CaliforniaCityNews.org

Great Moments from the Dais: A Blast from the Past from the Infamous Zuma Dogg

Gadfly Hall-of-Famer Zuma Dogg apparently has a full-length "Best of The Zuma Dogg Show" DVD out, and has been posting “best of” highlights. For a blast from the past, Zuma Dogg has posted clips from the first month of his entrance into City Hall (April 2006) and his triumphant exit.

States Look to Prevent Municipal Bankruptcy Filings w/ Legislation; Infringes on Local Control?

It has been reported that $20 billion is the combined shortfall that cities across the country will face this year. Amidst great budget woes, efforts are playing out in several states to approve legislation that would require a state to intervene in order to help a municipality avoid bankruptcy. In Indiana, state Senator Ed Charbonneau has introduced such legislation so that cash- strapped cities receive support. Commenting on the bill, Charbonneau stated that “We’re putting a process in place with the intent of avoiding the need for bankruptcy. The whole purpose of it is to try to get fiscal help to distressed local units of government so they can correct their situation before any need for bankruptcy would arise.” Bloomberg News points out that states like Indiana and California are considering legislation in the aftermath of the 2008 bankruptcy in the city of Vallejo, which has led to an onslaught of legal costs, layoffs, and continued fiscal issues. Bloomberg reports:

“In Michigan, Governor Rick Snyder, a Republican, signed a law last month empowering a state-appointed emergency manager to renegotiate a city’s contracts, sell assets and set minimal staffing levels. The Michigan managers will develop a financial and operating plan for a distressed local government that includes meeting scheduled debt service on all bonds, notes and municipal securities, making pension-fund contributions and changing, rejecting, ending and renegotiating contracts. The bills aim to protect states from the harm to their credit ratings that could result from a municipal bankruptcy, increasing their borrowing costs, said James Spiotto of the Chicago-based law firm Chapman and Cutler LLP.”

The legislation that has been introduced in Indiana would also require the appointment of an emergency manager who would wield great power over the city’s operations and finances, such as pay cuts, renegotiating labor contracts, and suspending salaries. Legislation in California would require mediation to take place in order to see if contracts can be renegotiated before a city can file for bankruptcy.

Back in March we relayed info about the imposition of financial martial law in Michigan, which meant state auditors would be able to void municipalities' union contracts and even dissolve local jurisdictions. For a refresher, see here.

Committee Approves a Bill to Prevent Teams From Leaving a City if Outstanding Debts Remain

Drama over the relocation of the NBA team the Sacramento Kings is continuing to play out at the Capitol. This week the Senate Judiciary Committee approved SB 652, which would bar a professional sports team in California from moving forward on a relocation agreement with another city if they are outstanding debts to the home city. Introduced by Senate President Pro Tem Darrell Steinberg, the senator acknowledged that the bill’s motivation stemmed from concerns the Kings would move to the city of Anaheim without repaying a $77 million loan it received from the city of Sacramento. Steinberg stated that “(If) anyone is seeking to make a cold business decision about where they want to relocate, public policy in California ought to be that the city from which they consider leaving is made whole before they in fact do leave.”

If the Kings are to relocate, the owners of the team have until May 2nd to request permission from the NBA. In the meantime, Sacramento officials and local businesses have put up a spirited defense to keep the team in the Capitol. Several legislators have even sent a letter to NBA Commissioner David Stern, urging him to keep the Kings in Sacramento and to highlight their efforts to build a new arena in the city.
Capitol Public Radio reports the following on Sacramento’s efforts to keep the team in town:

“'We knew that if we stepped up from a corporate community we'd be in the ballgame,' Johnson said.  'And that was our offensive play.' The defense is coming from the Committee to Keep the Kings in Sacramento. Rob Stutzman is in charge of the committee's signature drive.  He says he's got more than enough signatures to upset Anaheim's plan to use public bonds to lure the Kings away from Sacramento. ‘If the signatures are filed, it will place this matter on the ballot for the Anaheim voters to ultimately decide whether or not 75 million dollars of public finance bonds should be part of the deal to help bring the Kings to Anaheim,’ Stutzman said. Stutzman says Anaheim would have to find a new source for the 75 million dollar loan, or wait for an election.  He says he's not going to file the signatures though, because it looks like Sacramento might just keep the Kings.”

As for Anaheim, the NBA relocation committee held a conference call with the owners of the Kings and officials from Anaheim Arena Management as part of a fact-finding mission. More here.

Former Bell CM Set Up Special Pension Fund Worth $4.5 Million; City Looks to Recoup $

The financial health of the city of Bell is chief among the issues that the new city council has to address, as we relayed several months ago that the deepening of budgetary woes were slated to leave the troubled local government with a deficit of over $4 million, partly due to spending patterns and one-time legal costs. Fears were also raised that the city would soon be unable to afford basic services and that insolvency was on the horizon. Notably, grand jury testimony has revealed that former City Administrator Robert Rizzo set up a special pension fund that contains $4.5 million. Since there are IRS regulations that cap public pensions, Rizzo and his top assistant set up an account that was just for themselves so that they could rake in extra benefits—on top of the pension payments they would receive from CalPERS. Rizzo and his deputy also set up a second special account that would give extra benefits to around 40 workers. The LA Times reports:

“The discovery of the money could be a huge boost for the finances of Bell, whose entire operating budget is about $13 million and is faced with major budget cuts in the wake of a corruption scandal. City officials said Monday that they were looking into whether they could use the $4.5 million to reduce the city's budget deficit. In 2008, Rizzo said he wanted the city to spend $14 million to fund this second retirement account. Lourdes Garcia, the city's director of administrative services, testified that Rizzo said the city needed to place $2 million a year into the account, even as Bell's finances were deteriorating.”

Notably, even after Rizzo left office, on a private call he told the city's director of administrative services to move the pension fund money into a Wells Fargo account so that his retirement would be funded. What is more, a consultant from the bank warned the officials in 2009 that there would be backlash if the public ever became aware of the amount of the retirement funds. Rizzo and his deputy are now facing charges that they illegally increased their pensions and misappropriated public funds. The supplementary pension payments were put to a halt several months ago.

The Trillion Dollar Gap: PEW Report on the Recession’s Impact on Pension Funding

The PEW Center on the States has released a new report that analyzes states' funding of pensions and retiree health care. Entitled “The Widening Gap: The Great Recession’s Impact on State Pension and Retiree Health Care Costs,” the report shows how retirement systems were greatly impacted by the recession, evident by data from 2009 and 2010. Notably, in the course of one year, there has been a 26 percent increase in the gap between the promises states have made for public employees’ retirement benefits and the money set aside to pay for them. The gap is so large that it grew to $1.26 trillion in fiscal year 2009. In addition, 31 states were below the 80 percent funded threshold in fiscal year 2009. California’s pension liability is listed at $490,585,000 and is considered 81 percent funded. Susan Urahn, managing director for the Pew Center on the States, commented the following on the report’s findings:

“In many states, the bill for public sector retirement benefits already threatens strained budgets, and is competing for resources with other critical needs, including education, infrastructure and health care. The $1.26 trillion shortfall for pensions and retiree health care will drive up annual costs and make already tough budget decisions even tougher. […] A significant number of states are trying to deal with the bill coming due for their employees’ retirement benefits head on,” said Urahn. “Given the size of the problem and the challenges of reform, there are no quick fixes. But there is considerable momentum for change.”

Highlights from the report include the following:

• “Pension funding shortfalls accounted for $660 billion of the $1.26 trillion gap, and unfunded retiree health care costs accounted for the remaining $635 billion.
• States had only about $31 billion, or 5 percent, saved toward their obligations for retiree health care benefits.
• State pension plans were 78 percent funded, declining from 84 percent in 2008.

Read the full report here.

Two Officials Facing Recall Vote in Hercules; Candidates Vie for Council Spots

Hercules city council members Donald Kuehne and Joanne Ward have been the subjects of a recall campaign over a perceived lack of control of the city’s finances, as well as concern about the dismissal of City Manager Nelson Oliva’s replacement, Charlie Long. The city’s fiscal woes were revealed publicly by Long, and eventually Oliva was reinstated after being on medical leave. Former mayor Ed Balico was also the target of a recall effort, but he resigned abruptly back in February, so now his seat is vacant. The political turmoil will hit the stage in May when a forum is hosted for city council candidates looking to find (or secure) a seat in the June 7 election. The Contra Costa Times reports:

“Councilman Don Kuehne and Mayor Joanne Ward face possible recall. A third seat is vacant, after the January resignation of then-Mayor Ed Balico. The three elections are separate. If voters, by a simple majority, oust a given council recall target, they will get to choose a replacement in a second phase. The race for the open seat is between three business owners: Mark Anthony Jones, Sherry McCoy and Dan Romero. […] Gerard Boulanger, owner of a carpeting business, is the only replacement candidate for Kuehne. Vying to replace Ward in the event she is recalled are Virgilio de la Vega and Bill Wilkins, both of whom are members of the Citizens Finance Advisory Ad Hoc Committee.”

Recall candidates Gerard Boulanger and Dan Romero were behind the group that led the recall effort to gather signatures so that Council members Kuehne and Ward would face losing their spots in the June 7th election. From the start, Kuehne and Ward have resisted calls to step down and we noted in February that Councilman Kuehne, when served with a recall notice, tore up his copy at a council session and eventually said the effort was without basis.

106 Cops Facing Layoffs in San Jose; Read CM’s Letter to City Workers about 620 Layoffs

The full magnitude of San Jose’s budget crisis hit city workers recently when City Manager Debra Figone sent a letter to city employees to inform them about impending massive layoffs and the city’s $115 million deficit. (You can read Figone’s letter below) We relayed earlier this week that the local government is facing its 10th straight year of budget deficits, and little in the way of progress has been made in reaching agreements with employee unions so that pay cuts can provide the city some savings. According to officials, a major contributor to the city’s large deficit is soaring employee pension costs, but talks with many unions are at an impasse.

Public safety will also be greatly impacted by the city’s budget woes, as 106 officers may lose their jobs and many other cops may face demotions. If such cuts are made, the police force would experience a 9 percent reduction. Police Chief Chris Moore commented that “It's hard to be the chief at a time when we are laying off officers for the first time ever. Our best, brightest and youngest are being forced out of their jobs." More about cop layoffs can be read here.

Below you will find the letter that Debra Figone sent to city workers about cutting 620 positions. Figone is slated to release her proposed budget on May 2nd.

“Dear City Employee –

I am writing to update you on the City’s budget effort, and what you can expect over the next two weeks. As always, my goal is to keep you informed so that you don’t first learn of decisions that affect you by reading about them in the newspaper.

I know that you are aware of our current budget problems, so it will come as little surprise that the budget we will be releasing on May 2nd will include significant workforce impacts. The current projected budget deficit for the next fiscal year now stands at roughly $115 million. Although none of the recommendations will be finalized until the City Council approves a final budget on June 14, I think it is important that you know the magnitude of our situation now. 

Arbitrator Rules that Local Government Can Reduce Pensions of Current Public Workers

In the state of Michigan, an arbitrator recently ruled that the pensions of current workers, in this case Detroit police department employees, could be reduced in light of the city’s financial struggles. Reducing the benefits of current workers is not only controversial but goes against the laws and traditions that many states have on the books. But it would appear that desperate times call for desperate measures, and the economic woes of Detroit could certainly be described as desperate. Officials in states across the country may move beyond two-tier plans that only impose pension cuts for new hires, which offer rather limited savings. At the forefront of debate is whether or not pensions for current workers can (and should) be reduced, a question that appears all the more timely in light of the ruling in Michigan, as well as the possibility that other governments may seek reductions of their own. That is not to say the issue is without legal sticking points, and in many cases may depend on the strength of constitutional protections.

When it comes to constitutional protections for public sector retirement benefits, the following is a summary of state law on the matter in California: “A public employee's pension constitutes an element of compensation, and a vested contractual right to pension benefits accrues upon acceptance of employment. Such a pension right may not be destroyed, once vested, without impairing a contractual obligation of the employing public entity.”

Detroit’s reform presents a rare example of cutting back the amount of pension benefits that a current employee receives in comparison to other reforms that governments have relied upon. Due to the arbitrator’s ruling, lieutenants and sergeants will earn pension benefits from 2.1 percent of their salary per year, which will be a reduction from 2.5 percent. Originally the city sought to entirely freeze its pension fund, but the arbitrator rejected the proposal. The New York Times reports:

“But government workers, many of whom were recruited with the promise of good benefits and pensions, say that it would be unfair — and in many cases, very likely illegal — to change the rules in the middle of the game. It has been far more common for cities and states to adopt more modest retirement plans for future workers. But the savings from new plans are initially small, growing only over time. Other states have gone further, requiring workers to work more years before retiring, or to contribute a higher portion of their salaries toward their pensions.”

One method of reform, reducing cost-of-living increases for retirees, has already resulted in lawsuits in several states.

Part of the arbitrator’s report states that the local government’s pension costs “threaten both the city’s fiscal viability, as well as its wherewithal to provide public safety for its citizens.” Another section mentions that “Evidence showed that less than 37% of Detroiters are actually employed. The City's three major revenue sources, property taxes, state revenue sharing, and income taxes, have been declining and are projected to continue to decline.” You can read the arbitration document here.

Vernon Disincorporation Opposed by Two Powerful L.A. Groups; Send Letters to Speaker

Battling over the disincorporation of the small city of Vernon is heating up. While Assembly Speaker John Perez has got over 100 legislators to sign on as co-authors to a piece of legislation that would dissolve the local government, two powerful Los Angeles groups have come out against AB 46. The Los Angeles Area Chamber of Commerce and the Los Angeles County Federation of Labor have sent letters to the speaker to emphasize the economic impact of disbanding the city and the Federation of Labor is looking to preserve union jobs. Notably, on an 8-0 vote, the bill already passed the Assembly Local Government Committee. It is likely that the bill will go before the full Assembly in the summer or fall. You can read one of the letters that was sent to Perez below.

In other Vernon-related news, the LA Times has released a new report on the city and the large salaries, excellent benefits, and below-market housing rentals that its council members enjoy. An excerpt reads:

“Critics cite the lifestyle the councilmen and other top officials enjoy as evidence that the city is a fiefdom run for the benefit of its ruling clique. […] The five councilmen live in city-owned homes and apartments, paying below-market rents of $147 to $236 a month. As Vernon's leaders, they are both renters and landlords. At least two councilmen have family members or friends who also live in Vernon housing. Contested elections are rare, and all but one of Vernon's five sitting councilmen was appointed to his post. The last time someone won their seat in the small industrial town in an actual election, Richard Nixon was president.”

Council members reportedly earn around $70,000 a year, despite the city having a population of less than 100. Mayor Hilario Gonzales recently acknowledged that the city needed reforms but that it would not happen overnight. Read the full article here.

Perez

Video of the Day: Mud-Slinging City Council Candidate Compares Himself to Honest Abe

Looking for new ideas to create a campaign ad? You could compare yourself to American icon Abraham Lincoln in order to point out all the ways you are the superior man. That’s the route that Philadelphia City Council candidate Steve Odabashian takes in a humorous video for the city’s May primary. Take a look: