MOORLACH UPDATE — City CAFR Rankings – Vol. 7 — February 20, 2018

Last Friday was the deadline to submit proposed bills. I hit my allotment of 20. I also coauthored a select few bills that were submitted by other Legislators (also see MOORLACH UPDATE — City CAFR Rankings – Vol. 6 — February 16, 2018).

The Orange County Breeze, in the first piece below, provides my release describing SB 1033 (see MOORLACH UPDATE — City CAFR Rankings – Vol. 6 — February 16, 2018).

The Signal provides another example where I am a coauthor, this time of AB 2796 (Lackey), and it is the second piece below.

Volume 7 of the City CAFR Rankings provides for #200 to #151 and is the third piece below. These 50 cities comprise 2.2 million people, so the combined 7 volumes make up 70 percent of the state’s population.

OC cities include Laguna Hills (#198), Mission Viejo (#171), and Rancho Santa Margarita (#156).

The listing shows not all the June 30, 2017 CAFRs were completed by January of the following year, which is the norm. This may mean that the audits of the cities are more difficult, or Certified Public Accounting (CPA) firms that specialize in this industry have more work than time allows. A County as large as the OC was usually completed within six months, by the month of December. But, California’s CAFR is usually not completed until March of the following year. Two cities in this grouping, Calipatria and Maricopa, show the 2014 CAFR as the most current, which may indicate other concerns. Fortuna and Holtville show their 2015 CAFR as the most recent. Let’s hope a little public scrutiny like I’m providing will encourage these cities to become current.

As most cities receive funding from the Federal government, the independent CPA firm that is retained must comply with OMB A-133 single audit requirements (see https://en.wikipedia.org/wiki/Single_Audit). This mandates that certain continuing professional education (CPE) courses be completed by key staff (see https://en.wikipedia.org/wiki/Government_Auditing_Standards). Auditing cities is a serious and complex engagement and not all firms are interested in the burdens of pursuing this particular niche. The city of Bell may remind you that the liability exposure is rather severe.

For the previous six volumes, go to:

MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 2 — February 8, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 3 — February 10, 2018

MOORLACH UPDATE — City CAFR Rankings – Vol. 4 — February 12, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 5 — February 14, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 6 — February 16, 2018

Senator John Moorlach introduces Senate Bill 1033, the Pension Fairness Act of 2018

http://www.oc-breeze.com/2018/02/17/117455_senator-john-moorlach-introduces-senate-bill-1033-the-pension-fairness-act-of-2018/

“It is fair for an employee to be paid a pension based on each place he or she works. But currently, the formula used by the California Public Employees Retirement System (CalPERS) biases retirement costs in favor of bigger cities that can pay higher salaries against smaller cities who are often on the hook for payments they didn’t agree to.”

“An example of the current system: A small city trains and hires a police officer. He or she then is hired by a bigger city and is given a large raise. The current amounts paid into CalPERS are based on current salary, so the small city is hammered for the higher cost, even though the officer no longer patrols there.

“Current law mandates CalPERS must define ‘a significant increase in actuarial liability’ and ‘implement program changes to ensure … the increased liability’ is borne by the agency granting it. But that’s not happening.

“I’m introducing Senate Bill 1033 to put teeth into that requirement. It would mandate the agency increasing compensation must bear all actuarial liability for the action.”

This article was released by the Office of Senator John Moorlach.

Bill would require emergency information as part of car purchases

By Andrew Clark

https://signalscv.com/2018/02/bill-require-emergency-information-part-car-purchases/

Car buyers looking to purchase new wheels may soon add emergency contact information to the purchase forms if a new bill introduced in the state legislature gets approved.

Assembly Bill 2796, authored by Tom Lackey, R-Palmdale, and co-authored by Assemblymen Steven Choi, R-Irvine, and Adrin Nazarian, D-Sherman Oaks, as well as Sen. John Moorlach, R-Costa Mesa, would require dealers to add the contact information to the transfer of ownership paperwork. Lackey said Monday he thought of his career as a highway patrolman and the length of time it can take to notify next of kin after fatal crashes when crafting the legislation.

“I made over 40 death notifications,” he said. “The longer it takes to get that message to the family, the more tragic it is.”

Legislative documents stated the bill “would require law enforcement personnel, when practicable, to expeditiously provide emergency contact information from the system, either verbal or written, to the emergency department of a general acute care hospital receiving a motor vehicle crash victim who is unconscious or otherwise incapable of communication.”

The bill is modeled after one in New Jersey that required the creation of an emergency contact registry when filing for a temporary license plate from the Department of Motor Vehicles.

“We applaud Assemblyman Lackey for drawing attention to this critical issue by proposing an efficient way for loved ones of a crash victim to be notified much sooner,” said Shaun Rundle, deputy director for the California Peace Officers’ Association. “The public benefit here could not be clearer.”

The bill was introduced Friday, the last day of the legislative session to introduce proposed laws, and is yet to be assigned to a committee, according to legislative information posted Monday.

Should the bill be signed into law, it would go into effect by Jan. 1.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
200 Jurupa Valley 101,315 $8,644 $85 2016
199 American Canyon 20,570 $2,076 $101 2016
198 Laguna Hills 31,544 $3,315 $105 2017
197 Wasco 26,980 $2,945 $109 2016
196 Calipatria 7,555 $877 $116 2014
195 Norco 26,882 $3,195 $119 2017
194 Kerman 14,614 $1,742 $119 2017
193 Menifee 90,660 $10,903 $120 2016
192 Avalon 3,718 $460 $124 2016
191 Moreno Valley 206,750 $26,675 $129 2017
190 Solana Beach 13,527 $1,795 $133 2017
189 Visalia 133,151 $17,877 $134 2017
188 Yreka 7,777 $1,045 $134 2016
187 Huron 7,186 $967 $135 2016
186 Moraga 16,676 $2,261 $136 2017
185 Fowler 6,091 $846 $139 2016
184 Fortuna 11,989 $1,759 $147 2015
183 Lemoore 26,369 $3,912 $148 2016
182 Encinitas 62,288 $9,510 $153 2017
181 Bellflower 76,657 $11,890 $155 2017
180 Sierra Madre 11,010 $1,732 $157 2016
179 Tehachapi 12,280 $2,028 $165 2017
178 Perris 75,739 $12,523 $165 2016
177 Citrus Heights 87,013 $14,663 $169 2016
176 McFarland 14,919 $2,567 $172 2016
175 Holtville 6,255 $1,079 $173 2015
174 Ione 7,772 $1,434 $185 2017
173 Ceres 47,754 $9,957 $209 2016
172 Yucca Valley 21,519 $4,498 $209 2017
171 Mission Viejo 96,718 $20,367 $211 2017
170 Santa Monica 93,834 $19,957 $213 2016
169 Mendota 11,828 $2,571 $217 2016
168 Hughson 7,331 $1,637 $223 2016
167 Palmdale 158,605 $36,278 $229 2017
166 Porterville 59,908 $13,714 $229 2017
165 Rosemead 54,984 $13,109 $238 2016
164 Waterford 8,906 $2,233 $251 2017
163 San Jacinto 47,925 $12,389 $259 2016
162 Mountain View 79,278 $20,918 $264 2017
161 Imperial 18,658 $5,103 $274 2016
160 Orland 7,812 $2,146 $275 2016
159 Delano 53,152 $14,843 $279 2016
158 Temecula 111,024 $31,506 $284 2017
157 Canyon Lake 10,891 $3,105 $285 2016
156 Rancho Santa Margarita 48,602 $13,960 $287 2017
155 Chowchilla 18,840 $5,504 $292 2016
154 Chino Hills 80,676 $23,695 $294 2017
153 Maricopa 1,140 $336 $295 2014
152 Port Hueneme 22,808 $6,742 $296 2016
151 Temple City 36,389 $11,585 $318 2016

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MOORLACH UPDATE — City CAFR Rankings – Vol. 6 — February 16, 2018

Sen. Steve Glazer (D – Orinda) introduced a major pension reform bill, Senate Bill 1149, this week. I am proud to say I am a coauthor. The Sacramento Bee provides the story in the first piece below. The piece closes by mentioning superficially the three pension reform bills that I have introduced (for the first two, see MOORLACH UPDATE — City CAFR Rankings – Vol. 4 — February 12, 2018 and MOORLACH UPDATE — City CAFR Rankings – Vol. 5 — February 14, 2018).

The third pension bill that I introduced last week is Senate Bill 1033, which concerns reciprocity between public employee defined benefit plans. Many employees leave one system to go to another, only to have their salaries boosted dramatically by the new municipal employer. Unfortunately, the previous system is partially on the hook for this potential spiking in remuneration. My bill will shift the liability for the higher compensation component to the last employer. It’s a fair bill. And it’s something that CalPERS has been working on internally, as well.

Yesterday morning I had my second Joint Committee on Rules Subcommittee on Sexual Harassment Prevention & Response Hearing. KCRA Channel 3 was present and provided their perspective in the second piece below. In a political world, a false rumor whispering campaign can destroy a candidate. I asked a few good legal minds on addressing false accusations.

Volume 6 of the CAFR rankings, the third piece below, provides the cities ranked from #250 to #201. The OC cities of San Juan Capistrano (#223) and Seal Beach (#201) are included. The group represents 6.2 percent of California’s population. The median city is Angels Camp (#241). For the previous five listings, see MOORLACH UPDATE — City CAFR Rankings – Vol. 5 — February 14, 2018.

Two interesting observations. The first we now see cities in the list that have a positive unrestricted net position, starting with #219, Livingston. The second is there are three cities that do not have their annual CAFRs online and have been unwilling or unable to send copies to me in a timely manner. These small cities are Amador (#222), Fort Jones (#221), and Westmorland (#220). When we update this listing, after all of the 2017 CAFRs have been completed, we hope to find these cities in their appropriate places, versus the generous “zero” that we’re giving them by default. (For those of you residing in the city of Livingston, we did make a minor adjustment, dropping you a few spots, which will be reflected in our next edition.)

THE STATE WORKER

CalPERS pension or a 401(k)? State workers could choose under Democrat’s bill

BY ADAM ASHTON

aashton

http://www.sacbee.com/news/politics-government/the-state-worker/article200191149.html

New state workers would have a choice about whether they want to join CalPERs under a bill a Senate Democrat submitted on Wednesday.

The bill by Sen. Steve Glazer of Orinda is a long shot. Lawmakers last year rejected other proposals to change public employee pensions, such as a bill that would have suspended cost-of-living adjustments that retirees receive.

Glazer’s proposal, Senate Bill 1149, would enable new state workers to choose alternate retirement options outside of the California Public Employees’ Retirement System, such as a defined contribution 401(k) plan.

That option probably is most appealing to younger workers who aren’t sure whether they want to commit to a 30-year career in civil service.

Currently, public employees must keep their jobs for five years before they vest into CalPERS or the California State Teachers’ Retirement System. If they leave before vesting, they do not receive pensions and they are not able to keep money their employers pay into the pension funds on their behalf.

Glazer’s bill would require public agencies to match employee contributions to 401(k) plans. The employees would keep the money if they leave civil service.

After five years, the employee could choose to join CalPERS instead of keeping the 401(k) plan, under Glazer’s proposal. That would make sense for workers who decide they like civil service and want to accrue long-term retirement benefits through the state’s pension plan.

“This program doesn’t undercut the existing CalPERS program,” Glazer said. “It offers as an option to new employees and arguably will help the hiring of new employees because of the potential flexibility to take that retirement savings with them” if they leave civil service.

The University of California began offering a similar option to new employees in 2016. It proved popular, with 37 percent of new UC employees choosing a 401(k) option over a state pension between July 2016 and January 2018, a UC spokeswoman said.

California pension plans tend to reward long careers in civil service. It takes 20 years for teachers beginning their careers at age 25 to come out ahead with a state pension instead of a fully matched 401(k) plan, according to a 2016 CalSTRS study.

On the whole, the study found, teachers are better off with pensions. It estimated that 86 percent of the state’s K-12 educators would earn higher retirement incomes with their pensions than they would have received with a 401(k) style plan.

Glazer said offering the 401(k) plan now would demonstrate to the public that lawmakers are serious about addressing the state’s pension debts. Today, both CalPERS and CalSTRS are riding a strong stock market to high returns, but they are both considered underfunded because they do not have enough assets to pay all of the benefits they owe to their members.

Several city governments that do not belong to CalPERS already offer 401(k) plans, including Orinda, where Glazer resides. San Diego voters in 2012 passed a ballot initiative that did away with pensions for most new city employees, instead offering them 401(k) plans.

The pressure is building. The public sees an unfunded pension system that’s going to continue eating away at public services, and there’s a lot of frustration out there,” Glazer said.

Meanwhile, Republican Sen. John Moorlach of Costa Mesa this week submitted a separate package of bills that would make it easier for local governments to break from CalPERS without paying crippling termination fees and allow CalPERS to suspend the cost of living adjustments it pays to its pensioners. Moorlach submitted similar bills last year.

Adam Ashton: 916-321-1063, @Adam_Ashton. Sign up for state worker news alerts at sacbee.com/newsletters.

Reporting sexual harassment: Lawmakers work to protect accusers


Mike Luery

Reporter

http://www.kcra.com/article/reporting-sexual-harassment-lawmakers-work-to-protect-accusers/18204229

At the California Capitol, there is fear and uncertainty about sexual harassment and how to define it.

“What is sexual harassment?” asked Laura Friedman, chair of the Joint Committee on Rules Subcommittee on Sexual Harassment Prevention and Response.

In a Capitol hearing Thursday, Friedman, a Glendale assemblywoman said, “I think there’s a lot of anxiety across the country about what is acceptable and what’s not acceptable. I feel like we’re getting to a place here at the Capitol where people are afraid.”

California lawmakers are grappling with how to hold members accountable for bad behavior.

Four members of the Legislature have either resigned or temporarily left the building following allegations of sexual harassment on the job.

Cristina Garcia, a Bell Gardens Assemblywoman, was accused by four anonymous former staffers of creating a hostile work environment. In a letter, the workers stated, “Ms. Garcia often spoke, if not bragged, about her sexual activity. She would describe various sex acts in uncomfortable detail.”

Garcia, the Chair of the Legislative Women’s Caucus, is also known as an advocate for the #MeToo movement. She has taken a voluntary unpaid leave of absence, pending an investigation of the allegations surrounding her.

In a statement on Twitter, Garcia said, “I am confident I have consistently treated my staff fairly and respectfully.”

Thursday’s hearing focused on the conflict between holding members accountable without first having a fair hearing.

“Fact-finding becomes more challenging when it’s done anonymously,” said Assembly Rules Chair Ken Cooley of Rancho Cordova. “But, you need accountability.”

But for lawmakers, that is a challenge.

State Sen. John Moorlach of Costa Mesa, a member of the Joint Committee on Rules, asked, “I’m just curious how we address the balance in here so we take care of the creeps, but we don’t have all these scarlet letters that follow people for the rest of their lives when they are innocent?”

Lawmakers are planning more hearings, one on Feb. 26 and several others in March, before having final recommendations ready in April with new guidelines on reporting sexual harassment.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
250 Winters 7,255 ($624) ($86) 2017
249 St Helena 6,033 ($518) ($86) 2017
248 West Sacramento 53,163 ($4,204) ($79) 2016
247 Hanford 55,645 ($4,230) ($76) 2016
246 Taft 9,492 ($627) ($66) 2016
245 Tracy 90,890 ($5,343) ($59) 2016
244 Walnut Creek 70,974 ($3,856) ($54) 2017
243 Sonoma 10,989 ($570) ($52) 2015
242 Lomita 20,403 ($970) ($48) 2017
241 Angels City/ Angels Camp 4,020 ($182) ($45) 2016
240 El Centro 45,628 ($2,041) ($45) 2016
239 Paramount 55,923 ($2,208) ($39) 2016
238 Firebaugh 8,202 ($306) ($37) 2015
237 Rocklin 64,417 ($2,311) ($36) 2016
236 Norwalk 105,526 ($3,252) ($31) 2017
235 Sunnyvale 149,831 ($4,090) ($27) 2017
234 Elk Grove 171,059 ($4,635) ($27) 2015
233 Soledad 26,065 ($617) ($24) 2017
232 El Paso de Robles 31,745 ($681) ($21) 2016
231 Carpinteria 13,943 ($261) ($19) 2017
230 Corcoran 21,786 ($367) ($17) 2016
229 Los Banos 39,993 ($639) ($16) 2016
228 Atascadero 30,900 ($444) ($14) 2017
227 Lemon Grove 26,795 ($292) ($11) 2015
226 Lancaster 157,820 ($1,347) ($9) 2017
225 Belmont 27,594 ($188) ($7) 2017
224 Escalon 7,205 ($47) ($7) 2016
223 San Juan Capistrano 36,262 ($204) ($6) 2016
222 Amador 193 $0
221 Fort Jones 710 $0
220 Westmorland 2,302 $0
219 Livingston 13,947 $10 $1 2016
218 Newman 11,165 $65 $6 2015
217 Apple Valley 74,701 $477 $6 2016
216 Wildomar 35,782 $457 $13 2016
215 South El Monte 20,862 $452 $22 2015
214 Cudahy 24,411 $871 $36 2016
213 Artesia 16,816 $625 $37 2015
212 Ojai 7,553 $297 $39 2016
211 Fontana 212,786 $9,378 $44 2017
210 Banning 31,068 $1,380 $44 2016
209 Fresno 525,832 $28,252 $54 2017
208 Bell Gardens 42,824 $2,532 $59 2017
207 Tehama 427 $28 $66 2017
206 Lindsay 12,984 $898 $69 2016
205 Riverbank 24,610 $1,760 $72 2015
204 Dos Palos 5,391 $391 $73 2016
203 Arvin 21,157 $1,548 $73 2015
202 Calimesa 8,637 $696 $81 2016
201 Seal Beach 24,890 $2,070 $83 2017

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

Also follow me on Facebook & Twitter @SenatorMoorlach.

MOORLACH UPDATE — City CAFR Rankings – Vol. 5 — February 14, 2018

Happy Valentine’s Day!

The Daily Pilot has picked up SB 1031 in the first piece below (see MOORLACH UPDATE — City CAFR Rankings – Vol. 4 — February 12, 2018).

The Orange County Breeze provides the notification that we released to announce our three pension related bills in the second piece below.

It is followed by the next 50 cities, #300-251, in our series. No OC cities are included in this group. The above link provides the last volume and links to the first three.

Senate Bill 1032, the second of the three bills introduced last week, is an updated version of last year’s SB 681 (see http://district37.cssrc.us/content/senate-bill-681-local-pension-control and MOORLACH UPDATE — CalPERS Exit Strategies — November 18, 2017). It is another solution for struggling municipalities that need options in designing a financial work around plan.

Getting bills out of the Senate Public Employee and Retirement Committee, the customary first stop for pension legislation, will be very difficult, as the unions control three of the five votes. But, we need to provide solutions for municipalities that have contracted with CalPERS that need to consider something more fiscally reasonable and realistic than the very expensive TAP (Terminating Agency Pool) exit strategy. This current straight-jacket approach is not an appropriate strategy at all and is actually fiscal extortion. CalPERS has lost its way and has become a mother of plan sponsors and not a fiduciary provider. Let’s hope this second effort motivates CalPERS to resolve their misplaced authority over what should just be servicing financial customers (versus debt bondage).

BONUS: Do you want to learn more about California’s public employee defined benefit pension plans? I will be participating with fellow governing board members and experts at a public forum on Public Pensions hosted by the Association of California Cities – Orange County (ACCOC) Friday morning, March 9th at the Newport Beach Community Center. You are invited to attend. For more information visit: https://events.r20.constantcontact.com/register/eventReg?oeidk=a07ef40p9z654ae1d40&oseq=&c=&ch.

Political Landscape: State Sen. Moorlach proposes cost-of-living limit on state pension systems

By DAILY PILOT STAFF

http://www.latimes.com/socal/daily-pilot/news/tn-dpt-me-pol-landscape-20180212-story.html

Political Landscape: State Sen. Moorlach proposes cost-of-living limit on state pension systems

State Sen. John Moorlach (R-Costa Mesa) has introduced a bill that could limit cost-of-living adjustments for state pensions. (File Photo)

State Sen. John Moorlach (R-Costa Mesa) has introduced a bill he contends will reduce the future taxpayer burden to fund the state system while also protecting pensioners’ vested funds

Senate Bill 1031, introduced Thursday, would limit the pension system from making any cost-of-living (COLA) adjustments after Jan. 1, 2019, if the unfunded actuarial liability of the system is greater than 20%.

"It would protect the solvency of public-employee pensions by making sure each yearly COLA … isn’t so large it tips the underlying fund into insolvency," Moorlach said in a statement. "If a pension system is funded at less than 80%, then the COLA would be suspended until the funding status recovers.

"The requirement would prod pension boards and policymakers to ensure pensions are adequately funded and don’t end up being cut sharply in an emergency, as happened recently to Detroit’s pensions. Not just taxpayers, but state employees and retirees should be the biggest supporters of Senate Bill 1031."

Gov. Jerry Brown’s budget proposal for fiscal year 2018-19 sets aside $9.3 billion for pensions, with $6.2 billion toward the California Public Employees’ Retirement System (CalPERS) and nearly $3.1 billion to the California State Teachers’ Retirement System (CalSTRS).

The CalPERS funding is $389 million more than last year.

Inline image 3

Senator John Moorlach introduces Senate Bill 1031 to protect pensions funds

http://www.oc-breeze.com/2018/02/13/117252_senator-john-moorlach-introduces-senate-bill-1031-protect-pensions-funds/

Senator John Moorlach introduces Senate Bill 1031 to protect pensions funds

“With California’s pension problem getting worse every year, I am introducing three new bills to both reduce the future burden on taxpayers and protect retired public employees’ vested funds. Gov. Jerry Brown emphasized the problem in his new budget proposal for fiscal year 2018-19, slating a whopping $9.3 billion just to pay for current pension obligations. That cost is only going to increase and divert money from other priorities unless we make it better.”

“Senate Bill 1031 is the first bill. It would protect the solvency of public-employee pensions by making sure each yearly COLA – cost-of-living-adjustment – isn’t so large it tips the underlying fund into insolvency. If a pension system is funded at less than 80 percent, then the COLA would be suspended until the funding status recovers.”

“The requirement would prod pension boards and policymakers to ensure pensions are adequately funded and don’t end up being cut sharply in an emergency, as happened recently to Detroit’s pensions. Not just taxpayers, but state employees and retirees should be the biggest supporters of Senate Bill 1031.”

This article was released by the Office of Senator John Moorlach.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
300 Whittier 87,708 ($29,250) ($333) 2017
299 Oakdale 22,711 ($7,411) ($326) 2016
298 Burlingame 30,148 ($9,583) ($318) 2017
297 Roseville 135,868 ($42,898) ($316) 2017
296 Santee 57,100 ($17,759) ($311) 2017
295 Colusa 6,340 ($1,966) ($310) 2017
294 Antioch 114,241 ($34,184) ($299) 2017
293 Campbell 42,726 ($12,748) ($298) 2016
292 Selma 25,156 ($7,383) ($293) 2017
291 Crescent City 6,389 ($1,867) ($292) 2017
290 Oceanside 176,461 ($50,292) ($285) 2017
289 Bakersfield 383,512 ($108,784) ($284) 2017
288 Baldwin Park 75,537 ($21,286) ($282) 2016
287 San Anselmo 12,937 ($3,570) ($276) 2017
286 Grand Terrace 12,435 ($3,219) ($259) 2015
285 Dinuba 24,861 ($6,392) ($257) 2017
284 Sanger 26,412 ($6,695) ($253) 2016
283 California City 14,248 ($3,408) ($239) 2016
282 Dixon 19,298 ($4,444) ($230) 2017
281 Larkspur 12,572 ($2,850) ($227) 2017
280 Livermore 89,648 ($20,114) ($224) 2017
279 Martinez 37,658 ($8,402) ($223) 2016
278 Exeter 10,985 ($2,404) ($219) 2016
277 Clearlake 15,531 ($3,388) ($218) 2015
276 Anderson 10,450 ($2,150) ($206) 2016
275 Barstow 24,248 ($4,893) ($202) 2016
274 Pleasanton 75,916 ($15,319) ($202) 2017
273 Fort Bragg 7,772 ($1,518) ($195) 2017
272 Lake Elsinore 62,092 ($12,062) ($194) 2017
271 La Mesa 60,286 ($11,563) ($192) 2016
270 Galt 25,693 ($4,605) ($179) 2016
269 Reedley 26,152 ($4,457) ($170) 2017
268 Madera 66,082 ($11,207) ($170) 2016
267 Lakeport 4,786 ($801) ($167) 2016
266 San Mateo 103,426 ($16,647) ($161) 2017
265 Mount Shasta 3,355 ($523) ($156) 2017
264 Arroyo Grande 17,736 ($2,754) ($155) 2016
263 Glendora 52,608 ($7,938) ($151) 2017
262 Kingsburg 12,338 ($1,834) ($149) 2017
261 San Ramon 80,550 ($11,566) ($144) 2017
260 Corning 7,522 ($1,065) ($142) 2016
259 Yuba City 67,445 ($9,467) ($140) 2016
258 Watsonville 53,015 ($7,184) ($136) 2016
257 Cotati 7,272 ($958) ($132) 2017
256 Greenfield 17,866 ($2,284) ($128) 2015
255 Murrieta 114,914 ($14,654) ($128) 2016
254 Gridley 6,704 ($843) ($126) 2016
253 Belvedere 2,172 ($264) ($122) 2017
252 Santa Maria 106,280 ($10,597) ($100) 2016
251 Burbank 105,033 ($9,364) ($89) 2017

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

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MOORLACH UPDATE — City CAFR Rankings – Vol. 4 — February 12, 2018

Today’s Volume 4 provides the cities ranked between #350 and #301. It includes the Orange County cities of Placentia (#349), Westminster (#346), Garden Grove (#330), Los Alamitos (#328), La Habra (#315), and Buena Park (#302). This brings us up to 12 out of the 34 OC cities that are in the bottom 182.

This group of 50 represents about 7 percent of the state’s population, bringing us to about 52 percent of Californians residing in the bottom 38 percent of cities. See the chart below.

For the first three volumes, go to:

MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 2 — February 8, 2018
MOORLACH UPDATE — City CAFR Rankings – Vol. 3 — February 10, 2018

Last year I proposed eight measures addressing public employee defined benefit pension plans. The deadline to submit bills for the 2018 Session is this Friday. Last week I introduced Senate Bill 1031, which addresses pension plan cost-of-living adjustments. We started this discussion last fall (see MOORLACH UPDATE — Rising Tide — October 5, 2017).

I have recommended this modification for many years, including when I served as a County Supervisor. It’s this simple: If the pension system is not at least 80 percent funded, then cost-of-living adjustments, also known as COLAs, should be put on hold for retirees.

California’s taxpayers are contributing more every year to public employee pension systems. Public employees are paying more out of their biweekly paychecks. But, retirees are not making any sacrifices, while they have the most at risk if the system becomes fiscally unsustainable. Consequently, prospectively, COLAs should be put on hold until the pension plan is in better fiscal shape.

How did we get here? For a math lesson as to why pension systems are demanding higher contributions, see MOORLACH UPDATE — Straight Talk Magazine — March 30, 2011. It’s a great tutorial on how this mess came to be in California.

May I also introduce some of you the the "Rule of 72"? Here is how Investopedia explains it (https://www.investopedia.com/ask/answers/what-is-the-rule-72/):
The "Rule of 72" is a simplified way to determine how long an investment will take to double, given a fixed annual rate of interest. By dividing 72 by the annual rate of return, investors can get a rough estimate of how many years it will take for the initial investment to duplicate itself.

If retirees receive a 3 percent COLA, then their initial retirement benefits will double in 24 years. Using the example in the Straight Talk Magazine UPDATE, if a city police officer retires at the age of 50, after 25 years of service, and is making $100,000 in his final year, the annual retirement benefit will be $75,000 with the current "3% @ 50" formula. An annual 3 percent COLA means that at age 74 (in 24 years), the retiree will be receiving $150,000 per year. And this retiree also had 15 years of additional earning power, between the ages of 51 and 65. I would suggest that this individual will not go insolvent if the COLA is put on hold for a brief period of time.

Cities are looking for some relief. Temporarily prohibiting COLAs by poorly funded pension plans will assist in keeping the unfunded actuarial accrued liability from ballooning. It will be one more tool in the tool box to assist with the pension crisis. And, it means that all impacted parties are working to assure the promised retirement benefits.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
350 Concord 128,370 ($75,116) ($585) 2017
349 Placentia 52,268 ($30,490) ($583) 2016
348 Daly City 109,287 ($62,902) ($576) 2017
347 Willits 4,928 ($2,830) ($574) 2016
346 Westminster 93,533 ($52,892) ($565) 2017
345 Manteca 76,247 ($42,550) ($558) 2016
344 Davis 68,740 ($38,119) ($555) 2016
343 Santa Paula 30,654 ($16,936) ($552) 2016
342 Fairfax 7,571 ($4,179) ($552) 2016
341 Morro Bay 10,762 ($5,767) ($536) 2016
340 Pleasant Hill 34,657 ($18,511) ($534) 2016
339 Indio 88,718 ($45,879) ($517) 2017
338 La Verne 33,174 ($17,093) ($515) 2016
337 Napa 80,628 ($41,524) ($515) 2016
336 Sutter Creek 2,582 ($1,320) ($511) 2015
335 Lynwood 71,997 ($36,107) ($502) 2016
334 San Marino 13,467 ($6,745) ($501) 2016
333 Folsom 78,525 ($39,220) ($499) 2016
332 Clovis 110,762 ($54,927) ($496) 2017
331 Desert Hot Springs 29,111 ($14,320) ($492) 2017
330 Garden Grove 176,277 ($86,632) ($491) 2017
329 Rialto 106,528 ($51,934) ($488) 2016
328 Los Alamitos 11,739 ($5,717) ($487) 2017
327 National City 61,210 ($29,694) ($485) 2016
326 Beaumont 46,179 ($22,231) ($481) 2016
325 Pittsburg 69,818 ($33,348) ($478) 2017
324 Red Bluff 14,070 ($6,672) ($474) 2017
323 South Pasadena 25,992 ($12,261) ($472) 2016
322 Fairfield 114,157 ($53,391) ($468) 2017
321 Sebastopol 7,579 ($3,525) ($465) 2016
320 Paradise 25,841 ($12,005) ($465) 2016
319 Manhattan Beach 35,488 ($16,091) ($453) 2016
318 Del Mar 4,297 ($1,945) ($453) 2017
317 Lincoln 48,165 ($21,707) ($451) 2016
316 Gilroy 55,936 ($25,032) ($448) 2016
315 La Habra 62,084 ($27,711) ($446) 2016
314 Novato 54,522 ($24,236) ($445) 2017
313 Ridgecrest 28,349 ($12,569) ($443) 2017
312 Alturas 2,660 ($1,120) ($421) 2016
311 Simi Valley 127,309 ($52,860) ($415) 2016
310 South Gate 98,633 ($40,323) ($409) 2016
309 Milpitas 75,410 ($30,591) ($406) 2017
308 Brawley 26,928 ($10,866) ($404) 2016
307 Union City 73,452 ($28,777) ($392) 2017
306 Guadalupe 7,414 ($2,885) ($389) 2016
305 Victorville 123,565 ($47,007) ($380) 2016
304 Oroville 18,037 ($6,858) ($380) 2016
303 Suisun City 29,295 ($10,521) ($359) 2015
302 Buena Park 83,884 ($29,221) ($348) 2017
301 Turlock 72,879 ($25,383) ($348) 2016

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MOORLACH UPDATE — City Rankings – Vol. 3 — February 10, 2018

The state of California has 482 cities, all required to have their annual financial statements audited by an independent certified public accountant or certified public accounting firm. We just have not found a repository that provides all of these Comprehensive Annual Financial Reports (CAFRs) in one place.

Consequently, I am providing a resource with the data. And it is done in a metric format, using the unrestricted net position (UNP) divided by the city’s population.

The bottom 32 cities were provided in MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018. The next 50 worst are provided in MOORLACH UPDATE — City CAFR Rankings – Vol. 2 — February 8, 2018.

Today I am releasing Volume 3: the cities ranked between 400 and 351 in the chart below. This grouping represents about 8.6 percent of the state’s population.

Combining Volumes 1-3: These 132 cities comprise nearly 45 percent of California’s residents, but are only 27 percent of its cities. Stated differently, nearly one-half of Californians are living in the bottom quartile of cities.

Three Orange County cities are in Volume 3. They are Fullerton (#386), Orange (#367, and in my District), and Fountain Valley (#362).

What observations can we make? Here are three to consider. Most of Orange County cities with large unrestricted net deficits tend to be full service, having their own Police and Fire Departments. Contract cities utilizing the Orange County Sheriff and the Orange County Fire Authority (OCFA) have the pension liabilities reported on the County of Orange and OCFA balance sheets. This is a dilemma for discussion at another time.

They are also older cities. For instance, Fullerton was founded in 1887, two years before Orange County splintered off of Los Angeles County. These legacy cities have larger retired populations than those recently incorporated in South County.

And they are looking for alternative resources. The voters in the city of Fountain Valley approved Measure HH in 2016, raising its sales tax rate an additional 1 percent. Here was the ballot question:

To maintain 911 emergency response times, fire stations, police officers/firefighters/paramedics, anti-gang/drug programs, after school, senior programs; upgrade first responder disaster communication; repair stormwater systems to prevent flooding, streets/potholes/parks; other general city services, shall the City of Fountain Valley establish a one-cent sales tax providing $11.5 million annually for twenty year term, requiring public disclosure of expenditures, independent audits, all funds only for Fountain Valley?

One year ago today, the Los Angeles Times provided the following story in their “California’s Pension Crisis” series, titled “Costs push cities toward the brink,” by Judy Lin (see https://www.pressreader.com/usa/los-angeles-times/20170210/281500750997569). The city of Richmond is featured. It also approved a sales tax ballot measure in 2014 for an increase of 0.5 percent.

Increasing the sales tax is a solution. But, instead of referring to potholes, it should be honest and mention the pensions (see MOORLACH UPDATE — Pension Tax Begins — December 21, 2016).

Cities with budget struggles considering a sales tax increase measure should communicate to its residents that every pension reform currently available has been implemented and that a citizens accountability committee has certified that all excessive costs have or will be trimmed

Then the city council should keep the tax increase small, targeted, and limited in duration and commit that there will be no increases in salaries or benefits until a positive unrestricted net position is achieved (see MOORLACH UPDATE — Secretive and Expensive Union Deals — November 3, 2017).

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
400 Azusa 49,762 ($47,761) ($960) 2016
399 Maywood 28,016 ($26,683) ($952) 2015
398 Oxnard 207,772 ($197,253) ($949) 2016
397 Placerville 10,743 ($10,169) ($947) 2015
396 Calexico 40,921 ($38,429) ($939) 2016
395 Big Bear Lake 5,047 ($4,713) ($934) 2017
394 San Bruno 45,295 ($42,134) ($930) 2017
393 Petaluma 60,941 ($55,662) ($913) 2017
392 El Cajon 102,803 ($92,231) ($897) 2017
391 Pinole 18,975 ($17,015) ($897) 2016
390 Modesto 215,080 ($191,484) ($890) 2017
389 San Luis Obispo 46,724 ($41,497) ($888) 2017
388 San Leandro 88,274 ($77,776) ($881) 2016
387 Grover Beach 13,438 ($11,773) ($876) 2017
386 Fullerton 142,234 ($123,501) ($868) 2017
385 Atwater 30,406 ($25,983) ($855) 2016
384 Lompoc 44,042 ($37,631) ($854) 2017
383 Santa Rosa 176,799 ($149,789) ($847) 2016
382 Millbrae 23,168 ($19,446) ($839) 2017
381 Auburn 14,096 ($11,812) ($838) 2016
380 Newark 45,422 ($37,879) ($834) 2017
379 Chula Vista 267,917 ($222,843) ($832) 2017
378 Chico 93,383 ($77,226) ($827) 2017
377 Fremont 231,664 ($190,950) ($824) 2017
376 Eureka 27,120 ($22,017) ($812) 2016
375 Nevada City 3,208 ($2,589) ($807) 2015
374 Carson 93,674 ($75,486) ($806) 2016
373 Glendale 201,748 ($162,510) ($806) 2017
372 Bell 36,408 ($29,273) ($804) 2017
371 Covina 49,011 ($39,203) ($800) 2017
370 Seaside 34,165 ($26,815) ($785) 2017
369 Jackson 4,838 ($3,708) ($766) 2016
368 Brisbane 4,722 ($3,507) ($743) 2016
367 Orange 140,882 ($103,910) ($738) 2017
366 Albany 18,988 ($13,976) ($736) 2016
365 Salinas 162,470 ($116,218) ($715) 2017
364 Cloverdale 8,931 ($6,345) ($710) 2016
363 Blythe 19,660 ($13,750) ($699) 2015
362 Fountain Valley 56,709 ($39,063) ($689) 2017
361 King City 14,480 ($9,903) ($684) 2015
360 Hermosa Beach 19,616 ($13,287) ($677) 2017
359 Rolling Hills Estates 8,059 ($5,396) ($670) 2017
358 Rohnert Park 42,067 ($27,943) ($664) 2017
357 Willows 6,187 ($4,100) ($663) 2017
356 Escondido 151,492 ($99,262) ($655) 2017
355 Hemet 81,868 ($52,490) ($641) 2016
354 Marysville 11,973 ($7,614) ($636) 2016
353 Susanville 15,046 ($9,198) ($611) 2017
352 Merced 84,464 ($51,206) ($606) 2016
351 Healdsburg 11,800 ($6,976) ($591) 2017

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MOORLACH UPDATE — City CAFR Rankings – Vol. 2 — February 8, 2018

Costa Mesa City Councilmember John Stephens was with the Orange County delegation that visited and toured Haven for Hope in San Antonio last month (see MOORLACH UPDATE — Haven for Hope — January 19, 2018 and MOORLACH UPDATE — Becerra Conflict of Interest — January 20, 2018). Councilmember Stephens provides a great report on the trip and the facilities which we toured together in his Daily Pilot piece below. For a small bit of trivia, the "x" is silent in the pronunciation of the name of Bexar County.

Speaking of the city of Costa Mesa, it’s included in the next group of cities, numbers 450 to 401 out of 482, based on its per capita unrestricted net position as #444 (see MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018). This group also includes three other cities in my District, Newport Beach (#434), Anaheim (#426) and Huntington Beach (#422). They are mentioned in the second piece below. This group represents about 16 percent of California’s population.

A public-private homeless solution in Texas might work for Costa Mesa and O.C.

By JOHN STEPHENS

As Orange County officials evacuate the encampments near Angel Stadium, one would have to be extremely callous not to feel compassion for those whose situation is so dire that they have resorted to living in a flimsy tent on a riverbed.

I’m convinced that there is a better approach to homelessness right within our grasp. If you want to get a glimpse of one solution, then I have some advice for you.

Take a trip to San Antonio, Texas.

That’s what I did in January along with a contingent of 41 Orange County officials, including city council members (from 11 cities), nonprofit providers, healthcare and business leaders and state Sen. John Moorlach (R-Costa Mesa) to visit Haven for Hope. That facility is a sprawling and bustling campus that offers housing and transformational, life-saving services for homeless men, women and children in Bexar County, Texas.

Our group of diverse-thinking individuals who visited this remarkable place came to a consensus that is pragmatic and cuts across political lines. That is, homelessness can best be solved in Orange County with a thoughtful, integrated regional effort. Regional and integrated are the key words here.

Anaheim, Santa Ana, Fullerton, Tustin or any city, including my own Costa Mesa, should not have to go it alone. There is strength in numbers, and we need to integrate the efforts of city, county and state with nonprofits and the private sector. Let’s not forget the faith-based community, which brings the power of the Gospel and a spirit of compassion to the mission.

Now more than ever, we need champions from the private sector with deep pockets and the will to get things done, as well as high-profile, courageous elected officials.

Which brings me back to the story of Haven for Hope. City officials in San Antonio realized that homelessness was more than just a social blight, it was also damaging the local economy. They decided it was high time to fix it.

Luckily, that word reached a well-connected philanthropist Bill Greehey, Valero Energy’s CEO, who committed himself to solving the problem. Greehey put up $10.5 million of his own money and Haven for Hope was born in 2010.

Haven for Hope epitomizes the effectiveness of integration. Nearly every nonprofit in San Antonio that serves the homeless is present on the campus. That adds up to 142 partners providing over 300 services.

The results have been fantastic.

In January 2010, the point-in-time count found 738 homeless on the streets of downtown San Antonio. By January 2017, that dropped 80% to 148.

More than 3,835 people have moved from the transformational campus to permanent housing, with 90% of those not returning to homelessness.

In its first year, there were 3,300 fewer jail bookings in San Antonio. More than 50,000 people have received services since the campus opened.

Remarkably, city and county jails and emergency rooms avoided about $97 million in costs because of Haven for Hope. Each year, about 40,000 medical, dental and vision care services are administered to homeless men, women and children who would otherwise go without.

So, you may ask, who’s paying for all this?

As part of his commitment to Haven for Hope, Greehey searched for private donors outside of San Antonio to finance the project, and 61% percent of the $100.5 million it cost to build the campus came from the private sector.

That’s right, the private sector. Corporations invested in a project that is producing amazing dividends in human capital that you can’t measure on any financial statement.

Whether we work together or not, we pay. The Orange County United Way and UC Irvine’s recent cost study on homelessness shows that we spend $299 million annually addressing homelessness. Costa Mesa alone allocates about $1 million annually.

Other Orange County cities and nonprofits are doing great work. But we lack the integrated effort seen in Bexar County. Those efforts have substantially reduced the public cost of homelessness, and the OC United Way/UCI study estimates that Orange County would likewise save $42 million per year by housing our chronic homeless.

Haven for Hope is a true public-private partnership. San Antonio contributes $4 million to its $20 million annual operating budget, which in comparison is a much smaller proportion of San Antonio’s budget than Costa Mesa spends on its Network for Homeless Solutions. The balance of Haven for Hope’s budget comes from private contributions ($4 million), state government ($5.3 million) with nonprofits like the United Way and other funders contributing the remainder.

So back to our champions. Who is going to step up to fund and, just as importantly, advocate to solve the homelessness crisis that is currently damaging our communities and economy?

Orange County is a tremendously blessed and wealthy community. We have some of the world’s best beaches, parks, businesses and residential communities. There must be champions in our midst who will see this as an opportunity to create a better future not just for the homeless, but for all of us.

JOHN STEPHENS is a Costa Mesa City Council member and the chair of the Association of California Cities-Orange County’s Homeless Task Force.

450 San Fernando 24,486 ($39,587) ($1,617) 2016
449 San Gabriel 41,020 ($62,638) ($1,527) 2017
448 Montebello 63,917 ($96,385) ($1,508) 2016
447 Vallejo 118,280 ($174,091) ($1,472) 2017
446 Colton 53,879 ($78,865) ($1,464) 2017
445 Pomona 155,306 ($227,107) ($1,462) 2016
444 Costa Mesa 114,044 ($161,805) ($1,419) 2017
443 Coalinga 16,982 ($23,558) ($1,387) 2015
442 Benicia 27,695 ($37,760) ($1,363) 2016
441 West Covina 107,813 ($144,660) ($1,342) 2017
440 Redlands 69,851 ($93,361) ($1,337) 2017
439 Vacaville 98,456 ($131,084) ($1,331) 2016
438 Brea 44,214 ($57,998) ($1,312) 2016
437 Hawthorne 87,662 ($114,898) ($1,311) 2017
436 Scotts Valley 12,163 ($15,637) ($1,286) 2017
435 Long Beach 480,173 ($610,409) ($1,271) 2016
434 Newport Beach 84,915 ($107,775) ($1,269) 2017
433 Arcadia 57,374 ($72,804) ($1,269) 2017
432 Ukiah 16,314 ($20,647) ($1,266) 2016
431 Mammoth Lakes 8,002 ($9,909) ($1,238) 2016
430 Santa Cruz 65,070 ($79,331) ($1,219) 2017
429 Redondo Beach 68,907 ($83,567) ($1,213) 2017
428 Lodi 64,058 ($77,162) ($1,205) 2017
427 Sacramento 493,025 ($581,697) ($1,180) 2016
426 Anaheim 358,546 ($410,613) ($1,145) 2017
425 Sonora 4,871 ($5,545) ($1,138) 2016
424 Piedmont 11,283 ($12,835) ($1,138) 2015
423 Santa Ana 341,341 ($387,032) ($1,134) 2017
422 Huntington Beach 197,574 ($222,863) ($1,128) 2016
421 Claremont 36,225 ($40,697) ($1,123) 2017
420 San Diego 1,406,318 ($1,577,390) ($1,122) 2017
419 Riverside 326,792 ($362,146) ($1,108) 2017
418 Santa Clara 123,983 ($135,819) ($1,095) 2017
417 Alhambra 86,922 ($95,214) ($1,095) 2017
416 San Buenaventura 109,275 ($118,254) ($1,082) 2016
415 Huntington Park 59,383 ($63,625) ($1,071) 2016
414 Corte Madera 9,486 ($10,130) ($1,068) 2016
413 Montclair 39,122 ($41,621) ($1,064) 2017
412 Compton 100,050 ($105,045) ($1,050) 2013
411 El Monte 114,268 ($119,814) ($1,049) 2017
410 Monterey Park 61,606 ($63,742) ($1,035) 2017
409 Pacifica 38,124 ($39,127) ($1,026) 2016
408 Redwood City 85,601 ($86,738) ($1,013) 2017
407 Gardena 60,721 ($59,929) ($987) 2017
406 Woodland 59,616 ($58,585) ($983) 2016
405 Capitola 10,162 ($9,883) ($973) 2017
404 Gustine 5,886 ($973) ($972) 2014
403 Needles 5,044 ($4,878) ($967) 2015
402 Upland 76,790 ($74,170) ($966) 2017
401 Downey 113,832 ($109,605) ($963) 2017

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MOORLACH UPDATE — City CAFR Rankings – Vol. 1 – February 7, 2018

Last year, representatives from several cities across the state testified before the California Public Employees Retirement System (CalPERS) Finance and Administration Committee, sharing their financial plights (see MOORLACH UPDATE — What Pension Crisis? — September 27, 2017).
What was the response from CalPERS? They blamed the cities for creating their own problems (see MOORLACH UPDATE — CalPERS Exit Strategies — November 18, 2017). This is partially correct. Most of them followed CalPERS’ lead and voted for retroactive defined benefit pension plan formula increases. No doubt, they should have been more fiscally responsible despite the unrelenting pressure from public employee unions to pursue gold-plated benefits, no matter the cost.

But, CalPERS should never have advocated for better retirement formulas after the stock market rise in the late 1990s. And, CalPERS should never have kept its investment return assumption so high over such a long period of time. And, CalPERS should not have been governed by a Board that is dominated by public employee union representatives without significant financial expertise. And, I could go on.

California’s 482 incorporated cities now find themselves in precarious financial positions, as it relates to funding their pension plans. Many are fine, according to their audited financial statements, as presented in their Comprehensive Annual Financial Reports (CAFRs).

What do these CAFRs tell us? And, what simple metric can be used to find the range of the financial status as to positive and negative? I usually divide the unrestricted net position (UNP) for governmental activities by the city’s population (see MOORLACH UPDATE — Better Shape — February 1, 2018 ). So what does that provide? Well, some 218 cities are in the positive portion of the curve, the rest are not. And, the numbers are likely to get worse with the June 30, 2018 CAFRs, as retiree medical liabilities will have to be included on the balance sheets.

Gathering this data was not an easy task and is still ongoing. It took a large team and we tried our best to assure quality control. But, my first release did not go as well as planned, but I’m glad for it.

I tried to start from the bottom last week, but a good friend, Tehama County Supervisor Bob Williams, made a valid inquiry about a city in his county that I maybe needed to correct. He was correct. My sincerest apologies to the city of Tehama for the error. But, I’m the only State Senator that is analyzing the cities, with limited staffing and a great group of volunteer interns. All the same, I believe we have scrubbed the analysis enough to start releasing the list a portion at a time. So, I’ll try to release 50 per UPDATE going forward.

Why the project? Well, I carried some eight public employee pension reform measures last year alone. And did one city come to testify in support? No. And, are they now crying about their predicament? Yes. See www.sacbee.com/news/politics-government/the-state-worker/article198062129.html.

Why am I parsing out the data? Because 482 lines of data are too long for an UPDATE and if any of the data is incorrect, we can modify as we go along. Someone will let me know and I’m hoping that I do not receive another e-mail like the one I received from Supervisor Bob Williams. If I do, I will confidently provide the city representative with a link to their CAFR on their website (or the hard copy, if we had to request it), allowing them to do the same calculation. There are still three cities that have not yet provided us with their CAFRs, after numerous polite requests. So much for transparency. I’ll release their names soon, but do not expect any of them, hopefully, to appear at the bottom of the list.

So, below are the first revised city standings, starting with the bottom 32. What do we find? The city of Vernon is an outlier, as it only has 209 people within its industrial borders. But, the unrestricted net position is still outrageous. A city like this should be well above zero. But, it ranks as number 482, based on its 2017 CAFR. At least its CAFR is current. Note how many do not have the current CAFR available on their websites (at least half). Once they are provided, their rankings may change. But, it is February and the June 30, 2017 CAFRs should technically be up and available by now. Expect California’s in April.

Some other thoughts. The city and county of San Francisco ranked near the bottom when I did a similar study of all 58 counties with their 2010 CAFRs (for my 2012 State of the County Chairman’s Address – MOORLACH UPDATE — State of the County — January 20, 2012).

If California were a city, it would place between Richmond (480) (MOORLACH UPDATE — City of Stanton — March 4, 2013 ) and Oakland (479), making it a bottom dweller.

Plenty has already been written about the city of Isleton (see Daily Journal Considers Municipal Bankruptcy september 29, 2009 and MOORLACH UPDATE — Quasquicentennial — December 24, 2013).

This grouping represents one out of every five Californians residing in incorporated cities. It’s time to get serious about pension reform.

Rank City Population UNP UNP Per Year of
(Thousands) Capita CAFR
482 Vernon 209 ($101,678) ($486,498) 2017
481 El Segundo 16,717 ($86,756) ($5,190) 2016
480 Richmond 111,785 ($508,981) ($4,553) 2016
479 Oakland 426,074 ($1,789,831) ($4,201) 2016
478 Culver City 40,103 ($159,584) ($3,979) 2017
477 Cathedral City 54,557 ($181,885) ($3,334) 2017
476 Berkeley 121,238 ($394,430) ($3,253) 2017
475 Patterson 22,730 ($71,034) ($3,125) 2016
474 San Francisco 874,228 ($2,560,735) ($2,929) 2017
473 Santa Fe Springs 18,291 ($49,235) ($2,692) 2016
472 Monterey 28,828 ($73,816) ($2,561) 2017
471 Inglewood 114,900 ($289,425) ($2,519) 2016
470 Sausalito 7,327 ($17,852) ($2,436) 2016
469 Monrovia 38,514 ($91,785) ($2,383) 2017
468 Pacific Grove 15,498 ($35,936) ($2,319) 2017
467 Palm Springs 47,379 ($104,512) ($2,206) 2017
466 Isleton 854 ($1,860) ($2,178) 2015
465 Pasadena 143,333 ($310,488) ($2,166) 2017
464 Del Rey Oaks 1,681 ($3,590) ($2,136) 2014
463 South Lake Tahoe 21,024 ($43,322) ($2,061) 2016
462 Torrance 147,101 ($280,000) ($1,903) 2017
461 El Cerrito 24,600 ($46,509) ($1,891) 2016
460 San Rafael 60,842 ($112,913) ($1,856) 2017
459 San Jose 1,046,079 ($1,935,465) ($1,850) 2017
458 South San Francisco 65,451 ($120,120) ($1,835) 2016
457 San Bernardino 216,972 ($388,600) ($1,791) 2016
456 Santa Barbara 93,063 ($164,523) ($1,768) 2017
455 Mill Valley 14,910 ($26,345) ($1,767) 2016
454 Redding 90,653 ($157,130) ($1,733) 2017
453 Alameda 79,928 ($138,357) ($1,731) 2017
452 Hayward 161,040 ($266,000) ($1,652) 2017
451 Los Angeles 4,041,707 ($6,579,324) ($1,628) 2017

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MOORLACH UPDATE — Better Shape — February 1, 2018

Can I talk B/S for a minute?

I’m referring to balance sheets.

The Sacramento Bee, in its piece below, discusses what Sacramento can do with this year’s budget. A budget is a different document than a balance sheet, but it can be used as a management tool to address the balance sheet going forward.

Every city has an annual audit and it is presented in the Comprehensive Annual Financial Report (CAFR). These reports should be available online, but not always.

Near the front of these reports, usually around page 30, you find the Basic Financial Statements. The assets and liabilities are presented in a concise format. There are three columns, Governmental Activities (tax revenues), Business-Type Activities (fee revenues) and the combined totals of the two columns.

Assets minus liabilities gives you net assets. This should be a positive number. It is comprised of three components, investments in fixed assets, funds belonging to others, and unrestricted net assets. If the third amount is negative, the term unrestricted net deficit is used and the number is provided in parentheses. For this discussion, I’ll refer to both as unrestricted net position.

With 482 incorporated cities in California, how are they doing? What would we learn if we examine their basic financial statements, take the most recent unrestricted net position, and divide it by the city’s population? This will give us a helpful metric. Above zero is good, near zero is fine, below zero is bad, and way below zero is screaming that the city is a bankruptcy candidate.

With a few outlier exceptions, California’s cities fall within the range of a positive $5,000 per capita to a negative $5,000 per capita. So, where does your city fall?

Where would California fall if it is compared with the cities? Hint: Out of 482 cities, California, at $(4,263), would be in the bottom eight cities, just edging out the city of Oakland, where the Governor served as Mayor. This means 98.5% of California’s cities are better managed, from a fiscal perspective, than the state!

With this strategy in mind, giving cash rebates is the last thing a bankruptcy candidate should be doing. It should pay down debts, address pension and retiree medical liabilities, and address internal borrowings. It takes debt to stay in existence with a large unrestricted net position, so addressing the debt, and its ongoing interest costs, is critical and should be done as quickly as possible.

Oh, speaking of retiree medical liabilities, the State Controller just announced the latest obligation balance is $91.51 billion. Last year it was $76 billion. I have been telling you that this Governor has fallen short in addressing this growing ulcer, and it’s now up another $15 billion! In only one year! Add this to the State’s unrestricted net position, and California’s June 30, 2017 CAFR will probably show a deficit of a quarter trillion dollars!!

This is enough to lay on you today. I hope to provide you with all of the hard data soon. In the meantime, let’s see how Sacramento deals with its established spending constraints and policies to move up the fiscal chain of cities.

Capitol Alert

The go-to source for news on California policy and politics

CAPITOL ALERT

California is collecting so much of your money it can’t save it all

BY ADAM ASHTON

aashton

HTTP://AMP.SACBEE.COM/NEWS/POLITICS-GOVERNMENT/CAPITOL-ALERT/ARTICLE197715684.HTML

California’s swelling budget reserves are approaching a point where the state by law can’t save any more money ‑ but don’t expect a tax rebate.

The state is quickly filling up its so-called rainy day fund, the budget stabilization account voters created in 2014 when they passed an initiative that forced lawmakers to save money in flush years. Gov. Jerry Brown’s budget proposal puts the state on pace to fill it with $13.5 billion by July 1, 2019, but the milestone could come even sooner.

By law, the fund can only hold 10 percent of the state’s projected general fund revenue as a hedge against the cuts that would come in a recession. Any additional revenue has to be spent on infrastructure.

If the revenue keeps pouring in, Legislative Analyst Mac Taylor told senators earlier this month they’ll have a lot of options. The money “will be there for you do whatever you want to do with it, build reserves, tax cut, whatever you want to do.”

But, in one of those only-in-California budget formulas, filling the rainy day fund presents a different kind of problem for legislators.

If they want to use the windfall of today’s booming economy for other priorities, like paying down debt, they’d have to actually spend money before filling the rainy day fund. Otherwise, the additional revenue would have to be spent on infrastructure like roads and prison repairs.

That’s right, California lawmakers might have to spend money to save it.

Here are some of the ideas they’re floating now to make the most of the surplus:

Give it back

Sen. Jim Nielsen, R-Tehama, remembers the one “glorious time” in the 1980s when California saw a spike in state tax revenue and delivered rebates to taxpayers.

Technically, that could happen again, but don’t hold your breath.

A 1979 ballot initiative that became known as the Gann limit compels state government to return money to taxpayers if state spending exceeds certain thresholds.

Last year, the Legislative Analyst’s Office warned that rising revenue put the Gann limit within reach for the first time in decades. Brown’s office disagreed, and you didn’t get that check.

Nielsen, the top Republican on the Senate Budget Committee, said he’d advocate for some kind of rebate even though he knows it’s unlikely.

“Am I confident about the prospect? No, the temptation to spend money is vastly too great.”

Save even more

Lawmakers from both parties back Brown’s pledge to fill the rainy day fund. They’re thankful that the extra money buys them some insurance if a recession hits and cripples state tax revenue.

California’s state budget is especially vulnerable to recessions because its collection of personal income tax leans heavily on high-earners whose income from capital gains can nose dive in a downturn.

But some wonder whether a rainy day fund that holds 10 percent of one year’s revenue is enough. Past recessions, for example, have slashed revenues by 20 percent. Brown’s own budget suggested that a recession could take a $20 billion bite out of the general fund in its first year.

That history has some lawmakers suggesting that the state might need a bigger savings account. They’d have to put an initiative before voters to raise the cap.

“We can say with certainty (a recession) will come. It’s wise to remember that our state revenue is extremely volatile,” said Assemblyman Jay Obernolte, R-Hesperia, the senior Republican on the Assembly Budget Committee.

Other choices, Taylor told lawmakers in January, include setting aside more money in the state’s emergency fund – the account that pays for unexpected disasters like wildfires – or prepaying known expenses to relieve pressure later.

Tackle pensions

California’s main public pension funds are riding the soaring stock market to banner years. The California Public Employees’ Retirement System has gained almost $40 billion since July 1, and the California State Teachers’ Retirement System is up at least $20 billion.

But both systems owe tens of billions of dollars more than they have on hand. Brown’s budget estimated the state has more than $270 billion in debt related to its pension funds and promises it has made to pay for the health care state workers receive in retirement.

“We’ve got to get our balance sheet in better shape,” said Sen. John Moorlach, R-Costa Mesa, referring to the pension debts and the state’s bond debts.

CalPERS and CalSTRS have handed a series of fee increases local governments and school districts since the recession a decade ago to get a better handle on the debts and to fund pensions. Some government agencies say they can’t afford to pay more and they’re worried about how the rate hikes will affect their services if a recession hits.

“The state is taking away more than it is giving primarily by way of the ramping of the CalSTRS pension schedule,” said Democratic Assemblyman Al Muratsuchi, a former Torrance school board member. “There is such a disconnect between the prevailing narrative here in Sacramento and what the districts are reporting at the local level.”

He wants to fill the rainy day fund, but he said he’s looking for ways to provide some pension relief to school districts.

Build stuff

California has no shortage of deferred maintenance and capital construction projects, from bumpy roads to aging prisons. The Legislative Analyst’s Office two years ago estimated the total bill for those delayed projects topped $77 billion.

That’s why some lawmakers would be happy to see the surplus work as voters intended when they created the rainy day fund four years ago, by first filling up a savings account and then putting money into capital projects.

“We have done a terrible job at investing infrastructure lately in California,” Obernolte said.

Go in another direction

Lawmakers might choose to go in another direction, perhaps by following through on pledges to extend health care coverage to undocumented immigrants, extending tax credits to lower-income residents, expanding access to preschool or by setting aside money to spur more affordable housing projects.

“The state is doing well. We are a great strong economy, we have the lowest unemployment in forever,” said Nancy Skinner, D-Berkeley, at a January hearing. “And yet … in most of our communities we both see the benefits the strength of the economy has given, but also areas where it has not,” she said, describing proliferating homeless encampments.

She suggested putting $4 billion of the surplus into affordable housing.

Taylor, the legislative analyst, said the state would have a better sense of its financial standing by May. His office in November projected that the state would exceed its revenue expectations over the next 18 months by $3.5 billion. He told senators last month that if he had to update the number, he’d expect that his office would revise its revenue projections upward.

“It’s important to take a moment to enjoy these times budgetarily speaking. They don’t get much better than this,” he said a Senate Budget Committee hearing.

Adam Ashton: 916-321-1063, @Adam_Ashton.

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MOORLACH UPDATE — Work Arounds — January 31, 2018

On Tuesday morning, Senate Bill 227 was debated on the Senate Floor. It passed 27 – 7. It’s the majority party’s response to the Federal Tax Reform Act (see MOORLACH UPDATE — SB 227 — January 15, 2018).

The Democrats love shooting darts at the Trump Administration. When Republicans respond to their missives, we are scolded and told that we’re the ones being partisan, it looks like this is the new normal. Good grief. It makes you wonder how blinded the majority party has become. Well, SB 227 was not a dart, it was a missile. KCRA Channel 3 picked up the Associated Press story, which covers the fun in the first piece below.

I did not plan on speaking against either SB 227 or SB 705 (Allen). But, after listening to the Floor debate, I just had to put my two cents in. I kept my remarks very brief. In the case of a total ban on Styrofoam, my argument prevailed. KCBX Public Radio covers it in the second piece below.

California Senate passes bill to work around tax overhaul

By JONATHAN J. COOPER, Associated Press

http://amp.kcra.com/article/california-senate-passes-bill-to-work-around-tax-overhaul/15930237

The California Senate passed legislation Tuesday that aims to protect taxpayers from facing higher federal tax bills, the first concrete action in a Democratic state to push back against last year’s tax overhaul signed by President Donald Trump.

Opening another front in their ongoing war with the Trump administration and Republican-led Congress, California Democrats are looking to insulate the higher-income taxpayers who provide a massive share of the state’s revenue and ensure they don’t leave for lower-tax states.

The new federal tax bill caps a deduction for state and local taxes at $10,000, which hits wealthier taxpayers in high-tax states like California the hardest.

The California bill would allow people to make a charitable contribution to the state in lieu of state income taxes, then reduce their state taxes by 85 percent of their contribution.

Senate President Pro Tem Kevin de Leon, the bill’s author, hopes the bill would let people get around the federal changes by deducting their state taxes as a charitable contribution instead.

“This new law deliberately targets Americans in blue states…that didn’t vote in large numbers for Donald Trump,” said de Leon, a Los Angeles Democrat who has made legislative battles with Trump a central plank of his challenge to U.S. Sen. Dianne Feinstein, a fellow Democrat.

The legislation, which now goes to the Assembly, was backed by all Democrats and Republicans Anthony Cannella of Ceres and Scott Wilk of Santa Clarita, in a 27-7 vote. Four of the Senate’s 13 Republicans did not cast a vote.

Several Republican critics said the bill may not be legal, potentially exposing taxpayers who take advantage to higher taxes and a fight with the IRS.

“This is a missile shooting at Washington, D.C., and it will not stand,” said Sen. John Moorlach, a Republican from Costa Mesa in Orange County.

More than a third of California taxpayers used the state tax deduction in 2015, claiming an average of $18,438 – the third highest after New York and Connecticut, according to IRS data.

De Leon estimates that 3 million taxpayers would be eligible to benefit from the charitable contribution option.

Crafting a tax plan that can keep both taxpayers and the state whole – and also survive a legal challenge – has been a complex balancing act for De Leon and tax-law professors he consulted.

Efforts in California and elsewhere to get around the federal tax law, if successful, could significantly increase the federal deficit. Lawmakers who crafted the GOP tax plan capped the state and local tax deduction in order to limit the deficit impacts from a sharp drop in the corporate tax rate.

Lawmakers in left-leaning states have decried the federal tax overhaul and vowed to try to mitigate its impacts.

In New York, Democratic Gov. Andrew Cuomo has floated the possibility of allowing taxpayers to make a charitable contribution in lieu of their taxes, but he has not submitted a formal proposal to lawmakers.

New York, New Jersey and Connecticut have announced plans to sue Washington, potentially arguing the tax law violates states’ rights and is unfair because it singles out Democratic states for political reasons. The suit has not yet been filed.

Some Republican-led states are also expecting their residents to face higher state tax bills because they’ve tied their tax laws to the federal tax code. Idaho and Nebraska, for example, are considering legislation state tax cuts as a result.

Associated Press writers David Klepper in Albany, New York; Kimberlee Kruesi in Boise, Idaho and Grant Schulte in Lincoln, Nebraska contributed.

Styrofoam ban fails in California Senate

By BEN ADLER/CAPITAL PUBLIC RADIO
http://kcbx.org/post/styrofoam-ban-fails-california-senate#stream/0

http://ijpr.org/post/calif-capitol-roundup-federal-tax-law-sidestep-high-speed-rail-audit-styrofoam-ban-fail-and#stream/0

To-go cups and containers made of expanded polystyrene – otherwise known as Styrofoam – are already banned in all of Monterey County, and in many Central Coast cities such as Carpinteria, Arroyo Grande, Pismo Beach and Morro Bay. State lawmakers have tried several times to enact a statewide ban over the past decade, but this week the California Senate rejected a bill that would ban restaurants, food vendors and grocery stores from using Styrofoam containers.

Democratic Senator Ben Allen says the containers often become urban litter that hurts the environment and the economy.

“The more we spend time looking at the damage that this product is doing to our coastline, the impact that that has from everything from tourism to oceanic health, it becomes abundantly clear how important it is to take this modest step,” Allen said.

But Republican Senator John Moorlach says the private sector is already reacting to lawmakers’ concerns by finding alternative containers.

“It’s happening on its own, and it’s fantastic. And I’m just wondering, why a law?” Moorlach said.

The Styrofoam ban failed Tuesday 18-to-16, three votes shy of passage.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

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MOORLACH UPDATE — Gov. Brown’s End Game — January 26, 2018

Before Hurricane Maria hit the territory of Puerto Rico, it was experiencing a massive out migration and was imploding due to high debts.

For those of you who heard me share my PowerPoint presentation at one of several speaking events last summer, here is a quote from the New York Times I shared:

With its creditors at its heels and its coffers depleted, Puerto Rico sought what is essentially bankruptcy relief in federal court on Wednesday, the first time in history that an American state or territory had taken the extraordinary measure.

The action sent Puerto Rico, whose approximately $123 billion in debt and pension obligations far exceeds the $18 billion bankruptcy filed by Detroit in 2013, to uncharted ground.

While the court proceedings could eventually make the island solvent for the first time in decades, the more immediate repercussions will likely be grim: Government workers will forgo pension money, public health and infrastructure projects will go wanting, and the “brain drain” the island has been suffering as professionals move to the mainland could intensify.

https://www.nytimes.com/2017/05/03/business/deadlock/puerto-rico-debt.html

Shortly thereafter, Puerto Rico was able to obtain special legislation from the U.S. Congress to enter a Federal Bankruptcy Court. Amazing. So, the largest U.S. bankruptcies are as follows: Puerto Rico, Detroit, Michigan, Jefferson County, Alabama, and Orange County, California (we have dropped to fourth place, after holding first place for some seventeen years).

California, Puerto Rico is your future. California, take a good look at the end game. Bondholders, be forewarned.

Three major cities in California filed for Chapter 9 bankruptcy protection to address their financial distress: Vallejo, Stockton, and San Bernardino. Not one of these three cities had the will to modify its pension liabilities, although the Federal judges in all three venues informed them that they could. Why didn’t they? Because they were worried about having future hiring efforts jeopardized (and “mother” CalPERS put an immense amount of pressure on them).

Federal Judge Rhodes handled the Detroit bankruptcy and had retirees take a haircut, thus reducing their retirement benefits. There is a way to restructure pension debt, there just isn’t the will. Bloomberg Markets covers this sad chapter in a profound way by stating that municipalities with large unfunded pension liabilities may follow Puerto Rico’s path. It’s the first piece below.

Yesterday, Governor Brown gave his last, theoretically, State of the State Address. I was there and led the applause when he mentioned his minor efforts at pension reform and wanting to address forest fires. But, I also moaned when he insisted that he loved trains, especially electric ones. And, I wanted to vomit when he jested about the Bay Bridge and that it went $6 billion over budget on a $1 billion budget, and that these things happen. What a sad testimony and indictment of the ability of Caltrans and this state’s transportation management team to have a Governor joke about budget overruns (also see MOORLACH UPDATE — Bay Bridge Bloat — October 29, 2015 october 29, 2015 john moorlach).

So, I provide my thoughts on this last, yet historic, speech by the Governor who signed my college diploma on the second day of January, 1978 (Jerry, thanks for the forty year relationship). It’s the second piece below and received the top-of-the-fold placement in the FlashReport.

TONIGHT: I have a District fund raising event at 5:30 p.m. I would love for you to attend and to invite as many of your friends that are concerned about the direction of this state to participate. We’ll provide you with a taco dinner and special surprise guests.

Former Costa Mesa Mayor Steve Mensinger and current Costa Mesa Councilman Jim Righeimer are the hosts. We’re enjoying a great response to visit the Mensinger Lodge and you will be glad that you attended.

For a copy of the invitation and an easy way to RSVP, please go to https://www.efundraisingconnections.com/c/Moorlach2020/EveningReceptionJan2018.

Puerto Rico Wants to Stall Creditors. That Went Badly in 1842

By Amanda Albright

https://www.bloomberg.com/news/articles/2018-01-26/puerto-rico-wants-to-stall-creditors-that-went-badly-in-1842

  • The plan revives a tactic surpassingly rare in a placid market
  • Municipalities with $1.7 trillion pension burden seek an out

Puerto Rico may pave the way for struggling U.S. cities and states to bite the hands that fed them billions.

The U.S. territory says it can’t pay any of the estimated $17 billion due to bondholders in the next five years. If the gambit is approved by a federal financial control board and kept in place once it emerges from bankruptcy, it would be the first time a major municipal borrower formally suspended debt payments since New York City’s 1975 fiscal crisis.

That could make it easier for some of America’s most troubled cities and states — among them Chicago, Illinois, New Jersey, and Connecticut — to try the same maneuver in the years ahead. Such a step would provide relief for places struggling with pension obligations and moribund urban economies, but could cripple their ability to improve infrastructure and pay for new services. And it would threaten the viability of a $3.8 trillion market generally thought of as the safest investment behind Treasury bonds.

“When you’ve got unfunded liabilities in which there is no way to ever catch up, you wonder what’s the end game,” said Marilyn Cohen, chief executive officer of Envision Capital Management, who has worked in the municipal market since 1979. “The end game won’t be pretty for bondholders, that’s for sure.”

‘Matter of When’

Puerto Rico is idiosyncratic, given that its special territorial tax status made Wall Street eager to fuel a $74 billion debt binge despite a declining economy and population. Indeed, the number of municipal defaults — excluding those made by the island — reached an eight-year low in 2017. No city or town has filed for bankruptcy protection since August 2015, and states don’t have the ability to have their debts dismissed in federal court.

The market is sensitive to any possibility that Puerto Rico’s suggestion of a moratorium might spread. In 2010, banking analyst Meredith Whitney incorrectly predicted “hundreds of billions” of municipal-bond defaults, causing one of the steepest selloffs in the municipal market in the past decade.

State and local governments face a $1.7 trillion debt to their pensions, a debt that is difficult for politicians to rein in if they don’t deeply cut spending or hike taxes. In 2015, the Illinois Supreme Court struck down a 2013 pension overhaul, saying it violated the state constitution’s ban on reducing retirement benefits. Other states have similar protections.

States can’t file for bankruptcy protection, and when the idea of giving them that option was raised after the last recession it was roundly dismissed by U.S. lawmakers and governors of both parties. But some governments need a way out, said John Moorlach, who was treasurer of Orange County, California, which filed its own record-setting case in 1994.

“There are ways to get out of the situation,” he said. “It’s just the will.”

Breathing Room

Puerto Rico isn’t the first to try a debt-payment moratorium. New York lawmakers in 1975 allowed the near-bankrupt city to stop making payments on short-term notes for three years. An appeals court declared the measure unconstitutional the next year.

But the respite allowed the city to fix its finances, said James Spiotto, managing director at Chicago-based Chapman Strategic Advisors LLC, whose firm advises on municipal restructurings. The state created a vehicle that allowed the city to tap the capital markets again and it operated under a control board similar to Puerto Rico’s.

In the 1840s, eight states and one territory defaulted on their debts. Florida, then a mere territory, repudiated $4 million in bonds in 1842, according to the National Bureau of Economic Research.

It took Florida over 10 years to borrow again, Spiotto said. For that reason, he said he doesn’t think municipalities will follow Puerto Rico’s suit because having the ability to borrow cheaply is essential.

“It’s been greeted by the market harshly,” he said.

Paying Paul

States and cities are already taking at least one page out of Puerto Rico’s playbook. The island built up its crushing debt by borrowing to pay off older debts, like using one credit card to pay off another.

After a political standoff left Illinois without a budget for two years, the near junk-rated state borrowed $6 billion in October to pay off the $16 billion in unpaid bills it accrued from that time without a spending plan. Pennsylvania, which has seen its credit rating slide over the years due to high debt and pension costs, will borrow more than $1 billion next week to help close its deficit. Houston took on a $1 billion obligation in December to close the debt it owes to retirees, a practice widely frowned upon.

Puerto Rico gives a “big warning sign” for states and cities with large debts, poor financial management, and unfavorable demographic trends, said Jeff Timlin, managing director and portfolio manager at Sage Advisory Services, which oversees about $1 billion of municipal bonds.

“This isn’t a widespread problem, but there were no problems a decade ago in the muni market,” he said. “We’re starting to see municipalities trending in a direction leading to their own demise.”

The Real State of the State: Gov. Jerry Brown leaving California bankrupt and homeless

Posted by John Moorlach

http://www.flashreport.org/blog/2018/01/25/the-real-state-of-the-state-gov-jerry-brown-leaving-california-bankrupt-and-homeless/

Gov. Jerry Brown’s State of the State address yesterday, his last of 16, was rather melancholy and underwhelming. Some aspects of the state seem in great shape, such as low unemployment.

But when I look around the state I see something I have never seen before since my family immigrated here from Holland in 1960: a vast homeless population for which there seems no solution. Even the deep recessions of 1974, 1980-81 and 2008-9 never produced that.

Brown has to bear much of the blame, beginning when he first entered the governor’s office in 1975. In that year, according to data from the California Association of Realtors, the median home price in California was $41,600. That was 15 percent above the national median of $35,300.

That small premium certainly was worth it given not just the incredible weather we still enjoy, but great K-12 schools, from which I graduated in 1973; a low-cost state university system, from which I earned my accounting degree at Cal State Long Beach in 1977; and an interstate highway system the world envied.

Contrast that with a median home price in the United States of $207,000 today, according to Zillow, but $504,000 in California – 2.4 times as much. The state’s schools now rank among the worst in the nation. Its roads shatter shock absorbers faster than in any other state, according to TRIP, a transportation research group.

In 1975, Brown insisted, “There is no free lunch…. This is an era of limits and we all had better get used to it…. Small is beautiful.” The latter was a phrase made popular by the 1973 book “Small is Beautiful: Economics as If People Mattered,” by economist E.F. Schumacher and promoted among environmentalists and hippies.

Well, certainly we need to watch spending and balance budgets. But California’s population of 24.5 million in 1975 has soared to 39.4 million today – a 61 percent increase. There was no “era of limits.”

Then, after the great building programs during the 1959-1967 governorship of Pat Brown, Jerry’s father, and Ronald Reagan’s governorship, 1967-75, priorities and power shifted – to the detriment of the everyday people of the state and to the benefit of the political class and environmental activists.

Brown’s flippant, “small is beautiful” attitude also resulted in the cancellation of hundreds of road and highway projects meant to deal with a growing statewide population. There were opportunities to ease the congestion, but his inaction since has led to a state paralyzed by a failing infrastructure. Taxpayers are now assuming the costs of his folly starting 43 years ago as they are taxed over $5 billion a year through gas purchases and vehicle license fee increases. In today’s speech, he boasted about the taxing and spending, and vowed to oppose any repeal attempts.

Also in those years, Brown sharply shifted the state’s political power from its balance among many factions – industry, finance, unions, the public sector – to the public-employee unions. Some collective bargaining rights had been given to city and county unions in 1968 with the Meyers-Milias-Brown Act, signed by Reagan.

But Brown signed the Educational Employment Relations Act of 1976, which gave collective bargaining rights to teachers, turning the California Teachers Association into the most powerful force in the state. In 1977, he signed the Dills Act, which “<href=”#.WmkR066nGUk”>formalized collective bargaining rights for state employees.” And in 1979, he signed the Higher Education Employer-Employee Relations Act, which advanced collective bargaining for University of California and Cal State employees.

These new powers given to public-employee unions meant they sat on both sides of the bargaining table: on one side, representing labor; and on the other side, union-friendly politicians put in office by union campaign contributions. Union power has been busting budgets ever since.

The worst way the unions abused their new powers was to get the Legislature to pass pension spiking in 1999-2000, under Gov. Gray Davis, who earlier had been Brown’s chief of staff. For example, SB 400 of 1999 spiked pensions by 50 percent.

Yesterday the governor thumped his pride in minimal pension reforms. I was hoping to hear something about attempting one more college try to address our failing pension systems in a substantial way. I was hoping to hear more about additional reforms to PEPRA, the California Rule and cost of living adjustments as he has intimated through recent amicus briefs to the Supreme Court.

Instead, we’re left with Brown’s new budget proposal for next year, where he includes $9.3 billion to pay to keep CalPERS and CalSTRS solvent. And that’s just a start of future payments that will chew up the state budget, as similar pension spiking chews up city budgets and grinds their services to a halt. Expect to hear more cities utter the “B” word soon.

Brown persists in wasting billions on the bullet train that just this last week has been shown, again, to be dramatically over budget. The great train boondoggle also just sparked a bipartisan request in the Senate for a new audit. And he invoked the Bay Bridge and its $6 billion cost, which should only have cost $1 billion, by stating “budget overruns happen.” That may have sounded cute, but it was not funny.

The California Environmental Quality Act was passed in 1970 under Reagan with the expectation that narrow environmental review would be limited to major private projects. It has grown into a beast that prevents hardly any construction at all.

During these past seven years as governor, Brown has expended almost no political capital to reform what has become an immense regulatory burden on constructing new homes. Exceptions have been, not to ease the construction of housing for the middle class, the poor and the homeless, but to build the new NFL stadium in Los Angeles and Sacramento’s new arena for the Kings basketball team – playgrounds for millionaires.

Kerry Jackson of the Pacific Research Institute wrote January 14 in the Los Angeles Times, “By some estimates, California energy costs are as much as 50 percent higher than the national average.” All that “green” energy – duplicative power and transmissions for solar and wind for when the sun doesn’t shine and the wind doesn’t blow – aren’t free.

In the meantime, our state burns and the powers that be would rather you pay more in food, transportation and housing costs for their vanity projects, whether it means paying climate taxes or funding out-of-control costs for a train that is stuck on the tracks.

Jerry preached electrifying our cars and bragged about cap-and-trade. But the fires caused by electric power lines and transformers wiped out all of his greenhouse gas reductions. He expressed a realization and offered up the formation of a fire advisory committee. This is scores of lives too late. He should have offered up cap-and-trade revenues to focus on mitigating the causes of wild fires and mudslides.

Brown recalled that, when he again sat in the governor’s chair in 2011, our state was branded with such epithets as “Coast of Dystopia” and “the Ungovernable State.” And he touted the state’s economic comeback, with low employment, 2.8 million jobs created and record profits, stock values and revenues for the state treasury.

But surely he knows the main cause of the state’s prosperity is the national economic boom, which has intensified under President Trump, who enacted the tax cuts Brown and state Democrats, especially House Minority Leader Nancy Pelosi, have criticized. In the 2016 election, by 4 million votes California voters preferred Hillary Clinton, whose planks included massive tax increases that by now would have sparked the Great Recession II.

The sad thing is Brown’s missed chance may be the last opportunity California has to righten its fiscal Titanic. His mastery of the budget, immense institutional knowledge, family heritage and well-honed political skills could have been used to enact real reforms. All that will be gone in a little over 11 months.

Under the failed governorships of Gray Davis and Arnold Schwarzenegger, each signed a budget spiking spending 15 percent for just one year (fiscal 1999-00 and 2005-06), leading to $20 billion-plus deficits in recessions. That showed just how powerful the forces of overspending are – even before pensions become a part of the picture. The Democratic frontrunners, Gavin Newsom of San Francisco and Antonio Villaraigosa of Los Angeles, both ran their cities into the ground financially, as new studies are showing. So the future will be bleak.

As the governor takes a victory tour of the state these next 11 months, the cheers he heard today in the Capitol will fade as the realization sets in of the fiscal disaster barreling at us as fast as a Japanese high-speed train.

Sen. John Moorlach, R-Costa Mesa, represents the 37th District in the California Senate.

This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District. If you no longer wish to subscribe, just let me know by responding with a request to do so.

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