Napa Valley Taxpayers Alliance

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.

Membership Meeting, May 5, 2007

We held our first membership meeting this a.m. and it was well attended and very productive. The following is an outline of the key issues that were discussed.

1. It was generally agreed that we need more and better information. From there we need to develop a mission statement and then a plan of action to address that mission. There is a long list of potential issues that need attention, but in order to be effective it will be critical to adopt a relatively narrow, doable focus.

2. Michael Haley shared that his current mission is to monitor the current budget process in both the City and County which will conclude July 1. The City is in more budget trouble, and the focus on that is to make sure that they do not borrow money to close that budget gap, and to get the employee unions to do their part to help bring it into balance by agreeing to the $800,000 cuts requested by Mike Parness. It is clear that the reason that the City is in budget trouble is due to skyrocketing employee costs over the last five years. Despite higher than inflation increases in revenue there continues to be a structural deficit that must be resolved.

3. Haley will put together a letter for submission to the City stating our view for comment by our members before sending it in.

4. Other comments included not sweeping all public jobs together with the same broad brush and that individual factors for particular jobs and departments must be taken into account. Also, there are limiting factors on such things as cutting raises which include the fact that other nearby governmental entities may pay more and we can lose employees that way.

5 There was a discussion about positioning ourselves as being against taxes vs in favor of monitoring spending. Haley feels that it is better to position ourselves as watchdogs over fair and balanced spending rather than being particularly for or against tax increases.

6. Five members were chosen to be part of a committee to present a plan for a mission statement, a focus, and what possible actions we will take to carry out that plan. They are: Daniel Mufson, Jose Rossi, Lee Broad, Mike Delmage, and Michael Haley. This group will meet soon and we will then have a full membership meeting to discuss the results.

7. It was noted that the best time of day to meet for most people is early evening, so the next meeting will be at 6:00 pm on a week night. Everyone generally expressed an interest in getting organized and having regular meetings.

10 Steps to Reforming Baby Boomer Retirement

Good article from Kiplinger's investment newsletter, click through here to read the ten steps, several paragraphs before that caught my eye:

"Social Security, Medicare and Medicaid have made trillions of dollars of explicit and implicit unfunded promises. In fact, by 2030 (about the midpoint of the baby boomers' retirement years), we will have to double every tax rate or cut every benefit in half. But our problems do not end there. Federal, state and local governments have made $5 trillion in promises (many of which are unfunded) to civil service workers. Corporate America owes about $450 billion in pension promises and $350 billion in post-retirement health care promises that are also unfunded.

To make matters worse, the instruments we have created to help individuals save for their own retirement, principally through 401(k) accounts, are also not working well. Most people are not saving enough -- and are not prudently investing what they do save."

Napa Employee Health Costs High

The Sacramento Bee has an editorial about rural health care costs for government employees under CALPERS being  higher than state averages. One of the counties that is mentioned is Napa as being one of the higher ones, and the fact that Blue Sheild wants to shut down its HMO here due to the unusually high costs. The Bee suggests that the counties should instead look into why their costs are so high. From the article:

"In El Dorado County, the average cost of a hospital stay for a public employee is $7,373 a day. Statewide, the average cost is $4,825 a day for the health plan covering the California Public Employees Retirement System, or CalPERS.

A key health plan for CalPERS, Blue Shield, is proposing to abandon its HMO in four of the most expensive counties -- El Dorado, Napa, Lake and Plumas. Understandably, the counties want CalPERS to delay, defer or abandon the idea. In essence, however, they are asking public employees who live in urban areas to subsidize the costs in monopolistic rural areas.

Chico Sounds Like Napa

Ran across this article from Chico about their cities budget woes, and it sounds amazingly similar to what is going on in Napa.

Breaking the bank

Wonder why there isn't enough money to fix city streets? It's because fat pay and benefits packages are sucking up the dough

This negative state of affairs has been going on for about four years. If allowed to continue unchecked for a couple more years, the operating reserve would be gone, and another five or six years without corrective action would erase the emergency reserve, (City Manager)Jones explained. Then the sky could fall.

Root cause of the problem: The city pampers its 450 employees with costly pay and benefits goodies, which in turn limits the amount of money available for street repairs, parks maintenance--Bidwell Park especially--and development of creekside greenways, to name a few infrastructure needs.

"The cost of doing business for the City has outpaced revenue for a number of years, requiring the use of reserves. ... These cost increases are comprised of ... retirement system cost increases, health benefit costs ... pay increases, and other personnel related costs.

"These costs, if no changes are implemented, will continue to accelerate faster than revenues, causing continuing ongoing budget deficits and allowing no room for increasing levels of service which the community needs."

Jennifer Hennessy, the city finance director and the source for most of the numbers in this article, supplied specifics by revealing that 80 percent of the city's $46.9 million budget for 2006-07 went for people costs. That's almost $37 million, and of that amount $26.5 million went to public safety, meaning police and fire. Overall, public safety accounts for 71 percent of the general-fund budget, with police taking 45 percent of the total.

Retirement benefits for city employees as a group have gone up 379 percent since 2000, and pay rates have largely kept pace.

Just how sweet the benefits package has become can be seen through health and life insurance policies enjoyed by all employees. Health coverage ranges from an HMO policy that's free to the employee but costs the city $323 per month, to a "Cadillac" policy that covers 90 percent of anything needed for a family and costs the city $902 per month, compared with $170 for the employee.

All city workers also enjoy a city-paid life-insurance policy--cost: 34 cents per $1,000--worth a dollar of coverage for every dollar earned. Thus an employee who earns, say, $75,000 carries a free $75,000 life-insurance policy.

On average, permanent city employees earn $68,022 annually.

Public Pension Troubles Throughout the State

Econbrowser, a blog written by Economics Professor James Hamilton down at UC San Diego, has an interesting round up of public employee pension problems throughout the country. Hamilton writes an excellent economics blog that I read daily, as he is able to explain many economic issues in easy to understand terms.

The comments are well worth reading on this piece as well. A sample:

"I am forced to conclude that a pervasive feature of modern American politics is for elected officials to lavish benefits on their current power base, promising or in many cases legally obligating the government to make future payments that will prove to be extraordinarily costly to deliver. I conclude that the reason elected officials keep doing this is because that is what voters want."

"Alexis de Tocqueville wrote:

The American Republic will endure, until politicians realize they can bribe the people with their own money."

Personally I don't think voters realize what is really going on with the relationship between the public employee unions and California state government. The unions are literally running the state government, and have it wired to get whatever they want. I have read in two different sources that new assemblypersons are shocked when they start, because the union lobbyists simply come in and tell them how they are going to vote on everything. This is from Democrats, Susan Kennedy who works for Schwarzneggar was one of the people who said that.

Few voters know that. Few voters in Napa know that safety personnel are sometimes getting 109% of their highest salary when they retire, and in their 50's. Few voters know that over half of Napa City police have less than five years experience. Few voters know what is going on with the government and they are trusting the government to do the right thing, and have no idea of the incredible power and control that government employee unions have in California.

They have some idea, but they think that the corporations run things, which is simply a liberal bias. The unions are the big dogs, which Schwarzneggar found out and now look at him lap up to them. They completely defeated and broke the guy and it is sad to see it.

Don Clark, Leon Brauning and I held a very productive meeting with Mike Parness, City Manager of Napa, along with Carol Wilson who is the head of finance and with Nancy Weiss who is the Assistant City Manager.

The three of us all felt it was a good meeting and that we established a good basis for further discussions. Some of the new information that came out of the meeting included:

* The City has simply given up on maintenance on some roads altogether. Frankly I was shocked by that. Sorry for those of you whose streets will no longer be repaired. At the same time, Parness confirmed that there were safety employees retiring with more than 100%, 109% to be specific, of their highest salaries.

*They estimate that they will need $100 million more, that's $10 million over 10 years, than they currently have just to bring the roads up to standard maintenance levels. The entire city budget last year was about $50 million.

* Non safety employees do get 2.7 percent times years worked for their pensions at age 55. Compare that with 2.5 for the County, although the City employees do pay more in their weekly paychecks toward their benefits than the County employees do, but not enough to make up that difference for long term employees.

If someone has worked 25 years and is 55, that means they would get 2.7 times 25, or 67.5% of their highest salary as a pension for life.

Remember that benefit costs have increased by 132% in the City over the last three years. That is in great part due to the new contract that was signed just prior to this time period.

*Their unfunded liability for what is called OPEB, which means benefits for retirees other than pensions, which is mainly health insurance for those already retired, is currently $18 million. They are spending $600,000 annually to start to pay that down. Remember this does not include the unfunded liability for pensions or for safety employees, or for current employees health.

* Due to the distress of their financial situation, they are attempting to reopen negotiations with their unions, and in fact told the union leadership that they were getting pressure from us. The three unions said they would like to meet with us so Don, Leon and I agreed to do so and in fact are looking forward to it.

We made a request for further information and I will relay that as soon as I have it. Carol Wilson is working on it, but they are very busy and the kind of information we need takes some effort to extract so it may take a few weeks. The same is true of the county but I am in on going discussions with the County and will relay more information as I have it.

Both the Register and the St. Helena Star ran articles on our activities, both articles were helpful and I have continued to gather email addresses and new members for our list from both them and speeches I am giving.

Two Recent Articles on the NVTA

Both the St. Helena Star and the Napa Register ran articles on the NVTA this week. Here are some key paragraphs:

Star--"

Haley said he discovered that Napa County had no money for a parks and open space district, even though it has the highest per capita tax collections in the state. According to Haley, the primary culprit for the county’s money woes is the rapidly increasing amount of money going to salaries, benefits and retirements for public employees.

Haley said that three years ago, 77 percent of the city of Napa’s operating budget went to employee compensation and benefits; last year, that number had jumped to 88 percent.

He said the same problem exists at the county, state and federal levels. For example, the state’s CalPERS public employee program had a $14 billion surplus in 1998; in 2003, it was $60 billion in the hole, he said.

A variety of factors are responsible for the “pension tsunami,” Haley said, including the rising cost of health care, increasing longevity, and excessive giveaways to powerful, well-funded safety employee unions during former Gov. Gray Davis’ term.

Haley said he hopes the NVTA will raise awareness about the problem until it reaches a critical mass that will result in action.

“The power and money available to public employee unions is expanding,” said Haley. “We’ve got to stand up and start fighting against that. To me, a taxpayers group is the best way to do that.”

Register--

"Taxpayer alliance board member Don Clark is a registered Democrat, but considers himself a fiscal conservative.

“I came from Texas originally so I’m a little more conservative than most Democrats in California,” he said, adding that he shares Haley’s concern about a potential government fiscal crisis.

“I think like everyone should,” he said. “I have big concerns about the budgets at all levels: city, county state, federal. I think there will have to be big decisions to be made.”

True to his blogging roots (he maintains the Web site napablogger.com), Haley posted a kind of manifesto on the napataxpayer.org Web site, calling for government entities to open their books to the public, release salary information on public employees and pass ordinances requiring a vote of the people for further pension increases. He even suggested to the Napa County Board of Supervisors that it form a citizens’ group not unlike the General Plan Update Steering Committee to evaluate county spending priorities.

“It’s just complicated,” Haley said of the pension issue, adding that there was a learning curve to being a fiscal watchdog. “I’m not against the unions. I think they’ve done great, but it’s just like anything in the world. Once you get power you keep on going ... at some point it has got to stop.”

I thought the articles were good and fairly representative of what I said, although I am not just necessarily looking for fiscal conservatives. I think all of us, left and right, have to be concerned about where the budgets are going. Favorite programs for liberals are getting lost, there is no money for parks, for health care or insurance for children, or really anything else.

Citizens are going to have to get active and speak up, othewise the level of debt and lack of services that has already gone way too far is going to swamp us.

53% of Americans Now Receive Significant Income from the Government...

and other interesting articles.

This post is devoted to some interesting articles that are of interest to taxpayers, and have themes that are pertinent to Napa issues.

The first from the Christian Science Monitor is this article that shows that 53% of Americans are now recieving a significant portion of their income from government. In 1950 only 28.3 percent of Americans were in that category. There is a lot of good economic information in the article and is well worth your time.

Daniel Weintraub of the Sacramento Bee weighs in recently with an article on public employee pensions and the ongoing debate in Sacramento. Notice that the pension expert says it is a huge financial crisis, while the Employee unions say there is no crisis at all, in fact we need more of your money.

The union rep manages to work in skillfully someone dying with cancer who will be left out in the cold if we don't increase pensions for teachers.

"Dave Low, a representative of the California School Employees Association, told Fritz that his 58-year-old sister, a schoolteacher for more than 30 years, is fighting cancer and was recently forced to retire to deal with her illness. The proposal Fritz is backing, Low charged, would leave people like her with a reduced pension and no health benefits.

"This hits close to home," he said."

One thing that is mentioned in the Christian Science Monitor piece is the claim that some European nations have been able to have high taxes and big social entitlement programs and do well. This theme is particularly sounded with Scandinavian countries like Sweden and Norway. When one looks into it, though, the picture is not as rosy as they may make it sound.

Here is one that tells the truth about Sweden.

The next article is about one writer's time living in Norway, and how he found the standard of living to be much poorer than high tax/high entitlements advocates here depict. Everyone is carrying sandwiches around because they can't afford to even go out to lunch. It was carried in the New York Times but they now want to charge for it, so I have reprinted a bit below the fold here for you.

News and Action Alert

Please see the action alert at the end of this post.

Our meeting with the County on April 4 went well. We had good attendance and we put them on notice that we are watching and concerned about budget issues. I understand an article about the meeting will be appearing in the Register soon.

There was some frustration in that most of the information was general, and also lacked context. The context that we needed was historical and statistical. We found out many facts about this years budget, but it was not given in relation to anything from which to draw relevant conclusions.

Therefore, we are going to continue to meet with the county, and I am asking everyone who attended and also those who did not to identify important questions for follow up. The main need is for historical information, like what the per capita growth in government expenditures has been, and what is responsible for the increase. We also have yet to get detailed salary information but I am working on that soon.

Please email me the issues you would like clarified, as I am continuing to meet with the county and city. Today, Leon Brauning, Don Clark and myself are meeting with Mike Parness and Carol Wilson from the City of Napa.

Some gems of information have emerged, and I have followed up by attending the County budget workshop put on by staff today for the Supervisors and have continued to gain understanding of the budget. Some of the facts gathered from both events include:

* Over 50% of the state budget and 65% of county taxes are devoted to schools, the overwhelmingly largest item in tax expenditures.

* The unfunded liability for the County for just non safety employee pensions is about $48 million. The unfunded liability for health and other benefits for non safety employees who are retired is about $34 million, for a total of about $81 million–far more than I previously was told.

A pension expert was at the meeting today who evaluated the health portion and said that the county would need to pay $5.9 million a year into the pension fund for 14 years just to cover the health part. That is big bucks for the county, as another budget expert today gave $2 million annually as an example of an amount that would seriously impact the budget. They haven’t even started to look at the bigger pension liability yet.

* Safety employee pensions have been switched to a CalPers pool by State law, and the county does not know the dollar amount that is unfunded, but the percent funded is 87%. For comparison, the percent funded above that is leading to the $4.7 million annual payment is 85%, about the same. Safety employee benefits are much better than regular employees, but there are fewer of them. In any case it is going to be a sizeable annual sum to straighten this out.

* The county is $220 million short in funds in needed road maintenance according to the roads department. That is over a period of 30 years, which works out to about $7.3 million per year. For purposes of comparison, the current annual budget for the whole department is around $4 million from the county, with varying additional funds from the state. $1.2 million was given from the State last year, but next year we are expected to get nothing from the state which means nearly a million dollar deficit.

Due to the risk of putting everyone to sleep (if you have gotten this far), I will stop with the numbers.. Also, in fairness I have to say that I am tending to list the worst problems, but there is no doubt that we have some formidable issues here.

On the bright side the County has some large reserves, but if they were to pay off all these expenses it would take more than we have by a large margin. They are being paid off slowly while the county maintains reserves, a prudent policy.

The main problem as I see it now is that the unfunded liabilities and the problems that are creating the unfunded liabilities are not going to go away. Those problems are too generous salaries and benefits, and continued increases that are ongoing. The County is in negotiations with their two unions now for new contracts and there is no doubt that they are going to be pushing for further increases, while the current rates are leading to the above problems as it is. I note that there is an assumed 6% salary increase for the 08-09 year in road department projections.

Whatever pressures may be on the County to increase salaries and benefits, we are past the point of being able to afford it. Nothing will happen except increased debt unless citizens in Napa wake up and take action to demand that this train slow down.

One possibility that was mentioned at the Supervisors meeting by their long term budget consultant was to form a citizens advisory committee to consult on budget priorities. The Supervisors appeared cool to that idea, so I stood up and said that I thought it was a good idea, which I do. A group similar to the General Plan Steering Committee to go over all this and make recommendations to the County would be the best way to do it, in my view.

It is quite possible that this is eventually going to turn into a heated political issue, and the only way to generate more light than heat and not get bogged down into partisan warfare is to have citizens from all sides of the political spectrum informed and active in making long term budget decisions.

ACTION ALERT! Please email or call your supervisors and tell them that the citizens committee to set long term budget priorities is a good idea. Better yet, volunteer to be on it. You can get their contact information by clicking on their names at this address .