Click here to enter your name and email address.