Teeter Tottering

The Teeter Plan is an in-house financial arrangement whereby the County advances school and service districts their full share of the annual tax allotment in advance even though not all taxes have come in. The County then gets repaid when property taxes arrive — late, with penalties and interest. Lately, however, property taxes have not arrived in the accustomed volume. So, while tax revenue is delayed due to the bad economy, it's also sometimes higher than expected because it's later and interest has accumulated.

Last July, Supervisor John McCowen warned CEO Carmel Angelo that the County’s auditor, Galena & Associates LLC of Hartford, Connecticut, better be ready to answer some tough questions about their handling of the County’s Teeter Plan.

The numbers weren't adding up.

Until a couple of years ago, County staffers also “borrowed” from anticipated property tax late fees and penalties and used the money to balance the County’s tottering books. But they borrowed much more than actually came in because the yearly budget shortfalls had gone unaddressed.

And the borrowing from Teeter anticipated revenues kept getting bigger.

Then-Assistant CEO Alison Glassey used to call the penalties and late fees “found money,” conveniently found just before the fiscal year books were closed. Typically, the found money was used to avoid last minute, end-of-the-fiscal-year layoffs.

Over time, with the highly paid, unalarmed auditors looking on, this “borrowing” grew into the millions as the ballooning Teeter debt was listed as a "receivable." But County staffers continued to pretend that the late fees and penalties would someday make up the “Teeter debt” which, by 2008, had risen to more than $16 million.

Teeter was tottering and about to topple. And nobody seemed to be watching.

McCowen pointedly remarked last July, “After looking at our books forever [Galena and Co. the alleged auditor] has finally decided that the Teeter debt is an issue that has to be highlighted as a liability. So where were they for the last 15 years?”

CEO Angelo said she had discussed the problem with Galena reps and they’d be before the board in the fall to answer questions.

McCowen repeated for emphasis. “At that point, they can answer why, if this was the debt, it was hanging out there in the wind. No plan to repay it. No one really tracking the annual increase in the liability which we did have, perhaps we had $1 million or $2 million a year. Again, no plan to repay it. It wasn’t considered a General Fund liability. Once this board took action two years ago to put it on an amortization schedule and have a plan to pay it off and to keep it from escalating, then it became a liability we had to acknowledge. So Galena failed to do their job for probably 15 years and then once we take responsible action, they ding us.” … They’ll be ready to answer that. Right?”

The subject re-emerged at the September 27th Board meeting and McCowen pounced again: “So [Galena] will be prepared to explain why they never raised a question regarding the Teeter debt until the board took action to put it on an amortization schedule to insure that it be paid off in a responsible manner, then it became a problem.”

CEO Angelo replied, “We have discussed the 09/10 audit and Teeter in depth with Galena and they are aware that it is a question that we have and they will be prepared to speak to it.”

Sure enough, Galena representative Brad Constantine appeared before the Board last Tuesday. With his carefully trimmed gray hair, his smart-guy glasses and his finely tailored suit, here was a big city bullbleeper to be reckoned with.

After several minutes of the usual smiley-faced jibber-jabber with a man whose auditing firm had seriously misled them, McCowen, who wasn't smiling, finally got his moment to put Galena on the spot.

“Why are we now accounting for Teeter differently than the way we’ve accounted for it previously?”

Mr. Constantine replied, “The way that the financial statements are presented — it’s really up to the County to do that.”

Wrong. The County can be blamed for borrowing too much from the plan, but a reputable auditor would present the numbers in a way that elected officials, many of them math-deficient, can't mistake. They should have included the county's mystery budget balancing trick in their "management letter," and shown the Board exactly how much debt they were accruing.

Unfortunately, Constantine's shifting the blame back to "the County" went uncommented on by McCowen or anyone else in the room.

The rest of the Teeter discussion flabbed into mutual self-congratulation about how there is now a plan in place to repay the Teeter debt, some of which will indeed come from the late fees and penalties and interest. But the County's beleaguered general fund is now making up a big part of that accumulated debt.

* * *

Early last week, a County employees' press release had declared, “Mendocino County employees — seeking to reach a mutually acceptable agreement but fed up with the County’s refusal to send decision-makers to negotiations — are planning their most creative action yet at the Board of Supervisors meeting on Tuesday, October 4. The creative action will address County workers’ frustrating efforts to get the Board of Supervisors or key County officials to join negotiation efforts, which are being stalled by a hired County consultant who has no authority to make decisions.”

What could they be planning? Something dramatic was in the wind! Imagination promised to force the Board of Supervisors to return to the bargaining table.

Employee negotiator Sandy Madrigal began the long-awaited moment by summarizing the dismal state of negotiations and the county's stonewalling, concluding, “It takes two to tango.”

Then came the creativity.

“740 people are asking each of you to dance with them,” said Madrigal in an apparent reference to the number of SEIU employees left on the County’s payroll. “So we have 740 dance cards for the negotiation ball. One set for each of you plus [CEO] Ms. Angelo. The dance steps are the no-tension tango, the work-together waltz, the change it up charleston, the settlement salsa, the labor peace polka and funky finish flamingo. Ole!” … “Each dance uses the same basic steps,” continued Madrigal. “Problem solving, invent and expand options, be non-positional, allow yourselves that extra wiggle room, use executive authority to make decisions, strive for mutual gain — we’re all about win-win, and value the ongoing relationship with the negotiating partner.”

And so on. Imagination was flogged to death.

Not one Supervisor or Ms. Angelo responded.

The employees awkwardly walked their big dance step map to the Clerk of the Board's desk where it presumably will stay. "Have a nice day," said Ms. Madrigal as the group left the boardroom, pretty much in the same condition they found it in before the creativity.

* * *

After lengthy public input from a number of fixed-income gray-haired mobile home owners facing ever-increasing space rentals and utilities costs, and a few mobile home park operators who said they couldn’t operate their mobile home parks if they couldn’t pass along cost increases, the Board voted 4-1 (Supervisor Pinches dissenting) to ask County Counsel Jeanine Nadel to draft a rent stabilization ordinance modeled after Sonoma County’s ordinance.

It’s not clear how long this may take, but Ms. Nadel said if she began with the Sonoma County model, it might not take too long. Since mobile home park owners are entitled to “fair and reasonable” rent increases by law, there’s not much likelihood that rents will “stabilize.”

Straight up rent control is needed here and everywhere, and it simply isn't true that the owners of the land on which rest the modest tin shelters of the elderly and the struggling deserves or requires built-in government-mandated rent increases for simply maintaining water and sewage services which the park owners are already passing on to their space renters.

* * *

Next subject was the royal screwing of under-65 County retirees.

Agenda item summary: “On September 21, 2011, staff was informed by the Mendocino County Employees Retirement Association (MCERA) that they did not intend to transfer the remaining balance in the Retiree Health Insurance Reserve ($658,653.66) to the County to offset retiree health care costs as previously anticipated. This decision was based on the legal advise [sic] of MCERA’s attorney’s pending legal clarification regarding compliance with the Government Code (1937 Act), Internal Revenue Code, and/or Fiduciary standards. It is not known if or when these funds may be released to the County. This funding was essential to the sustainability of the County’s Medicare and Non-Medicare Eligible retirees health care contributions. While there still may be possibilities of other revenue sources (i.e., additional Early Retiree Reinsurance Program funds, stop loss reimbursements and prescription drug formulary rebates), the loss (at least temporarily) of this funding coupled with significant recent increases in claims costs (doubling over the past two months), have caused the fund to go into a projected deficit position. This deficit will require unbudgeted general fund monies in the amount of approximately $107,000 to fund the Medicare Eligible Retirees Health Reimbursement Account during the 90-day notification period informing them of the depletion of funds and the termination of the County’s $100/month contribution (effective December 31, 2011).”

Several retirees told the Board during public expression that the huge health payment increase would be crushing for them. They are looking at an increase from an average burden of $531 per month to more than $922 per month -- for health insurance.

Then it came back to the Board for a motion to approve. Who would step up and make the motion?

Would the retirees get whacked with a near-doubling of their health care premiums?

After a long pause Supervisor John Pinches reluctantly announced, “I don’t want to but I will. I don’t know if this is leadership or stupidity. But I’m going to move the recommended action.”

Board Chair Kendall Smith: “Do I hear a second?”

Silence. … Silence. … No second.

Pinches: “That’s great! Throw out a better idea.”

Smith: “Someone will now need to…? Board members?”

Silence. … Silence.

Smith: “We need to take action or I will quickly start thinking of something.”

McCowen: “You could pass the gavel.”

Smith: “I could. But you could just go ahead and make a motion, Supervisor.”

Pinches: “You gotta make a motion that’s gonna work, though.”

Smith: “Yeah.”

Silence. … Silence.

McCowen: “Is there a second to the motion.”

Smith: “Yes I did. Yes I did.”

Pinches: “OK, so I’ll make the motion again then.”

After another longish pause, McCowen said, “I’ll second that motion for discussion. And I don’t think there’s a lot of room for discussion here given the financial condition of the County. Without having the retiree health insurance account funds available, the County is not in a position to continue the subsidy.”

Retiree and former County Clerk Marsha Wharff commented, “Plan changes [to reduce the monthly cost] would involve more out of pocket for healthcare which means that those who have health issues will pay more out of pocket anyway. Neither of these plans is any good. I would have preferred combining us with County employees and it should have gone there a long time ago. As it is, you should throw the whole thing out.”

Former Second District Supervisor Richard Shoemaker was much more incisive than he ever was as Supervisor: “The County ought to send a demand letter [to the Retirement Board] for the $658k. I don’t buy this BS that the IRS is going to shut the retirement system down. It’s been said [sarcastically] that ‘it’s not in non-compliance.’ If you give this money over, you might get a little slap on the hand, but this is $658k for the 120 employees — some of them worked 32 years here! I’m just a short-timer — eight years and I’m out there still working. There’s people who aren’t. There’s people who have planned their whole lives around their retirement. And it’s being undone! It’s because somebody — [retirement association administrator] Mr. [Jim] Andersen and [retirement board chair] Mr. [Tim] Knudsen, put all this stuff together in the first place and now they’re going at it in a way that’ll cover their ass and hurt all of ours.”

Chair Smith cut in with Mendolib's ultimate censure.

“Well, Mr. Shoemaker I think those comments are really inappropriate. I mean…”

Shoemaker continued to grumble.

“I was on the retirement board. I was in the room when they wrote this up! Inappropriate? I watched it! Don’t tell me what they’re doing.”

Smith, in full neener-neener mode: “There’s a seated member of the retirement board that’s receiving these benefits that also had to vote on that. So that person is seated there and they’re, they’re, they’re… it affects them directly and personally. That’s just how the code is. So…”

Shoemaker stood up to respond.

Smith tried to shut Shoemaker up, shooing him away:  “Your time is up! Excuse me!”

Shoemaker: “And they make $60 grand a year in retirement, at least!”

Smith: “Excuse me!”

Shoemaker: “If not $100 grand!”

McCowen: “Mr. Shoemaker.”

Shoemaker: “I’m done.”

McCowen: “Well. No. We have to decide which option to go with.”

Shoemaker: “Each option’s a bad thing. We need the $658k.”

Smith: “NO! I don’t want to engage in any more discussion from the public!”

Shoemaker: “Might as well keep what you have. … But the Retirement Board has $658k they could give to you. That’s a different pot of income.”

Supervisor Hamburg said he felt blindsided by the huge increase proposal, having only been informed about it a few days earlier.

“As Supervisor McCowen pointed out, this has been going on a long time and it involved way more than the $650k. I simply don’t believe that [the tax qualified status] would be disallowed based on this one final payment which, frankly, a lot of our employees were counting on to get through the next few years with their health insurance.”

Supervisor Brown simply bemoaned having to make a “difficult” and “unfortunate” decision.

McCowen: “We thought we could make the funds stretch to 2014 [when ObamaCare was supposed to kick in and save everyone's marbles]. We weren’t sure we’d be able to get there. Until the word came that we weren’t getting the $658k, which until very recently we had every reason to think we would receive, we arguably would have gotten there. I really disagree [with Supervisor Smith] that we are where we thought we’d be.

Smith: “Well, we are, Supervisor, with respect to…”

McCowen: “No. No. No.”

Smith: “Well, there was a meeting…”

McCowen: “No! No. NO!”

Smith: “We were…”

McCowen: “No. Madam Chair, I have the floor. We knew the funds would run out and we did everything we could to make the funds last to 2014. We were on track with our plan. But, unfortunately, the retirement board which has control of the funds, after apparently sending a letter saying those funds were going to be released, then reneged on that intention and withheld the funds. In retrospect it would have been appropriate to bring that to our attention. But what’s done is done; we’d wind up in the same position. I don’t recall that we were informed that they were going to withhold those funds. If you’re not going to vote for this you have to come up with an option.”

The Board voted 4-1 for the $922 a month unchanged-plan option, Supervisor Hamburg dissenting.

Staff then pointed out that many retirees will quit the program when the outrageous new rates kick in a few months from now, and staff will be back proposing even higher insurance rates for the remaining non-Medicare retirees.

* * *

Noting that the County’s Planning Department had submitted a detailed workplan for updating the decades-old, perhaps eternal discussion of the Mendocino Town Plan, Supervisor McCowen warned, “I just wanted to make note of the Mendocino Town Plan Update. It looks like we’re going down a path that we went down before where staff goes out and gathers information and then starts holding community workshops. Some of you may recall that didn’t work out so well previously because the community, regardless of where they stood on the issue of the Town Plan revision, had no faith in the data that was collected. So without having some process to ground-truth the data that is collected it’s not going to be well received and it’s probably not going to form the basis for revisions to the plan. So we have an elaborate workplan here but if we don’t have a way to collect and verify reliable data on the front end this is all going to fall apart. That’s my concern.”

McCowen’s fellow supervisors, as usual, ignored McCowen's right-on remarks. No action was taken. No comments were addressed to staff. The Town Plan Update process will proceed per the workplan.

Mendocino’s innkeepers (mostly) complained at length about and had “no faith” in the last attempt to inventory their rented rooms. The County staffer who tried to compile the information a few years ago did a pretty good job. But the definition of a commercial rental in the “Village of Mendocino” ranges from subjective to opaque. Neighbors are quick to complain about others who may rent out their basements periodically without paying the bed tax to the County (for one small example of why it's difficult to count the number of rooms for rent). To have any chance of finishing the Town Plan Update the County has to stand behind their staff’s numbers, not attempt to “ground-truth” the data which will only delay things even more.

* * *

Supervisor Hamburg made another noble attempt to understand the extremely convoluted planning process. This time the subject was the controversial Harris Quarry use permit which, if approved, would allow the Quarry to also make asphalt besides the gravel and rock they currently mine on Willits Grade south of Willits. The permit has been pending for years. Neighbors have filed lots of complaints. One of the delays involves revising the zoning for land near the quarry before the new permit can even be considered.

Hamburg (to Chief Planner Roger Mobley): “You’re talking about the proposed ordinance amendment. Is that the mining overlay to allow gravel operations on the rangeland.”

Mobley: “Yes. That’s the overlay combining district that would be created if that is adopted and then it would be, rezoning would be put to apply that.”

Hamburg: “OK. So that happens first.”

Mobley: “Correct.”

Hamburg: “Is there an EIR required for that ordinance?”

Mobley: “There’s an EIR under preparation right now that would cover that.”

Hamburg: “OK, so actually, there’s an EIR, and then that EIR has to be approved and then we can approve the ordinance amendment if we so choose. And what if that ordinance amendment doesn’t get approved by the board?”

Mobley: “The order of action would be to certify the EIR and then consider the adoption of the ordinance amendment and then if that’s adopted, apply the rezoning and then the use permit would have to go back to the Planning Commission for action. If the board decides not to adopt the ordinance amendment, meaning the combining district, then the proposed asphalt facility which requires that would not be able to be…”

Hamburg: “Would not go forward.”

Mobley: “Would not go forward. So they would have to revise their use permit and reclamation plan to take that out so that if you approve the ordinance, then the asphalt plant can be considered as part of the use permit amendment. If you don’t approve it that will have to be removed from their plan.”

Hamburg: “What does that leave of their plan if that’s removed?”

Mobley: “Well, a mining operation obviously can…”

Hamburg: “The mining operation continues. So the asphalt operation?”

Mobley: “Yes, it would delete the asphalt operation from the, uh…”

Hamburg: “And are we going to be looking at the EIR for the project prior to passage of the ordinance amendment?”

Mobley: “Correct. Yes. The EIR that would come forward for certification would address both the mining plant and the asphalt operation and the ordinance amendment proposed.”

Hamburg: “OK. I’m just trying to get an idea of the order here. Because it seems like the ordinance is being approved… Why approve an EIR for the project before you know if you’re going to get the ordinance in place?”

Mobley: “Because you have to certify the EIR before you can take any action on the ordinance amendment. So you have to take that step and then you’re allowed to act on the ordinance amendment even if you decide not to approve it.”

Hamburg: “OK.”

Mobley: “So the EIR document would stand as a certified document regardless of what ultimately gets implemented.”

Hamburg, hopelessly outblathered, finally gave up.

“OK. Thank you madam chair.”