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CalPERS Chief Raises Concerns about Low-Return Environment; Upcoming Forum

The 7.75 percent return rate is overly optimistic this year, according to CalPERS Chief Investment Officer Joe Dear. The lagging economy has put a damper on expectations and Dear believes overall the next few years will be tough for the pension fund. The officer commented that “This low-return environment is structurally driven, and there’s not a lot of policy to move it.” While losses and gains are spread out over 15 years, Bloomberg reports that “Even with gains in fiscal 2011, the pension fund has earned 3.41 percent annually on average in the past five years, 5.36 percent in the last 10 and 6.97 percent in the last 15. It has only beat its assumed rate of return with a 20-year average of 8.38 percent annually.” Back in the spring, the Board of Directors rejected a proposal to reduce the assumed rate of return. While the pension fund was fully funded before the recession, it is now at about 70 percent.

And in other CalPERS-related news, from October 24th to the 26th, the pension fund will hold its annual educational forum in the city of Long Beach. The three-day learning and networking event for public agency employers will include workshops, exhibits, leadership training and keynote speakers. This year’s two featured speakers are former North Dakota Congressman Earl Pomeroy, a leading expert on retirement and health, and Dennis Snow, a former Walt Disney Executive, will discuss proven techniques to create customer service excellence. Anne Stausboll, CalPERS Chief Executive Officer, commented that “CalPERS staff looks forward to meeting with employer representatives at exhibits and workshops. The Forum offers an excellent opportunity to strengthen our partnership in managing health and pension benefits.”  Here is the pension fund’s description of the event:

“This year’s offerings include updates on popular topics such as Social Security and payroll reporting, actuarial basics, reportable compensation and membership eligibility. In the exhibit hall, participants can meet one-on-one with an actuary, and visit booths to learn more about CalPERS customer contact center, retirement estimates, supplemental retirement plans, and electronic fund transfers. The Leadership Policy Series provides up-to-date information on a variety of topics including public pension reform and health care benefits, and will also offer an opportunity to ask questions of CalPERS Chief Actuary.”

Key details:
Location: Long Beach Convention Center
Registration Fee: $300
Registration Deadline: Friday, October 7, 2011

Registration information can be found here. A video on the event can be viewed below:

Download Video as MP4

 

Smells like Success? LA to Launch Pilot Program to Advertise on 500 Garbage Trucks

The smell of a garbage truck rolling down the street is sure to turn heads, which could lead to extra funds for the Los Angeles Council, as the placement of ads on the sides of city-owned garbage trucks could rake in much-needed revenues. The city’s Board of Public Works recently approved a pilot program that would basically turn 500 trucks into mobile billboards. But will there be interest in advertising on the side of a garbage truck? It’s not exactly among the more glamorous options. Officials in favor of the idea hope that it can generate as much funds as advertisements on MTA buses, which provides $30 million annually. The LA Daily News reports:

“Revenue generated from trash-truck ads would go into the Sanitation Bureau's Solid Waste Resources Fund, which is used to purchase the vehicles. This represents the first effort to have advertising on city vehicles, although officials said the idea could be replicated on DASH buses and in public parks. The city has faced multimillion-dollar shortfalls for each of the past four years, resulting in a reduction in the city workforce of more than 4,000 employees and cuts in services.”

Officials plan to examine whether some truck routes should cost more than others for advertising. If the program is successful, then the use of advertising opportunities may be expanded to further generate revenue. Richard Wozniak, a manager in the Sanitation Bureau, commented that “We realize that we have to get beyond the stigma that this is a trash truck. We have tried this in the past, but never were able to get much of a response from the industry. We are hopeful this time will work.”

Worried Residents Heckle Officials During Meeting on Crisis Planning for San Onofre Power Plant

In the aftermath of the earthquake and tsunami in Japan, residents from all over Southern California flocked to a meeting hosted by the San Clemente City Council due to concerns about the San Onofre Nuclear Generating Station. The event was entitled "Implications of the Fukushima Dai-ichi Nuclear Disaster for the San Onofre Nuclear Generating Station" and over 200 people turned up for the meeting that lasted 5 hours. Officials at the event provided testimony to affirm the station was far better designed to withstand a powerful earthquake, and federal regulators noted that they don’t believe similar circumstances that occurred in Japan will plague Orange County. That being said, it was recommended that upgrades should be considered as well as an evaluation of protections.

However, worried residents weren’t entirely put to rest by the testimony of various officials. Some locals (and/or enviros) are calling for the station to be shut down or a transition to alternative energy. The OC Register reports:

“Many in the audience sat quietly. Nuclear critics were more vocal. There was an occasional exchange of conflicting views. Several critics walked out, unhappy with the meeting format that did not allow environmental group San Clemente Green to present speakers alongside representatives of NRC and Edison. A separate meeting for San Clemente Green's speakers is set for Oct. 11. There were occasional interruptions, such as when critics challenged the NRC staff's position that a 10-mile emergency planning zone around San Onofre is sufficient. Some opponents called for a 50-mile evacuation zone.”

A regional administrator for the Nuclear Regulatory Commission commented that improved studies of seismic faults will be necessary if lessons are to be learned from the Japan disaster. However, no specific details were offered about when such improvements would be enacted.

Sobering Audit in Lindsay Further Riles Residents; Gross Mismanagement by Former Officials

We relayed recently that the Tulare County Association of Governments accused the city of Lindsay of misusing taxpayer dollars and TCAG demanded that the city pay back $3.75 million in Measure R funds, which tipped residents over the edge and they initiated a recall of all five council members. However, if the city is forced to pay back that $3.75 million in addition to $1.25 million to the California Housing Finance Agency (CalHFA), then the city may be forced to file for bankruptcy, according to Thomas Young, who audited the city. Young, a member of Brown Armstrong Accountancy Corporation, said former administrators spent wastefully and ignored compliance standards in order to give city workers $1.1 million in fraudulent home loans. The audit report and financial statements show great mismanagement on the part of former City Manager Scot Townsend and former Finance Director/City Clerk Kenny Walker. Townsend resigned and Walker retired last November. The two former officials are shown to be at fault for almost every improper action that the auditors discovered. Unsurprisingly, the audit’s revelations have only angered local residents even more. The Sun Gazette reports:

“’The news is disappointing and we have a long road to hoe to restoring public trust,’ Current City Manager Rich Wilkinson said. ‘We are trying to fix what’s wrong with the city’s internal controls and the audit gives us the tool to do that.’ The draft audit was presented to the City Council at its Sept. 13 meeting. It was precluded by a torrent of outraged citizens wanting answers for the actions of Townsend and Walker and the lack of oversight by the City Council. Excluding Councilmember Ramona Padilla, Lorena Vazquez renounced the City Council for their rubber stamp approval of Townsend and Walker’s actions and said they should pay back all of the taxpayer money they squandered.”

Residents called for the resignation of council members and/or the continuation of the recall campaign. The Recorder reports that Mayor Ed Murray said he is “concerned that the potential (for filing for Chapter 9 bankruptcy) is there. […] Common sense tells me that making payments and letting us pay the money back would be better than having this city go bankrupt. We’ll see what route [the creditors] decide to go.”

While the city is in a bit of turmoil, Council woman Pam Kimball is still optimistic and in an interview with the Recorder, the official commented that “Things are being resolved and dealt with by people who are in the best positions to do so. I’m optimistic that we’re going to get through this, put it behind us and move forward. We’re implementing correct procedures and policies to make sure this sort of thing doesn’t happen again. [...] The motives of this council are as good as you can get. No one has a personal agenda here. We’ve done our best for this town, and we’re still committed to doing that.”

You can read an extensive summary of the audit’s findings here.

Governor Cites Local Control as Reason for Veto of Bill that Restricts Pot Shops

Citing fears about infringing upon local government control, Governor Brown has vetoed SB 847, which would have barred medical marijuana dispensaries from setting up shop within 600 feet of homes. The legislation was introduced by Senator Lou Correa (Santa Ana), but the governor ended up rejecting it because he noted that cities and counties should have power to determine regulations that impact pot shots. The veto message states, “This bill goes in the opposite direction by preempting local control and prescribing the precise locations where dispensaries may not be located. Decisions of this kind are best made in cities and counties, not the state Capitol.” Medical marijuana advocates are undoubtedly pleased by the governor’s decision and local government officials may be pleased that Brown affirmed local control (at least on this matter).

The governor also pointed to the recently-signed AB 1300 as another reason SB 847 was unnecessary because the assembly bill gives cities and counties clear authority to restrict the location and operation of such dispensaries as well as file civil or criminal claims against violators.

Correa expressed frustration with the outcome, and the senator commented “I’m disappointed for the community. All we were talking about is taking a buffer zone already in the law to keep second-hand pot smoke away from children at schools and extending it to keeping it away from residences." Correa also argues that he worked with marijuana advocates to reach a compromise on the language of the zoning requirements in the bill.

The Sausalito Slap: Physical Dispute between Council Members Leads to More Acrimony

During heated council sessions, verbal disputes are to be expected but in Sausalito some “shushing” led to a slap between council members as they were seated next to each other and the so-called “assault” has perhaps created an overreaction across the board. During a September 13th meeting, Councilwoman Carolyn Ford was unable to hear comments from city Public Works Director Jonathon Goldman, so she held up her hand and said “shush” to Vice Mayor Mike Kelly. The Marin Journal reports that then the following very adult exchange occurred:

“Kelly: "Don't shush me for Christ sakes," followed by a slap to Ford's hand.

Ford’s reply: "Don't hit me."

Kelly repeated: "Don't shush me. You put your hand on my side of the table."

Clearly it was not the council’s finest hour. The slap led Councilwoman Ford to press for an assault charge against Kelly, as she spoke to local police about the incident. Ford says there has been a pattern of abuse on the council and she released the following statement:

“The constant hectoring and belittling from my fellow members meets the threshold of abuse. ...Vice Mayor Kelly and Council member (Jonathan) Leone are verbally abusive. ... The mayor doesn't reign it in and he occasionally contributes to it. When I spoke to Mayor Weiner several months ago about the verbal abuse and his inability to get it under control, he suggested that I be more passive. ... I was reluctant to go public with this because it is embarrassing for the Council and the City as a whole.”

Ford is right that “embarrassing” is a good word to describe the whole affair. Kelly ended up issuing an apology for the hand-slap, stating the following:

“I responded to Councilwoman Carolyn Ford's gestures to silence me by inappropriately slapping her hand, something I have never done to anyone before and an act which is against everything I stand for. This was truly uncharacteristic behavior on my part. I am deeply embarrassed by my action and apologize to Carolyn Ford, and to the citizens of Sausalito."

The Marin Journal reports that the slap covers just the surface of ill will on the council, as “meetings have become contentious, with council members snapping at each other, bickering and fighting for microphone time. Sausalito politics is known for being rough and tumble.” More here. You can see video below:

Isleton Officials Face Additional Criticism for Failed Pot Deal in County DA’s Report

Over the summer we relayed that the city of Isleton ran into a bit of trouble with the Sacramento District Attorney’s Office after ignoring requests for public documents about a deal between the city and Delta Allied Growers for a massive pot farm. The DA eventually initiated a grand jury investigation of the city, and every manager and elected official in the town was subpoenaed by Sacramento County District Attorney Jan Scully. The jury ultimately concluded that Isleton officials allowed procedures and laws to be compromised because they had their sights set on receiving $25,000 in monthly revenue from Delta. In an update, the District Attorney’s Office has now released a report of its own that continues to dump on the criticism of the city’s officials.

However, no charges will be filed against Isleton officials or Michael Brubeck, the man behind Delta who offered up the lucrative revenues. That being said, the 21-page report doesn’t hold back in criticizing the city’s decision process. For instance, one section reads: “Had the marijuana cultivation farm project become operational it would have been illegal under state and federal laws and not in compliance with attorney general guidelines.” The DA report is particularly critical of City Attorney Dave Larsen due to concerns that he worked through a conflict of interest by being paid $150 an hour by the city while being paid $250 an hour by the developer. Reportedly the issue will be brought to the attention of the California State Bar Association. Conclusions from the District Attorney’s Office are as follows:

• The City Attorney provided incorrect information about the California Environmental Quality Act [CEQA] when he advised the City Council that the marijuana cultivation farm was not subject to CEQA and exempt from CEQA. The consequence of the incorrect information was to expedite the adoption and implementation of the development agreement and mislead the City Council.
• Members of the City Council and Planning Commission were not provided with objective and well-researched information by the City Manager, the City Attorney, or the City Police Chief.
• Conflict of Interest – City council members need to be better informed about what constitutes a conflict of interest. It appears that they did not know or at a minimum did not understand the conflict of interest laws. They should participate in conflict of interest training and make appropriate disclosures.
• The City’s public records maintenance should be improved.

You can read the full report here. It provides a detailed account of how the deal proceeded with specific dates.

San Juan Cap Fines Couple for Bible Study Gatherings due to Code Violations; Legal Dispute

The city of San Juan Capistrano fined a local couple $300 for violating zone codes, which has led to a legal dispute that is garnering national media attention. So what was the couple’s offense? Hosting bible study sessions in their home created the dispute, as neighbors complained about the weekly gatherings of up to 50 people and the parking problems in the area. Code-enforcement officers dished out two citations, one for $100 for the first offense and then $200 for a subsequent violation. But the couple is fighting the $300 in fines and wants the charges to be overturned. While a hearing officer already denied the couple’s appeal, they are taking the matter to Superior Court for a hearing. The OC Register reports:

“If the fines are not overturned, the couple intend to sue in federal court to get the city ordinance in question struck down, according to their attorney, Brad Dacus of the Pacific Justice Institute. The Bible studies occurred every Sunday morning, which Sandoval said violated city zoning codes prohibiting a residential building from being used as a gathering place for more than 50 people on a regular basis. The couple could apply for a conditional use permit, but those are issued only after traffic studies, environmental-impact reports and various other studies are performed, Dacus said.”

The city has defended the fines since the gatherings are a clear violation of city codes, but the couple is making the issue larger than a simple ordinance. The couple has stated that it does not believe it should pay the city anything beyond property taxes and that it has no right to regulate behavior on private property. The council could dismiss the fines, but the item has not been placed on any agenda, at least not yet. A statement from the city says that “Zoning and building codes treat residences differently than places of public assembly because of public welfare and safety reasons." Time magazine covered the case, which can be seen here.

City Officials and San Diego Pension Fund Wrestle over Authority to Settle Lawsuits

Despite the fact that a judge ruled a former president of the Municipal Employees Association was only entitled to receive a small retirement benefit, the San Diego City Employees Retirement System settled a legal dispute with a $700,000 payout to the ex-MEA boss. The hefty settlement sum was offered without any consultation with the city council; consequently, council members passed an ordinance to remove the pension fund’s blanket authority to settle lawsuits without council input. However, the legislation hasn’t resolved disagreements between the city council and pension officials over who rightfully has the final say when it comes to such settlements. The Union Tribune points out:

“City Attorney Jan Goldsmith says future settlements must be approved by the council while pension administrator Mark Hovey says the city ordinance is unconstitutional because it restricts a power granted exclusively by the state Constitution and the city charter. The dispute isn’t likely to be resolved until the next proposed settlement moves forward and the two sides disagree over the merits, possibly winding up in court with taxpayers footing the bill for each side.”

In the past, San Diego decided to let labor leaders include their union service toward their pensions as a city employee, which created conflict with the IRS and one employee ended up suing the city and the pension fund. However, since the city did not actually approve the employee’s benefit, a judge ruled this particular employee was only entitled to receive a small pension for her short years working for the city. Ultimately, the pension fund ended up giving the worker the $700,000 settlement and the city was unable to block it, according to Goldsmith, because of a 2008 trust agreement signed by the former city attorney. In the end, the pension fund has promised to keep city officials in the loop when it comes to settlements, but the issue is likely to be contentious in the future when a similar legal situation arises.

NTSB Releases Findings from its Investigation on the San Bruno Pipeline Disaster

It’s taken a year, but the National Transportation Safety Board's (NTSB) has released the findings of its investigation into the San Bruno disaster. The full report is a whopping 140 pages, but the key takeaway is that PG&E's pipeline integrity management program is deemed deficient and ineffective. The investigation criticizes the utility’s slow response time, as it took 95 minutes to stop the flow of gas and to isolate the rupture site, which lead to more property damage and danger for local residents. In comparison, the report applauds the prompt and appropriate response time of local authorities in San Bruno, as firefighters and police officers were at the scene almost immediately after the rupture. The executive summary states, “More than 900 emergency responders from the city of San Bruno and surrounding jurisdictions executed a coordinated emergency response, which included defensive operations, search and evacuation, and medical operations.”

PG&E's pipeline integrity management program is singled out for deficiencies for the following reasons:

• Was based on incomplete and inaccurate pipeline information.
• Did not consider the design and materials contribution to the risk of a pipeline failure.
• Failed to consider the presence of previously identified welded seam cracks as part of its risk assessment.
• Resulted in the selection of an examination method that could not detect welded seam defects.
• Led to internal assessments of the program that were superficial and resulted in no improvements.

A list of 28 findings and recommendations can be found here. For instance, one recommendation to the governor states that “Expeditiously evaluate the authority and ability of the pipeline safety division within the California Public Utilities Commission to effectively enforce state pipeline safety regulations, and, based on the results of this evaluation, grant the pipeline safety division within the California Public Utilities Commission the direct authority, including the assessment of fines and penalties, to correct noncompliance by state regulated pipeline operators.”

PG&E released the following statement in response to the report:

“PG&E is grateful for the NTSB’s thorough investigation of the San Bruno pipeline accident and fully embraces the Board’s recommendations for improving the operations and management of the company’s natural gas system. We are implementing those recommendations as part of a larger effort, both immediate and long-term, to promote safer pipeline operations. We are committed to continuing to learn from the San Bruno accident and to sharing those learnings across the natural gas industry so that a tragedy of this magnitude never happens again. We are deeply sorry that our pipeline was the cause of the accident, and we remain committed to supporting the City of San Bruno and its residents as the healing and rebuilding process continues.”

The NTSB also released a video on the findings from its investigation: