County supervisors have placed a new tax measure on the November ballot to benefit the Contra Costa County Fire Protection District. Measure Q is a parcel tax intended to boost District finances now plagued by reduced property tax income and rising labor costs. In truth, though, this tax does not address the root cause of the District’s money troubles. This is one reason County Supervisor Candace Andersen opposed the tax measure, which was approved on a 4-1 vote.
The District expects the proposed 7-year parcel tax to raise about $17 million annually through a yearly flat $75 tax for homeowners; a half-rate for apartment units and vacant parcels; and $75 per-quarter-acre for commercial/industrial land. District polls predict the measure could pass with the required two-thirds support from voters, but only if there is no opposition campaign. Since the measure doesn’t solve the problem, opposition is strong.
Without this tax, the District projects a budget deficit next year of $13 million. With the tax – and using the District’s unrealistically rosy revenue and expense projections – the District projects a $2 million budget deficit in budget year 2015/16.
A Band-Aid — Not a Cure
While the tax would provide the Fire District short-term budget relief, it does nothing to address chronic fiscal mismanagement and resistance to change. Consider:
- Labor costs consume nearly all of the District’s income. In 2003/04 labor costs (i.e., salaries, benefits, pension bond payments) represented 84% of all District revenues. In 2013/14 this figure jumps to 103%. Living beyond one’s means is a formula for failure.
- The District allocates insufficient funds for vehicle replacement and fire station maintenance. While one fully-equipped fire rig can cost up to $1 million, the District no longer maintains an adequate vehicle replacement fund. As a result there is a chronic shortage of funds available to meet the District’s capital maintenance and replacement needs.
- More economical service delivery methods should be explored. A recent Contra Costa Times editorial states, “There has been no serious evaluation of alternatives. Instead, voters are told to either pay more or watch homes burn.” The District’s stubborn resistance to change was on display recently during discussion among county supervisors regarding a draft response to a grand jury report. Chief Daryl Louder defensively insisted that the District’s current system “is not flawed,” while Supervisors John Gioia and Candace Andersen disagreed with Louder’s assessment.
The Fire District acknowledges the impact of rising labor costs, which restrict funds available for other purposes. Since pension costs, in particular, consume a progressively larger share of the annual budget, county supervisors urge adoption of a lower pension benefit for new hires. Firefighters say they’re willing to discuss this change, which county employees have already accepted.
But adding a lower pension benefit does not address the Fire District’s current fiscal woes. Since it only affects new hires, whatever savings this change can yield won’t come for decades. And the state’s new pension reform legislation, recently signed by Governor Brown, amounts to nothing more than tinkering at the edges, offering no significant short-term fiscal relief.
Something’s Gotta Give
Because pensions take more than their fair share of the Fire District budget, little is left for anything else. And as pension costs escalate, each year this problem gets worse. The only way to solve the current problem is to adopt lower pension benefits for all current and future employees. Yet county supervisors and employee unions reject this solution, citing legal uncertainty.
California courts have long held that unearned, future pension benefits are contractually protected, thus cannot be reduced. However, the Little Hoover Commission watchdog group and legal scholars maintain that pension benefits can be reduced prospectively for current employees.
Ultimately bankruptcy may be the only alternative when fiscal insolvency strikes and taxpayers refuse to pay more. Sacramento Bee columnist Dan Walters reports that, while California’s state constitution protects pensions as contracts, federal bankruptcy law may trump the state constitution’s contract impairment provision. In an August 2012 federal bankruptcy court ruling related to City of Stockton retiree health benefits, the judge stated: “While a state cannot make a law impairing the obligation of contract, Congress can do so. The goal of the Bankruptcy Code is adjusting the debtor-creditor relationship.”
As more California government agencies declare bankruptcy these legal issues may evolve to provide elected officials new mechanisms to reduce benefits in order to achieve long-term fiscal solvency. This would be an important development for agencies at the financial brink, such as the Fire District.
Ballot Box Success a Long Shot
The Fire District needs to agree on a plan to deliver needed services at an affordable cost. Likewise, the District must assure employees that its pension system is financially sound. Because residents demand value for tax dollars already given, they expect government to manage money responsibly and live within its means. Given the lackluster economy and public skepticism of government spending, voters are unlikely to support this new tax.
Public confidence about personal finances has declined. In recent years, families used savings to survive unemployment and other impacts of economic downturn. Today most residents and business owners don’t have extra income to pay higher taxes. Further, placing additional tax burdens on commercial property owners hurts the local economy and jeopardizes jobs. As taxpayers see it, this is reality, and county supervisors remain oblivious.
With this measure the Fire District offers voters an ultimatum: pay more taxes or accept reduced services. By opposing the measure, taxpayers present a counteroffer: Spend public money responsibly and live within your means. Only then will taxpayers be receptive to plans for new taxes.
Bill Gram-Reefer is Editor & Publisher of Halfway To Concord, founded in 2004. Halfway To Concord is the leading online source for community-driven political news, events, and opinion for Contra Costa County and the San Francisco East Bay.
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Could this be a glimpse into our future? . . . The Chicago Tribune reports on that city’s public pension disaster:
“Absent a city pension overhaul, the fund for retired city firefighters would become insolvent in nine years, according to a city report issued two years ago. The police pension would go broke four years later. Funds for city laborers and municipal workers would be broke by 2030.”
There’s more:
“A state law approved a couple of years ago requires the city to start making payments by 2015 to fully fund the police and fire funds. The city now uses property taxes to cover pension costs, and without changes, aldermen were told they would have to raise that unpopular tax by up to 80 percent.”
Full article at: http://www.chicagotribune.com/news/local/ct-met-chicago-emanuel-pensions-0927-20120927,0,6433883.story
This article sums up why voters are unlikely to support new taxes: When bad behavior goes unpunished, you get more of it. The most harmful “bad behavior” seen in local gov’t is elected officials’ support of unsustainable pension and OPEB benefits. Something’s gotta give.
http://www.jec.senate.gov/republicans/public/?a=Files.Serve&File_id=6bdeeee9-4560-4904-bb2e-73cea6de06ab
The legal analysis is simple and clear:
UNDER THE SUPREMACY CLAUSE OF THE U.S. CONSTITUTION, FEDERAL LAW PREVAILS OVER ANY CONFLICTING STATE LAW.
Bankruptcy law is federal law.
Contract law is state law.
The California Constitution is state law.
Regarding pension contracts and bankruptcy, there is a clear conflict between bankruptcy law (federal law that allows contracts to be modified or terminated) and contract law (state law). There is also a clear conflict between bankruptcy law (federal law that allows contracts to be modified or terminated) and the California Constitution (state law).
ACCORDINGLY, BANKRUPTCY LAW PREVAILS OVER ANY CONFLICTING PROVISION OF CONTRACT LAW AND THE CALIFORNIA CONSTITUTION.
It’s time to fight firefighters with bankruptcy.
File bankruptcy.
Modify pension contracts (ten cents on the dollar sounds good) or terminate pension contracts (sounds better).
Of course, the filthy rich firefighters’ union will use their war chest of money (filled with union dues funded by salaries and pensions funded by taxpayers) to hire an army of super-expensive lawyers to file appeals and lawsuits asserting absurd academic arguments based on state sovereignty, federalism, perversion of commandeering doctrine, blah, blah, blah, which will further burden our insanely overburdened courts and ultimately fail.
Back to the future… perhaps it’s time to bring back ConFire’s volunteer program that was disbanded years ago in response to union pressure:
http://www.sacbee.com/2012/09/22/4843512/placer-looks-for-volunteers-to.html
Battle of the Titans in Stockton: CalPERS vs. Bond Insurers. This is one to watch . . . will impact all public employers (including those covered by county CERL pension plans):
http://calpensions.com/2012/09/24/stockton-bankruptcy-bond-insurers-vs-calpers-3/
Utah and Rhode Island pension reforms show promise.
http://www.ncpa.org/sub/dpd/index.php?Article_ID=22388&utm_source=newsletter&utm_medium=email&utm_campaign=DPD
Too bad California’s faux reform didn’t get the job done.
Today’s WSJ editorial explores the fiscally reckless notion of giving federal bailouts to state pension plans, as is under discussion in Illinois. This column also describes some of the reasons that state pension plans are failing:
https://www.illinoispolicy.org/news/article.asp?ArticleSource=5083
One reason that public pension plans are underfunded is use of wildly unrealistic investment earnings assumptions. This is a big cost driver for the county pension plan provided to ConFire employees.
But it’s also an easy way for public agencies to “kick the can down the road” and keep pension plan contribution rates artificially low. It’s a convenient way for public officials to delay funding pension obligations — but carries a steep long-term cost for taxpayers.
For example, the District’s pension plan currently assumes investment earnings at a rate of 7.75%, though actual investment earnings last year were 2.7%. This earnings gap eventually must be paid by taxpayers.
To those who say that the investment earnings assumptions used by the District’s pension plan are just fine and dandy as is thankyouverymuch, the question must be asked: Well, then, where did the District’s $131 million in unfunded liabilities come from, hmmmm?
The ConFire pension plan wouldn’t be underfunded to this degree if its investment earnings assumptions were consistently on target (or close to it). Obviously the plan assumptions aren’t working too well, based upon the unfunded liability “report card.”
ConFire’s pension system will revisit its investment earnings assumptions in early 2013, which could impact pension rates for the District and its employees.
Here are some additional legal theories that may be used to break the unsustainable “California Rule” to prospectively reduce public pension benefits for current employees:
http://www.calwatchdog.com/2012/09/20/yes-we-can-break-public-employee-pensions/
I have a great idea! Why don’t we totally disband Contra Costa County Fire and have each city worry about their own fire protection. Alameda County , Santa Clara County, San Mateo County, Solano, Napa, and Sonoma Counties all have city run departments. Maybe Concord and Pleasant Hill could go in on a fire department. Let’s compare: Concord population 124,055, Pleasant Hill population is 33,689, combined for 157,744. Currently Confire has 4 station covering Concord and two covering Pleasant Hill. A similar sized city would be Hayward at a population of 144,186, with 9 fire stations (11 Crews) covering Hayward. That’s only 3 more stations for a similar sized population. That makes great financial sense, right? Maybe Lafayette could join Moraga – Orinda Fire and benefit from the extra money that the CC Times reported that Orinda Residents are paying for fire protection. I think that we are on to something here. I am sure that closing a few more stations will not make any difference at all, who needs firemen anyway?
Hey Jack,
Perhaps taxpayers should give every firefighter a full year of salary, benefits, and pension payments just to go away and then pay more money to hire someone else to do the job that still needs to be done.
That’s fiscal responsibility!
It does not take a mental giant to conclude that labor costs (wages and benefits) of any type entity that exceed 50% not successful nor will stay afloat. In this case (as shown) the labor costs are 103% of the budget.
Conclusion: Labor Costs much be reduced before doing anything else
It does not take a mental giant to conclude that since the Union and Board of Supervisors have not renegotiated in an emergency situation such as this, the public is being scammed to unnecessarily pay more.
Conclusion: Board of Supervisors and Union are not serious about fixing the real problem (Pensions). They promise but do not act.
It does not take a mental giant to conclude that the unfunded liability (debt) that the district has accumulated (129,000,000 million dollars) is unsustainable without major reform. The Board of Supervisors and the fire district sold bonds just to make payments on the debt. Those bonds cost the taxpayer’s 3.5% more than the fund receives. This was an extremely poor decision and proves the Union and Board of Supervisors are not serious on fixing the problem. Instead, they will just keep asking for more money from the pockets of everyone else.
Conclusion: No tax will fix this problem. It is just more money flushed down to toilet
Finally, If you taxpayers fall for the “ sky is falling “ pitch, along with the threats of less services, along with the blackmail of what they will do unless you pay, and threatened lives, the blame should fall right where it belongs. The people that control the funds, your Board of Supervisors and their special interest Union, because they can fix this without a new tax, therefore they are putting the public at risk by not acting.
Yours truly,
All taxed out
No one wants to see severe cuts in emergency response services, but this parcel tax proposal will only kick the fiscal responsibility can down the road once more.
The district is out of time. The key players must immediately undertake a project to redesign the delivery model, and craft a budget that supports truly essential functions – one that forces the district to live within its means.
The taxpayer well is dry.
just vote NO
^^^
NO new taxes…………. PERIOD…!!!!!!!!!!!!!!!!!!!