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Petition Over $290M Unfunded Liability Continues

Original post made by TriValleyPatriots.com, Another Pleasanton neighborhood, on Jan 7, 2011

The grass roots petition from the citizens of Pleasanton asking the city to a hold public forums to discuss the $290M in unfunded pension/benefits liability continues. This public discussion is needed before the city approves any more city worker contracts.

Pleasanton citizens are encouraged to sign the petition here: www.ptowncitizens.com.

The city, the workers, and (especially) the citizens all need to understand the challenging fiscal situation presently facing our city. This should be accomplished by the city holding public meetings where we review the data and understanding the assumptions all parties have made when analyzing the city's present and future financial health.

Pleasanton citizen Bart Hughes has been reviewing the city's financial situation and meeting with city officials to ensure he is working with the same financial data as the city. His analysis shows that 18% of the general city budget is now consumed by city obligation in paying employee pensions. In comparison, this number was only 1% in 2002. Additionally, this obligation is expected to grow unsustainably going forward as the city is forced to contribute even more to make up for the city worker's underperforming pension fund.

Mr. Hughes brought this information before the city and the citizens in December and the city has yet to respond publicly to this revelation.

Next Mr. Hughes analyzed the unfunded liability aspect of the city's pension and benefit obligations. This has revealed that the city worker's pension and medical funds' market value of assets (MVA) is severly under funded to meet the upcoming obligations for city workers. This underfunding is estimated to be $290M that the taxpayers of Pleasanton will be required to pay.

The city has yet to respond publicly to this new $290M unfunded liability revelation

Finally, the city will reveal the terms of the new general city worker's contract on Wednesday, Jan 12th and likely vote on approving it on January 18th. The terms of this contract will have a direct impact on the fiscal concerns that Mr. Hughes has raised. Common sense should lead most of us to conclude that this new city contract should not be approved until the recent fiscal concerns are clearly understood and the contract's impact is appropriately factored.

This all leads back to the petition. All that is being asked is that the city addresses this $290M concern in a public forum BEFORE approving the city worker's contract. This is an appeal for transparency by the citizens, to ensure the citizens and the city fully comprehends the present fiscal situation and the impact of any new financial commitments.

The TriValley Patriots TEA Party group has been following the developments on this issue from near the beginning. We have contacted Mr. Hughes and reviewed his analysis and are in agreement of his conclusions. We are part of the grass roots coalition behind the website and petition initiative. We are contributing our technical resources, communications tools and organizational infrastructure to help this effort. However, this goes beyond the TEA Party. Mr. Hughes is not a TEA Party member and others in the community we have aligned with on this issue are also not TEA Party members. Of course, many TEA Party members have joined as well.

So this is an issue common to diverse citizens who all share a common value in expecting careful fiscal stewardship from our city and our elected officials. We invite all citizens who care about Pleasanton and its financial future to urge the city to hold public hearings on this matter by signing the petition.

Let's work as a community to get all the facts out on the table. Understand the basis for all the assumptions that have gone into the analysis. We will agree where we can agree, disagree where we must, but meet this challenge squarely and forthrightly so the decisions we make today are made with eyes open and fully aware of the consequences.

By signing the petition you are not declaring yourself a TEA Partier, a Republican, a Democrat, Independent, conservative or liberal. You are declaring yourself a citizen of Pleasanton and all you are asking is that the city stop, take a deep breath and let's all discuss these concerns with the city in an open public forum.

Details of the petition can be found at www.ptowncitizens.com.

To find out more about TriValley Patriots, visit us here: www.TriValleyPatriots.com. There you can learn about our core principles: Individual Rights, Limited Government, Free Markets and Fiscal Responsibility. Feel free to join our mailing list and hear firsthand what the "TEA Party" is about. If you find out we are not your "cup of tea", you can easily unsubscribe and we part ways amicably. To contact our leadership council visit: Web Link

Comments (29)

 +   Like this comment
Posted by Bart Hughes
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 7:47 am

Thank you for joining the effort. This is an issue that should be important to all Pleasanton citizens regardless of political party.

It is good that the City sees this as a significant issue facing the community. The key question is how quickly they move to address the issue. We will see with the new PCEA contract.

As I did at the City Council meeting on Tuesday, I want to commend our City Manager Nelson Fialho for his excellent example of leadership. For those who are not aware, Nelson proactively changed his employment contract so that he is now contributing the full 8% of his Employee Contribution. This essentially is an 8% pay cut for him. It it going to take shared sacrafice from all to dig us out of this $290M unfunded liability hole, and it is great to see Nelson leading by example.


 +   Like this comment
Posted by b
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:10 am

It would be interesting to see Bart's analysis re-adjusted for ANY timeframe other than the horrendous 10-year period 2000-2009 that he continues to use in his dark and dreary analysis.


 +   Like this comment
Posted by Arnold
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:16 am

Hey b

Pick any time frame you like. The unfunded liability is what it is, and I actually think it it is much larger than 290 million. I guess it's easy for you to ignore the seriousness of the problem when your gambling with other peoples money (the taxpayers money).


 +   Like this comment
Posted by Bart Hughes
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:29 am

B - How many times to I have to say to you I am using the 2002-2010 timeframe for the simple reason that 2002 is the year that Pleasanton significantly expanded the public employee entitlements program and 2002 is the year City Management projected what the costs would be?

I like to deal with facts and then make appropriate decisions based on those facts.


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jan 7, 2011 at 8:36 am

Stacey is a registered user.

Congratulations to Fialho for showing leadership in this matter. The 8% translates into $16,000 for the whole year.

It would not make sense to pick any timeframe other than the one that consists of when Pleasanton increased benefits in 2002 to today.


 +   Like this comment
Posted by b
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 9:20 am

Bart, because it represents an artificially bad period that doesn't accurately represent longer-term trends (20-30-40 years, which is the timeframe most relevant to retirement assets), recent trends (market stabalization in the past 1-2 years) or the most probable future path for the economy (current indicators are showing substantial improvement). It assumes that the already heavily-written-down real estate assets will continue to require substantial future write-downs equivalent to what's been done the past couple fiscal years. It just isn't realistic.

Arnold, that's the very definition of these plans. You gamble with your 401(k) money, and the state gambles with this pension money. Some timeframes you win, some timeframes you lose. But the idea (and history) generally supports the theory that you're better off gambling with long-term funds (retirement obligations that aren't due for many decades) than stuffing the funds in a mattress.

What you're basically proposing here is that we do less gambling and more mattress stuffing. That's fine. It just means you have to put more in up front, since you have less chance of returning a higher return on investment.

Incidentally, it isn't taxpayer money. It is the money of retirees who have had their compensation paid into their retirement fund instead of their paychecks. You may take issue with their total compensation or the fact that it is being paid as retirement contributions instead of W2 income. But if they're being fair market compensation for fair market work on behalf of the City, it's their money, not yours.


 +   Like this comment
Posted by two cents
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 9:26 am

Mr Fialho, thank you for your leadership. I didn't know you had done this and it says a lot.




 +   Like this comment
Posted by Concerned
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 9:28 am

In 2002 we followed the big mistakes of Gray Davis by giving free handouts to the City employees, money that we do not have.Even Davis admits he made a mistake. For over 8 years the taxpayers have been penalised. We have become the serfs and there has been a silent coup by the public sector employees. The host is dying and there is no more money to be bled without totally killing it. By going back to pre-2002 formulae everyone will be better off and the city employees will have a better chance of collecting their pensions. Collecting a lower amount is better than zero% of a larger amount. Oakland is negotiating for a 9% contribution from its police force. They are in a death spiral with fewer and fewer police that makes their job impossible. We are in better shape but we need to action before our hole is so deep that there is no way out. O'Bama will not be able to give any more handouts and Brown knows that the other states are all after our businesses. Our taxes are already too high and businesses and the people paying most of the taxes are leaving. California is in a death spiral too.

Step up to the plate and take action. We need to do this at all levels.


 +   Like this comment
Posted by resident
a resident of Downtown
on Jan 7, 2011 at 9:32 am

"Incidentally, it isn't taxpayer money. It is the money of retirees who have had their compensation paid into their retirement fund instead of their paychecks. "
BULL! If that were true they would get the DOLLARS that they paid in, not a guarantee of certain amounts for life. That is what a 401k is about, not this guaranteed for life pension. My guess is that they actually paid in a few thousand dollars per year and they will be getting basically their entire salaries FOR LIFE. That does not equate with the compensation that was paid into the retirement fund.
People who spout off crap like that are the reason that this problem has become so huge. It does not take a degree in math or rocket science to see that people who pay in nothing should not be entitled to lifetime pensions in those, or any, amounts.
I agree that Fialho made one good move, now get rid of the two full time paid assistants and just do the job. Pleasanton does not need three city managers, we are way too top heavy with people who sit around and collect huge salaries.


 +   Like this comment
Posted by TriValleyPatriots.com
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 10:03 am

Posters: "b", "resident", and other who are attempting to argue the facts via blogs. If you believe so strongly in your positions, then you should have no problem signing the petition. If the city hold public forums on this, then you can stand up next to Mr. Hughes and present your data and assumptions.

So, thank you for signing the petition, "b" and "resident". Let's all go have a beer after the forum. TriValley Patriots will buy.


 +   Like this comment
Posted by two cents
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 10:03 am

for b:

We need to get our fiscal house in order.

House Budget Chief Ryan Says No Bailouts to Prevent U.S. State Defaults

Web Link=

"Should taxpayers in frugal states be bailing out taxpayers in profligate states?" Ryan asked during a forum near the Capitol. "Should taxpayers in Indiana, who have paid their bills on time, who have done their job fiscally, be bailing out Californians, who haven't? No, that's a moral hazard we are not interested in creating."


 +   Like this comment
Posted by Concerned
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 10:11 am

Ryan is the only Congressman that has been making sense over the past few years. I am glad he is the Budget chief. California should not get one cent from the Feds. We need to cut our expenses and live within our means. Cut salaries, pensions,wasteful programs, overhead etc.The days of wine and roses are over. Welcome to the real world. This applies equally to Pleasanton.


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jan 7, 2011 at 10:26 am

Stacey is a registered user.

b wrote: "it represents an artificially bad period that doesn't accurately represent longer-term trends (20-30-40 years,"

b said it exactly. The timeframe is an artificially bad period. The market high was artificially inflated. Corrections to such extremes always go roughly equal in the opposite direction. That's the nature of corrections (makes the Austrian school look right). The current business cycle period always lays the groundwork for the next. The increased benefits were made on the assumptions of the artificial high. And that's _exactly_ why the timeframe has to be used. No one can expect that we can continue to run with a plan that was created based on artificially inflated numbers.

b also wrote: "What you're basically proposing here is that we do less gambling and more mattress stuffing. That's fine. It just means you have to put more in up front, since you have less chance of returning a higher return on investment."

Yes, let's do that exactly. It prevents large exposure to market volatility. The numbers are out there. Prior to SB400, California funded public employee retirements primarily with contributions. Let's not easily brush off b's comfort with the idea that those with 401(k)s take higher risk and this makes CalPERS risk taking somehow acceptable. Owners of 401(k) accounts assume the risk. CalPERS investment risk is assumed by taxpayers. The risk-taking by CalPERS basically enables them to take on public debt without voter approval when the fund is underfunded. If CalPERS members are looking for higher returns to investments, then they should assume the risk instead of placing that burden on those already taking the risk with their own retirement accounts.


 +   Like this comment
Posted by Stacey
a resident of Amberwood/Wood Meadows
on Jan 7, 2011 at 10:28 am

Stacey is a registered user.

That's a ridiculous comment from Ryan because California has been a donor state for a long time now. Time for Californians to stop subsidizing Indiana's bills.


 +   Like this comment
Posted by Stacey do you
a resident of Del Prado
on Jan 7, 2011 at 10:35 am

Believe that the federal government should bailout California?


 +   Like this comment
Posted by two cents
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 10:54 am

Sorry, I shouldn't have posted that article here as this is a discussion about Pleasanton pensions and we need to stay focused. Thanks to the TriValleyPatriot group for clearly explaining who they are and that this petition is open to all.


 +   Like this comment
Posted by s
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 10:58 am

B, the reason you use this timeframe is this is when the benefit was increased and the reason they said it should be increased is "it will not cost us anything!" Well that was using assumptions based on the market and real estate growing at the unsustainable amounts before the crash and they knew the economy was about to take a major correction.

"Incidentally, it isn't taxpayer money. It is the money of retirees who have had their compensation paid into their retirement fund instead of their paychecks." is complete BULL, BULL, BULL. They have a defined benefit plan PAID 100% BY THE TAXPAYER. The employees do not contribute one penny to the plan. The taxpayers have paid 100% of the contributions into the plan AND we take 100% of the risk of the market to guarantee they can retired starting at age 55 (or age 50 for public safety) and can receive 90%-100% of their highest salary FOR LIFE plus cost of living increases. They also could have worked 20 years at the lowest paying job in the city, but when they retire 10 years later they are a manager, and the retirement is based on their highest salary; not how much they actually earned during the period.


 +   Like this comment
Posted by TriValleyPatriots.com
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 11:21 am

What to do about California is a great subject for a new post on PW.

What to do about Pleasanton is what we should be discussing on this post. We have an important issue staring at our city and we citizens have a responsibility to ensure our elected officials address it.

As can be seen, there are many perspectives on "the facts"...hence the need to sign the petition for public forums where "truth" can not hide: Web Link


 +   Like this comment
Posted by Concerned
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 11:30 am

TriValleyPatriots,

I signed the petition and forwarded it to my friends several of whom have signed. Looking forward to drinking your beer. Make sure that you have some Guinees on hand.:)


 +   Like this comment
Posted by Arnold
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 11:35 am

"Incidentally, it isn't taxpayer money. It is the money of retirees who have had their compensation paid into their retirement fund instead of their paychecks. You may take issue with their total compensation or the fact that it is being paid as retirement contributions instead of W2 income. But if they're being fair market compensation for fair market work on behalf of the City, it's their money, not yours."


If it is their money and their pension, why is the 290 million dollar unfunded liability my problem? I feel like I'm staking you at a poker game and you get to keep the winnings, or I get to absorb the losses. Either way, I take all the risk and you receive all the benefit. Right now I'm just stuck with the losses. When CalPERS was over funded (super funded) you and CalPERS found a way to distribute those gains to yourselves in the form of SB400. I never agreed to this distribution of assets in the form of pension formula increases and earlier retirements ages , nor did any other voter in California.

Here is a quote from an article in today's NY Times. The article is about an S.E.C. investigation into CalPERS, but the quote is referring to SB400:

"David Crane, an aide to then Gov. Arnold Schwarzenegger, said last year in legislative testimony that he found it "nothing short of astonishing" that Calpers had "promoted the largest nonvoter-approved debt issuance in California history" without revealing the risks or conflicts of interest involved.

"Frankly, I've never seen anything like the Calpers sales document, which makes even Goldman Sachs's alleged nondisclosure look like child's play," said Mr. Crane...".

Web Link

b, I'm starting to get the feeling I will soon see your signature on the PCEA contract, with some union designation just beneath it.


 +   Like this comment
Posted by TriValleyPatriots.com
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 11:55 am

Thanks Concerned! Guinness it will be...I'm personally a Sam Adams fan. :)

I'm hopefully that we can all engage in a constructive public dialogue with the city. These are tough times for everyone, so it is even more important to have clear information to make tough choices.

TVP


 +   Like this comment
Posted by Concerned
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 12:04 pm

Thanks TVP. Sorry I didn't spell Guinness correctly. Need to read my messages before sending them. I like Sam Adams too.(Fits the Patriot image better.:)

Incidentally our esteemed Gov.Brown is getting ready to unload a lot of expenses to counties and cities without revenues to pay for them. I am sure it is going to affect Pleasanton's budget in a big way. I am assuming we are not responsible for any prisons.


 +   Like this comment
Posted by b
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:10 pm

Absolute baloney. Bart has some sort of perceived authority here because he keeps spewing numbers. But they are statistically meaningless and grossly misleading. As they say, past performance is no guarantee of future results. And that swings both ways.

Picking this arbitrary timeframe doesn't take into account what happened in 2001 or 2010 or 1992 or 1982. It doesn't take into account what will happen in 2011 or 2020 or 2032 or 2057. These are VERY long-term investment plans and it is impossible to predict what performance will be. Even stuffing cash in a mattress isn't a sure thing. It is just an arbitrary timeframe that was really bad for most ALL of our retirement accounts, and conveniently supports his political position.

Most people with political agendas are very clever at manipulating statistics for their own gain. Anyone with enough free time on their hands can manufacture statistics to prove most any viewpoint. But none of us can predict what will happen next week, next year, or in the next four decades, so it is nothing but baloney.

You want a sure thing? Fund the whole thing now. Then you don't have to burn so much energy trying to guess what's going to happen to the real estate market and the stock market for the next forty years. Or just lay off the whole city staff. You clearly think they're not doing anything to earn their paychecks, so let's just lay them all off and cut our taxes to zero.


 +   Like this comment
Posted by b
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:18 pm

Stacey, I've already expressed my support for moving to a 401(k) style plan. From the perspective of the city and the taxpayers, it is a good strategy.

Sadly, 401(k) plans have been a huge failure. They've moved all the risk off employers and to the employees. But very few employees have taken adequate personal responsibility. That's how we have 70-year-olds desperately seeking employment in a lousy job market.

But that's another discussion.

I stand by my previous assertions from other threads--we absolutely should take advantage of this statistical anomaly to negotiate better terms with city employees. That doesn't change the fact that the statistics are baloney.


 +   Like this comment
Posted by two cents
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:30 pm

b your comment:

"You clearly think they're not doing anything to earn their paychecks, so let's just lay them all off and cut our taxes to zero."

. . . shows that you are the one doing the manipulating here. Bart has made his position clear without exaggerating like this and he's made his respect for city workers clear and the fact that we have to correct a 2002 mistake clear.

Also hoping for a new bubble isn't going to cut it, though Bernake might drive a very short term one in the stock market through QE2. We need to get sensible growth, not manipulated growth.


 +   Like this comment
Posted by Arnold
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 8:47 pm

"Absolute baloney. Bart has some sort of perceived authority here because he keeps spewing numbers. But they are statistically meaningless and grossly misleading. As they say, past performance is no guarantee of future results. And that swings both ways"

Good point, b. In the case of CalPERS, past performance has been painful for taxpayers. Compounding the problem is the increased pension benefits that were sold to our elected officials based on the CalPERS projections of the DOW reaching 25,000, by 2010. The 290 million plus isn't a statistic. It IS the unfunded pension liability, for already consumed services, that taxpayers will pay for over the nexr 30 years. And if CalPERS projections for the next years are as pathetic as their projections for the past 10 years we are all in big trouble, and that includes the past/present employees that are counting on their pension/health care benefits.

Have a good evening.


 +   Like this comment
Posted by s
a resident of Another Pleasanton neighborhood
on Jan 7, 2011 at 9:38 pm

It is obvious that b is one of the union members trying to dispel any truth. Bart has been showing the number that are directly in the city financials. Most people with union agendas are very clever at manipulating statistics for their own gain. That is how they used dubious projections in how the current retirement plan was not going to cost the taxpayer anything because CalPERS investments will easily make a guaranteed return of 12%-15% per year for life.

Also, nobody is saying that the city staff is not working hard enough; as 'b' implies. What the taxpayers are looking for is a fair plan. The current system in place is WAY out of wack. The workers in Pleasanton received an 8-year contract in 2002 where their salaries went up 35%; significantly higher than increases in the private sector (i.e., the taxpayers). At the same time they were given a retirement plan, paid for an guaranteed by the taxpayer, that allows them to retire at age 55 with 90%+ of their highest year salary, and given that retroactive to the date they started employment at the city. The employees also have the taxpayer paying the employee contribution into the retirement plan (how many of you have their employer paying their social security employee portion of their paycheck?). In addition to being able to retire at age 55, the taxpayers pay their medical insurance for live with no caps.

We know that there is a serious liability out there. We can also talk about the fairness factor. Why are we allowing any employee to retire at age 50 or 55 with almost a full salary? Social Security age keeps going up because people are living longer and we cannot fund social security for all those years but we have a retirement plan for city workers where they retire at full benefits while in their 50's. When people are living longer, that is not the time where you allow them to retire earlier; that is the wrong direction. We are essentially paying for two workforces; those who are working now and those who retired.

As for 401(k) plans, the employees should go to them. I have heard we pay high salaries in order to attract the brightest employees so I assume they will be able to manage a 401(k) better than the general population and probably do well financially.

I guarantee for every job in the city, if the city offered the current salary but no special retirement plan and no retiree medical and retirement age of social security, there would be a tremendous number of qualified people applying for the jobs. In fact most of the people in these jobs now took the jobs before all the increases because they thought the salary and benefits before were fair.

My advise to the employee unions, unless you negotiate a fair deal that gives back the excess benefits, be prepared for an initiative by the people that the smart people of Pleasanton will pass to bring salaries, benefits, and the negotiation process back to a fair level and will tie your hands for negotiations in the future.

I think it is fair to say that the public is "mad as hell and is not going to take it anymore."


 +   Like this comment
Posted by t_time
a resident of Another Pleasanton neighborhood
on Jan 8, 2011 at 12:23 am

At this point I'm skeptical the city will respond, but we have to speak up regardless. I've signed the petition Web Link.

It is a shame we have to expend so much CO2 and agitate so many electrons debating this over a blog. If the city would just honor the petition, all parties could have their arguments exposed to the disinfecting sunshine of public scrutiny. The naked truth would then be all that's left standing. Then bloggers lounging around in their PJs would have to go find something else to rant about.

I'm not understanding the city's silence here. Pleasanton's erupting and all we hear are crickets from city Hall. They only explanation I can muster is that the city has lit the fuse and this contract is now go for liftoff, citizens be damned.

This is frustrating. What's happened to America? What recourse do we have? Is there a process to recall city officials (a la Gray Davis)? I think I'll sip some Earl Gray (in my PJs), calm down and contemplate my civic options.

Cheers,
t


 +   Like this comment
Posted by two cents
a resident of Another Pleasanton neighborhood
on Jan 9, 2011 at 2:29 pm

Sounds like Berkeley has a similar problem. I hope our health benefits aren't being handled like they are there. Anyone know?

Daniel Borenstein: Berkeley benefit debt at least $310 million

Web Link


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