Wednesday, February 27, 2013

Joe Nation Is The Bearer Of Bad News

The Grim Reaper showed up at the Costa Mesa City Council Special Study Session Tuesday night, but he was disguised as former Democratic politician now Stanford University professor Joe Nation.

In what turned out to be a more than two-hour long presentation to the council on the current state of Costa Mesa's pension obligation situation, he painted a bleak picture.  His slick, informative slide show can be viewed HERE.  When the whole presentation is available on the city web site I'll return and post that link here, too. (As promised, you can view the streaming video of the study session HERE.)  You can read Bradley Zint's take on the presentation in the Daily Pilot HERE, and Mike Reicher's coverage in the Orange County Register, HERE.

According to Nation, who has become the go-to guy on the pension crisis since he was drafted by his Stanford department chairman to fully-immerse himself in this issue, Costa Mesa's relationship with the CalPERS pension system is unsustainable and, unless dramatic, drastic steps are taken, it will saddle the current taxpayer's children with the debt.

He tells us that for our city, and most others around California, to dig themselves out of their pension difficulties it will require pension reform - changes in the pension formulas and two tiers with lower benefits for newer employees - and increase in revenues.  In the latter case, he suggested that a one-quarter cent sales tax increase would raise $5.5 million annually, which would close the gap less than one-third of the way.  He also suggested a parcel tax of $370 per household for every household in the city for the next twenty years.  He said that would resolve the shortfall.  He described that kind of approach as "uncommon, but not unheard of".  He told us that Oakland assesses such a fee - $1,200 - and "they are a lot worse off than you are!", which didn't give me any comfort at all.

Among the many interesting comments Nation made during his presentation went like this:
"A lot of people consider me a progressive or liberal.  I think that this is a progressive or liberal issue.  And I think it's a progressive or liberal issue because, if you don't deal with this, you as a city, not only will you not have police officers and fire at the levels that you need, you won't have a library, you won't have potholes filled, you won't have parks, you won't have anything you care about."

I left the meeting before Bobby Young presented his discussion of the "Fiscal Impacts of the 2.5%@55 Enhancement for Miscellaneous Group. I'm going to review his presentation on tape, but you can see his slide show HERE.

I did fast forward to the end of the meeting and watched Mayor Jim Righeimer's summation.  It didn't leave me feeling particularly good about the future.  He called for collaboration between the City and Employees to try to resolve the problem.  He said in no uncertain terms that this state-wide problem will not be fixed until it crashes, blaming it primarily on the unwillingness of the legislature and the CalPERS Board to come to grips with the true financial reality of the situation.  He did state unequivocally, "There's no way this is going to get paid off. It can't be paid off. That's another 15-18 million dollars a year.  There's going to have to be some movement from the state legislature and PERS to go ahead and change benefits going forward for existing employees.  That will not happen in the State of California until it crashes." He went on to say, "The situation is 'Where is Costa Mesa going to be when that happens?' and I, for one, am not interested in giving additional payments to PERS.  I don't mind putting it aside somewhere else, but I can't imagine sending them an additional 10-15 million dollars a year when it can just disappear tomorrow and we'll be tossed into the same category with everyone else."

So, are you feeling good about this now?  I'm not.  I encourage each of you to try to carve out the time to watch Nation's presentation, Young's presentation and, especially, Righeimer's summation.  The play schedule for this event on Costa Mesa Television - Channel 24 on Time Warner Cable and Channel 99 on ATT U-Verse is below. Click on image to enlarge.

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No way in hell am I paying $370 a year or a half cent sales tax to fund employee retirements.

I pay for mine, they pay for theirs. If there are shortfalls, it gets made up in increased contributions by employees, later retirements, etc. When the enhancement for general employees was adopted in 2008, they agreed to make up any shortfalls.

2/27/2013 01:47:00 PM  
Anonymous big idea said...

To solve this issue could Geoff ask Wendy to have another Town Hall meeting so everyone can talk about safety? Then Geoff could post a very nice picture of Wendy and share how bad the council majority is?

That would make a lot of people feel better

2/27/2013 02:18:00 PM  
Blogger The Pot Stirrer said...

big idea,
I let yours through the sieve just so people could be reminded of just how stupid some anonymous commenters can be. A completely irrelevant, nasty comment just to make yourself feel important and clever - which you obviously are neither.

2/27/2013 02:21:00 PM  
Blogger Bruce Krochman said...

It seems to me that the current employees might actually be money ahead if the helped the city pull out of PERS and started funding their own 401K style plan. At least their money wouldn't be in the pool that will be distributed to places like Oakland when the whole fund crumbles.

2/27/2013 02:51:00 PM  
Blogger The Pot Stirrer said...

Not so fast there, pardner. I recall when we had Bartels in town and the discussion turned to the cost of pulling out of PERS the numbers were astronomical. At the time the unfunded liablility number being floated was around 200 million. To pull out of PERS would have cost 350 million!

2/27/2013 03:01:00 PM  
Blogger Bruce Krochman said...

You never know, that could turn out to be a bargain.

2/27/2013 03:08:00 PM  
Anonymous Cheap Business Fees said...

Haven't all the employee groups already agreed to different pension formulas for all new employees, and increased payments towards pensions to current employees? Seems like the employees have been helping, but the City needs to address things like the TOT and business license fees.

2/27/2013 03:52:00 PM  
Anonymous History Channel said...

Cheap Business Fees wrote:
"but the City needs to address things like the TOT and business license fees."

Good luck. During the campaign Mensinger and Monahan admitted that they had signed anti-tax pledges, which apparently include the afore-mentioned fees. How nice that they put Grover Norquist before Costa Mesa.

2/27/2013 04:06:00 PM  
Anonymous Riggy says pay the man said...

@ NO PARCEL..PENSIONS--You will do as Riggy says and you will do it faithfully. Riggy is running the show and if he says pay, you don't ask how much.

2/27/2013 04:11:00 PM  
Anonymous Sam Grady said...

Bruce, give it a rest. The city is not going to dump PERS and have everyone go to Social Security and a 401k plan. Right now the city is currently recruiting for several high priced positions such as City Engineer, Senior and Associate Planner, and Chief of Code Enforcement. All these positions are needed and will be earning a PERS pension.

2/27/2013 04:30:00 PM  
Blogger Bruce Krochman said...


Let me ask you this; if city employees were facing the loss of equity in PERS, which doesn't sound so far fetched, would they be better off to cut their losses early or hope that the situation improved and risk greater losses?

At what point do the employees make that decision? After everyone else has come to the same realization or do they get ahead of the crowd?

Now, it might be impossible to even pull out of PERS. It could very well be that employee pension money is tied up there and can not under any circumstances be pulled out and invested in a more secure fund.

I am just saying that if my pension funds were in an unstable and unsustainable fund, I would be a bit worried. I would be looking for alternatives.

2/27/2013 05:05:00 PM  
Anonymous Doods dad said...

Nobody is going to "pay" their way out of the "unfunded" situation with PERS.
The funding status at this time is a result of the damaged economy and PERS' losses due to that over the last five years.
Prior to that, PERS funded these retirements with huge investment returns that subsidised low cost to the cities. That is what opened the door for them to buy in.
The monday morning quarterback says "bad planning" and he's right.
If the economy never recovers then there is a bleak future for the whole thing.
If it does, then PERS will be the one who turns the funding around with their investment power.

There are people who love to tell everybody that PERS isn't capable of making another nickle with their investments and this will all be on the tax payer from here on out. That's BS.

A couple hundred billion being properly invested in a improving economy with rising property values is going to do more for funding than all the fixits that Mr Joe Nation can come up with.

2/28/2013 06:59:00 AM  
Anonymous one solution said...

we should never levy a parcel tax to pay for these pensions. period. new hires for top paid positions should be hired from the PRIVATE sector, not public sector. Then they would get a much reduced pension formula due to Gov. Brown's pension plan. But if they come from the public sector they get "grandfathered" in at the high rate. Council would be wise to look at private sector for all new hires.

2/28/2013 07:08:00 AM  
Anonymous 5 Instead of 10 said...

one solution-- I don't think that police or fire have a private sector, so if they're laterals then yes they're "grandfathered" in, but new hires with no experience are hired at the lower pension formula and pay their full portion towards their retirement.

Does anybody recall something about the fire department offering to pay 10% towards their pensions, but the city council only wanted them to pay 5%? Seems like a missed opportunity to collect more from an employee group.

2/28/2013 09:26:00 AM  
Anonymous Reality check said...

Doods dad,

Everyone keeps talking about the historic investment returns and surplus of PERS. Guess what - totally irrelevant, that was either before 3%@50 OR during the artificially inflated tech or real estate boom.

They knew 7.5% was unrealistic when they made that projection.

They knew 3%@50 would never work.

Meanwhile, we pay more and more out of our general fund to make up for PERS' losses.

No thanks.

2/28/2013 09:43:00 AM  
Anonymous I suppose said...

5 instead of 10,

There must have been strings attached.

2/28/2013 09:44:00 AM  
Anonymous Bright line said...

Cheap Business Fees,

Let me get this straight - raise taxes on local businesses and visitors to pay for employee pensions?


Employees pay for any shortfall. Bright line.

2/28/2013 09:47:00 AM  
Anonymous COIN Operated City said...

@ 5 Instead of 10 & I suppose--this is were COIN comes into play, the firefighters got their deal done right before the council started the COIN process, we would have been able to see why the city refused to take 10 percent and only settled for 5 percent.

2/28/2013 11:05:00 AM  
Anonymous Mary Ann O'Connell said...

There are calls here for the employees to pay the way out of the shortfall as if it's their fault. WE are all culpable and therefore all pay. Through officials we chose, WE made promises. Promises WE can't keep, so WE all have to make good on them, or demonstrate to our next generation that promises are valid only when easy. WE made this bargain and the employees did their work, now WE have to suck up and live up to our end of the bargain.

2/28/2013 02:47:00 PM  
Anonymous Pronouns said...

THEY will put Costa Mesa in Chapter 9 BK to boost Riggy for the Board of Supervisors.

2/28/2013 06:29:00 PM  
Anonymous Pension Backpedaling said...

If you check the May 2008 Council Meeting report you will see the $4,000,000 increase in unfunded liability is specifically addressed. Former Mayor Eric Bever is trying to claim he didn't know this.

Of course Mayor Bever made the motion to approve with Mansoor second and then a 5-0 vote.

See the numbered page 14 and 15 on the linked attachment.

2/28/2013 10:43:00 PM  
Anonymous Pension Backpedaling said...

But I think what disturbs me most is the misleading attempt regarding the retirements after the enhancement in 2008.

The report by John Bartel presented at the study session tries to make it look like all these employees just bailed after the increase to 2.5 @ 55 escalating the problem.

Now while the numbers showed 2002 - 2008 retires numbered 100, from 2009 - 2011 87 retires. So it looks like WOW! massive exodus. I do not doubt the numbers here. But what they failed to inform everyone was that in 2009 the city strategically encouraged, as a cost saving method, retirements through an early retirement incentive.

If you check the report in April of 2010 you will see the city brags about 54 people accepted the city baited golden handshakes.

87 - 54 = 33. That would be about 16 retires a year from 2009 - 2011. Compared to 17 per year during the 2002 - 2008 period.

So they are trying to have it both ways. They offered a 2 year incentive in 2009 to help with the problem but now they want to say all these people bailed without paying into the system making it worse.

Go to page 2 Item #2.

2/28/2013 11:10:00 PM  
Anonymous Pension Backpedaling said...

Keep in mind Joe Nation has tipped his hand at several other presentations.

There should have been no surprise to people what his numbers and report would reveal.

He uses the lower assumtion rates which paints the worse case scenario. Calpers on the other hand uses more optimistic numbers.

They are basically both just guessing and using their own strategiaclly chosen time periods to support their positions.

We do need to solve the issues.
CalPers needs to help.
If city employees or state for that matter want to have these higher pensions then they need to pay at least half the costs. If not then they should have a 2nd alternative, say a hybrid Social Security and 401K.

PS, Bruce Krotchman your name suits you! You are clueless.

2/28/2013 11:29:00 PM  
Blogger The Pot Stirrer said...

So, Pension Backpedling, after all that valuable information you just couldn't resist the snarky shot at my friend, Bruce, huh? Too bad. He's a very smart fella, who is also concerned for the city. His views are his and your multiple comments served to set the record straight - at least from your viewpoint. I do appreciate them. Too bad you couldn't resist your zinger - it diminishes your message.

2/28/2013 11:41:00 PM  
Blogger Bruce Krochman said...


Its too bad an anonymous poster had good information. As you know, I remove those posts from my feed without reading them. If someone can't man (or woman) up to their opinions, they are of no value to me.


3/01/2013 07:01:00 AM  
Anonymous Sam Grady said...

I agree with Pension Backpedaling. Bruce is commenting based on his emotions, not facts. He posts reek of envy. I made the mistake of reading his Civic Thinking blog. He gushes over the Righeimer and his cohorts. He has also never held Monahan,Bever, and Mansoor to any culpability for their voting records in regards to pensions. He blames the employees instead of actually looking at facts. I know he is your friend Geoff, but what he says is not based in factional reasoning, just emotion.

3/01/2013 07:01:00 AM  
Anonymous sk said...

I agree with Sam on this one. The council should understand what they are voting for before they vote. It wasn't like they couldn't have asked for clarification if they didn't understand. The information was provided.

3/01/2013 09:04:00 AM  
Blogger Bruce Krochman said...


If you really read my opinions on the pension subject, they have two main points.

First, the existing system is unsustainable without tax increases which I oppose. Those that believe that a growing economy will bail us out are not paying attention to the experts such as Mr. Nation.

Second, as a taxpayer, I don't want to be in the position of guaranteeing anyone's retirement benefits. I don't do that in the private sector and I don't want to do that in the public sector. When we write a paycheck, we have compensated that employee for their efforts. How they invest their funds is up to them and they take responsibility for those investments, not us, the taxpayers.

My commentary on the issue of what I would be concerned with if I were a public employee and a participant in an unsustainable pension plan are just that, my commentary.

So, there you have it. Simple and uncluttered with all of the "emotions" the union/association members keep trying to bring into the discussion.

3/01/2013 09:34:00 AM  
Anonymous Sam Grady said...

Bruce, you keep believing that you aren't responsible to guarantee anyone's retirement based upon this statement from you.

"Second, as a taxpayer, I don't want to be in the position of guaranteeing anyone's retirement benefits. I don't do that in the private sector and I don't want to do that in the public sector. When we write a paycheck, we have compensated that employee for their efforts. How they invest their funds is up to them and they take responsibility for those investments, not us, the taxpayers."

As a taxpayer you are already guaranteeing retirement benefits for social security recipients. If you are a business owner, you are required to pay the employers portion of FICA, just like Costa Mesa pays the employer portion for PERS. Remember Costa Mesa employees do not participate in Social Security. You may believe that Social Security won't be around in the future, but you don't know that and you as a tax payer and business owner are still on the hook to pay for it, just as Costa Mesa is on the hook to pay for PERS. The employees do not have a choice of what system they pay into. The choice was made by the elected officials at the time who knew exactly what they were doing.

3/01/2013 03:16:00 PM  
Blogger Marquis said...

Mary Ann;
I'm sorry, but WE did not make these irresponsible and irrational commitments. 10,000 or so other residents thought that bumbling amateur hacks like Mansoor, Bever, and Monahan were qualified to handle these complex issues. They were/are not qualified and WE do get to live with the consequences of their foolish actions. But please don't lump me into the WE. I did not vote for people who were obviously not qualified. I actively campaigned against them and did as much as I could to convince others. But 10,000 or so people in Costa Mesa were dumb enough to think that Eric Bever deserved two terms and that Gary Monahan deserved FOUR terms, in spite of the fact that Mr. Monahan created the problems and that Mr. Bever just did nothing at all. I refuse to accept responsibility for my fellow citizens who think that Al Mansoor did such a wonderful job for Costa Mesa that he deserved to be kicked upstairs to the Assembly, where he continues his record of doing absolutely nothing useful.

WE only own this because we unfortunately live among enough people who are too ill informed or too blindly loyal to some ridiculous party-line dogma to make an intelligent decision about who runs the city.

3/01/2013 03:49:00 PM  
Blogger Bruce Krochman said...


you are 100% correct except for the part where you state: "you keep believing that you aren't responsible to guarantee anyone's retirement"

I said I don't "want" to be responsible for ongoing pension expenses.

I certainly understand that right now, the city, and by proxy, all of us are.

I would hope that as we work through this problem, we come to the conclusion that it was a bad idea and should not be done in the future.

As for Social Security and all of the other issues. It is hard enough to encourage reform as one of 112,000 or so and I will stick with influencing decisions here in Costa Mesa to what, probably immeasurable or would that be UN-measurable, extent I can.

3/01/2013 04:47:00 PM  
Anonymous Confused? said...

So was this good for us as staff claimed or was this a really bad idea and costly like Member Mensinger is trying to point out.

Bubbling Cauldron Dec. 2009

The plan assumed that somewhere around 50 employees would take advantage of the plan, and that of those 50 positions vacated perhaps 25 could be left unfilled and the annual cost savings might be the above-mentioned $3.5 million.

As of this morning 51 employees have taken advantage of the enhanced retirement program and have either already departed or will have departed by the deadline of December 31, 2009. However, after extensive analysis by individual department managers and senior staff, it has apparently been determined that only 6 of those departing employees will be replaced! The result is a projected savings of $3.6 million for the remainder of this fiscal year - or double the rate previously anticipated.

This is good news, which will be made even better if the staff assessments prove correct and acceptable service levels can be maintained despite the loss of those 45 very senior people.

It's nice to have a little good news for a change. Kudos to the management team for the plan and congratulations and thank you to those retirees who have contributed so much to the well-being of our city over the years. We here at A Bubbling Cauldron wish them all the best in their "golden years".

3/01/2013 11:03:00 PM  
Blogger The Pot Stirrer said...

Well, with the benefit of 3 years of hindsight, that's a good question. The decisions made back then were made with the best information available to them - as Wendy Leece explained in the Study Session. The City needed cash and the early retirement of more than 50 people made a huge dent in the payroll costs.

We all do the best we can at the time and considering all the factors we can muster. That's what the council at that time did. It's easy to stand back and throw rock now. Where was Mensinger then? With all his alleged far-sighted business acumen, where was his advice to the council back then?

3/01/2013 11:12:00 PM  
Anonymous Criminal investigation needed said...

It is not yet available online, but the OC Register has a damning article on the front page of today's (March 2, 2013) Local section with the following headline:

Vote yields $15 million in debt

It details how the 2008 vote to enhance general employees' pensions was an utter failure, and documents a true FRAUD on the Costa Mesa taxpayer.

The staff report and testimony of Allan Roeder made it 100% CLEAR that any extra ccost of this enhancement was to be PAID FOR BY THE EMPLOYEES.

That has not happened, and we now know it was never intended to happen. Despite the representation as outlined in the staff report and presentation by Roeder and staff, there was never any intent to cover the full cost. Bobby Young acknowledges that the increase in debt was totally foreseen - meaning that, without a doubt, without any question, staff was LYING to Council. Bobby Young was quoted in the Register as follows: "...probably could have been called out a little more clearly in the staff report."

BS - it is fraud, it was a deliberate lie, and the general employees MUST pay EVERY DIME of the extra debt.

The District Attorney's public corruption unit should be assigned to investigate EXACTLY what happened. Staff lied to Council in a public hearing in order to obtain enhanced retirement benefits - direct financial gain. That is theft.

This is $15 million being stolen from Costa Mesa taxpayers and it CANNOT be allowed to happen.

3/02/2013 10:57:00 AM  
Anonymous Kansas Cornfield said...

"The District Attorney's public corruption unit should be assigned to investigate EXACTLY what happened. Staff lied to Council in a public hearing in order to obtain enhanced retirement benefits - direct financial gain. That is theft."

So despite the nice guy propaganda, the extremists are back to demonizing our employees.
Can't tell if this was written by the paralegal, or Thin Skin Tim Sessler; sounds like the latter. Let's keep an eye on Timmy in any case. He's on the PC now and likes to parrot Boss Hogg and mouth the extreme positions. It was funny when he complained to Facebook like a 14 year old girl would.

3/02/2013 07:07:00 PM  
Anonymous Costa Mesa Beanfield said...

Kansas go watch the meeting and read the staff report for that meeting and get back to us about what happened.

3/02/2013 09:25:00 PM  
Anonymous Staff did not commit fraud! said...

There is a FRAUD being committed alright and it's current council member Mensinger and former mayor Bever who are guilty.

I encourage everyone to read the staff report from 2008. It could not be clearer that there was an immediate increase in the unfunded liability.

The staff report which included the actuarial assumptions attachment of Joe Santos, provided a chart in 2 different ways showing an increase of 4 million dollars immediately in the unfunded liability.

The opening paragraph even states and explains how trying to figure the future costs is difficult because of the future assumptions it must include like deaths, retires, pay raises and the future economy.

As we all know the economy tanked, which increased the unfunded liability of all enhancements given since 1978, and yet oddly enough though even with the tanked economy causing the employers normal rate to climb, John Bartel's recent report says the employers rate is about 2.5% higher which is being covered by the city employees.

Had Eric Bever read the report that is still available online it's is dumbfounding that he is now claiming there was fraud committed.

Eric Bever is essentially admitting he is clueless, was clueless and now wants to blame others for what he did. This is very sad and its now become even more apparent what a useless, unscruptulous mass of matter he was for so many years on the dais.

3/03/2013 08:29:00 AM  
Anonymous Twist and Shout said...

I went and read the report from May that backpedal referred to.

I have to say it's all there. The immediate cost increases for the Unfunded Liability is stated several times.

A few other things I noticed. During the Fiscal Review section there is in parenthesis the comment the agreement for the employees paying the full cost is based on the current actuarial information available.

There is no fraud there. It's based on as Geoff said the information provided at the time. I would hope, raises, retirees, deaths and new hires was part of the actuarial estimates. But there is no fraud.

Also interesting is that the employees began paying 1% of their salaries toward this an entire year before it was implemented.

So Menisnger's comment is false that those who retired after it was implemented didn't pay a dime for this.

Granted they certainly received a good deal and paid less than what they should have but it's an outright lie to say they didn't pay a dime for this. They paid 1% of their salary for year.

I would also hope all costs were factored into the 3.52% the remaining employees would pay.

3/03/2013 09:55:00 AM  
Anonymous Not Very Bright Bever said...

Kind of sucks when people/staff lie and make up numbers, oh wait didn't out current City Council do that recently to the resdidents & employees with the whole "the sky is falling" plan.

3/03/2013 09:55:00 AM  
Anonymous Mary Ann O'Connell said...

Marquis, I agree with your assessment of those elected officials. And I realize that Councils before those chose pension increases over pay raises, but WE are still responsible. If I voted for those people, I bear the responsibility. If I didn't work hard enough to change some minds and defeat them, same responsibility. Freedom and democracy take a lot of work from each citizen and the community as a whole takes on the responsibilities for the actions of its leaders. WE have failed at that and now there is a very expensive piper to pay.

The expensive lesson is to stay vigilant, stay involved and don't think others will do it for us. Others will do it to us, instead.

3/03/2013 11:12:00 AM  

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