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1. Irresponsible Supervisors Are Still Ignoring Grand Jury -- ACCT Chairman Ken Hambrick exposes continuing,
costly irresponsibility of Contra Costa supervisors -- John Gioia and Mark DeSaulnier in particular (July 1, 2006).
Union Favoritism Brings Unsustainable Taxpayer Costs --
ACCT Chairman Ken Hambrick's
Tax for County-Wide Spending Abuses Statutory Process -- ACCT
Chairman Ken Hambrick and
4. A BAD Tax Is Bad News -- Ken Hambrick's article in the Walnut Creek Journal of May 27, 2004
Costa Supervisors Have Mortgaged the County's Future -- Ken
Hambrick on the politically motivated
Supervisors Are Still Ignoring Grand Jury
Once again the Contra Costa Board of Supervisors is ignoring a major financial problem by unjustly criticizing a grand jury report.
They did it with the county pension problem (and the grand jury was proved to be right). Now they are doing the same thing with the grand jury report "County Ignores Retiree Health Costs."
The new report points out the county is badly underfunding the retiree health plan accumulating an unfunded liability of at least $2.4 billion.
It also makes the point that large cuts in important county services will have to be made for many years to fund this.
Board of Supervisors Chairman John Gioia reacted as expected. To quote the Times (June 9), "The chairman of the Contra Costa Board of Supervisors reacted to the report with outrage. Supervisor John Gioia said the county began tackling the retiree health tab in the summer of 2005 and has made plenty of progress."
What have you actually done, Supervisor Gioia? The county delayed having the actuarial study done in time for union negotiations, which are now into their ninth month.
There is talk of waiting 15 years to qualify for lifetime health care, but that will only impact future retirees and do nothing for the $2.4 billion debt.
Upping co-pays for services? That has a minuscule effect on the cost. Asking the state and federal government to pay a share (the county administers a number of state and federal programs) -- that could have an impact, but why has that not been worked on?
Even now the discussions have been delayed.
What they have done is hide a vital report, delay the actuarial study, and continue to downplay the impact of this very real cost.
John Sweeten (then county administrator) had a report from Ira Summer (actuarial consultant) on Sept. 5, 2005.
The numbers were hidden until the grand jury forced the county to give up the memo in February 2006.
It's clear that the board was hiding this information and one guess is it did this because Gioia was running for re-election and DeSaulnier is campaigning for state Assembly.
But for whatever reason, the numbers in the Summer memo were not shared with the public.
The county administrator denied on several occasions the county had received any estimate of the liability and in fact told the credit rating agencies in November 2005 that the county had not received any numbers.
The board was finally forced to hire a consultant for a full evaluation of the liability and authorized this in its meeting on Feb. 28.
This evaluation was presented to the Finance Committee of the board on May 4. The report says the liability is $2.4 billion.
Gioia's other claim that the county "has made plenty of progress" is totally false. The only things that have been done are to receive the actuary's report and to ask the staff to evaluate the alternatives presented by the consultant.
The staff wasn't even going to be given a timeline to report back until a member of the audience asked the Finance Committee to set a schedule.
We are going to continue to get the political spin that the retiree health numbers are no big deal. The fact is they are a big deal. Our number is $2.4 billion. Other counties (several of our peer counties), which are much larger have a smaller number than ours.
The truth is the board does not have the courage to take on the public employee unions. They are too busy accepting their campaign contributions and endorsements to move on to higher political office.
For far too long the public employee unions and the board have been on the same side of the negotiating table leaving the taxpayers to pick up the tab.
Until we break the stranglehold the public employee unions have on the board and their ownership of most of the supervisors, we will continue to see the downward spiral in county finances continue.
The result of this spiral will be continued cuts in vital services to those citizens who badly need them.
Hambrick is a resident of Walnut Creek and is chairman of the Alliance of Contra Costa Taxpayers.
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Union Favoritism Brings Unsustainable Taxpayer Costs
THE TIMES PUBLISHED a guest commentary by Contra Costa County Supervisor Mark DeSaulnier on Dec. 28 in which he said he didn't like the Times' editorials and series detailing the mismanagement of the pension system.
The Times did an outstanding job in researching and reporting the facts on this huge give-away and capitulation to the unions by the Board of Supervisors. And the Times wasn't alone in reporting the egregious nature and fiscal irresponsibility of these actions.
The County Grand Jury published Report No. 0301, on Oct. 1, 2002, which reached the same conclusions as the Times. It made strong recommendations that the board not adopt these benefits increases because of negative impacts on the county's fiscal well-being and the huge increase in the benefit plan unfunded liabilities.
DeSaulnier says the Times is wrong in saying that taxpayers are "on the hook" for $1.2 billion in pension shortfalls. He is wrong. This amount is supported by data from the county's own actuary and information provided in the Preliminary Offering Statement when it issued $322 million in pension obligation bonds in May 2003.
His claim that two-thirds of the shortfall resulted from "recent stock market losses" is not correct (the decline started in March 2000, not recently). Should the retirement system just earn its assumed investment rate, market losses account for approximately 56 percent of the total shortfall. More importantly, had the Retirement Board and the supervisors not spent the entire excess reserve on rate subsidies to the employers and employees, and on new benefits, more than $300 million would have been available to offset approximately half of these losses.
Another claim is that "acceptance by the pension board of its actuary's findings that pension system costs are increasing because retirees are living longer" added to the shortfall. The truth, the pension board has not accepted this recommendation nor one that reflects the increased marriage benefits. Whenever accepted, these costs will flow directly to the unfunded liability (taxpayer liability).
It is true supervisors don't manage the pension fund assets. But pension increases cannot be made without board approval. Thus it is responsible for shortfalls created by its actions.
Supervisors appoint four members of the retirement board, union employees/retirees appoint four and the ninth member is the County Treasurer/Tax Collector. In l999, with strong lobbying by the public employee unions, the board appointed Retirement Board members who were recruited by the public employee unions and considered "labor-friendly." As a result the public employee unions controlled the Retirement Board.
Beginning in June 2000, the "labor controlled" Retirement Board took actions that effectively lowered employee costs while increasing costs to employers, and ultimately the taxpayers. It also proceeded to spend remaining surplus earnings on employee and employer rate subsidies and new benefits. The proper use of the surplus funds would have been to pay down the unfunded liability created by court decisions and to offset losses from the 2000-2002 stock market decline.
He quotes Standard & Poors evaluation to support his claim of excellent financial management. What he doesn't say is that the county's bond rating was almost downgraded nine months ago and probably will be in 2004.
His claim that the egregious and costly pension increases to "safety employees" were necessary to retain experienced people is spurious.
Rather than retaining experienced, long-term employees, they are bailing out in droves. Many are retiring and receiving pensions in an amount greater than their salary when they were working.
DeSaulnier says "safety employees" are paying all future costs of these pensions. Wrong. Salary increases of 5 percent per year were granted over each of the next four years sufficient to offset these costs to the employees.
DeSaulnier states they have eliminated funding for 255 positions over the past two years, but all were vacant and there were no layoffs. Balancing the budget was done with "smoke and mirrors" using a number of one-time revenues to fund on-going expenditures.
For example, the board used a one-time $13.2 million savings from issuing $322 million in pension obligation bonds last May to fund retiree health benefits for the current year. Where will the revenues come from next year? All the board did was paper over serious budget problems until FY2004-05 ... and after the March 2004 supervisorial elections.
The biggest untruth in DeSaulnier's commentary is that he says we deserve this kind of financial management. What we, the citizens, deserve is a financially prudent board that represents all the people, one that is not owned and controlled by the public employee unions.
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Tax for County-Wide Spending Abuses Statutory Process
|In 1996, California voters
passed Proposition 218 to change the California Constitution to limit the
use of benefit assessment districts. These changes were required because
this valuable tool was being abused by local governments in order to avoid
putting taxes to a two-thirds vote. That same abuse is occurring now in
Contra Costa County with the Contra Costa Parks and Open Space Measure for
which all property owners have been sent mail-in ballots.
The issue is not Open Space: it is using a benefit assessment district to avoid the two-thirds vote required by a parcel tax (a benefit assessment district requires a simple majority vote of property owners.) If this measure passes, it would set a precedent that invites other taxes using the lower voter threshold. That is why a similar Open Space benefit assessment district in Santa Clara County is currently being appealed in the California courts. A decision on that case is expected shortly.
Under Prop 218, a benefit assessment district can be used for property-related services or projects such as sewers or sidewalks. Benefit assessments must reflect the specific benefit received by each individual property and the vote of the property owner is weighted to reflect the cost of the benefit received. The cost/benefit allocation is determined by an engineering report required as part of the benefit assessment process. This works well with sidewalks, but open space with vaguely defined projects does not meet the criteria. It certainly does not meet the legal intent of Prop 218 if over 245,000 single-family dwellings throughout Contra Costa County each receive the same exact benefit from this measure.
All properties within a benefit assessment district must be included in the assessment pool. If any property is excluded, the burden of proof rests with the taxing authority. Therefore, churches, government buildings (including the County jail), senior centers, etc. are all being assessed. Does it make sense that a church, hospital, or jail can be said to receive a "special benefit" from open space?
Given the number of legal questions surrounding the use of a benefit assessment district, one has to wonder why it would be selected over an unquestionably legal parcel tax. Evasion of the two-thirds vote is obviously foremost. East Bay Regional Park District will be a beneficiary of this measure and they have twice failed to pass parcel taxes. A benefit assessment district offers other advantages to supporters of the measure as well. They include:
While the initial assessment is relatively small, this benefit assessment district will have an immense impact on taxpayers. It goes way beyond open space. Supporting this measure will both undermine the voters who approved the limitations on benefit assessments in 1996 and set a precedent for using benefit assessments to avoid a two-thirds vote on other issues.
We urge you to give this matter careful thought before you vote.
Kris Hunt, Executive
Kenneth Hambrick, Chairman
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A BAD Tax is Bad News
At last week's Walnut Creek City Council meeting Public Services Director Dan Richardson presented the limited information he had on the countywide Benefit Assessment District (BAD) for open space being proposed by the County Board of Supervisors (BOS). He did the best he could with the limited information available to him. He had only received the "Engineering Report" on the Friday before Tuesday's meeting.
The council asked a lot of very good questions that could not be answered (not Mr. Richardson's fault). Both Save Mt. Diablo and East Bay Regional Parks District representatives, major supporters of this BAD, were there too. They couldn't answer a lot of questions either, or guessed at the answers.
No one can argue the value of open space. But the argument about this BAD is not about open space but about several very scary issues:
1. A BAD for this purpose is illegal. It violates both Proposition 218 and the California Constitution, Article XIII.
2. The normal use for a BAD is small, tightly contained projects like sewers, sidewalks, lighting, etc., all within limited geographical areas. It was never intended for an entire county, even if it was legal.
3. The voting process runs against all accepted standards for elections. More than 340,000 ballots will be mailed. They will be handled and counted by an outside firm, not the County Registrar's people. There is to be no signature verification. No pro/con ballot arguments will be included with the ballots.
4.This is a stealth election. The BOS wants as few people as possible to know and understand this. The Engineer's Report was delayed and delayed. It is needed to even begin understanding what is included in the BAD.
5.The BOS believes a mail ballot to people who don't know the details will either be thrown away or voted for open space without understanding the details.
6.The BOS is using deceptive advertising. It claims the measure would cost taxpayers $175 million. To get as low a number as possible, a Net Present Value was used. This is never done for a tax proposal. Using the numbers in the Engineer's Report, the real cost is $250 million with an escalator that can raise it to $400 million over 30 years.
7.This BAD is a device to avoid the 2/3 requirement for a parcel tax, requiring only a 50 percent weighted vote. It's also an end-run around the East Bay Regional Park District's failed parcel tax. EBRPD gets 12 percent of this money to use on land it already owns.
With all these issues, a BAD is clearly not the vehicle for a countywide tax, whether legal or not. The correct vehicle is a parcel tax with a full disclosure to the voters and the 2/3rds vote. If the voters of this county want to buy open space with a parcel tax for open space, so be it, but not with this deceptively bad idea. This is not about open space. It is about forcing the county to use the right method and put the facts in front of the voters legally.
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Costa Supervisors Have Mortgaged the County's Future
|The County Board of Supervisors (BOS) has
mortgaged the financial health of the county and our children and
grandchildren will be paying the price. Through inappropriate and
irresponsible increases in pension benefits for county employees by as
much as 50%, the county must now cut critical services to those who need
As background, the last two Grand Juries published reports criticizing the board for approving increases that it could not financially afford. In fact, the 2002-03 Grand Jury broke precedent and appeared before the BOS asking it to delay the approvals for two weeks as a report on the subject was in preparation. The BOS, especially Supervisors DeSaulnier and Gioia, derided the jury members, saying the Grand Jury was just a bunch of old fogies who didn't understand county finances.
Time has shown the Grand Jury understood the impact of these decisions far better than the BOS did. But then maybe the BOS did understand but not really care. But caring or not, the BOS approved these increases without any consideration of what they would cost.
To quote the 2002-03 Grand Jury report, " Under funded employee benefits threaten the County's financial stability. By approving these increases, the Board of Supervisors is spending money it does not have. Present and future taxpayers of Contra Costa County will have to pay for these pension obligations. How that will be done is unknown."
We now know how it will be done, by cutting vital services, including safety personnel and service to those who need them the most. The county has balanced budgets in past years by cutting vacant personnel positions.
It is now crunch time. A recent newspaper article stated that "Contra Costa County's $53 million budget crunch will cut deep into the county's law enforcement agencies in the coming year forcing the Sheriff's Department to go without 20 deputies and leaving the district attorney without 10 prosecutors".
The BOS is reviewing further cuts in health services, social services, aid to the elderly and other important services to children and the homeless. All of this is to fund an overly generous benefit plan that allows an able bodied Sheriff's deputy or firefighter to retire at 50 with a pension of 80 to 120% of his/her annual salary. How many of you will get that kind of retirement pay?
Supervisor Millie Greenberg (she is running for re-election against Mary Piepho) still doesn't get it. She is quoted as saying that the supervisors have to address the underlying problem - revenue that doesn't keep up with expenses. Apparently neither she nor the other supervisors have ever thought of the idea that the underlying problem is that they are spending too much, especially on benefits.
Between January 1, 2002 and October 31, 2003, the outstanding liability for pension costs rose from $832 million to over $1.263 billion. As the 2003-04 Grand Jury said in its report, critical services such as infrastructure repairs, law enforcement, social welfare and health, will be reduced. And to repeat, these reductions will fall on those who can least afford to lose these services.
The BOS caused all this to happen. It wouldn't listen to others who had analyzed the costs. The supervisors paid off their public employee unions for their campaign contributions by doing this.
I predict they won't follow any of the recommendations of the latest Grand Jury but will lash out at it as they have in the past and blame the fiscal problems on everyone else. As stated at the beginning, they have mortgaged the financial future of the county and still refuse to acknowledge that it is their fault.
As a recent Times' editorial said, it's time for the supervisors to "show some backbone and fiscal discipline". They need to get their heads out of the sand, stop pandering to the unions and take back some of the pension gifts that are driving this county toward bankruptcy.
(Read the complete Grand Jury reports at www.cc-courts.org/grandjury)
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