Dithering, Dithery Doo. Who Got Who?

by Mark Scaramella, March 11, 2010

When the banks collapsed they said if we gave them the money they'd lend it back to us. So, we gave them billions, even trillions, not that anyone seems to be keeping track, no strings attached.

But instead of lending the bailout billions back to US the banks invested it, partially in the stock market, and invested it big time in the rolling, ever-expanding Ponzorama schemes that created the crisis in the first place.

All of which means that the recent uptick in the stock market caused by the bailed out banks investing in the stock market has made Mendocino County's retirement fund worth roughly $40 million more right now than it was back then, the entire monetary situation being precarious, to say the least.

The Supervisors voted 4-1, Pinches dissenting, to increase the County's share of contributions to the fund to make the Retirement Fund a little more solvent because it's still millions short of guaranteeing the gold for the golden years of Mendocino County employees.

For years, Mendocino County didn't put enough money into the fund to cover the costs of all the people retiring at larger and larger percentages of salaries that have grown larger and larger over the years, and now the current official shortfall between what the County can pay and what their retirees are owed is estimated at $70 million.

Which is a lot of money for a cow county with only 90,000 people living in it.

Retirement Fund administrator Jim Andersen was quick to point out that the increase in fund value from the uptick in the stock market, nice as it is, is still far from returning the fund to its pre-crash level in the summer of 2008 in either value or earnings.

“We are not in a position to declare excess earnings,” said Andersen, referring to the fund’s ongoing inability to cover a large portion of the ballooning retiree health insurance cost on top of its basic pension obligations. At present, any increase in value or earnings is going to pay down the County’s huge pension obligation now estimated at the previously mentioned $70 million. And that’s on top of the payments on previous pension obligation bonds (loans) which were taken out years ago to cover previous unfunded pension obligations at what by today’s standards are high interest rates but were lower back then.

The retirement board proposed that the County raise its retirement pension obligation payment to an estimated $9.5 million this year, much more than the $2.2 million payment last year.

Among other factors, the County’s pension obligation assumes an 8% return on their investment, but, of course, the true return is only about half that. The 8% assumed return rate, however, allows the County to pretend that more of the pension deficit will be covered by interest and stock returns instead of County payments. If the 8% “target” was more realistic, say 4%, then the math would require that the County contribute an even higher share of the pension obligation.

It was this “reality gap” (the mythical 8% return) that generated a lot of public input and discussion.

Yorkville financial maven/stockbroker Ted Stevens told the Board that the combined pension debt is a “budget buster,” adding that “there are no excess earnings” and never have been. “This is just continuing a disastrous policy that no one wants to talk about,” said Stevens. “The numbers are messed up. You are underfunded by $100 million today plus there’s the pension obligation bond worth over $90 million. Over the last 13 years the average rate of return has been 4.4% and that does not include the 'excess earnings' siphoned off in past years” for retiree health insurance.

In essence, then, the county’s pension obligations are big and getting bigger while the County’s revenues are declining. And the stock market uptick, while better than nothing, isn’t helping much. Yet the County is going to make a huge annual payment to try to catch up.

Ukiah CPA Wendy Politz told the board the obvious — “the County’s salaries are too high and the retirement payments are too high.” She also pointed out that the $10 million pension debt payment is more than the County’s budget deficit for this year and next year combined. “You have to reduce salaries at the higher levels,” said the solemn Politz, “not lay people off at lower levels. Most people in this County would settle for $65k-$85k for these high level positions. You should reel back salaries and benefits or this will continue. Salaries climb and climb to the point that some County employees are making over $120k per position. [Mendocino County has] over 30 people earning well over $100k per year. You need to contain costs.”

Redwood Valley’s intrepid Supes observer, Jim Houle, reminded the Board that they should cap salaries at $85k, twice the median income in the county.

Fifth District Supervisor Candidate Wendy Roberts pointed out the futility “of blaming those who came before,” saying that previous loans were taken out “in good faith. But it didn't work.”

(Gross, ongoing incompetence would seem more to the point of what has happened but Ms. Roberts is running for office in a county — and a country — where candor is not a path to elected office.)

Roberts urged the Board to be “very transparent. Make it clear we have to live with decisions made in the past.” Roberts agreed, however, that the ratio of managers to line staff should be reduced and that “salaries need to come down.”

Long time financial critic John Dickerson urged the Board to be more up front about how bad the situation is.

“You've been told you have to close a $7.5 million deficit for the end of next fiscal year,” said Dickerson. “But this year the County is paying almost $11 million on pension bonds, $3.5 million more than the deficit you have to eliminate. If you didn't have that debt, you would not have this deficit. And most of that debt is caused by the Supervisors.”

Supervisor John McCowen challenged Dickerson to propose a solution — although Ms. Politz had done just that by proposing reductions in upper echelon staff salaries. “What's your option?” asked McCowen. “Default? You say none of this needed to happen and that there’s a simple solution? What is it?”

Dickerson replied, “You need a long term plan.”

McCowen noted, “The cost is still there.”

Supervisor Pinches, summed up, “If you’re in a deep hole, quit digging.”

Supervisor David Colfax, who costs the County well over $110k per year in salary and benefits all by himself, launched a garbled monologue that would have further confused the issue if anybody had been able to decode it before concluding, “I have no solutions. I have no answers. We are not unique. At all levels, the federal, state or local, I do not see a solution. But I would be receptive…”

(As predicted here when the crisis began, local governments will hide their dereliction in the rubble of the wider collapse.)

Board Chair Carre Brown, apparently now aware she's got to be firm when it comes to the wandering garrulousness characteristic of the remarks of Colfax, Smith and McCowen, interrupted, “Supervisor Colfax? We are an hour behind.”

Pinches noted that the County was drastically increasing its pension contribution but the employee share was only going up 0.01%. “I do not support this,” grumbled Pinches.

Finally, the Board voted 3-2 to accept the new, much higher County contribution rates as proposed by Andersen and the Retirement board, Pinches and Colfax dissenting.

Then it was on to the next big subject of the day: fears — some say paranoia — about what may be buried underground beneath the former Masonite site — the site that Developers Diversified Realty owns but can’t develop into a mall since Measure A, a DDR-funded proposal to change the site from industrial to commercial zoning, went down nearly two to one in last fall's election.

Supervisor John McCowen raised the question because of what he described as “persistent concern in the community” about what may be buried at the former glueboard manufacturing facility. “Persistent concern in community” means a half-dozen or so of his friends and supporters who really want no development of any kind at the site.)

Regional Water Quality Control Board staffer Caryn Woodhouse summarized the background and the process the Water Board has undertaken to see that the site is cleaned up “to background levels when it's technically and economically feasible.” She showed a map of the 14 areas of interest at the site and what they’d found.

Which is not much, actually. They did find a relatively low level petroleum plume underground which is being worked on, but not much else. She added that anything can be reopened if necessary based on what’s found. Members of the public can go to their website (https://geotracker.waterboards.ca.gov) and look up case numbers: 1NMC042, and 1TMC042. Or email her at cwoodhouse@waterboards.ca.gov)

In answer to a question from Supervisor Pinches, Water Board Assistant Director Louis Riviera said that he thought his agency had “a good handle on the issues” and that he was “quite confident in the approach” being used.

McCowen tried again.

“There’s a level of concern about certain items, persistent comments including from former employees about buried drums. Anecdotal reports. Have you done any community outreach or investigation?”

Woodhouse replied, “We have heard those. We hear them at many sites. It would surprise me to find buried waste at this site because of the number of investigations and the long history and record we have. If someone comes forward we'd look into it.”

McCowen, and here's a perfect example of why he's so irritating, why he's got to be suppressed when he's unreasonable, which is often.

“But there’s been no outreach, therefore the questions will persist.”

Who's fault is that, McCowen? Ms. Woodhouse is supposed to find the people making the claims?

Woodhouse: “People can use our website to report information or releases.”

Two DDR reps stood to say they were serious about cleaning up the site and were working with Masonite to see that it gets cleaned up. DDR attorney James Camp said that there could be unknowns at any site including the Masonite property and that’s why they purchased environmental insurance in case anything pops up because DDR is responsible for any new contamination found.

Jim Houle told the board of his chemical engineering background and professional license and then suggested the County take a more active role, perhaps forming an ad hoc committee of volunteers to oversee the site with some authority from the Board so that they can go on the site legally without being declared trespassers to gather information of as-yet undiscovered contamination. Perhaps at some point they might arrange for a consulting expert to take a look.

The Board had no interest in that idea. It was too simple, and it was free.

Supervisor Pinches saw it all clearly.

“This is the third or fourth public meeting on the alleged Masonite contamination,” said Pinches, emphasizing the word “alleged.”

“The water board has been on top of this site since the 1980s. Now we're supposed to bring in volunteers and a consultant? I guess we can close our library to do the job the Water Board's been doing. That's where we are here. We’re beating a dead horse. This is really an attempt to scare everybody away. I guess they're doing a good job. Masonite or Remco [another toxic site in Willits] or Georgia Pacific in Fort Bragg. These are our prime locations for having something going on. We seem intent on losing our assessed value, having no tax base, which is the reason for our budget cuts. The problem is we have stymied all economic development and now we're using the disguise of possible contamination to make us stay away from all our prime sites for industrial, commercial or any other uses. This has to stop! We have beat this horse to death.”

McCowen, predictably: “I disagree 100% with the characterization my colleague has made. This agenda item has nothing to do with attempting to scare people away from this site. That's ridiculous to raise that. My motives are stated in the agenda summary. Read the agenda summary. … I have not heard anyone say there's been a comprehensive effort made to solicit information from the public, particularly former employees who might have knowledge of toxic substances being disposed of in an inappropriate manner. You’ve done a great job of looking at areas where we know certain processes were taking place. But it's tough to find something if you don't know where to look for it. We should make an effort to solicit the information from members of the public who might have knowledge. Nowhere have I suggested that county funds be used for this. What is the role of the County? Hire experts and bill responsible parties? But not with county funds. This keeps coming up because it's never been resolved.”

County Counsel Jeanine Nadel said the Board had no statutory authority to take over the decontamination program and no ability to hire consultants and send the bill to DDR.

Pinches became even more sarcastic.

“Maybe we should put a hold on the $500k [in redevelopment money] that’s going toward the ARC (the Alex Rohrbaugh Recreation Center). We can hold that for remediation in the future. I don't think that's an option anybody wants to do, but if we're so concerned maybe you'd support that.”

Supervisor Colfax, having been silenced himself, commented, “It’s getting late for facetiousness.”

Board Chair Carre Brown agreed. “Yes, we should stop here.”

The Supervisors agreed that maybe the Water Board could do a bit more outreach. Mr. Riviera suggested people can file environmental complaints at their website, anonymous complaints are fine, adding, “We keep hearing about buried things — rumors. But it has to be specific for us to take action. We can't chase ghosts. Where? What? We are open.”

Riviera said he would consider putting the Masonite site on the agenda of the next Regional Board meeting in Ukiah on April 29th.

The Supervisors then spent a couple of hours on possible reductions (mentioned at the previous week’s meeting) in the number of animal trappers in the County, now down to 2.5 federally authorized employees paid for with funds from the feds, the state and the County. After a few sons of the soil said the program shouldn’t be cut further, the Board punted again, postponing the issue to the Big Budget Workshop on March 22 where there’s a theoretical possibility that some budget decisions will be made.

The Board spent another hour on a list of 13 or 14 new hires presented by new County CEO Carmel Angelo. The Board discussed each position and how each would be funded. The relatively short list is proof that the byzantine funding structure that has blossomed in California in recent years makes personnel management nearly impossible to understand, much less manage. Each of the positions on Angelo’s list had multiple funding sources accompanied by jargonzied and acronymed state and federal program designations.

After more than an hour of job by job review the following jumbled item was entered into the minutes by the beleaguered Clerk of the Board: “Board Action: Moved by Supervisor Smith, seconded by Supervisor Pinches, that the Board of Supervisors accepts the recommendations (including item no. 14) with the change on item no. 11. Upon further consideration, the second to the motion was withdrawn. Board Action: Upon motion by Supervisor Smith, seconded by Supervisor McCowen, and carried (4/1, with Supervisor Pinches dissenting), IT IS ORDERED that the Board of Supervisors accepts the recommendations, including item nos. 6, 11, and 14, with the change on item no. 11, and with funding verification for item nos. 6 and 11.”

Got that?

The revised pot dispensary regulation was postponed again and now looks like it might not come before the Board until sometime in the summer even though Supervisor McCowen says it’s ready for Board action.

Supervisor Pinches suggested an even longer delay: “It might be better to put it off until after the November election. There's a marijuana legalization initiative on the ballot.”

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