A financial revolt is coming
This is not fiction. This is what this very fine city is facing. I do not ask the residents/voters to believe me. Vice Mayor Young posted an article about this issue on “Benicia Happenings.” Sorry, posting is not the answer. Action is.
It is all about the underfunded CalPERS retiree funds. Vice Mayor Young has been on the council for one year. He had plenty of time to report on this issue and put it on the agenda, but following in the footsteps of his council partner Mayor Patterson, he chose to ignore it. Not good, Vice Mayor Young. It is not going away. It will be here for many years to come.
Does Vice Mayor Young remember the memo sent by outgoing interim City Manager Steve Salomon last year to the entire council? It clearly stated the rising pension costs of CalPers. It also stated that Bartle-Wells would be giving their analysis of Benicia’s pension accrued liability. They did, and it should have been a wakeup call to the mayor and vice mayor. Salomon stated that within 10 years, the cost to the city would more than double to over $12 million per year. It will be more. The 2018-19 budget year cost will be over $800,000 and rising every year after that. Just where does this city get the money to cover that? Do Young and Patterson know that answer? No, they do not.
Sorry, Vice Mayor Young. Reposting an article does not solve the problem. I am using Young and Patterson as the responsible parties because they have the top two positions in the city. It is their responsibility to make this issue a priority. All other issues can be put on the backburner like the ISO, etc. This issue must be addressed and now. I do believe any action will not result in any good news for the residents/voters of this fine city. It is far beyond an immediate fix. Yes, the city could very well get through the 2017-18 and the 2018-19 budget years, but reserves and Measure C will cover that. No more Measure C for infrastructure, and reserves will just go away. However, the next two budget years are going to be a big problem. Expect cuts. By cuts, I mean a reduction in city staff, benefits and reduced services. Start thinking the library, parks and rec, pool hours etc.
The next big cuts will be re-organization. What is left to re-organize? They will take a long, hard look at outsourcing/contracting certain services. Does any resident or voter want our police, fire, parks and rec, library, city attorney and possibly our sewer and water to be a victim of very bad financial management? We no longer can blame others. * Mayor Patterson will end up being in office for 17 years by the 2020 election. It is very apparent financial crisis is not her No. 1 priority, but Valero is. That’s not good. Poor Vice Mayor Young has fallen victim to this type of thinking. It might just be time to start being a little more independent. I am sure he will say he is, but we need evidence of that.
This letter is in no way an attack on the city manager or city staff nor is it a scare tactic. They simply follow the direction from the mayor-led City Council. This is a very critical review of what this very fine city is facing. The mayor-led council must act now. I do not consider my self the bearer of bad news. I consider myself a bearer of just what we are facing. I will watch the actions of the mayor and vice mayor to see if they really do understand this financial crisis. It appears they do not. I will admit the vice mayor did agree with me on the financial issue, but this has not led to action. Stay tuned, I am not done with this issue.
Bob “The Owl” Livesay,
Benicia
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Good letter. The truth can be painful. The unfunded liabilities associated with CalPers are staggering and could bankrupt the state. Day of reckoning is coming.
Thanks.
I agree Bob but don’t worry. When the day comes the council will put any and all increases to the voters and tell us if you don’t vote for this we will have to lay off X personnel from Police and Fire, cut back these city services, close the library. And the people will vote for it. They will complain for a bit but it will go away. The main reason for the increase in water and sewer rates was due to increased costs for current and future retirees. The people didn’t read or care about it until the increase actually occurred and then they complained about it for a few months. Any opposition will slowly die away but it will die off. The politicians will try to blame it on Prop 13, or Prop XIII as some seem to prefer.
The water/sewer will not go away. The residents are reminded every two months. The sewer/water issue was caused because the council keeps kicking it down the road. The present council has been in power for more than enough time to fix it. There were three alternatives. The council voted 3/2 to take the high one not the lower one. I am not sure what you are talking about on retirees being the reason. What we are paying for now is unfunded liabilities for retirees. It is huge. In 2000 we were paying nothing. Within a few years we will be paying about 14 mil per year of our city budget.Contributions were less based on returns that did not happen. CalPers mismanaged the fund. Now we pay. No way out. Not as simple as you may think. If something is not done it will happen as you say. The best way out is to add another 1% sales tax with a ten year sunset. Then measure C can go 50/50 for roads and sewer and water. The new 1% or 5 mil will have to go to the city budget to keep the doors open. Even at that it is tight until we get a sound econ dev going. The 1% will have to go to a vote. It will pass. Cannabis will be of very little help., We need changes in the council/mayor. It will happen in 2018 and 2020.
check your numbers. According to the CAFR, the unfunded liability is $41 million. $14million per year will pay that down in 3 years.
also, it is incorrect to say CALPERS mismanaged the funds. They did not, in fact they have managed the funds quite well. They have consistently misused the actuarial analysis, inventing return rates that are not realistic. As they correct this, the unfunded liability will go way up. They did this because it allowed employers and employees to underpay, by a lot. That works until it doesn’t, like not raising the rates on water and wastewater for years and years: eventually you have to pay to make up for it.
Sorry Greg it was managed poorly. They new with returns it was moving in the wrong direction. Check what the City of Benicia paid in the early 2000;s and what we are paying now. I said it will eventually get to 14mil. That was over a ten year run. Read what the departing city manager said on January 9, 2017. Here it is. “Within three, the City’s annual Pers payment is expected to rise from $5,140,000 in 2016/17 to $7,316,000 in 2019/20. Within 10 years {2027/28} it is expected to more than double from 2016/17 numbers to over $12m/year”. Your statement that says “They have consistently misused the actuarial analysis, inventing return rates that are not realistic.” So that proves my statement that CalPers mismanaged this fund is not incorrect. You proved it. Thank you.
In fact, the problems arose with several factors around 2000, when Gray Davis raised pensions for safety employees that allowed full retirement at 50 without paying anything for those already in the system. Cities and counties followed suit, and under pressure from employee unions, raised them for other employees (not to the same extent). Many cities and counties continued the bad practice of allowing employees to spike their pensions (so they ended up getting paid far more than they had contributed for). Those things put a huge hole in the pension fund, but returns were, until 2008, sufficient to hide the hole. The returns in fact were excellent and covered things until the crash. then they didn’t. Since then, CALPERS has been dragging its feet on adjusting the actuarials which just delays the inevitable. But is it the fault of CALPERS or the fault of the employees and others who sit on the Board, or the cities and counties and state who created the mess in the first place by expanding benefits without paying for them?
You made it sound like they mismanaged the money which is not the case.
Bottom line it is a mess and there are plenty to blame for the mess. “CALPERS mismanaged the fund” is a gross oversimplification that avoids many of the important reasons and lessons for the mess.
Very good, Greg.
I understand all that you said. But the bottom line is CalPers knew the issue and as you said did not adjust. CalPers runs and manages the fund and it is their responsibility. It may be a combination of things but at the same time the charges are now there and could have been avoided at a much lower or even graduated rate if CalPers had made a more timely fix. They did not. So who is to blame? The workers, tax payers? Just who is at fault. It points to one group. That is CalPers. I do believe you understand that and know it. I am not trying to put the blame on anyone except the folks that run the employee retirement plan. Who else can we blame? You tell me.
Greg you just agreed with me. CalPers new the problem. They and others manage the fund and did not adjust as you say. So who do we blame? Remember that is all they do is manage the funds. You said they were dragging their feet. CalPers created the problem. Should have been funding at 100%.
this is a problem with more than just CALPERS. Many agencies do not use CALPERS for their pensions and are facing the same problem, in some cases much worse. The CALPERS Board is made up of reps of the agencies and employees, they make the decisions. The Gov, Legislature, city councils, boards of supervisors made the decisions to raise pensions without funding them 15 or more years ago. That was not a CALPERS decision, it was elected people who did that in approving contracts with employees. So no, I don’t agree that CALPERS caused the whole problem. It didn’t. The Board of CALPERS is a contributor, a big one, but there is plenty of blame to spread around for the mess.
“A big One”. is correct. That’s all I want to hear. Thank you. Does CalPers fund the pensions? I believe they do. So how can we say they are not at fault. They report the numbers set the contributions. Is that correct?
no the agencies and employees fund the pensions. CALPERS manages them. The CALPERS board, made up of agency and employee reps set the parameters for the actuarials that determine the contributions.
You are Correct the agencies/employers and employees fund it. This is where I am correct as you said. CalPers manages them. So as I said CalPers did a very bad job of managing the funds. No doubt about that.
Greg we must remember that CalPers manages the pension for more than 1.6m Ca. Public Employees. They are considered a global leader in the investment industry. Yes they mismanaged the funds. The word “manages” tells the whole story.