I am happy to have received the Contra Costa Times endorsement. Even if it is “tepid,” I’ll take it.
Dan Borenstein of the Times is an expert on deferred pension and health plan liabilities for public agencies and writes about it relentlessly on the Times editorial pages.
He is right about the problem, although our City management disagrees with him about the magnitude. In any case, I concede it is huge. This is a problem that Richmond shares with most other cities. It is so complex that I’m not sure there is a readily available solution.
Public agencies that try to institute pension and benefits reform end up with labor disputes (BART) and litigation, which has gone both ways. It can also result in departure of critical employees, such as police, for greener pastures in a competitive hiring environment. Ask San Jose. See New San Jose Firefighters Pensions will be Cut and San Jose: Police will lose another 100 officers by 2016 ...
In the recent endorsement interviews with Nat, Uche and me, Borenstein focused on the ARC (Annual Required Contribution - The employer's periodic required annual contributions to a defined benefit pension plan, calculated in accordance with the plan assumptions) for health care, designated in the chart below as OPEB (Other Post-Employment Benefits). He later criticized the City for not including in its unfunded obligation calculations the funds generated by a Pension Override Tax used to pay debt service on a pension obligation bond, probably fair, but the city manager disagrees. Lindsay, who attended Yale and has an MBA from UC Berkeley Haas School of Business, compares it to having to have all the present value of all future mortgage payments on your home stashed away in a bank prior to taking out a home loan. I see the weakness in that comparison, but it is still a ponderable point.
Nat and I both acknowledged the challenge, but neither of us was willing to commit to cut tens of millions of dollars from the budget to prepay pension obligations that are real and may be substantial, but the value of which is still speculative. That obviously wasn’t the answer Borenstein was looking for.
I admit that I am willing to kick the can down the road a little longer as an alternative to gutting our police force, closing our library and letting the streets go to pot even more than normal.
I have invited Borenstein to attend a study session of the Richmond City Council to discuss possible ways to address the unfunded pension obligation challenge.
In any event, thank you Dan and the editor of the Contra Costa Times. I will try to do better fiscally, but I need all the help I can get.
Below – Pension Obligations Compared to Other Contra Costa
Below, Other Post-Employment Benefits compared to Other Contra Costa Cities
Contra Costa Times editorial: Butt for Richmond mayor; Rogers, Beckles for City Council
Contra Costa Times editorial © 2014 Bay Area News Group
Posted: 09/25/2014 04:00:00 PM PDT0 Comments
The city of Richmond spends more than it takes in even though it's buried deeply in debt. Yet two City Council veterans running for mayor in the Nov. 4 election seem unconcerned, as do most candidates seeking four council seats.
The debt "is a low priority," says Tom Butt, a councilman since 1995. "In comparison to other things we have to deal with, in comparison to what the people I represent care about, it's way, way down there."
Nat Bates, councilman all but 12 years since 1967, blames his ignorance on city staff. "No one raised a flag from the staff level," he said. "We assumed everything was going smoothly." Actually, the debt problem was outlined in a February presentation to the council.
It's unclear which response is worse: "It's a low priority" or "I wasn't paying attention." Butt and Bates were council members when the city teetered on bankruptcy in 2004. Now they're running for mayor.
Unfortunately, they are the only viable choices. The third candidate, Uche Justin Uwahemu, lacks knowledge of Richmond issues and operations.
We tepidly endorse Butt -- not because of fiscal acumen but rather his ability to bridge the divisive council. We hope a more civil discourse will provide room to address the fiscal crisis ahead.
City leaders have made tough cuts in recent years. But that's not an excuse for ignoring mounting debt. The shortfall in the pension and the retiree health programs, and debt created by borrowing to shore them up, totals $573 million. That's equal to four years of general fund spending; and 7½ times the annual cost of employee base salaries.
The city is not even making minimum payments on its debt for its retiree health program. Delay will only make the problem worse, increasing future debt payments that will siphon funds needed for city services.
To make matters worse, the city general fund has a $7 million structural imbalance covered this year primarily by tapping into reserves and one-time money.
Like the mayoral candidates, the 12 City Council hopefuls don't grasp the seriousness of the city's fiscal plight. We opt for those most likely to learn.
For the short-term seat, we endorse Jael Myrick, who has demonstrated independence and poise since his appointment two years ago. We're tired of the antics and conflicts of his main opponent, Corky Boozé.
For three full-term seats, we back re-election of Jim Rogers because of his independence and Jovanka Beckles because she deserves a chance to prove herself without the poisonous attacks she's had to endure. Of the other seven candidates, we cannot find one that we can recommend.
We reject the three candidates backed by Chevron's wildly excessive campaign spending. West Contra Costa school board trustee Charles Ramsey has been the driving force behind the district's uncontrolled $1.6 billion school bond program, which is currently the subject of a Securities and Exchange Commission investigation. Bond payments have increased West Contra Costa property tax rates to the highest in the county.
One-time Councilwoman Donna Powers called for council civility and then launched into sharp attacks. And retired cop and postmaster Albert Martinez demonstrated little insight into the city's financial problems.
While we back Beckles, we reject the two other Richmond Progressive Alliance candidates. Mayor Gayle McLaughlin, barred by term limits from seeking re-election and now running for a council seat, has been a divisive leader who remains stunningly ill-informed about the city's debt-ridden retirement program. Retired teacher Eduardo Martinez, who has run before, has also failed to do his homework.
Solving Richmond's financial problems will not be easy. But ignoring the situation, failing to balance the budget and not even making minimum payments on debt is not acceptable. It will only make things worse.
We hope city leaders wake up.
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