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.

Put The Cookies Back!

Local media fans the flames.

Thursday’s Star Progress had an article by OCR writer Doug Morino with the headline, “Last year’s city trip to Asia still a hot topic.” — yeah, and it’s about to get even hotter.

The article begins, “Brea leaders are once again catching fire for their traveling ways.  First, the heat came from a few residents (cough, cough…).  Now, it’s coming from one of their own.  Councilman Marty Simonoff said he wants to take a deeper look at how the city’s travel budget is allocated and how public funds were spent during a trip last year by city officials to Korea and Japan.”

Better late than never.

cookie-jarBless you Marty for finally jumping in, but I’m afraid I have to take a different view of this…  it’s not time to focus on the minutia.  Getting mired down in the trivialities of the trip will not address the real issue.

The bottom line is that Schweitzer, Murdock and O’Donnell appear to have gotten caught with their hands in the cookie jar.

It’s time to stop all of the muddling around spreading half truths, in an attempt to cloud the real issue, too much time has been wasted already trying to make this junket appear to be something it wasn’t… official anything.

cookie-2It doesn’t matter if the cookies were chocolate chip, oatmeal or peanut butter.  They weren’t for the taking.  It’s time to man up.

You can’t just help yourself to what isn’t yours without expecting to pay the consequences when you’re caught.  Extremely poor choices were made, they come with a price.

In this case there may very well be a law against stupid.

 Is travel the issue?

cookie-3

Not completely, no.  There are historically legitimate reasons that require Council and staff to travel.  At least that’s what we’re being told.  A discussion about which organizations make sense for Brea to join and which don’t should also go on the agenda.  Could be some real savings lurking here.

I’m talking about National League of Cities, League of California Cities, the Energy Coalition and the like.  I’m still trying to figure out how Breans have directly benefitted from the city’s involvement in these and other dubious organizations, but that’s not the issue at the moment.

Who’s business was it… really?

cookie-1This whole debacle began when the Mayor inappropriately intruded into the business of a private organization over which the city has never had any authority beyond a minor ceremonial role.  How the BSCA and BKSCA choose to settle their differences is their business.

When Mr. Park, Anseong Mayor Hwang’s emissary, came calling, Don Schweitzer should have politely directed him to share his concerns with these organizations.  Instead Schweitzer butted in like we were on the brink of some international crisis.

The pool boy wades in.

liar-liarIt’s even more ludicrous that, according to the article, “Murdock fired back at Simonoff, calling his inquiry into the Asia trip a type of politically-motivated vendetta aimed at shifting attention from other civic issues.”

Hogwash.

I don’t believe that any more than I believe Brett Murdock is, as he has so loudly suggested, the leading knight on a white horse trying to solve Brea’s unfunded pension liability.  What a ridiculous claim to make.

It’s on the agenda now.

I’m glad to see that the Mayor reversed his denial and is now allowing the discussion to occur.  Sadly, it’s slated for the study session on June 4th which means it’s at a time and place where the public isn’t likely to be free to attend and unfortunately will not get to hear a full report on the conversation.

Have the courage to take it downstairs!

With the whole matter blowing up as it has in the media weeks in advance, and with the unsubstantiated personal attacks being leveled to further keep the truth from seeing the full light of day, I’m curious to see what sort of preemptive strikes might be made when Council meets next week (05/21).

This would almost be funny if it wasn’t so sad and embarrassing.

 

No excuse is better than a bad one.

evil_hearnoTwo weeks ago the illustrious Mayor aggressively asserted that he would put his life on the line to guarantee free speech and open discussion.  He swore in front of his Viet Nam buddies he would never roadblock anyone’s attempt, especially fellow council members, to discuss any issue, anywhere at any time.

I decided to take him at his word.

Back in January Garcia and Murdock both gave reports from the same League of California Cities committee meeting.  It struck me odd that Brea would occupy two seats on any committee and I was not alone in my curiosity.  So I sent off a short email to Mayor Garcia with a couple of simple questions.

Opening a discussion with the Mayor.

They were simple questions, really.  They could have easily been handled with simple, honest answers.

“How is it that you and Mayor Pro Tem Murdock are both appointed to the League of California Cities’ Policy Committee on Housing, Community and Economic Development?  Does this mean the City of Brea will always have to pay for you both to travel to Sacramento, attend the same meetings and give the same reports?  Is this redundancy truly necessary?”

Simple answers can be a long time coming.

evil_seenoTwo weeks pass and, finally, this is the response I get, “We’ve each been appointed by separate entities of which the City is a members.”

“These types of committees are educational and have a major legislative impact on local governance.  The City of Brea has a long history of representation on these policy committees.  Having more representation is better for the citizens of Brea.”

What?

Did I find out how they both got on the same committee? No.

DId I get an answer to the duplicate cost and redundancy query?  No.

If at first you don’t succeed, try, try again.

So I responded, asking, “What are the separate entities making the appointments and why would they place two members from Brea and not make similar redundant appointments for other cities?”

“Would we not accomplish as much with a single representative while saving half of the travel costs?”

“What, precisely, is the benefit of membership on the League of California Cities’ Policy Committee on Housing, Community and Economic Development for the citizen’s of Brea?”

A slightly quicker response from the Mayor.

evil_speaknoAfter a seven day delay, I get this, “Among the duties of a Councilmember is representing the Citizens of Brea in the organizations in which we hold membership.”

“The City Council budgets for attendance at these meetings and events, the educational and networking opportunities have made the City of Brea the community it is.”

“If you would like to visit  regarding this or any other issues, please feel to contact my office.”

The straw that broke the camel’s back.

Up ’til now I had remained civil in my inquiry, albeit with a touch of sarcasm, but this response took me off the charts.  I’ll give you my final rejoinder in a moment.

Turning to other, more forthcoming, more articulate and more experienced resources, here is what I discovered.

  • Brea is a dues paying member of both the National League of Cities and the League of California Cities.
  • The National League of Cities and the League of California Cities are small lobbying organizations in a sea of giants, lobbying for municipal issues.
  • Any benefits coming to Brea are, at best, the byproduct of a lobbying effort that was initiated by someone else to resolve their need.
  • For years, Brea council members have been appointed to committees in both organizations, but never have we had two members sitting on the same committee.
  • Both organizations place members on committees through Presidential and Divisional appointments.
  • The organization’s President and Divisional Chair must receive letters requesting an appointment from the individual seeking the seat.
  • Garcia and Murdock had to make specific requests to be appointed, extolling their credentials, Garcia to the President and Murdock to the Divisional Chair.
  • No other committee has two members from the same city.
  • No explanation has been given regarding the benefit Brea receives having both Garcia and Murdock in attendance at the same meetings.
  • No explanation has been given clarifying any realtime benefit Brea has received, directly or tangentially from this or any committee.

Does no one up there talk to each other?  Does no one in city hall think it odd that both Garcia and Murdock were headed, at taxpayer expense, to the same meeting?

Granted, at about $200 bucks round trip each, maybe a meal and no hotel expense… for committee meetings that occur quarterly, this isn’t a ton of money.  It’s not like they were taking a vacation together in a foreign country.

My final response to Mayor Mumbles McEloquent.

rgarcia_stache“Let me be plain spoken.  Your repeated vacuous non-answers are unacceptable.”

“I asked simple questions, questions being posed to me by other Breans.  Simple, truthful answers would have been appropriate.  Extending the invitation to visit your office, the best way to avoid any written record of the discussion, is obviously sarcasm and, frankly, is insulting.”

“Your repeated deletion of the other Council Members from the Cc: list, effectively excluding them from witnessing and/or wading in on the discussion, cannot be whitewashed with the boilerplate Brown Act caveat.”

“You’ve left me no alternative but to carry this to a public forum, as I fully intend to have answers to my questions.”

“Shame on you for squandering an opportunity to really be the open and ethical elected official you repeatedly profess to be.”

While I have provided, verbatim, the exchange I had with the Mayor, here is a PDF COPY of the emails for those interested in documentation.