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Guest opinion: City isn't really living within its means

by Bart Hughes

I'd like to point out an oversight in your "S&P Downgrade" op-ed you published last week. The discussion with city management leaves the reader with the impression that Pleasanton debt is carefully managed and the city has a balanced budget requirement that helps keep debt in check. The facts suggest otherwise.

Current accounting rules allow cities like Pleasanton to keep public employee pension and retirement medical debt "off balance sheet" and out of sight from the general public. Only those willing to expend significant effort are able to discover the complete debt obligation picture of the city. Pleasanton had zero pension debt in 2003 before the significant contract give-aways to city employees. We now have a $180 million (Market Value of Assets) debt bill that is likely to grow and with no credible plan to bring it under control.

This situation is similar to a family who makes the claim that all is well and they are living within their means while charging all expenses in excess of income to a secret no-limit credit card that is hidden away. GASB, the accounting standards board, is so concerned about this misrepresentation by government agencies that it is changing accounting rules next year to force greater disclosure.

This lack of complete and open disclosure can lead to poor decisions and outcomes. It fools people into believing that things aren't that bad and so they can put off difficult decisions -- essentially "kicking the can down the road." Unfortunately, this mindset was on display Tuesday night at Pleasanton's City Council meeting during the discussion of the next police contract. It was quite disconcerting to see several City Council members equivocate and ask questions with the hope of minimizing the problem. However, there was no way around the simple and direct point that John Bartel, an actuarial expert, made. Pleasanton's unfunded liability and therefore its pension expenses are likely to increase regardless of CalPERS' likely investment returns.

Many continue to try to blame this predicament on the Great Recession. Yes, the recession has aggravated things but is really only a receding tide that has more quickly exposed underlying issues (as acknowledged recently by the League of California Cities). It was a mayor/City Council in 2003, wanting to get elected to higher office and/or re-elected, who voted in an unaffordable employee contract. It was subsequent councils and city management who supported and voted in additional unaffordable employee contracts and ignored the mounting unfunded liability and personnel costs. The current City Council was set to approve another unaffordable employee contract late last year until there was significant push-back from the community.

With all the compelling data that proves the unsustainability of the current situation, it is disappointing and a bit amazing to realize that the reluctance of some council members may cause the City Council to not ask for full concessions from our labor groups as many other cities are already doing. If this happens, Pleasanton's unfunded pension liability will grow more quickly and personnel costs will continue to crowd out other city services. Keep this in mind when you wonder why an expanded library, additional much-need sports fields and other city amenities continue to get pushed off into the future.

I do hope that this council can find the courage to do what is right for the citizens of Pleasanton.

--Bart Hughes has been a proud resident of Pleasanton for 13 years. During his 20-plus year career, he has held senior management positions with several leading technology companies where he focused on operational improvement. He has held several board positions with local nonprofit organizations. In addition to his engineering degree, he holds a graduate degree in business.

Posted by I agree, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 2:18 pm

I watched the council meeting and the actuary's presentation on CalPERS/Pleasanton's pension plan and I couldn't be more alarmed. We have a big problem that needs addressing and the sooner the better, assuming it isn't already too late. The picture he painted of our city's pension plans isn't pretty.

Posted by truth, a resident of the Bridle Creek neighborhood, on Aug 19, 2011 at 2:41 pm

Please get ALL the true facts before you determine what if any problem exists.

Posted by the problem exists, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 3:05 pm

"Please get ALL the true facts before you determine what if any problem exists."

I give, what facts are you refering to?

I watched the council meeting. The city brought in an actuary that was called a pension expert who has advised cities up and down the state regarding CalPERS pension plans. Glad I watched because up until this point the issue has been a bit confusing. What the actuary presented was nothing less than a disaster in the making.

If you haven't watched his prensentation you should do so. If you have, what additional facts are you refering to? What I heard, in a nutshell, is that pension costs are going to "continue to rise for a long, long time".

Posted by Hugh, a resident of the Danbury Park neighborhood, on Aug 19, 2011 at 3:24 pm

Bart,

Our current Mayor and Council are just as bad as the ones we had in the early 2000's. Just look at the Climate plan they passed without a single no vote. They do absolutely no indepth evaluation of anything because possibly they are not equiped to do so because of their backgrounds. It is absolutely frightening when you think of the complete lack of controls on them. I do not know who is worse them or the school board. What is so hard to understand about not having money?

Posted by Cholo, a resident of Livermore, on Aug 19, 2011 at 4:19 pm

What's so bad about living beyond your means? That's what American business is all about. It keeps some businesses afloat!

Even collection agencies can't harass consumer who owe money. Lots of businesses have to suck it up and moveon.com. I rest my case.

Posted by Cholo, a resident of Livermore, on Aug 19, 2011 at 4:20 pm

Correction: Even a collection agency can't harass a consumer who owes money. tee hee hee, tee hee hee...

Posted by S-, a resident of the Pleasanton Heights neighborhood, on Aug 19, 2011 at 4:51 pm

"What's so bad about living beyond your means? That's what American business is all about. It keeps some businesses afloat!"

There is a distinction between business investment in future revenue streams and city government racking up huge unfunded debt for past services. The business would go bankrupt if they were to base their price strategy on flawed expense recognition. The city will just ask taxpayers for money or reduce service levels. Those are really their only two options.

If you were running a business two things that would cause you great stress - other than realizing you were selling your product/service at less than cost because you were providing off-balance sheet compensation that your accountant forget to mention but is now coming due - are raising prices for the same amount of service and/or cutting service levels but charging the same rate.

The business would struggle or go bankrupt. The city will look for ways to increase fees & taxes while cutting service levels. The taxpayers won’t have an option to look at competing businesses for reduced rates on service because the city is a monopoly service provider.

That is why it is so IMPORTANT for THIS CITY COUNCIL to get the PENSION ISSUE UNDER CONTROL. And that IS why it is SO IMPORTANT for Taxpayers to Pay Attention to this issue

Posted by Concerned, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 5:32 pm

With the big drop in the market over the past month the current deficit is probably over $200 million. Starting next year cities will have to account for this and it will drop our credit rating like a stone. Police and Fire need to pay their full 9%. The City has been paying this for the past decade on top of the 24% City share. In the private sector the max.match is usually 5%. We are on the verge of disaster. The actuary said that even with returns well in excess of the assumed 7.75% the liabilities will increase. We have dropped over 15% in the last month for a net change in excess of that compared to the assumptions. I can't believe that we are still fiddling while P'town burns. Maybe it will take an initiative pointing out the facts to the disinterested public.

Posted by What we pay for, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 6:08 pm

These pension numbers are monthly & annual numbers. They only represent the employees that receive six figure pensions. Employees also receive 2% cost of living increases every year and their spouse can receive 75% of that amount upon the retirees death. Many members not on this list will be when the 2% annual cost of living increases their pension. They also receive retiree medical on top of the lifetime pensions. The current annual cost of the cadillac employee union medical plans is about 15K for employee + spouse, and 18K annualy for the employee + two dependants.

We aren't talking about people that retire at the social security required age of 65. People getting this city funded/taxpayer funded deal can retire at at age 50, or 55, and receive these benefits for more years than they actually worked - with a lot more pay.

BRAMELL, THOMAS $10,569.50 $126,834.00 PLEASANTON

BUCKOVIC, JOSEPH $9,595.19 $115,142.28 PLEASANTON

CARLSON, ERIC $10,771.36 $129,256.32 PLEASANTON

CHAPMAN, SEAN $9,855.65 $118,267.80 PLEASANTON

COUSINEAU, CARL $9,266.81 $111,201.72 PLEASANTON

CROLL, DOUGLAS $10,137.49 $121,649.88 PLEASANTON

DICKINSON, CHRISTOPHE $9,274.32 $111,291.84 PLEASANTON

EASTMAN, WILLIAM $9,966.59 $119,599.08 PLEASANTON

GARY, STEWART $13,431.30 $161,175.60 PLEASANTON

GOODWIN, JOHN $11,712.36 $140,548.32 PLEASANTON

HALVORSEN, WILLIAM $8,550.00 $102,600.00 PLEASANTON

HELMS, PAUL $8,865.64 $106,387.68 PLEASANTON

ISERSON, JERRY $11,200.31 $134,403.72 PLEASANTON

KIELY, DENNIS $8,474.15 $101,689.80 PLEASANTON

LAURENCE, MAUREEN $8,955.50 $107,466.00 PLEASANTON

LYNESS, ROBERT $10,887.35 $130,648.20 PLEASANTON

MADRID, SALLY $9,054.73 $108,656.76 PLEASANTON

MOLKENBUHR, PAUL $8,726.88 $104,722.56 PLEASANTON

NEAL, TIMOTHY $14,316.04 $171,792.48 PLEASANTON

PHELPS, KRISTEN $9,105.34 $109,264.08 PLEASANTON

RADFORD, DAVID $10,661.33 $127,935.96 PLEASANTON

ROSE, GARY $8,497.48 $101,969.76 PLEASANTON

ROSS, STEVEN $8,755.43 $105,065.16 PLEASANTON

ROSSI, SUSAN $12,759.43 $153,113.16 PLEASANTON

ROUSH, MICHAEL $13,445.05 $161,340.60 PLEASANTON

SAULSBURY, DONALD $8,576.44 $102,917.28 PLEASANTON

STJOHN, MICHAEL $9,461.25 $113,535.00 PLEASANTON

SWIFT, BRIAN $10,949.07 $131,388.84 PLEASANTON

TOLLEFSON, GARY $12,090.89 $145,090.68 PLEASANTON

WALSH, WILLIAM $8,430.23 $101,162.76 PLEASANTON

WILSON, ROBERT $12,695.70 $152,348.40 PLEASANTON

WIXOM, GREGORY $8,765.64 $105,187.68 PLEASANTON

WOLFE, JAMES $11,801.51 $141,618.12 PLEASANTON

Posted by Part two - PUSD, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 6:10 pm

CASEY, JOHN M $12,979.69 $155,756.28 PLEASANTON UNIFIED

COUPE, WILLIAM S $10,415.89 $124,990.68 PLEASANTON UNIFIED

DELLANINI, SALLY R $9,282.34 $111,388.08 PLEASANTON UNIFIED

DELLANINI, STEVEN J $8,423.61 $101,083.32 PLEASANTON UNIFIED

DONALDSON, MERLIN C $14,843.33 $178,119.96 PLEASANTON UNIFIED

JAMES, BILL $9,110.25 $109,323.00 PLEASANTON UNIFIED

KETTWIG, JOSEPH L $9,141.41 $109,696.92 PLEASANTON UNIFIED

KINDRED, KATHLEEN $9,700.11 $116,401.32 PLEASANTON UNIFIED

KREITZ, ROBERT W $12,878.02 $154,536.24 PLEASANTON UNIFIED

KROETCH, ROBERT M $11,713.99 $140,567.88 PLEASANTON UNIFIED

LEONARD, PATRICIA A $8,892.37 $106,708.44 PLEASANTON UNIFIED

MAHER, STEPHEN P $11,460.60 $137,527.20 PLEASANTON UNIFIED

PUPPIONE, RICHARD J $8,406.00 $100,872.00 PLEASANTON UNIFIED

RADULOVICH, WILLIAM M $9,625.54 $115,506.48 PLEASANTON UNIFIED

SCHACHT, ANDREE M $8,925.01 $107,100.12 PLEASANTON UNIFIED

Posted by Pat 3 - alameda county, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 6:16 pm

We contribute to this too

ALTEMUS, RICHARD $9,493.61 $113,923.32 ALAMEDA COUNTY

ANANOS, MICHAEL $8,810.19 $105,722.28 ALAMEDA COUNTY

BANCHERO, JOSEPH $8,448.51 $101,382.12 ALAMEDA COUNTY

BAUMAN, RODGER $9,297.27 $111,567.24 ALAMEDA COUNTY

BEARD, JAMES $10,267.49 $123,209.88 ALAMEDA COUNTY

BECKER, MICHAEL $8,785.72 $105,428.64 ALAMEDA COUNTY

BLANCHARD, MARK $11,512.89 $138,154.68 ALAMEDA COUNTY

BOTTORFF, EDWARD $10,054.37 $120,652.44 ALAMEDA COUNTY

BRADLEY, BRUCE $8,761.90 $105,142.80 ALAMEDA COUNTY

BROWN, RICHARD $9,085.15 $109,021.80 ALAMEDA COUNTY

BROWN, STEVEN $9,710.53 $116,526.36 ALAMEDA COUNTY

CASTRO, THOMAS $8,917.61 $107,011.32 ALAMEDA COUNTY

CENTONI, GARRETT $9,532.50 $114,390.00 ALAMEDA COUNTY

CHASE, WILLIAM $8,657.42 $103,889.04 ALAMEDA COUNTY

CHEN RAMIREZ, ELAINE $11,138.82 $133,665.84 ALAMEDA COUNTY

CONOVER, TED $9,040.47 $108,485.64 ALAMEDA COUNTY

CYSEWSKI, MICHAEL $9,903.02 $118,836.24 ALAMEDA COUNTY

DAVISON, KENNETH $8,974.93 $107,699.16 ALAMEDA COUNTY

DELPIANO, PAUL $9,297.50 $111,570.00 ALAMEDA COUNTY

DILLARD, THOMAS $8,983.64 $107,803.68 ALAMEDA COUNTY

FARRELLE, STANLEY $8,433.96 $101,207.52 ALAMEDA COUNTY

FERDINAND, JAMES $9,122.86 $109,474.32 ALAMEDA COUNTY

FERNANDEZ, GREG $9,651.84 $115,822.08 ALAMEDA COUNTY

GHEZZI, BRUCE $10,115.94 $121,391.28 ALAMEDA COUNTY

GIBBONS, PAT $12,419.63 $149,035.56 ALAMEDA COUNTY

GLASSBERG, ARNOLD $15,804.33 $189,651.96 ALAMEDA COUNTY

HALL, RACHEL $9,431.28 $113,175.36 ALAMEDA COUNTY

HAMPEL, CHARLES $8,893.53 $106,722.36 ALAMEDA COUNTY

HAYES, KENWARD $8,948.59 $107,383.08 ALAMEDA COUNTY

HENTHORN, GARY $9,132.27 $109,587.24 ALAMEDA COUNTY

HILL, CRAIG $9,503.29 $114,039.48 ALAMEDA COUNTY

INGLE, JAMES $9,072.31 $108,867.72 ALAMEDA COUNTY

JOHN PURCHIO, JAMES $9,851.27 $118,215.24 ALAMEDA COUNTY

JOHNSTON, JAMES $9,977.30 $119,727.60 ALAMEDA COUNTY

KLEVENO, ALVIN $9,084.10 $109,009.20 ALAMEDA COUNTY

KOLDA, RICHARD $9,101.87 $109,222.44 ALAMEDA COUNTY

KUNTZ, RONALD $8,500.04 $102,000.48 ALAMEDA COUNTY

LAKES, JAMES $8,612.58 $103,350.96 ALAMEDA COUNTY

LEEN, TERRENCE $8,939.48 $107,273.76 ALAMEDA COUNTY

LENAHAN, RICHARD $10,873.61 $130,483.32 ALAMEDA COUNTY

LEPLEY, SANDRA $11,897.03 $142,764.36 ALAMEDA COUNTY

MCCAMMON, WILLIAM $15,600.37 $187,204.44 ALAMEDA COUNTY

MCGHIE, GARRY $8,521.46 $102,257.52 ALAMEDA COUNTY

MCKENNA, BRIAN $10,663.61 $127,963.32 ALAMEDA COUNTY

NAAS, JODY $10,813.75 $129,765.00 ALAMEDA COUNTY

ORR, LENNIE $9,989.81 $119,877.72 ALAMEDA COUNTY

PEYTON, MARGARET $8,450.67 $101,408.04 ALAMEDA COUNTY

PIRAINO, PAUL $15,418.66 $185,023.92 ALAMEDA COUNTY

RAMSEY, JEFFERY $10,840.24 $130,082.88 ALAMEDA COUNTY

REYNOLDS, JAMES $9,443.61 $113,323.32 ALAMEDA COUNTY

SALAICES, RICKY $8,482.06 $101,784.72 ALAMEDA COUNTY

SILVA, STANLEY $9,513.65 $114,163.80 ALAMEDA COUNTY

STEPMAN, LYLE $9,250.32 $111,003.84 ALAMEDA COUNTY

STUTZMAN, ROY $8,605.90 $103,270.80 ALAMEDA COUNTY

SUN, COSSETTE $8,810.10 $105,721.20 ALAMEDA COUNTY

SUTTERLEY, CHRISTOPHER $8,629.41 $103,552.92 ALAMEDA COUNTY

TERZIAN, TIMOTHY $8,368.46 $100,421.52 ALAMEDA COUNTY

TRETHAN, SHARON $8,856.78 $106,281.36 ALAMEDA COUNTY

TRUJILLO, WILLIAM $9,231.21 $110,774.52 ALAMEDA COUNTY

WALSTON, DEANNA $10,635.85 $127,630.20 ALAMEDA COUNTY

WHEELER, DAVID $10,773.06 $129,276.72 ALAMEDA COUNTY

WOOD, WILLIAM $9,585.90 $115,030.80 ALAMEDA COUNTY

YASITIS, PETER $8,443.04 $101,316.48 ALAMEDA COUNTY

YOUNG, JUDY $9,448.89 $113,386.68 ALAMEDA COUNTY

Posted by Part 4, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 6:20 pm

The State employees, Prison Guards, EBMUD, Etc...we contribute to their pension funds and lifetime medical also...but the list is too long to post.

Posted by Cholo, a resident of Livermore, on Aug 19, 2011 at 7:25 pm

It seems to me that Plutonians are Jealous Bugs! So many residents brag about how well heeled they are but fall apart if another person receives a friendly pension. So when hard times hit, you act like cry babies...get over it...it's time to moveon.com...

i rest my case...

Posted by all, a resident of the Downtown neighborhood, on Aug 19, 2011 at 7:52 pm

these people are just ripping us off and should go back to work. this is disgusting.

Posted by To: Cholo, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 8:01 pm

So what you are saying is that you don't have an original or independant thought. Have you watched the video of the Pleasanton coucil meeting? Have you listened to what the actuary had to say? Do you understand how the underfunded pension liability & almost completely unfunded retiree helth care liability will have detrimental consequences for taxpayers, city employees, service levels, future city amenities, and our school district.

The Mayor of San Jose said that these very same underfunded/unfunded costs will require layoffs of 50% of city employees to the extent they will no longer have the ability to provide a minimum level of service.

I guess your OK with Pleasanton following the path of San Jose. And for anybody that thinks San Jose is in worse shape than Pleasanton they don't understand the difference between the San Jose pension plan and the CalPERS plan. I work in SJ and have been following the issue. Pleasanton is probably in worse shape. The only difference that I see is Pleasanton's cost are lower because the payment terms are about 5 times longer.

Posted by Cholo, a resident of Livermore, on Aug 19, 2011 at 8:40 pm

If you didn't wantemmployees to receive a large pension, something should have been done about it sooner. Employees were allowed to work hard and to believe that they would receive a pension when they retired. Now, they're the bad guys and their names are published online?

Your explanation means nothing to me. If employers don't want employees to receive large pensions, it may be too late. Maybe nobody in the USA should receive any benefits package, that way it seems to me that it's more fair. The employee comes in with nothing promised and retires with nothing in the bank. ta-ta...

Posted by Cholo, a resident of Livermore, on Aug 19, 2011 at 8:47 pm

I forgot to say that if you don't like the way things are going in the USA, have you considered purchasing a one-way ticket to the country where your ancestors came from?

If you can't manage a silly hissy fit...git...I mean it! BEGONE! Just because some employees made out better than you, you're upset? get a life.

signed,

tee hee hee, tee hee hee...

Posted by To: cholo, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 19, 2011 at 9:11 pm

The cost of the pension plan, absent unfunded liabilities & the taxpayers paying the employee contribution, is about 16% of payroll. Why are taxpayers currently paying the discounted rate of about 42% of payroll. How does that compare to the original cost of 16% of payroll, or the 3% match that is found in private sector 401K plans.

How do you justify this?

Posted by Caesar, a resident of the Charter Oaks neighborhood, on Aug 19, 2011 at 10:52 pm

I think it's about 85% the individual's fault, 10% union's, and 5% corrupt politicians.

Everything else is a unfunded liability. I'm broke. These conditions are not sustainable. There is no accountability. There is no responsibility. I'm these people's boss. My children are enslaved. We are about to be innundated by a giant tsunami. They don't do this in the private sector. Public employees don't work. Unions are corrupt.

Posted by Hummm!, a resident of the Another Pleasanton neighborhood neighborhood, on Aug 20, 2011 at 12:07 am

When do these yokels take a rest? The sky is falling, yet government workers have a hard time understanding that something has to change. It must be nice having our money pay for incompetence. I only wish my small business was able to run a deficit and merely put out my hand to cover the costs of mismanagement. No such luck. I have to face reality.