SDCERS prepared a Power Point Presentation for last Fridays Board meeting. The presentation contained fifty-six slides detailing the "Actuarial Implications of FY 2009 Investment Results." Contained in the presentation were options or maybe better stated, "Scenarios" for the future. Starting with slide sixteen (16) you can get a picture of where the fund is and what the ramifications of these scenarios to the City as the "Plan Sponsor" and SDCERS. Slides seventeen (17) to twenty-four (24) provide options for consideration by Board Members to decide what is best for the "PLAN" and the health of SDCERS into the future. Slides twenty-five (25) to forty-four (44) is a summary and examples of the various possibilities available to SDCERS for calculating the City's required contribution or ARC to SDCERS on the employees behalf. Slides forty-five (45) to fifty-three (53) are projections for each of the scenarios provided to the Board for consideration.
So what is this discussion all about? In simple terms, it is talk of a "bailout" on a much smaller scale than what we are seeing across this nation by the Obama administration. Remember MP1 and MP2; schemes that got us into this mess in the first place? The underfunding of our retirement plan so the City and elected officials could spend the money ear marked for pension contribution, on pet projects and other things? Well, this is what they are talking about; another plan to "lessen the load" or "defer" the obligation to future years for the City.
The mayor first floated the idea of changing the "corridor." The mayor went so far as to NOT re-appoint an experienced and educated trustee to replace him with someone he felt would be more supportive of his plan. The pension system's corridor, limits the "smoothing" or averaging of the payment needed from the City to meet the obligations of the plan. The corridor ensures this smoothing does not get too far off track and ensures adequate payments from the City. Confusing I know but bear with me. Because of the economy performing so badly, the pension system's assets are worth much less than before. The smoothing allows the value to be shown at a value higher than actual value by using an average over a specific period of time from high to low. But the pension system's corridor ensures this "smoothing" doesn't get more than 20% out of line. So the smoothing effort is restrained and the appearance of the health of the fund is more closely aligned with reality (sorta).
Scott Lewis in the Voice of San Diego wrote an article; "Amazing Admission; It's Either This or Bankruptcy." Scott generally writes well reasoned and articulate pieces. This article is articulate but to me misses the true point of what the mayor is attempting to pull off. Scott reasons if SDCERS does not make adjustments and allow the city to put off $50 million of their payment; the city will end up in bankruptcy. Scott writes; "Now, we finally have a number measuring the exact distance between the city and insolvency: $50 million." The mayor would have you think that. It is not true in any way shape or form.
Scott details what the corridor and smoothing is and what is being discussed regarding the city and their ARC payment due for the next fiscal year to SDCERS. Scott lays out well the discussion at SDCERS regarding the funding, where the system is, what to expect in the coming years and what options are available. But at the end of his article Scott writes the following;
"For weeks, I couldn't figure out why the mayor would ever consider pushing such a plan. Was he nuts? Had he not seen what similar decisions had done to his predecessor? Now it's much clearer. This time, he really is staring down the barrel of insolvency and he, and the city's powers that be, are doing everything they possibly can to make it shoot somebody else in the face."
"The mayor is bound and determined to prove something: that not being able to make your payment to the pension system doesn't mean you don't have enough money. It just means the rules are wrong. You, residents, are at least technically in control of the situation. You have to decide whether you fear bankruptcy more than you fear the pain of reckoning with what is the defining attribute of the city in which you live: It simply doesn't take in the money it has promised to pay out. You can change all the rules you want. You can count it in different ways. But we now have as clear a reckoning as ever. If the city is forced to put $50 million into its pension fund, it will be insolvent."
Scott, the mayor is not nuts; he is a cold, calculating individual who has an agenda and is using all resources to pull it off. What is the agenda? He is intent on eliminating DROP; reducing retirement benefits; and stripping employees of all reason to work for the City of San Diego. The mayor is staring down the barrel of insolvency NOT because of the payment to SDCERS. He is in fact doing everything he can to make the shot hit somebody else in the face. The mayor chooses to stare down that barrel because he refuses to make the tough decisions. Why in hell is money being spent to look at building a new city hall? Why is money being spent to plan a new downtown library? Why is money being spent to discuss and plan an expansion to the Convention Center? Why has the mayor not yet placed on the ballot an initiative to charge for trash collection? Why has the mayor not yet implemented a plan to charge for parking at beaches, parks, zoo, and wild animal park? Why are taxpayers still paying to provide security at private events like the Rock n Roll Marathon, Street Scenes; Mardi Gras; Padre and Charge games? Why are taxpayers paying the maintenance for fields, courts, lights and security for little league, pop warner, AYSL leagues, youth basketball, tennis and other groups?
My point is the mayor and his priorities are way out of focus and not in step with 2009. The economy and collapse of the markets that resulted in the loss of revenue, has required a re-focus of the priorities of all Americans. We have all made adjustments and changed the way we do things at home. We have put off the re-model of the bathroom, kitchen, front or back yard; we have held onto that car for a few more years rather than take on another payment; we have cut back on our water use, electricity, going out to dinner; we have begun bringing our lunch instead of eating out. Yet the mayor and council continue along with a one billion dollar expansion project to the Convention Center, a similar expenditure for a City Hall and yet another half a billion dollar tab for a downtown library. I could go on with examples of the priorities of this mayor and council but I think you get my point.
That somebody Scott, who is going to get shot in the face, is the poor sap elected to office in 2012 to replace this mayor. The new mayor, stuck with the idiocy of this mayor, will be facing that bullet. The new council (We can all hope it's new) will have to figure out the mess left by this group. Taxpayers have been fed so much crap about the benefits, wages and cost of city employees; we will forever be the cause of the financial ills of this city. The press and politicians have found an easy patsy to blame and we will suffer the consequences for years to come. We could offer up further concessions and cuts and it will never be enough. We could fix the funding issues with the retirement but the mayor and council refuse to listen. They know better and besides; if it's fixed, they could no longer use us as an excuse.
The city will not become insolvent if they are made to pay the $50 million they owe SDCERS. Changing the corridor may very well be acceptable and necessary to assist short term with the lack of revenue. But it must be temporary and only if the mayor and council begin to honestly seek reductions in services; increase in fees and revenue and STOP the nonsense around the Convention Center expansion; City Hall planning and the new Downtown Library. Until then; I'm sick of giving back, when all I see from city hall is more spending on projects that we cannot afford all the while telling the taxpayer more reductions and cuts to employee wages and benefits is necessary.