MOORLACH UPDATE — Collision with Reality — October 16, 2015

Yesterday, I started reading "Fierce Conversations — Achieving Success at Work & Life, One Conversation at a Time," by Susan Scott.

Two thoughts came to mind. The first is that I have been enjoying a conversation with you for a long time through these e-mail UPDATEs. The second is the first of seven principles in Scott’s book is very apropos for the first story below:

"Master the courage to interrogate reality. No plan survives its collision with reality, and reality has a habit of shifting. Markets and economies change, requiring shifts in strategy."

The first story below, from Reuters and Yahoo! Finance, could not capture this theme better. In fact, it’s been a recurring topic of interest in my UPDATEs (see MOORLACH UPDATE — Assumption Rate Impacts — December 12, 2012 december 12, 2012 john moorlach, MOORLACH UPDATE — OCERS Election — October 26, 2012 october 26, 2012 john moorlach, and MOORLACH UPDATE — Pension Overhaul — September 6, 2012 september 6, 2012 john moorlach). I’m the closer for the continuing and tragic financial drama.

In the second piece, the Voice of OC gives a shout out on an initiative that I hoped to see while serving as County Supervisor. Maybe the momentum is finally moving?

Most California cities back new pension strategy despite cost

By Robin Respaut and Rory Carroll

SAN FRANCISCO, Oct 15 (Reuters) – Most California cities support a new strategy by the nation’s largest public pension fund to make its investment portfolio more conservative, even though the move could gradually increase how much employers pay into the fund.

Still, some cities expressed serious reservations about a California Public Employees’ Retirement System plan to incrementally lower the $293 billion fund’s assumed rate of investment returns following periods of strong performance.

The League of California Cities surveyed its members, which have been struggling to shoulder the burden of growing pension costs. The survey found that many cities prefer a more gradual increase in costs, as opposed to spikes following market downturns, said Bruce Channing, Laguna Hills city manager.

"As employers, more predictability and less spiking of rates from one year to the next is preferable," said Channing, who is also chair of the league’s city managers pension reform task force.

Next week, the Calpers board will consider a new policy to gradually reduce the assumed return rate from 7.5 percent to 6.5 percent over a few decades. The average return rate across 126 funds tracked by the National Association of State Retirement Administrators was 7.68 percent as of May.

Calpers intends to reduce portfolio volatility as California’s baby boomers retire and payouts exceed active workers’ contributions. The idea is similar to that of an individual nearing retirement adopting a more conservative investment strategy.

But a lower, albeit less volatile, rate of return will necessitate higher contributions from local governments and public workers.

The league said 77 percent of those surveyed supported Calpers’ strategy to reduce portfolio risk, even though the move would over time raise pension contributions more than currently planned. Ten percent of respondents opposed the strategy, and the rest were unsure, the survey of 115 cities found.

Opponents of higher contributions included Alameda, a city of nearly 76,000 near San Francisco. Its pension costs for safety workers like police and fire consume 48 cents of every dollar paid in salary and are expected to grow to 65 cents in five years.

"It’s devastating on our bottom line," said Alameda Interim City Manager Liz Warmerdam. "We have very little input. Whatever they want to do, local governments have to sit here and deal with it. It’s extremely frustrating."

Massive pension costs contributed to a handful of recent municipal bankruptcies across the country, including in the California cities of Vallejo, Stockton and San Bernardino.

Stockton and Vallejo have emerged from bankruptcy. Vallejo City Manager Daniel Keen said he supports actions to ensure Calpers’ ability to pay benefits, but added it may require sacrifices.

"While this plan does cause us more pain on the part of our budget, it is pain we were anticipating," said Keen. "It is going to require adjustments in our budget and might result in cuts to some services."

"It’s undeniable that we have to deal with the fact that there are significantly fewer active employees paying in," said Leyne Milstein, Sacramento’s finance director. "We need to make sure this system is sustainable."

But like many cities across the state, Sacramento’s budget is not keeping pace with rising pension costs. Next year, the city’s expenses are expected to exceed revenues by $8.8 million, of which $5.8 million is pension growth, Milstein said. In five years, Sacramento expects to pay close to $80 million in pension costs from its general fund, up from $60 million today.

"This will be extremely painful on local government budgets, but it’s the honest approach to address the large unfunded liabilities," said Senator John Moorlach (R-Costa Mesa), a pension reform supporter. "Unfortunately, it’s the taxpayers who are on the hook as pension debt eats up public funds meant for police and fire protection, as well as other services."

(Reporting by Robin Respaut and Rory Carroll; Editing by David Gregorio)

Homeless Advocates Want Action on Long-Delayed Storage Center

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A homeless person walks near the Walk of Honor at the Santa Ana Civic Center.

(Photo by: Violeta Vaqueiro)

By Nick Gerda

A broad coalition of advocates met face-to-face Wednesday with Santa Ana and Orange County officials in an effort to get local leaders moving on a number of homeless issues, including the months-long delay in establishing a center in the Santa Ana Civic Center for homeless people to store their belongings.

Those living in the Civic Center have long complained about police confiscating their belongings, which led the Santa Ana City Council to set aside about $200,000 per year last December for a check-in storage center.

Yet, while the money was set aside and the nonprofit Mercy House chosen as the operator, the check-in center still seems far from becoming a reality.

Finding out why was one of the major reasons why the Project Homelessness coalition called for Wednesday’s meeting with officials.

The coalition includes a wide range of representatives, including from downtown businesses groups Downtown, Inc. and the Santa Ana Business Coalition, the homeless advocacy group Civic Center Roundtable, and nonprofit groups Illumination Foundation and Heart of Delight.

City Manager David Cavazos noted the city’s political and financial support for the storage center, but said a viable site hasn’t yet been identified. He said an open-air parking lot next between the county Hall of Administration and the county’s abandoned Building 16 would be “a decent location.”

But Cavazos also said the county, which owns the lot, is concerned about “any kind of long term check-in center there” because it might conflict with a yet-to-be-revealed Civic Center master plan.

Local activist Dylan Thompson, meanwhile, suggested that a site like that could be used temporarily until a more permanent space is found.

Another option is an abandoned bus terminal right next to the Civic Center, which some officials, like former county supervisor and now state Sen. John Moorlach (R-Costa Mesa), have said could be turned into a center for homeless services.

When city staff took that option to council members there was “pretty strong majority” who wanted to use the terminal for the storage center, Cavazos said. But there’s been little progress on that front, with county Community Resources Director Karen Roper noting that it was funded with federal transportation grants that restrict its use.

“It’s a great location and it’s not being used now, but we don’t have the authority to do anything” with it right now," Roper said.

However, asked whether, given the terminal’s abandoned state, OCTA officials could seek a waiver from the federal restrictions, county executive Carolyn McInerney said they could.

Madeleine Spencer, a Santa Ana-based activist who arranged Wednesday’s meeting, said she would contact OCTA officials to find out what needs to be done to use the terminal for a storage center.

The advocates emphasized that officials should be asking whether the services they’re providing, such as the storage center, are humane. Ian Daelucian of Heart of Delight pointed to a storage center in Anaheim run by Mercy House, where homeless people’s belongings were stored in trash cans.

“When we provide a service, let’s put ourselves in that position of being the service recipient,” Daelucian said.

Cavazos said he’s recommending that part of Santa Ana’s newfound $11 million budget surplus go toward combating homelessness. A decision by the City Council is scheduled for Tuesday.

And county officials noted that they recently conducted a survey of homeless people in the Civic Center to get a sense of what the main issues are.

It showed that while many homeless people are connected to certain welfare benefits, the use of housing subsidies is “very low,” Roper said. One reason could be the “very long wait lists” for such subsidies at housing authorities, she added.

Another big barrier is the federal ban on Section 8 housing subsidies for those with felony convictions, which many homeless people have. To address that, county staff members plan on asking their elected bosses, the county supervisors, to fund more accessible housing subsidies that aren’t funded through Section 8.

Roper acknowledged that having mental health outreach workers working with law enforcement to connect people with services is “far cheaper and more cost-effective” than jailing people.

“It’s just better all the way around for homeless folks, as well as the whole community, and so we’re all for getting [homeless] connected to resources,” Roper said.

Cavazos, meanwhile, emphasized that police have to enforce the law.

“If anybody commits a crime, regardless of their situation, they have to face the consequences,” he said. “So things that are criminal offenses, we have to arrest people.”

Spencer encouraged city and county officials to work with people on the ground and bring them into the process, something officials have been criticized as doing too little of in the past.

Roper said the comments from Spencer and Daelucian were “great feedback,” and encouraged them to share those ideas with the county’s health workers who do outreach to Civic Center homeless people.

“While we’re looking to create some bigger systems change," Roper said, "I think it’s important for all of us to come together to work on [interim strategies.]"

You can contact Nick Gerda at ngerda, and follow him on Twitter: @nicholasgerda.

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This e-mail has been sent by California State Senator John M. W. Moorlach, 37th District.

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