CALIFORNIA: AMERICAN GREECE
Tim Cavanaugh of an on-line news company called REASON has written a good analysis of the dilemma facing California. He writes:
“What do Europe’s most bankrupt state and America’s most bankrupt united state have in common, aside from being bankrupt?
In what is undoubtedly a coincidence , noticed only by free-market fundamentalists, it turns out that Greece, that sun-drenched paradise on the Aegean, and California, that sun-warmed El Dorado on the Pacific, are the worst places to do business in their respective economic zones.”
[Investment In People Too High]
The city Manager recently announced that we are in a “war for jobs”. He is right, but know this. We will be competing with every city in the nation for those same jobs. The winner will be the public entity that realizes that the jobs we lost in the 2008 depression are not coming back. We have to create new opportunity and new jobs.
The city needs private enterprise now more than ever, so please City Council when a new project developer or businessman comes through the door give him a hug, and not a bill for all of the costs and fees that you have piled onto such projects. A happy face and lower fees, as an incentive to come to Ventura, will work wonders.
The Ventura City Council says they are going to “Live Within Our Means” and stay within their budget, but they wince when it comes to the thought of layoffs. The closing of a fire station proposed by the City Manager, as expected, has heightened the emotions of several adjacent neighborhoods and the Fire Department folk. These citizens and the firemen need to wake up and realize that this is not about saving a fire station, but the financial well being of the entire City. We must keep in mind that City government has been entrusted to provide “basic governmental services” to its citizens within its means, but does not have an obligation to keeping individuals employed so that they can retire with life with lavish pensions and benefits.
Any business owner knows that to reduce services diminishes their value. They also know that the single highest AND controllable expense is labor. Maybe the theme of “Living Within Our Means” needs to be better defined. Reducing services and programs should only come after a reduction of staff levels reached the bear minimum.
Five years ago, the claim was “we have cut expenses to the bone and there is no where else to cut.” Today, the City has reduced the workforce by 16% AFTER they made that claim. Sounds like the story of the “boy who cried wolf”. Enough on the budget for now. All we know is the reduction of services has long been a ploy to get the citizens to sympathize with public employees.
WAS IT $10,000,000 or $20,000,000 LOST?
[Monetary Investment Too Risky]
In March and April 2009, VREG discussed the loss of $10,000,000 in Washington Mutual and Lehman Bros. investments.
The City father’s took refuge [seemed proud?] that they only lost $10 million in investments in 2008, they defend their loss by comparing the loss to the average citizen’s 401K losses. Hardly a realistic comparison given that the investment policy for a municipality is and should be much be more conservative and restrictive. Some at the City make it sound as if it is heresy to suggest that they should not have lost anything.
The City Attorney on the other hand is crying “fraud” on the part of Lehman Brother and WaMu — a distraction at best. The decision to invest in these financial institutions was made by a committee of four. None of the four members of the Investment Committee has investment licenses, nor the experience and qualifications to oversee a $200 million portfolio in this current financial market. Months before the Lehman and WaMu debacle, the City had a prior warning of problems due to a potential $10 million loss they had invested with Bear Stearns. It turned out that the Bear Sterns was acquired by JP Morgan and thus avoided bankruptcy, however at this writing we do not know how much JP Morgan is willing to pay the City of Ventura on that investment.
How is the recovery of the loss of $20,000,000 by the City of Ventura with their investment in Bear Stearns, Washington Mutual and Lehman Brothers going? We do not know. Was anyone fired for losing $20 million? Nope. And we predict no one will not be fired. What the Council should do is appoint people who are qualified AND do not have a potential conflict of interest in making investment decisions to insure that income from the investments will be available to feed the general budget.
THIS FROM A READER OF THE LAST EDITION
[CalPERS Investment Underperforming]
It is interesting that when I attended the PERS conference in Los Angeles at the Convention Center in February, the strongest criticism of PERS [CALPERS] came from the representative of the Governor’s office, who had been a former member of the CalPERS Board. His critique was focused on two things:
- That PERS consistently and incorrectly utilized a projected return of investment (7.75%) that was grossly overly optimistic of their likely actual long-term results
- That PERS was virtually impenetrable and as dark as a lead lined coffin when someone attempted to secure information from it.
I reported this critique to both the Compensation Task Force and to Council Members…I have also reported repeatedly on the losses that PERS has incurred in their investment portfolio, that they are the subject of criminal investigations over potential fraud and kick-backs form their relationships with placement agents (former Board members using their old connections to get rich), and that at least several current Board members have incurred serious fines because of their consistent failure to report publicly on their investment holdings and sources of income as required by law… Needless to say, our union representatives constantly run with the official PERS line that PERS is sound and in good health.”
We have previously reported on the failed investment policies of PERS. This organization invests our pension dollars using failed economic models and fallacious investment return calculations. It is easier said than done, but the sooner we can distance our City from this organization the sooner we can be on the path to economic recovery.
B. Alviani S. Doll J. Tingstrom
K. Corse B. McCord T. Cook
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