Brea First: Unfunded Pension Liability

unfunded liabilityUnfunded pension liability was the topic at last night’s Brea First meeting. A very detailed description and analysis was presented by Pete Constant and Truong Bui from the Reason Foundation. When I say detailed, I’m mean deep into the numbers, tiered water rates, where did you get your PhD. sort of detailed.

To their credit, and thanks to a stream of astute and probing questions from the audience, the details provided a backdrop upon which some very down-to-earth discussion emerged. While understanding how we ended up in this hole isn’t without value, finding a way out is the real issue.

A brief history lesson.

In 1999 Council adopted an enhancement of the city’s defined benefit retirement program providing Public Safety personnel with a guaranteed 90% retirement at 30 years of service (Simonoff, Perry, Moore, Daucher yes; Vargas no). This greatly exacerbated Brea’s unfunded liability. Had Brea chosen a defined contribution plan instead we wouldn’t be having this conversation.

In 2000 Brea was overfunded to the tune of $15 million. I’ll let that sink in for a minute. We were ahead of the game by $15 million bucks! Expressed in 2016 dollars, that would be $17+ million – almost three times what we just deposited into our PARS account (Public Agency Retirement Services).

It was downhill from there.

pension liabilityIn 2001 and 2009, coinciding with the two recessions, funding rate for retirement had dropped from an enviable 133% in 2000 to 60% in 2009. Today’s unfunded pension liability, conservatively, is $85 million dollars and market value assets are only 74.9% of what is required.

The $85 million relies upon an overly generous assumed Rate of Return that CalPERS projects to be 7.5%. The average Rate of Return earned by CalPERS investments over the last 15 years is 5.2%. I’m not sure who they’re trying to fool, participants or themselves or both?

Staff has suggested to Council that maintaining an 80% funded level is sufficient. It is not.

That assumption puts all Brea services in jeopardy, including public safety. Further, the $6 million transferred from year end surplus into the PARS account is barely a drop in the bucket. The road to hell is paved with good intentions.

If you’ve ever tried to pay off a credit card relying on making minimum payments, you know exactly how ludicrous this is.

Where the state comes in.

The decades old dinosaur that is CalPERS operates using a very complex set of calculations to determine Rate of Return and Discount Rate. I’ll save you the rocket science, you can find the full reports here if you’re so inclined.

Suffice it to say that CalPERS is systemically malfunctioning and in dire need of a major overhaul. This is the other half of the problem/solution formula. Literally thousands of agencies state wide share in this multi-billion dollar unfunded liability. Public employee pensions are constitutionally guaranteed.

So, no matter what Brea decides to do to fulfill our local responsibility, funding our pension plan, we also have to bring pressure to bear on Sacramento to adopt the constitutional amendments that govern how public pensions are managed.

Joining forces.

I suppose it isn’t out of the question to think cities might band together to lobby Sacramento. Brea keeps a high priced lobbying firm on retainer, other cities must do the same. There is strength in numbers.

League of California CitiesOh, and as longstanding members of the League of California Cities I would think we could turn to them for assistance too. After all, that’s what they do… right, they advocate on behalf of member cities.

But wait, their employees pension plan is CalPERS. Is it possible there is a conflict of interest here?

Where does Brea start?

pension liabilityWe’re in a hole. A deep hole. We need to stop digging and find a way out.

Finding that way out must start with the Council. They need to create a plan to raise our pension funding level from 74.9% to 100%. Not over some protracted length of time. Now. Anything less than 100% adds to our unfunded liability.

Council must commit to a vigorous debt reduction plan, eliminating our unfunded liability.

It’s not as simple as tacking on another half a percent or so sales tax targeted only to pay off the debt. That’s illegal. And we’re not likely to stumble across some windfall and miraculously escape. It will take sacrifice.

City services will be seriously impacted. Public health and safety services will be effected as well. If you thought coping with the drought has been tough, you ain’t seen nothin’ yet.

pension liabilityOkay Council, the ball is in your court. It looks like Brea First is committed to holding you accountable… so am I.

Download PDFs of the Reason Foundation Brea Unfunded Pension Liability Presentation and Report by clicking on the blue links.

Brea Envisions: Good News Bad News.

Last Saturday’s blog, “Brea Envisions Needs Midcourse Correction” highlighting city staff’s clever usurping of control of the project triggered immediate damage control from Brea’s Community Development Director. First thing Monday morning the following email was sent to all Brea Envisions Steering Committee members and various staff involved in the project. That afternoon it was forwarded to Council.

Subject: Brea Envisions and blog criticism this weekend.

Good Morning Envision Committee Members-

As you may be aware, this weekend a local blogger has taken issue with the Brea Envisions project, process, City staff, and the consultant team and published comments in his blog. We wanted to let you know we take these comments and expressed concerns very seriously because the integrity of this process and our relationship with you and the community are of paramount importance to our work.

brea envisionsWe want you to know how much we value your participation and leadership in the Brea Envisions project. As staff, we have been following what we believe to be the Committee’s established protocol for staff/Committee interaction and collaboration. To date, we believe we have worked to implement your vision and ideas between each Committee meeting, moving forward with the production of materials and coordination of project details. Our comments at Committee meetings, either reflect our understanding of the Committee’s past direction or offer our professional insights to demonstrate our support for your decisions or inform you of any challenges or limitations (e.g. achieving goals in alternate ways, meeting expressed schedule goals, keeping within established budgets, etc.). This process has and can continue to include refining the website and tech tools as may be desired as your efforts continue to unfold. We also feel very confident that you are capable and have demonstrated your resolve to communicate when you disagree with anything or feel a different approach is necessary. And while we believe the comments contained in the blog are without the benefit of this context and do not resonate with our experience with you, we feel it is important at this time that we check in with you to make sure we are not missing something.

As your staff and resource team we want to confirm your direction. We want to support and provide tools you need for this effort. We have understood it is the preference of the Committee that staff provide guidance as to best practices and to have for you information which is based on your direction to respond to at your meetings, rather than expecting the Committee to develop content and process from scratch. Given the assertions made it is good practice to step back and confirm the Committee is comfortable with this process or, if not, you have the ability to express modifications the group can discuss and consider. We are eager and interested in discussing this issue with you to ensure the Brea Envisions effort continues to reflect the community’s perspective and we’ll tee that up as quickly as the Committee desires.

In closing, my apologies for disrupting your weekend. We felt strongly you needed to be made aware of the public comments posted and to know we continue to be committed to make certain an accurate understanding of Brea Envisions and the Committee’s great work is put forward, correcting what we view as an unfortunate, misleading, and potentially damaging representation. Staff looks forward to seeing you soon and checking in with you on the Committee process. Please feel free to contact me if you should have any questions or comments.

Okay, who talks like that?

Seriously, how many times did you stop, reread a sentence or two and continue… still not sure you fully grasped what you just read? It’s called, among other things, city speak. This jargon laden language is the hallmark of government publications, documents and correspondence.

City speak, first and foremost, has evolved to make listeners/readers feel immediately inferior. Second, it relies on cumbersome compound sentences designed to even further confuse and intimidate the listener/reader.

Classic damage control.

Anyone witnessing the committee meeting, I’m confident, would come away with virtually the same impressions I did. The observations and criticisms I made in the last blog struck too close to home and demanded that an immediate response be made.

Sadly, it has backfired. The retreat into city speak and attempts to justify the status quo do more to validate my position than deny it.

Counterattack.

The most egregious comment in the email is when he wraps up by describing Brea Matters as “an unfortunate, misleading, and potentially damaging representation.”

Unfortunate, perhaps, but for whom? If it stifles staff’s attempt to hijack Brea Envisions and puts the project back on the course Council intended, how is that unfortunate?

Misleading? I’m confident you would have come to the same conclusions.

Damaging? Only if Council turns a blind eye to this and the status quo is allowed to continue unchecked.

The hidden message.

Buried in this measured response is the suggestion that staff would like to know if any committee members share similar feelings about Brea Envisions as those expressed in Brea Matters.

Go ahead, read the email again. Did you find it? Hint: it’s in the third paragraph.

Feeling as I do, that committee members sincerely desire to make a positive contribution to Brea Envisions, I’m confident they all read through the email several times and discovered the request to share their feelings – pro or con.

Besides chatting amongst themselves, what options do they have? Do you think, for a moment, they or anyone on staff would post a comment on the blog?

Best case scenario for Brea Envisions?

Having read the blog and the damage control email, Council could put Brea Envisions on their agenda for an open discussion. They could ask the City Manager to interview committee members for their side of the story. Council has the final say, they have many options if they would just choose to exercise them.

Whatever Council decides to do, I hope they remember there is a big difference between molding public opinion and gathering public opinion. Brea Envisions? Whose Brea?

Brea Envisions

 

Brea Envisions Needs Midcourse Correction.

Brea EnvisionsCompared to the 121 pieces posted to Brea Matters over 5 years, this has been the most difficult blog to write. Here’s why. I do not want to diminish or dismiss the contribution of those volunteering as Brea Envisions Steering Committee members or Ambassadors.

One of Brea’s great strengths, for decades, has been a consistent outpouring of volunteerism. Brea Envisions is only the most recent beneficiary. Brea schools have long benefitted from the hard work and largesse of PTAs. Youth sports have thrived thanks, in large part, to the generosity of the community.

Around 1996 then Mayor Glenn Parker launched the Mayor’s Annual Youth Award helping to instill the spirit of volunteerism into countless young Breans. Brea’s faith based community and service organizations have touched every aspect of life in Brea.

Where did the problem start?

With the best of intentions, Council launched Brea Envisions with the stipulation that no current or former elected or appointed officials could be on the Steering Committee. This was designed to prohibit the committee from being peppered with the same old faces (Old Guard) in an effort to overcome the legacy of manipulation that has blemished every effort at public engagement in recent history.

They forgot one thing, creating a means of continued oversight. Beyond the occasional self aggrandizing updates they’ve been given, Council has no real clue how leadership has evolved. Convinced to not select a Chair, the Brea Envisions Steering Committee essentially handed staff the keys.

Supported by their very expensive consultant MIG and their subcontractors, staff has taken over, concocting a long range planning project hardly touched by the very people they’re hired to serve.

What was my first clue?

Brea EnvisionsA sparse, poorly conceived social media effort and a cookie cutter website that was difficult to navigate and barely mobile friendly. Then I heard about this all purpose hashtag, #breaenvisions, that would be the linchpin tying everything together and triggering a viral response.

Newsflash: going viral is not a strategy, it’s a phenomenon. Jimmy Fallon’s Thursday Tweets create so much traffic they become trending topics because Fallon has 38.4 million followers and his staff understands how to engage their fans. City of Brea has 4,800+ followers interested in traffic updates and Amber alerts. Do the math.

The Brea Envisions website, an app/template from consultant subcontractor Crowdbrite copyrighted in 2015, is an off-the-rack one-size-fits-all “engagement” tool sold to city after city. As I said, it is far from user friendly on mobile devices and almost impossible to determine if or when any new content is added.

Did you take the survey? Did you know there is a new survey now and you can take it too? I didn’t think so.

A third of the survey questions ask for narrative input. Yeah, you have to type sentences and stuff. Someone explain to me how this anecdotal input will be translated to quantifiable data. Plus, as of this writing, only 60 folks have taken the survey. Many questions are phrased, “What are your three favorite…” which leaves zero room for constructive criticism.

This overly Saccharin Pollyanna approach has been the hallmark of that bogus old City Manager Survey that Council used to justify giving Tim O’Donnell raise after raise.

Brea Envisions: Trust but verify.

Brea EnvisionsI checked in with a couple of Brea Envisions committee members, off the record. As promised, they’ll remain anonymous… but they shared that they couldn’t remember the committee having any influence in originating anything relating to the website or social media.

Since Steering Committee meetings are, by law, open to the public and anyone may attend, which Council confirmed during their Study Session the night prior, I decided that sitting in on one was the next logical step.

Brea EnvisionsLast Wednesday evening I went to the third floor conference room, picked an unobtrusive seat to ensure my presence wouldn’t have any impact on the meeting. I stood, for a brief moment, and took a photo with my phone, then sat quietly for the rest of the meeting.

As the meeting started, a quick head count showed that attending were 11 committee members and 8 city staff members. The meeting was run and dominated by staff who easily filled 80% of the airtime. Most of their rambling presentation seemed designed to convince committee members how amazingly well staff was succeeding every step of the way. Near the end of the meeting the committee did interject a few comments. I’ll get to that in a moment.

Brea EnvisionsA detailed “Social Media Promotion Schedule” was shared which consisted of posting on Facebook, Twitter and Instagram twice a week. (Not one of those accounts is for Brea Envisions!)

Yup, a whole six posts a week! The plan is anchored on the assumption that all followers will “like” and share every item with their entire network. The plan will go viral!

Brea EnvisionsBusiness entities relying on social media for their company or personal brand, employ management apps (Hootsuite, IFTTT, TweetDeck etc.) and often post 50, 100, 200+ posts a day across a half dozen social media platforms. Do the math.

They also rely upon advanced analytics which allow them to know precisely how they’re influencing the market. I heard nothing of the sort shared with the committee.

Committee input mostly rebuffed.

When staff was challenged about there not being a dedicated Brea Envisions Facebook page, the answer was, “We decided that it would be potentially too confusing.”

Whoa. Wasn’t that the committee’s job? Doesn’t the Brea PD have their own site for recruiting? What about the Curtis Theater and Brea Gallery?

The heart of marketing, and that’s what this is folks, is built upon differentiation. Burying Brea Envisions in the city’s Facebook, Twitter and Instagram pages is completely backwards. Don’t even get me started on their ridiculous use of Periscope to live stream video of the Ambassador training session. They got 2 viewers.

Committee comments were either greeted with rebuttal or the standard city speak, “We’ll look into that.” which often means waiting long enough that the comment is forgotten.

Time for Council to reassert itself.

There is much more of the racetrack still ahead of us than behind. If Council can find a way to take a more hands-on role in overseeing Brea Envisions without interfering with it being a project by the people, the interest, expertise, energy and enthusiasm of the volunteers will not be squandered.

Otherwise, Brea Envisions will join the ranks of so many other workshops, public discussions and charrettes that tapped the public only for validation and not direction.

Brea Envisions