Good riddance, Six Californias

Silicon Valley venture capitalist Tim Draper’s proposal to split California into six states failed to garner enough signatures to qualify for the ballot.

Good. It was a lousy idea.

Draper’s idea was an delusional exercise in callous libertarianism. The rich states would get richer and the poor Central Valley — which, together with all the mountain counties between L.A. and Sacramento — would become the nation’s poorest state.

But that was OK with Draper. Smaller states would be more “efficient.” The state of “Central California” would have incomes roughly half of “Silicon Valley,”  but we could “compete” with other states, and that’s healthy, see.

“At least initially—and perhaps for many decades after their creation—the six proposed new states would have widely varying income levels,” the Legislative Analyst’s Office wrote in a report on the proposal. “The varied income levels would have important effects on each state’s tax base.”

That’s putting it mildly. The state of Southern California would have an annual taxable income of $157.5 billion. Our state would have to skimp by on $53.7, or 1/3 the amount. And we would be severed from the progressive distribution of taxes from wealthier regions. We could compete, all right. For a place in the soup line.

That would destroy what California is about. Or supposed to be about.

Considering that voters will sign virtually anything thrust at them outside a Target by signature-gatherers, Draper’s half-baked proposal got the rebuke it deserved.  ‘Tis better to be underserved by one state than left to rot by five.

 

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“Nevada, the sucker is you.”

The state of Nevada paid — overpaid — twice what other states were offering to land the Tesla battery plant, much more than Tesla chief Elon Musk expected, writes Michael Hiltzik in the L.A. Times.

“(Gov.) Sandoval brags that the project will produce $100 billion in economic stimulus over the next 20 years, including 6,500 permanent jobs at an average wage of $25 an hour, for an 80-to-1 return. “Nobody really believes it, outside the governor’s office,” says Bob Fulkerson, state director of the Progressive Leadership Alliance of Nevada, a watchdog group questioning the deal.

“The deal doesn’t require Tesla itself to create any specific number of jobs directly, according to an analysis by Good Jobs First, an economic development think tank.”

And this: “No matter how you slice it,” asserts Richard Florida, an expert on economic development incentives at the University of Toronto, “the deal makes utterly no sense. It is just one more example of a government giveaway for a factory that would have been built anyway.”

Hearing that Musk snookered Nevada makes me feel better about losing the plant. Seriously, there is a concern here.

“Industry extracts lavish subsidies not merely by playing states and communities off one another, but by monopolizing the information about them,” Hiltzik writes. “Tesla imposed non-disclosure agreements on the five states it lured into a bidding war on its battery plant (Nevada, California, Arizona, New Mexico and Texas).

“Secrecy achieves nothing except to keep taxpayers out of the loop.”

On the one hand, I’m all for a business-friendly Stockton offering generous incentives to lure big employers. On the other, the secrecy is unsettling. Stockton’s economic depression and inferiority complex cause worries that leaders will go overboard. Even now, hoping to land some secondary Tesla business, the city is maintaining the strictest secrecy in its negotiations. How do we know they are not giving the store away?

We don’t.

 

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Art of the streets

This guy promotes Flowmaster Mufflers out front of Stockton Muffler and Radiator on on East Miner Avenue.

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Historic pension ruling nears

Oct. 1 is fast approaching. That is the day Stockton’s federal bankruptcy judge has scheduled to rule on Stockton’s plan of adjustment — and, probably also whether public employee pensions can be cut.

Calpensions lays it out:

“Stockton argues that cutting pension debt in bankruptcy would terminate the city CalPERS contract, triggering a $1.6 billion payment that would cut pensions 60 percent, cause an exodus of employees, and unwind deals negotiated with unions and creditors.

“When a plan is terminated, CalPERS needs a big up-front payment because the obligation to pay the pensions, often running 50 years or more, shifts from the employer to CalPERS, which cannot get more money from the employer if funds fall short.

“If the employer cannot make the full termination payment, CalPERS has the brief power, only as the pension obligation is being transferred, to evenly cut the pensions of current workers and retirees to an amount covered by the employer payment.

“An expert said during the trial that Stockton could only pay about 40 percent of the current $1.6 billion “unfunded termination liability” calculated by CalPERS for the city’s two pension plans, hence the view that pensions would be cut 60 percent.

“Whether a procedure like this can used to cut pensions in bankruptcy is one of the legal issues debated in the briefs requested by Judge Klein.”

So, if pensions can legally be cut, Stockton would be forced to pay approximately $640 million into the termination pool, and the pensions of city employees would be slashed by 60 percent.

Both of these actions seem untenable. A bankrupt city cannot pay its existing debts, let alone $640 million. The amount would have to be amortized, though that is not how CalPERS says it must work.

And hacking city employee pensions by that much on top of eliminating free lifetime retiree medical would be a severe hit to their pocketbooks. I suspect many would find themselves in poverty.

On the other hand, taxpayers across the land are footing the bill for budget-busting pensions. To find these Hogzillas,we are paying more taxes yet receiving fewer services.

Stockton aside, a ruling that pensions can be cut would give cities a last resort in balancing budgets and restoring the things a city should do. It would also give city management increase muscle at the bargaining table when exacting concessions.

Fifteen days and counting.

 

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San Berdoo pulls cord on gravy train

A federal judge ruled yesterday that the bankrupt city of San Bernardino may impose cuts to its firefighters’ overtime and pension benefits.

I’m tempted to say, ya think?

San Berdoo unions had the city more sewed up than Stockton’s ever did. According to this Reuters story, “Under San Bernardino’s city charter, it is unable to impose cuts in pay to its police or firefighters, only benefits.”

Unsurprisingly, “The city currently pays an average $190,000 annually to its top 40 firefighters,” though the rank and file is well-paid, too.

The story says the unions are “fiercely opposed” to this overcompensation, though — hello-o — the city is bankrupt.

Interestingly, it also says the city reached a deal with CalPERS, but there’s a gag order on it. Hmmm. I requested the correspondence between the city and CalPERS early on in Stockton’s fiscal crisis. My request was denied under a loophole in the California Public Records Act that says cities may keep documents secret if their contents may be the subject of future litigation.

Which is curious. If the city never intended to fight CalPERS, and allied with it (which I see as a case of Stockholm Syndrome), where is the risk of litigation? Come what may, however, one day those documents will come out. I think then you will see the true face of CalPERS.

One guess is that City Manage Bob Deis knew CalPERS bullying was so outrageous that it would put Stockotnians on the warpath and politically complicate his Plan of Adjustment, in which he did not seek to impair pensions.

Anyway, back to San Berdoo. It is remarkable that at this intermediate stage of its bankruptcy the unions are still in la-la land. But then they had to suffer court defeats, here, too.

 

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On the mayor, wanting more power

Mayor Anthony Silva, kvetching at Tuesday’s Council meeting, and again in this story, says the limits on his office are so stifling he often feels like little more than a “cheerleader.”

Silva wants more power. He continues to chafe.

The mayor’s authority, or lack of it, is clearly spelled out in the city charter. Silva’s dismay suggests he never actually read up on the mayor’s role before running for the office of mayor. In a sustained seance of magic thinking, he refuses to accept that Stockton’s council-manager form of government vests power with a council majority and with the city manager.

Again: a council majority. To be effective, a mayor must sway a majority of four votes on the council. Silva entered office blasting away at the council, which for six straight months he denounced as untrustworthy puppets of those mysterious puppeteers that pull the strings around here.

The most self-defeating entrance, ever.

Even as a competent city manager got everyone on board to support the well-thought-out Marshall Plan — demonstrating, incidentally, how consensus works — Silva galloped off the reservation, championing a half-baked rival plan developed by a car salesman and championed by his brother, a developer.

Pause for the irony: even as Silva denounced the council for being lackeys of the business elite, he let a developer with business before the city hand him a major policy proposal.

Digging the hole deeper — with the professionalism of a well-drilling company — Silva also exhorted his Facebook followers to harangue the council for standing in his way. His Facebook friends gave the council headaches for months.

When the Council, demonstrating maturity, overcame its antipathy towards Silva and entrusted him with a key role in the city manager hire, he bungled it.

And since then … nothing, really. The mayor has produced no major policy initiatives.

Gary Podesto, mayor 1997-2004, also chafed at the strictures place on the mayor, and bemoaned how slow government moves. But Podesto got things done. Big things.  Because Podesto knew how to go around quietly to community leaders, rounding up support, how to lobby council colleagues, and how to rally the public behind a vision.

Silva can do none of this well. In truth, Silva is straight-jacketed not by the charter’s limits but by his limits.

The weird thing is, he apparently cannot see this. He externalizes the problem. The city manager wrongly ignores him, the charter binds him, I get him wrong, this paper sensationalizes him because it only wants to sell papers, the Grand Jury reached an erroneous conclusion about him, his critics are all politically motivated.

He could be a good mayor, really. If only the rest of Stockton would get it together.

Because of all this, Silva has not been relegated to the role of cheerleader, as he complains. He had been sidelined. There’s a difference.

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The gravy train

Pension spiking by state employees will cost taxpayers $800 million over the next 20 years, says the L.A. Times, reporting on state Controller John Chiang’s new findings.

To refresh your recollection, pension spiking is a way public employees artificially juice up their pensions by contriving themselves pay increases in their last few years before retirement. It gives them a life long pension above what they earned fairly.

Chiang also found that CalPERS, the corpulent state pension system, looks the other way on pension spiking.

“CalPERS’ lack of robust auditing, underutilization of advanced technology and its generally passive approach to the problem invites abuse,” Chiang said. “The state’s largest pension system can and must be more vigorous  in protecting taxpayers from this form of public theft.”

Chiang should not hold his breath. CalPERS is there to promote public employee enrichment.

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The poorest schmuck in congress

That would be Rep. David Valadao, a Republican farmer from Hanford. According to Roll Call, he reported a “minimum net worth” of $3.7 million.

Wow.

“Roll Call’s estimate actually falls on the low side,” says The Week. “Both Time and CNBC also named Valadao the poorest member of Congress this year, with Time estimating his net worth at -$12.2 million, and CNBC noting it could be as low as -$24.5 million.”

We have been critical of south-Valley republicans as provincial extremists. Valadao’s personal finances raise legitimate questions about his financial competence. One is tempted to say, hands off my purse strings, Mr. Money Hole.

On the other hand, the U.S. Chamber of Commerce just gave Valadao the Spirit of Enterprise award “in recognition for his work toward immigration reform and water solutions.” The Chamber says he’s shown real leadership on immigration. Which is to say, his district has so many Latinos he knows the House has to act, unlike congressmen from lily white districts in the South. That is something.

I mention all this because Delta residents have to contend with these guys.

Last word to Valadao: “Water policy … it’s difficult and probably the most confusing thing I’ve ever seen. Well, immigration is a pretty close second.”

 

 

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‘You will disappear. You will be gone’

That’s allegedly what Stockton’s former City Manager, Mark Lewis, told one of his executives in the city of Chowchilla would happen to her if she spoke to the council without his approval.

He’s been place on administrative leave.

Mark Lewis in his office at Stockton's city hall in 2005. Photo by Craig Sanders.

Lewis, Stockton’s city manager 2001-06, is the great pharaoh of Stockton’s building era, but also the Bernie Madoff of its finances. There were — are — a lot of good things about the guy. But he brought too much of his Army Rangers training into his management style. I am the alpha male, you maggots!

Two female employees have filed complaints. “Lewis is named in both complaints, one from a former employee and one from a current employee. Each worker says she felt fear, emotional distress and anxiety over the potential loss of her job while working under Lewis’ supervision,” the Fresno Bee reports.

The story suggests Lewis may have been fudging to the council about the city’s true finances and got medieval on subordinates who tried to communicate the true state of affairs. But it could also be that he was merely trying to keep maverick execs on the rez. Or merely trying to get an honest day’s work out of rank-and-file employees. Innocent until proven guilty, and all that.

One of the most telling passages in the story is Lewis’ comment: “I work at the pleasure of Council and they can dismiss me at any time without cause. The only thing they are required to do is follow the terms of my contract.”

Translation: if you fire me, you will have to pay me for the balance of my contract, while I go fishing. A cynic would say that may be what Lewis wants. An optimist would say there’s a better interpretation, one fairer to Lewis, and we just can’t see it because of all the secrecy that surrounds personnel matters.

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Graph of the day

State Controller John Chiang unveiled a new website today. ByTheNumbers.sco.ca.gov shows local government financial data for the period 2003-2013.

I typed in Stockton, and asked for this city’s total revenues and total expenditures for that decade. Here’s what came up.

Controllers Stockton graphs

These graphs are simple, but still telling. Stockton’s revenues started to decline in 2006. That year or 2007 was the time for leaders to make the tough calls, such as exacting concessions from public employees. Instead, in 2007, leaders authorized big new expenditures. They set a course for bankruptcy.

The City Managers in 2006 were Mark Lewis, who was fired that year, and Gordon Palmer, who replaced him. They mayor was Edward Chavez.

Check out the Controller’s website here.

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    Michael Fitzgerald

    Mike Fitzgerald is The Record’s award-winning metro columnist. His column runs in the paper three times a week. Born in San Francisco, he was raised in Stockton. His column covers diverse beats including, sometimes, the offbeat. Read Full
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