Pensions sledgehammer Stockton’s future

Chastened by bankruptcy, Stockton created a prudent long-range budget — which pensions are going to murder.

That’s the word the Council got on Tuesday.

The California’s Public Employee Retirement System, CalPERS — a.k.a. Hogzilla — is actually reforming after years of irresponsibly advocating penion increases and hiding the true cost.

Unfortunately, the real bill is obscene.

Here’s a chart showing the ups and downs — but ultimately the sustainability — of Stockton’s Long-Range Fiscal Plan, or L-RFP, before the latest developments.

City finances, gobbled by pensions, dip deeply in the mid-2020s. The General Fund balance falls not only below the 16.7% working capital reserve which is the industry standard, it actually falls below the 5% minimum. That is a crisis, a state of near-insolvency. Whoever’s running the show then will have to get out the chainsaw.

It won’t be pretty. But with the aid of reserves, the city will scrape by. That was the plan.

And the plan was conservative in that the L-RFP anticipated CalPERS would hike its bill (Hogzilla hikes the bill by lowering its “discount rate,” the discount it can offer by co-paying the bill by using its investment returns.

The discount rate when Stockton tanked was 7.5% — which is to say CalPERS anticipated a 7.5% return on its investment porfolio, money with which it would defray Stockton’s pension costs.

Skeptical — becasue projecting rosy investment returns was one way CalPERS hid pensions’ true cost — The L-RFP foresaw a reduction to 7.25%

This fractional change may sound teeny. But every quarter-percent drop translates approximately to a 10 percent increase in city pension costs. The last time I checked, Stockton pays $37.8 million a year toward pensions. So 10 percent equals about $3.8 million a year.

Staff was obliged to inform the Council that CalPERS has utterly upended the city’s fiscal plan. “The recent board action exceeds prior L-RFP assumptions” is how staff dryly put it in this staff report.

And it will “exceed” the budget more and more. CalPERS is going to reduce its discount rate over time from 7.375% …

to 7.25% …

to 7% by in fiscal 2020-21.

“Based on preliminary estimates, the City’s CalPERS costs will exceed those projected in the Long-Range Financial Plan (L-RFP) by $4.2 million in FY 2020-21, and $16.5 million in FY 2024-25 when the full annual effect is realized,” the analysis says.

Which is to say pension costs, already doubled over the last decade, will spike another roughly 50% over the next decade.

Behold what a shambles that makes of the city’s long-range budget.

In reality, state law requires cities to submit annual blanced budgets — unlike Uncle Sam, Stockton cannot run up a deficit. So what you’re looking at there is a chapter 19, a second bankruptcy, if the city doesn’t take steps now.

Fortunately, it has. The city has squirreled away millions of Measure A tax dollars intended to fund police positions that have remained vacant longer than expected. Now you know why leaders didn’t mind too much if the Measure A money wasn’t expended.

Staff puts a brave face on the hammer blows CalPERS is going to rain on Stockton. “With prudent and rapid action the City is well positioned to weather the CalPERS changes … and ensure financial sustainability.”

They think the future looks like this:

I hope they are right.

In their defense, they, too, are being conservative; the above chart reflects a bad-case scenario in which voters do not renew the Strong Communities (Measure M) tax in fiscal 2034-35 at an annual cost of $11 million.

But there’s reason to doubt.

The fiscal consultant who devised the L-RFP was hailed as a wizard for factoring in one bill hike. But CalPERS’ voracious appetite for tax dollars dead-lettered his projections and made him look shortsighted only three years into the L-RFP. It is simply impossible to overestimate the money-sucking capacity of California’s public employee pension system.

Of course, the courts may rescue municipalities by ruling pensions may be cut. There are myriad other variables. However, the poet Robert Burns may have it right: “The best laid schemes o’ Mice an’ Men, Gang aft agley/An’ lea’e us nought but grief an’ pain …”

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Stockton crime declines

Stockton Police Chief Eric Jones with confiscated weapons at last week's news conference about a big gang bust.

When writing this column about Mayor Michael Tubbs’ first 100 days, I requested the year-over-year crime statistics from the Stockton Police Department. If you’re curious, here they are.

crime stats 17

Couple off-the-cuff remarks: Not only is violent crime down over the last year, property crimes are down. This is new. Police have been throwing resources at gun violence and hot spots. Property crimes were not dropping.

Only motor vehicle theft is really up. Arson doubled, but the numbers are small.

Undoubtedly police work has affected the numbers. As has new hiring, which brought the force up to 430 on Monday. It’ll be interesting to see how much crime rises as the rains end and the sun comes out.

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A lazy trip on the Queen

Helen Schneider describes her trip on the Delta Queen years ago.

 

The Delta Queen, launched in Stockton in 1927, became a floating hotel in Chattanooga, Tenn., after Congress tok her off the river. Now the historic boat may resume passenger service.

“We sailed from New Orleans to Baton Rouge. It was quite luxurious.”

Well, not for everyone. “The staterooms that were off the main lounge area were very luxurious. They outside staterooms were not.”

The Queen stopped at four cities – Schneider can’t remember which ones — and passengers viewed antebellum mansions. A crewmember also discussed the Queen’s rich history.

So thick was fog at night the Queen had to drop anchor. But so what?

“Somebody in our group played piano. She played a concert. They served mint juleps every night before dinner. It was a fun experience.”

 

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Sunrise on the Mokelumne

From Jessice Renshaw, a reminder of why we love the Delta.

 

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Another blow to the pension monster

 

San Diego

“When governments fail to act on problems such as with pension liabilities, the people have a constitutional right to pursue a citizens’ initiative by obtaining signatures on a petition and presenting solutions directly to the voters, bypassing the legislative body. The court held that there is no requirement that citizens’ initiatives be negotiated with labor unions.”

—Jan Goldsmith, former San Diego city attorney, crowing about the latest court ruling that there is no inviolate legal right to ever-expanding pensions that bankrupt cities and suck services away from the public; and that citizens have the right to change things.

I tweeted last week when an appeals court overturned a crazy state labor board ruling that a voter-approved San Diego pension reform was invalid because the city failed to bargain over it first with labor unions. Citizens in America can create and approve initiatives, thank you very much, even if labor unions, and outfits like Hogzilla, oppose them.

To put it another way: citizens of San Diego voted to curtail pensions. Public employees fought to overturn the democratic will of the people they purport to serve.

As this Calpensions article says, several court rulings have dented the case-law armor called “the California rule” that holds penions can’t be cut (unless replaced with a benefit of equal value).

Labor (and Hoggy) will appeal. So all the cases are headed to the California Supreme Court. I can’t call what that court will do. But anybody can predict what will happen if the court doesn’t uphold reform: municipalities, including quite possibly Stockton, will go bankrupt again, this time in droves; and pensions will be reformed in bankruptcy court.

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The Ashley Drain jury prism

 

Jennet Stebbins.

Activist Ralph Lee White called to object that the lone black woman on the Ashley Drain voter fraud trial, a juror who was the lone holdout on a jury voting 11-1 to convict, was removed form the jury and replaced.

“Do you know what that do to the Black community?” asked activist Ralph Lee White. “They took a Black off the jury–and she was only one Black on the jury—what kind of justice is that?”

Fair question. I imagine for White the removal of juror Jennet Stebbins is prima facie proof of racist manipulation of the system. As the story becomes better known (this paper is working on it) I further imagine many whites will wonder, for their part, whether Stebbins was pulling an O.J. juror nullification.

Neither may be the case. Stebbins, a Delta College trustee,  is notorious for voting to abstain when votes come before the board. Possibly she again had difficulty making up her mind.

Or maybe she was voting her conscience, “Twelve Angry Men” style. Only when the facts are laid out by reporting is a responsible interpretation possible.

What I can say is that cases such as this are prisms. Different culture groups look into the prism and see different things. You can learn a lot about other peoples’ perspectives at times like this. You can also learn who goes off half cocked.

As of this writing, jurors were still deliberating.

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Not loving SB1, even with the pork

 

Gene Beley protesting the Delta tunnels at the Capitol in 2012.

 

Gene Beley does not share my approval of SB1, the transportation bill with a special earmark for the Valley:

“You could’ve interviewed a few citizens ranging from seniors to truck drivers to get their feedback on the damages that will be done and how everyone will be paying more for every commodity produced in California and probably from all over the USA for delivery in California,” Beley writes.

“Between the ever-rising property taxes in Stockton and the increased sales taxes and now the state’s forthcoming gas tax, when seniors don’t get any raise each year in SS and we can’t earn money on money anymore for our retirement savings via CDs, trouble brews ahead.

“Seniors will soon get pushed out of their homes and homelessness will increase greatly. Rents are already rising dramatically and more people will come here from the Bay Area to push up rents and home prices even more because they can’t exist over there.  Our youngest son and his wife just moved here from San Francisco and are living with us until they remodel a houseboat in dry dock now at Ladd’s Marina that will go to Village West Marina for their new home when completed.

“Our oldest son and his wife live in a one bedroom slum apartment in Santa Clara for $1800 a month rent. We are lucky that we were born in 1939 and 1940—perhaps the last lucky generation that didn’t have to worry about having a decent place to live to raise our families, jobs were plentiful, and yes, we did make money when we sold our homes instead of having them being “under water.”

Beley’s point is well taken. Tax hikes hurt people on fixed incomes, especiall in already-costly California. Still, at least there’s a silver lining to SB1, the $400 million for ACE.

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Another hooray for the General Plan vote

Blogger/Ten Space's David Garcia.

“I cannot overstate how big Tuesday’s vote was for the future of Stockton.”

—Blogger/infill developer David Garcia on his Stockton City Limits blog, extolling the Council for selecting a General Plan 2040 that prioritizes infill and fixing the existing city over sprawl.

Garcia goes on:

“I have a long held belief that a number of our city’s ills are a direct result from our sprawling land use pattern, from obesity, to segregation, to stagnating neighborhood revitalization, to our shortage of community resources, and even our bankruptcy. … So to not only see the council vote in favor of Alternative C, but to see them ask thoughtful questions and articulate why Alternative C clearly was the best option gives me incredible hope for the future of our city.”

Garcia’s piece amplified one I did a couple days earlier. Read Garcia here. Also note a reader’s comment at bottom, which ends, “It’s so nice to see you (Stockton) emerge from your 60-year coma.”

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Shadowbird: a complete fiasco

The Shadowbird land.

Back in 1989, a self-righteous slow-growth group called the Land Utilization Alliance sued the Grupe Co. developers for building Brookside. The market was hot, so Grupe settled by giving LUA money and land and got on with building.

Grupe bought LUA off.

As part of a settlement, Grupe set aside two properties on Wright-Elmwood Tract. One of the properties, wetland, is responsibly stewarded by the Center for Natural Lands Management.

The second, “a horseshoe-shaped buffer area that protects the existing wetlands on three sides,” LUA gave to a dubious organization formed solely to accept the land, Shadowbird. the principal, Alex Roessler, was a member of LUA.

Roessler announced big plans. The land would be a public resource. People,  including schoolkids, could hike out there and see what Delta habitat is like. Rangers could educate. Delta critters could thrive.

When Grupe got a load of Shadowbird, the company Grupe sued to get the land back. CEO Kevin Huber worried the organization was too flimsy to steward land in perpetuity. LUA’s response was to demonize the evil old developer. But Huber was right.

Grupe lost in court, though.

Soon Roessler, who had a genuine desire to make the land a public resource, fell out with his board, a bunch of outsiders who evidently saw only the money to be made by selling the land. Even though the spirit of Grupe’s donation, if not the letter of the deal, was for the land to remain natural in perpetuity.

They, too, sold out the public for money.

LUA sued Grupe and Spanos, and got $600,000 in settlements. With that money so many environmental battles could have been fought. Instead LUA frittered the money away on a newspaper for the poet Katy Webster, a gourd festival (one of LUA’s leaders grew gourds) other vanity projects, office equipment — computers the members kept for themselves — and other nest-feathering. Honestly, it’s impossible to say where all the money went.

Then LUA fell apart without ever achieving another victory.

At least developers build something.

 

 

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Galgiani helps land big ACE expansion

 

ACED it: State Seator Cathleen Galgini, D-Stockton.

Gov. Brown’s drive to pass the big transportatin plan, SB1, gave certain lawmakers the chance to hold out for earmarks in exchange for votes, and Sen. Cathleen Galgiani was one of them.

Galgiani helped land a $400 million expansion of ACE Rail to Modesto and Merced.

She called it a “big win.” It is.

“This project will help relieve congestion on Highway 99 and the Altamont Pass and will provide a fast and comfortable alternative for both commuter and leisure travelers from our communities to the East Bay and San Jose,” Galgiani said in a press release.

“SB1 will provide funds for desperately needed road and bridge maintenance and repair for both counties and cities. The constitutional protections in the bill guarantee that the money can only be spent on for transportation improvements in every part of the state. San Joaquin, Stanislaus and Merced Counties will receive extra funding as self-help counties which have passed their own transportation tax measures. ”

Here’s an article about the sausage-making. thanks in part to Galgiani, it benefitted us, for once.

 

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    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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