Napa Valley Taxpayers Alliance

NVTA Board Letter to Planning Commission/Supervisors on Anwin

To: Napa County Supervisors and Planning Commission

Re: Angwin Bubble

From: The Napa Valley Taxpayers Alliance

The Napa Valley Taxpayers Alliance Board supports retention of the Angwin bubble.

The bubble issue should be separated from the decision of whether to allow PUC permits for their eco-village project. Unfortunately, SRA (Save Rural Angwin) has attempted to use the General Plan process to do an end-run around normal permitting and environmental review processes. We view this as an abuse of the General Plan process as it has gone beyond the general issue of whether removing the bubble has merit, turning it into a referendum on the very specific PUC eco-village project. It is patently unfair to PUC, (and ultimately, all landholders in the county) to change zoning designations in the middle of the game, and a misuse of the General Plan process to attempt to do so.

Because of that, and the attendant overwrought emotions which has limited meaningful dialogue to date, we believe that the bubble should remain in place. Any decision should, at a minimum, be postponed until after PUC project environmental reviews and other permitting processes take place. In no instance should PUC's zoning be changed without their express permission. The bubble issue should not be allowed to be leveraged against what should be a regular planning process. And as there is likely insufficient time left in the General Plan process, the bubble should remain so as not to interfere with PUC's lawful right to apply for project permits.

We cannot subvert a process hammered out over a long period of time because a vocal minority decides they merely don't like it. What message does this send to the rest of the county - to other property owners?

If we allow SRA to subvert PUC's right to develop their property, without even a hearing before the planning commission, then we are sending a message to all our neighbors that if and when the time comes for them to legally do work on their land, vocal neighbors can shut them down. That undermines all the agreements made to set up the ag preserve, it is unfair and uneven in its application, and finally, it is an abuse of both due process and rights of private property ownership afforded to all by our system of law. It would be an ill-advised decision likely exposing the county to unnecessary legal complications.

The whole purpose of having the bubble was to provide for some limited development in the Ag Preserve. This was not an accident, and it has been reaffirmed since then. The county should resist any urge for expediency or to broker an "agreement", and abide by its laws and regulations reached over time through debate and compromise.

Do not "pop" the bubble.

Michael Haley

President, Napa Valley Taxpayers Alliance

Pension Relief Initiative Filed

Former Assemblyman Keith Richman has qualified an initiative to reduce the pension load for taxpayers in the State, at least for future employees. The link gives you an overview of what the law includes.

The new law, if passed, would apply only to new hires and would therefore affect future costs only. That is huge, however, and would be a big step toward solving our current pension and benefit problems with public employees.

It appears to be a rather milder reform than could have been done, and hopefully it has a good chance of passing. It retains the defined benefits that current employees recieve, but brings the numbers more in line with reality.

For instance, police and fire eligibility ages for retirement would go back up to 55, from the age of 50 that was recently passed and proved to be so costly. The age of retirement for other workers would be aligned with the private sector and social security, that being ages 65 to 67.

Right now it is estimated that state retiree medical benefits are unfunded to the tune of between $40 and 70 billion, and that half that amount would be cut if the age of retirement was restored to 55 for safety and 65 for the rest of employees.

It is a common sense reform that needs to pass to help restore fiscal responsibility to the state. With some employees getting over 100% of their highest salaries, in addition to disability benefits and other perks in retirement, the system has become unsustainable economically.

One analysis of the Richman initiative that I found illuminating comes from Gerard Miller. He writes for Governing Magazine on pension issues and his audience is government officials, so he tends to be very moderate in his criticism of anything government.

Here are some of his comments:

"Those who believe that traditional public pension plans have run amok will be attracted to this proposal. It addresses many of the abuses cited by critics, such as lavish unearned early retirement packages and pension spiking (see my May column on spiking). The benefits caps are probably consistent with average private sector benefits in today's labor market. Nothing in the proposal would preclude a public agency from sweetening its pension plan with a companion defined contribution program to supplement the pension. The proposal also requires proper funding to assure fiscal sufficiency. To this extent, it qualifies as a "reform" proposal.

Labor advocates are nonetheless expected to mount a strong campaign in opposition to this proposal if it reaches the ballot. They won't like the benefits limitations, the age requirements for normal retirement benefits, the prohibition against retroactive benefits, nor the exclusion of overtime, sick leave and special pay from pension payout calculations. After all, who needs a union if these benefits are limited by voter action?"

Read the entire article here.

Transportation Issues

The NCTPA, the Napa County Transportation and Planning Agency, is preparing a new transportation plan for Napa and they are seeking input from various citizens groups, including the NVTA. What follows below the 'fold' here are the comments I have sent thus far to Eliot Hurwitz, and some further comments for the group or anyone who happens by and reads them. Email me your comments and I will pass them on, post them here, or email me for Eliot's email address so you can send them directly if you like.

Here are my comments so far:

Board of Supervisors Meeting Tommorrow

The following was sent to our membership tonight, and states our position on the current contract negotiations with the County miscellaneous employees. Links are provided for sources of some of the information included therein.

I received information on the salary increases for County employees over the last five years, for both miscellaneous employees and the Sheriff’s dept. The employees are divided up into these two main categories, so that any non safety employees are called miscellaneous. This includes the Probation department which is pushing for the enhanced pension and retiree health benefits.

In short, in the five year period from 2002 to 2006 miscellaneous employees received a 17.5% increase in COLA, or cost of living adjustments, ie pay increases.Law Enforcement received 25.2%. Now they also received what they call step increases each year, and equity adjustments. All receive the equity adjustments, not all receive step increases if they are at the top of their scale already or if they receive a bad performance review. It is my belief that most of the employees get both those every year, although I do not yet have the exact numbers.

Even if you just look at the COLA increases, and compare them to the CPI, according to ABAG the CPI has increased 10.9% in the last five years through 2006, so their COLA raises are higher than that. COLA raises are supposed to reflect the cost of living only, yet they have been consistently higher than the cost of living.

In the meantime, in the private workforce, raises have actually been below the CPI, about 1.3% currently in Napa. Private industry workers typically get only merit increases, a "raise" that is based mostly on performance, and to some extent on longevity.

Because we can’t be certain exactly what the negotiations specifically are about, I plan to raise the following points tomorrow.

1. The Napa Valley Taxpayers Alliance is here today because we are concerned that unless employee costs are reigned in, the County is going to head down the same path of structural deficits and technical bankruptcy that the City of Napa is now in, that the State of California is now in, and that local governments across the state are now in.

2. The Budget document itself says that a relatively small increase in County costs could push us into a structural imbalance. What that means in plain english is that you already know before the year begins that you don’t have enough money to pay for what you are already obligated to pay for. It means you’re broke.

3. One good example of where those costs could come that would push the County into deficits with no revenue to cover it would be if the Probation Dept pensions were to be increased to the enhanced safety level. We feel that the safety pensions for Sheriff’s are already too rich and to continue to push other groups of employees into that high level of pension is fiscal insanity.

Only three short years ago the Probation employees along with the other miscellaneous employees were given a 25% increase in their pensions, going from 2% at 55 to 2.5% at 55. This resulted in the unfunded liability increasing in those three short years from $26.9 million to $48.7 million. Now they want another large increase, which is going to further increase the unfunded liability dramatically, and therefore create large increases in annual payments to Cal Pers.

Most people in this room know that just to cover an unfunded liability for retiree health and other benefits, the Supervisors recently voted to pay $4.1 million per year for 14 years to cover it. That is about the total amount we are currently able to spend on roads in the County, and that amount is woefully inadequate.

We cannot afford another multi- million dollar annual liability which enhancing probation pensions represents without serious further cut backs in service as well as leading toward a City of Napa perpetual budget crisis situation.

4. Long term we cannot afford to give public employees in Napa County or anywhere else higher raises and benefit increases than the taxpayers are earning themselves, for they are the ones who have to make the money to have to pay for it. It is an unsustainable system economically and it doesn’t really matter whether or not certain employees deserve certain benefits, it is bankrupting the system.

Ok, that is probably way more than I will have time to say. I am hoping that some other members will bring up a few more points like:

1. Wages for private employees have been below the rate of inflation, the CPI, for almost a decade now. This however is not true for government employees, whose wages have grown much faster than inflation.

2. Miscellaneous County employees have enjoyed a 17.5% increase in wages just on COLA’s alone over the last five years, law enforcement 25.2%, while the Bay Area CPI has been 10.9%. County employees have also received step increases and often large equity increases in that time as well.

3. The fact that 911 operators or Probation officers both of whose jobs consist mainly of office work can be included in safety pensions undermines the whole rationale of a safety pension.

Safety pensions were originally conceived for those risking their lives in the line of duty. I suppose anyone who drives to work could be portrayed as risking their life for their job, but it is clear that both 911 operators and Probation Dept work are not nearly on the same level of risk as fire and police work, and just asking for these level of pensions betrays the fact that this is just about seeing how much money they can get, and is not justified.

Facts and Issues for City Council Budget Meeting June 4

This article is largely for members of the NVTA to to provide back up for our opinions for both tommorrow nights budget meeting and for long term budget issues which will be ongoing.

I would first of all like to mention that Kevin Courtney wrote an article describing differences of opinion between Mike Parness and myself in Saturday's paper. Here is a link to that article.

I think overall he does a very good job of fairly representing my viewpoints, I did want to mention several things however. One is that I do not resent the employee unions. They have done their job which is to get the best deal they can get for themselves. To use the word resentment is just not my style--that is far too personal for me, and I do not feel things that way.

A second point is that in a previous article about the transportation agency I was quoted in a way that made it sound like I supported a tax increase for transportation, the so called self help sales tax of one half cent. That is not the case and I hope that didn't confuse anyone.

At this point I have not taken a position on that because I am on the citizens advisory group and I feel that it is only fair that I hear them out and examine the issues before I make up my mind.

Okay, on to city budget issues.

First, some facts and sources about salary information. 2005 is about as recent as you can get on salary information except for the city itself, which gave us average salaries and cost of living increases for all catagories of salaries for 2006.

Comments to Napa City Council on Budget

The Napa Valley Taxpayers Alliance has reviewed the most recently available public budget document for the City budget dated April 18, 2007. We have the following comments which we hope will be taken into consideration for the public budget meeting coming up June 4.

We support the general spirit and detail of the proposed budget cuts and adjustments as outlined by Mike Parness and his staff, and commend them on doing an excellent job under difficult circumstances. In particular we agree with looking into reorganizing and possibly privatizing some services to save money, as well as the need to simply make cuts to stay within our current means. Employee lay offs are difficult but at present there appears to be no other reasonable options.

We have two key concerns. The most serious problem with the current plan is that not enough is being set aside to pay for already committed obligations for retiree medical and pension costs. These costs balloon rapidly if the required investments are not maintained on an annual basis, and indeed throughout the entire state this is an increasingly obvious and alarming problem. Recently the state of California announced that their retiree medical and other benefits fund, referred to as OPEB, was $48 billion short of being able to pay current obligations—and this analysis was based on assuming that the cost of medical care would not grow over the next five years! Governor Schwarzeneggar immediately announced that the state would not be paying into it the required $2.3 billion a year, thus ensuring that that amount would continue to grow exponentially. This is a huge mistake and we cannot let our local governments head down the same path, at least any more than they already have.

The current city plan includes only $200,000 next year to pay a liability that they have been told requires $800,000 to meet. The unfunded liability on safety pensions alone in 2004 was $22 million, and $18 million for non safety employees, and continues to grow. $40 million is almost an entire years operating budget.

The reason this gets so out of control comes from not paying sufficiently into the fund each year, combined with the fact that costs are continually going up. Napa County just found out that they have a $5.9 million annual payment for 14 years to make up for a $34.2 million unfunded OPEB liability alone, not counting pension. Note that that adds up to over $82 million actual cost in that time.

Employee costs for government workers, not just in Napa but throughout the state, are also rising faster than the Consumer Price Index and faster than the income of private sector employees whose taxes go to pay for all this. This is a formula for economic recession if not worse. It is economically unsustainable to have your costs continually rising faster than your income to pay them.

In the past five years of City budget troubles, having to spend reserves and make substantial cuts, firemen have seen a 24% increase in salary, and police have seen a 33.5% increase. Pension and medical benefits are far superior to those given in the private sector, and this all at a time when

tax revenues have increased, during the last three years by 18%. This is twice the rate of inflation.

If costs for government were in line with costs for every other aspect of the economy, then we should have seen a rise in our ability to afford more services, rather than these draconian cuts.

Therefore, in addition to the $800,000 in requested cuts for next year from the employee unions, we believe an additional $600,000 should be cut from employee budgets to shore up the medical and pension plans, money that will save millions in future budgets. The needed amount to make a full payment for 2008-09 should also be included in that years budget. This seems very fair as this money will be going to ensure the solvency of their own future benefits, in essence cutting from the employees themselves to give to themselves in the future, while saving the City and taxpayers millions.

The second issue of concern is the long term health of the City budget. The City currently has a number of development projects in the works, and the tax revenue from that is expected to bail out the City over the long term. Along with all this development we will need new staff for the City including remediating the low level of police personnel, and we will likely see the continued rapid growth of salaries, benefits and new infrastructure expenses.

All this needs to be carefully evaluated to make sure that the new tax revenues that come on line will cover expected growth in government. Our fear is that we may be in a situation that will constantly demand new development to support an ever expanding and never ending spiral of always being behind and always needing to build more tax generating businesses just to pay off last years shortfall. This may be a more appropriate subject for after the budget has been finished, but it needs to be carefully evaluated and costed out in detail so that we do not find ourselves continually in the same position in the future.

Thank you for considering our comments,

Michael Haley

President, Napa Valley Taxpayers Alliance

Napa County Has Responded to NVTA Questions

I have received four PDF files of information that we have requested from the County. I am not going to post them here, but I have forwarded them to our email list via email. If you would like to see them and you are not on our email list, you can join the list and I will send them to you. Write me at michael@napablogger.com

I will be posting information and analysis of the information soon.

Important Issues in the Press

Three recent articles are worthy of note in the developing pension crisis. The first is from USA Today, key paragraphs:

"The federal government recorded a $1.3 trillion loss last year — far more than the official $248 billion deficit — when corporate-style accounting standards are used, a USA TODAY analysis shows.

The loss reflects a continued deterioration in the finances of Social Security and government retirement programs for civil servants and military personnel. The loss — equal to $11,434 per household — is more than Americans paid in income taxes in 2006.

The federal government does not follow the rule, so promises for Social Security and Medicare don't show up when the government reports its financial condition.

Bottom line: Taxpayers are now on the hook for a record $59.1 trillion in liabilities, a 2.3% increase from 2006. That amount is equal to $516,348 for every U.S. household. By comparison, U.S. households owe an average of $112,043 for mortgages, car loans, credit cards and all other debt combined.

"We're on an unsustainable path and doing a great disservice to future generations," says Chris Chocola, a former Republican member of Congress from Indiana and corporate chief executive who is pushing for more accurate federal accounting."

Texas has decided that it is not going to follow Federal accounting rules itself, a dangerous precedent because if they can get away with hiding their liabilities from voters, other states may follow.

"The state Senate gave final approval Tuesday night to legislation that would make Texas the first state to reject a national accounting rule designed to make public officials fully disclose the long-term cost of retirement benefits.

One state estimate says Texas could rack up $50 billion in liabilities in the next 10 years if it does not start setting aside money to pay for them.

The bill's author, Sen. Robert Duncan, R-Lubbock, said the state isn't trying to ignore the cost of its retiree benefits.

But, Duncan said, the accounting rule does not take into account that Texas budgets and pays for retiree benefits in every two-year budget cycle.

The benefits can be curtailed or eliminated at any time, Duncan said, and are not legally promised to workers. The accounting board "requires Texas to declare something a liability when it is not," he said."

What Duncan is essentially saying is that we don't have to worry that they may not have the billions needed later to pay all the pension obligations they are promising to their employees now--they will just stiff them if they need to. It is like signing up for a home mortgage that you know you don't have the money to pay, but figure you can get through the first year then worry about it later. Bad idea.

Finally, we have the California Legislative Analysts office finally coughing up and stating how much health and other benefits to retirees besides pensions are unfunded--about $48 billion. Then Arnie says, great, good to know, and we are not going to pay the 2.3 billion a year we need to pay to cover it. This assures that the amount will grow exponentially, because that $2.3 billion is needed as an investment to grow in order to keep that number, called OPEB, at $48 billion over twenty years.

Here's a good analysis by Daniel Weintraub.  A few key paragraphs:

"This coming year, the state will probably pay about $1.4 billion for health care for retirees. But the government would need to set aside another $1.2 billion to pay for the future care of employees still working. If the state does not do that, and it probably won't, the amount added to the unfunded liability will be even higher -- $2.2 billion -- because the state won't be earning any interest on money it doesn't set aside. That's how quickly this thing gets out of hand.

To put the problem in perspective, consider that the real, total annual obligation for retiree health care -- about $3.6 billion -- is more than the state spends on either the University of California or the California State University system. And that number will grow every year that the state does nothing to address the looming liability.

Chiang said his numbers are no cause for "panic," which is a good thing, because there is no sign of panic in the Capitol. There is not even a sign of concern. But Chiang does think that some of that might be in order.

"These are big numbers, but they are not insurmountable," he said. "If we act, we won't have a crisis 30 years from now."

Chiang is recommending that the state establish a trust, similar to its pension fund, into which it would put some or all of what it owes each year. As that money was invested, the fund would likely grow, relieving future taxpayers of part of the obligation we're racking up today."

News and Notes from Recent Activity

I have been busy around town lately, and this article is to update everyone about some of that activity. Also see the Parks and Open Space article below this one.

1. The next City of Napa budget workshop has been postponed til June 4 at 6:30 p.m. This was the meeting I announced that originally was planned for May 15. This is the most critical event coming up right now, please mark your calenders and plan to be there. I am preparing a response from the NVTA for the City, and hope to have it finished by Wed or Thurs of this week to be sent around.

2. Leon Brauning, Don Clark and myself will be meeting with the six City of Napa union representatives Wed night.

3. I have been out giving speeches and meeting with individuals involved in the issues that I am working on. My main topic is government employee compensation, especially pensions, and the fact that we can’t afford them, and that they are heading toward financial disaster if we don’t do something about it. My message has been very well received.

I spoke with the Chamber of Commerce legislative committee last Wed am, which included their President Kate King. I ran into her the next day and she told me that my speech had had an impact and that they were going to put the issues I raised on their next board agenda.

At this meeting I pointed out that the City of Napa is depending on all this new development to bail them out, and I was concerned that no one had really pencilled it all out and made sure that it would in fact bail them out. Their pension and medical liabilities are growing rapidly, and with all the new construction they are doing they are going to need more infrastructure and more employees. Someone in the community needs to get into that and make sure that we know what employee costs are going to be to make sure we don’t stay perpetually in a low budget situation.

I also spoke that day to the noon Rotary meeting, courtesy of Steve Orndorf, the incoming President who invited me. Brad Wagenknecht was at both the Chamber meeting and the Rotary meeting, so he got to hear me twice in one day. I want to give him a special mention for that. Right now he is my biggest fan:)

Based on the response at the meeting and emails I received after it appeared to be a great success, and because there were so many in attendance who are in important government and business positions around town I felt that my concerns were being widely broadcast to the community at this event. Here is one email I received from an attendee after the event:

"The group was really impressed that you knew the facts and figures, governmentese names of things, people in the know and the trends. There were some very key people in the audience and you made a big impression. Not blaming was a major stroke of genius for you. The facts and figures overwhelmed everyone and gave lots to think about. You gained a lot of support today by the way you approached the issue. You should come back again when you are ready to implement ideas for solutions and I am sure you will get lots of influential help."

4. I have gotten a lot of feedback on my vision statement, almost all of it very positive. I did receive two emails that contained some criticism, both criticizing my view of the Republican party. Here are some selected quotes from those emails, the first I will identify as from Janet Kirtlink, Chair of the Napa County GOP Central Committee, because I have her permission:

"Very well said. As the Chair of the local Republican Party. Everything you have perceived is very close to accurate. Here is the reason many Republicans are dedicated to our conservative principles. Can we win elections on this no, but we will strife to move forward no matter what because it is down deep rooted inside belief in the republican ideals. I do believe though that through strong leadership and getting the message out through better organized grassroots efforts we can energize and mobilize an army of volunteers that could change the Republican party in California. But being inclusive is key. Because we need moderates and conservatives to work together. But we don't have to lose the core of the party in doing so. I hope you willl continue on with everything."

I would only add to this, that we need moderates, conservatives, AND liberals to work together as well.

Other messages included:

"I think we should be honest. We are a Taxpayers
group. We are dedicated to keeping taxes down.
Everyone pays taxes. Renters should be educated that
they also pay taxes. Since we all pay taxes, it is
our money and it should not be wasted. People should
get their hands out of our pockets.
Something has to be done about the excessive pensions
but taking on safety unions does not seem to be a
popular way to start. Maybe a maximum or a two tier
system. After all in the two tier system the guys who
are in now will get their ill gotten windfall but we
won't be stuck with it for new hires.
We are not a special interest group trying to get
government money for our pet cause. We are the people,
trying to keep money to use for our own needs and
families."

and this

"I agree with your vision for NVTA 100%....

It is a worthy role for NVTA to take up the cause of the general public in Napa County, which needs a coordinated voice in order to oppose special interest groups with narrow, but expensive, objectives.

As a matter of practicality, you are right to take action issue by issue, while keeping an eye on all of Napa County's activities, whether they involve expenditures or not."

Thank you for all the feedback. I received more but this is fairly representative.

Parks and Open Space Budget Issue

There was a meeting last Friday of a subcommittee of the Supervisors, Mark Luce and Bill Dodd, to take testimony about a pot of money garnered from TOT taxes and how they were going to spend it.

There is a little pot of money with the county that is 1.5% of the 12% of the TOT tax that is collected from tourists at hotels that is in the process of being divvied up. Right now it is about a million dollars and they expect it will generate around $750,000 or more each year.

There is a write up by the Napa County Convention and Visitors Bureau which details their position as well as provides background information. I have copied some of that information below, click on the "continue reading" link. Thanks to Julie Nord of the Grape Growers for passing it on to me.

What is happening is that the CVB is being drastically cut by the City and the County is only going to give them $99,000 for this year of the TOT money. In the meantime they are going to give the Parks and Open Space District the biggest chunk of that money, around $550,000. I think this is short sighted in that investment in the Visitors Bureau will generate more tax dollars by increasing tourism, and everyone will benefit from the further taxes generated by that.

You may feel that there are a lot of tourists coming through here, which there are, but there is no guarantee that will continue and any business has to devote some substantial part of its revenues to marketing or it will be in trouble. We cannot be so arrogant as to assume that visitors will automatically come here without doing anything to attract them when Sonoma and other wine country locations are literally spending millions attracting them right next door.

Also, many lodging places in Napa are not doing well, and even the top ones have a lot of vacancies during off peak times. The Sales and Marketing manager from Marriott Hotels spoke at a meeting Friday afternoon and stated that they are collecting about $1 million a year in TOT taxes in Napa, and that if the CVB plan works they could fill their off peak dates it would result in about another $400,000 in TOT taxes. That is just from one vendor, so we are talking some significant amount of money here.

It's a case of being penny wise and pound foolish, but I am afraid that the Parks and Open Space District has three votes sown up, Diane Dillon, Brad Wagenknecht, and Mark Luce, and that they will be getting the bulk of this money.

And by the way, that is more money right away than the voters were promised during the campaign, where they stated there would be a $350,000 budget.