McDermott uses the actual market value of assets in the pension funds as opposed to CalPERS’ inflated “actuarial” values which pretend that the the funds are worth far more than their actual market values.

The calculations can be seen in this spreadsheet.  The source documents can be found here.

Even the $80 million figure may understate the problem as it still uses CalPERS’ highly optimistic assumption that it will earn 7.75% annually on its investments.   If returns fall short by even a few percent, the underfunding will be far more.  Further, these figures consider only already accrued liabilities for past service, not any pensions for city employee earnings going forward.

The Encinitas Taxpayers Association would welcome a response from city staff, city council, or CalPERS.

Risks of underfunding current benefits could result in the loss of future jobs and government services and need for massive tax increases.

LA Times Opinion:California’s $500-billion pension time bomb

That’s the finding from a study released Monday by Stanford University’s public policy program, confirming a recent report with similar, stunning findings from Northwestern University and the University of Chicago.

Pension Issue 2: Perceived unfairness or unnecessarily excessive perks

On January 26, 2012 Democratic Governor Edmund G. Brown Jr. asked Los Angeles business leaders to stand with him on two major priorities for 2012: passing his balanced budget plan and persuading the legislature to enact his 12-point pension reform proposal.

“The numbers just don’t add up,” said Governor Brown of the public pension system. “Benefits, contributions and the age of retirement don’t reflect today’s realities, putting taxpayers on the hook for huge costs in the future. The cracks are showing and this dam will burst unless the legislature gets serious and takes urgent and decisive action.”

Governor Brown’s pension reform plan, introduced in October 2011, will apply to all California state, local, school and other public employers, new public employees and current employees as legally permissible. The plan’s 12 points are:

1. Equal sharing of pension costs between all employees and employers
2. Establish a “hybrid” risk-sharing pension plan
3. Increase retirement ages
4. Require three-year final compensation to stop pension spiking
5. Calculate benefits based on regular, recurring pay
6. Limit post-retirement employment
7. End felons’ pension benefits
8. Prohibit retroactive pension increases
9. Prohibit pension holidays
10. Prohibit purchases of service credit
11. Increase pension board independence and expertise
12. Reduce retiree health care costs

For full details of Governor Brown’s pension reform plan, click here.

From the LA Times coverage of Governor Brown’s request:

Reporting from Sacramento—Gilbert Robles retired as a state parole agent at age 53, able to collect a $101,195 annual pension — 94% of his final salary. Last year, six months after he retired, the Arcadia resident accepted a political appointment with the same agency that pays an additional six figures.

Scott Hallabrin took retirement as the top attorney for the state’s ethics agency on June 29, 2009. The next day, he went back to the same post, as he prepared to watch his pension checks roll in on top of a salary.

Los Angeles school administrator Norman Isaacs got a 35% raise in 2006, the year before he filed for his public pension. The increase sharply boosted his retirement benefits.

Robles, Hallabrin and Isaacs acted within their rights under California’s pension rules, which the Legislature’s independent budget analyst recently described as “among the most generous in the country.” That generosity comes with a price: The main pension system for public employees is expected to cost taxpayers $2.3 billion this year and has long-term obligations that it is $85 billion short of being able to fund.

Council Member Gaspar admitted to the Union-tribune that she purposely used her personal email address to (incorrectly) avoid the California Public Record Act’s requirement for full disclosure.

In an effort to better comply with the state’s laws on open meetings and public records, The City of Saratoga has adopted a new electronic communication policy for its council members and planning commission members. “We are in a constant state of discussion about the best way for the city to comply

Council and commission members who were using their personal e-mail accounts to respond to questions and comments from citizens were given a new city e-mail account and were warned by Taylor to no longer use their personal e-mail accounts for city business. “If you were to use your personal account for city business, then when we get a public records request, we have to be sure to look through your personal accounts,” Taylor said. “If we get sued, we have to tell you to freeze and not delete anything in your personal or business accounts.”

The policy also forbids the council from using “e-communication” during meetings.

The group also discussed adding a text message to the top of all e-mail communications that would alert members and residents not to forward any communication from one council member to another.  E-mails communications that discuss policy issues among a majority of the council members can be defined as a “serial meeting,” which is illegal under the state’s open meeting law, the Ralph M. Brown Act.
Saratoga News, 9/1/09

Read the judge’s review here.

When you keep a completed roads report secret from the public, saying it was a draft document, what do you do when the document actually isn’t a draft and you get sued for the release of the document? You change your legal defense! That is what Encinitas did. That was sign number one that the City was full of bologna.

In court, the City changed their defense from saying it was a draft (it had been finalized all along, but the City kept that secret) instead the City just said it would harm the public to release the document. They did not really explain why releasing the roads report (THE FINAL or the previous draft) would have harmed the public. That guaranteed that when they lost the public was going to see through the Council’s statements. They put up a bologna defense which included all sorts of suspicious statements. They also dragged out the lawsuit and kept Cummins’ side from adequately establishing all the facts and their legal responses seemed to have very suspicious “problems” getting delivered. In the end that cost taxpayers.

Most of the City still has no idea that the City is far behind on scheduled roads maintenance. Most of the rest don’t care much. The City should have just released the report and not worry about what the public would think. But, that means they would also been asked to release the Hall park documents which probably would have shown that the park was being artificially delayed because the City’s budget wasn’t adequate to accommodate building the park.

What do you say when you get caught by a citizen, an open government organization, a judge and an appellate court spinning a bologna story that the Cummins’ case was without merit? Use the political spin playbook if you think the public won’t look into the details and keep saying the case was without merit and use the  4 Ds.

For more history on the Hall park and the roads report, see here.

[Note on the roads report: The report purposely fails to report the projected roads conditions beyond 5 years out from now. The road maintenance cycle is much longer than 5 years. Why did the City not want those number reported? We can never know that because City has admitted to destroying the correspondence with the consultant. The City has demonstrated to not be open to tough questions they know they will have to defend.]

The dynamics of pension accounting — and therefore its politics — are changing.

The Connecticut-based Governmental Accounting Standards Board is decreeing that state and local governments and their pension funds must not only fully report unfunded liabilities on their balance sheets as debt but must also include what those liabilities would be using super-safe bond earnings.

A Stanford University team has already analyzed California’s three state pension systems on the latter basis and reported a half- trillion dollars in unfunded liabilities.

Read more: http://www.vcstar.com/news/2011/jul/19/walters-potential-debt-from-states-pension-to-be/?partner=RSS#ixzz1eRSL52MH
- vcstar.com

CITY HALL CONTINUES TO IGNORE OUR VOICE

ENCINITAS CITIZENS PROTEST

Encinitas citizens gather to hold elected officials accountable for engaging in blatant cronyism, ignoring conflicts of interest, and condoning politically corrupt practices.

Concerned Encinitas citizens to hold press conference at City Hall, 505 S. Vulcan, Encinitas, CA 92024, Wednesday, November 9, 2011, at 5:15 p.m., before the regular City Council meeting.

On November 9, at 5:55 pm, the Encinitas City Council plans to swear in Mark Muir into the seat formerly occupied by Maggie Houlihan.  The decision to appoint Mr. Muir was made by the Council majority —Bond, Stocks, Gaspar— in complete disregard for the concerns and wishes expressed by many of the citizens at the City Council meeting of November 2, 2011.

Earlier, at their September 26 (non-televised) Special Meeting, the Council had viewed an eloquent and hopeful videotape of Maggie Houlihan — taped in her last weeks.  Her desire was to seek out someone to step into her shoes, to fulfill the last months of her term of office and to keep true to her campaign promises. She endorsed Lisa Shaffer.  As a popular candidate who was the runner-up in the last election, Tony  Kranz also had a justifiable claim to the seat.  Either Lisa Shaffer or Tony Kranz should have been appointed to serve the remainder of councilperson Houlihan’s term of office.  Instead, the majority appointed their employee, their election campaigner and sitting Encinitas Fire Chief, Mr. Muir.

Why was Mark Muir chosen? Could it be because each of the majority members owed him favors?  Mr. Muir worked on several of their campaigns in the likely expectation of paybacks. This was not democracy in action, this was political quid pro quo.  There is a word for this:  Cronyism!

Mr. Muir funneled endorsements and support through Political Action Committees directly linked to him.  Muir founded and led both ECHO (Encinitas Coalition of Home Owners) and Golden State Firefighters (GSF) which repeatedly endorsed campaigns of Stocks and Bond and paid for deceiving trash mailers.  The International Association of Firefighters described GSF as a “San Diego-based political organization” that circulated “cynical and deceptive” slate mailers.  One of these mailers endorsed Stocks and Bond and included a message and picture of the PAC’s leader, “Mark Muir, Fire Division Chief and Chairman of Golden State Firefighters.”  He organized and established these PACs while employed by the City and benefitting from promotions culminating in his ascension to the well-paid post of Fire Chief for the City of Encinitas.   The term for this is:  Conflict of Interest!

Mr. Muir’s political activity of more than a decade was also a direct violation of City Policy. Egregiously, he campaigned using his city email address from the City Hall during normal business hours.  This is a clear violation of City policy and common standards of ethics.

This was brought to the attention of the Council prior to the appointment.  The Council majority proceeded with the appointment without asking Muir to confirm or deny the allegations.  The accurate characterization of this conduct is: Corruption!

Mr. Muir’s new council vote delivers a 4-to-1 super-majority, and the pro-development majority can rest easy knowing that their developer-funded plans for Encinitas can avoid public vote.   Our current General Plan requires “voter approval” for increases in zoning density unless the Council approves the change by a vote of 4 or more.   With Mr. Muir’s vote replacing Maggie Houlihan’s, this 4-to-1 majority is all but assured.

The negative impacts on our community character and vision for Encinitas are numerous. Among these, we count:

• A super-majority will enable the Council to approve rezoning and up-zoning without voter approval (for example, reconsidering and approving the conversion of the Ecke property from agricultural-zoned —“in perpetuity”— to residential-zoned land).

• A super-majority would be able to push through the replacement of our well-written, original General Plan and approve the controversial redevelopment of the El Camino Real corridor without a vote of the residents.  The proposed plan extends from the recently City-approved Walmart in the north to Encinitas Blvd in the south.  Current proposals would allow four-story or higher multi-use buildings, causing increased traffic congestion, crowding, and a decrease in neighboring New Encinitas residential property values.
• A super-majority would allow immediate obliteration of sunsets by 90-foot tall field-lights for neighbors of the Hall Sports Park (aka Hall “Community” Park)
• A super-majority would effectively enable the Council to approve spot up-zoning of any parcel, irrespective of neighbors’ concerns, whenever a deep-pocket developer asks for it.

Mr. Muir’s appointment means that the 12,488 voters who elected Maggie Houlihan in 2008 will no longer be adequately represented on the Council.  A chance to vote again in November 2012 is upcoming, but unless we show the council majority that we do not believe this appointment is fair, democratic, and morally supportable, they will be emboldened to further abuse our rights and continue to marginalize our participation in the democratic process.  Don’t let them ignore you.

Please come to protest the swearing-in of Mark Muir on Nov 9.

Attend the public protest and press conference in front of City Hall at 5:15 pm, before the Council meeting, and attend the protest during the Council meeting thereafter, at 5:55 pm.

Don’t let them ignore you!

A request to the city for records relating to revenue assumptions turned up nothing that would justify the big increase in sales tax revenues. We can only guess that the city is assuming a new Walmart in the vacant Home Expo site, despite concerns over inadequate parking. As for longer-term projections, the records request returned nothing at all that backed up the revenue forecasts beyond 2012.

The lack of public discussion about financial assumptions during a council meeting on the budget is as troubling as the lack of documentation. It seems the projections are made behind closed doors by staff and consultants and our elected representatives accept them at face value without question.

But most obscure, and most dangerous to the long-term financial health of Encinitas, are pension costs. In the hundreds of pages of budget and financial plan documents, nowhere are pension costs honestly and transparently addressed. A single table shows pension costs only as a percentage of payroll, not in dollar terms, and only for the first two years, not for the full six years of the financial plan. What is the city hiding? If the 15 to 35 percent increase in city pension costs in the first two years is any indication, the hidden third through sixth years are likely much higher. Is the city afraid to show these numbers to the public?

Still worse, the numbers the city is using assume that CalPERS will earn 7.75 percent on its investments annually forever. The staff report notes that “continued strong returns may lower future employer contributions,” but omits the obvious corollary, that lesser returns will leave taxpayers on the hook for much larger pension costs. With bond yields at extreme lows and equities at historically high valuations, the notion that we are likely to see continued robust returns forever is suspect at best. The city should plan for, and show, pension costs under a truly conservative scenario of investment returns.

As with revenue assumptions, there was appallingly little discussion of pension costs in the council meeting approving the budget. Discussing this large and growing liability is apparently taboo in polite Encinitas company.

Anyone can declare a budget balanced by playing games with the revenue and cost estimates. It is time the city had an honest discussion with the public about the city’s financial future.

Ed Wagner
President
Encinitas Taxpayers Association

Approximate Timeline
2006: Engineering department tells Kevin Cummins they don’t play favorites with road maintenance. They say an objective road maintenance schedule report is used and that schedule shows they are not deferring maintenance.
2007-2008: City avoids sharing roads document with Cummins.
2009: Cummins gets more serious in his request for the report. City agrees to show the report, but requires a meeting to discuss it. It turned out that the city only had a long outdated schedule that was no longer useful for the city. The city had been fibbing about basing road maintenance decisions on an objective analysis.
2009: City follows up by hiring a consultant to create an new roads maintenance schedule. The report was contracted to be complete by September 2009.
2010: From about Feb-June Cummins infrequently checks in on the status of the report. Staff was adamant that document was in draft form and they were working really hard to complete the report. Staff, claimed that because the document was draft they didn’t have to release it.
2010: March. The consultants finish their report, print it, bind it and deliver it, and get paid for a final report.
2010: June. Staff still claim the report is in draft form and continue to claim the draft document disclosure exemption.
2010: Mayor Dalager claims the city is not behind on core infrastructure maintenance during public meetings.
2010: Calaware then sends letter to city. City changes its tune and no longer claims the draft document exclusion. It now simply claims releasing the document would hurt the public’s interest in releasing the document.
2010: Tony Kranz calls the consultant and stated the consultant considered the report complete. That made it really hard for the city to continue claiming they were still working hard to finish. See below.

 

Burning Question: Does the city really accept final reports without first reading and reviewing the draft reports? There shouldn’t be anything left to review by the time the final report is issued, no? So, either the city was lying about needing to review the final report or they pay their contractors without checking their work (example).

2010: Cummins contacts Mayor Dalager asking him to help advert a lawsuit and to explain all the inconsistencies in statements and legal justifications by the city. No response.
2010: Cummins with the help of Calaware attorney, Dennis Winston, asks a Superior Court Judge to help.
2010: September. City releases a report dated March 2010, that says city is $17 million dollars behind in maintenance, which contrasts with previous and subsequent statements by Encinitas City Council Members.
2011: Calaware reports Judge Casserly has instructed the city to turn over all the remaining documents it had been keeping from the public.

See Also: For the documents and history of this case read this set of posts.

FOR IMMEDIATE RELEASE