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By Roz Rogoff

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About this blog: In January 2002 I started writing my own online "newspaper" titled "The San Ramon Observer." I reported on City Council meetings and other happenings in San Ramon. I tried to be objective in my coverage of meetings and events, and...  (More)

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Walking, Talking, and Listening

Uploaded: Aug 14, 2011
Scott Perkins, who is running for reelection to his City Council seat, told me he has walked to over 14,000 homes in San Ramon in the past 2-1/2 years. 14,000? Yes, he showed me a map of the city with the portions he walked highlighted. It covers everything North of Crow Canyon Road, not too many residences there, and everything East of Alcosta, which is most of Dougherty Valley. Perkins, who lost a lot of weight a few years ago, looks very fit from all of his walking. He says, "It really energizes me to walk neighborhoods."

I asked if people bring up Measure W, and he said no. About a dozen asked about staff salaries, but the number one question is "When will we build the City Center?" Perkins said the plans are still on the table but Alex Mehran who has them, is waiting until the economy turns around.

Perkins wants to get out and listen to the residents. He feels the Council, including him, didn't listen enough to the concerns about moving the Urban Growth Boundary into Tassajara Valley. He believes the Council should have put it into a separate measure, so the rest of the General Plan would have passed.

I mentioned that Steve O'Brien has a comment on his blog that anyone who disagrees with the Council is ostracized. O'Brien mentions Phil O'Loane, but also links to a story in the Express about Perkin's vote against the General Plan. I asked Perkins if his divergence from the Council Majority has caused him any problems. Perkins smiled and said, "I'm not feeling the love I used to," but he was quick to add that everyone is cordial and there is no hostility.

Perkins and I agree that O'Brien is a good writer, but Perkins wanted to point out that O'Brien's interpretation of the budget is incorrect. Perkins went into the other room and brought bound copies of the Audit Report and the Annual Budget. He said that long term debt must be offset by long term assets and short term debt to short term assets. He compared a home mortgage to the value of the home and a credit card to the value of the last purchase. The City's long-term assets include buildings, land, and even the streets.

He said the City is in very good financial condition and cited the AAA bond rating by Standard and Poor's. "We are able to pay our obligations," he said. The City had to dip into "a small amount of reserves, $3 to $4 Million this year, but we never over run our expense plan." In other words, they have used some reserves last year but never overspent their approved budget.

Perkins said he regretted not comparing Herb Moniz's salary increases with regional averages. The City conducted a study of cities in the 50,000 to 100,000 size range for the offer to new City Manager Greg Rogers. Herb was paid annual increases based on performance and the Council didn't think of looking at the comparisons at the time. Perkins told me that Moniz never asked for a raise, and added, "The City saved Herb's salary many times over by his astute ability to craft contracts to the City's benefit."

I asked Perkins what he thinks about his opponents in the race, Phil O'Loane and Abram Wilson, so far. "Phil is a smart man and a reasonable man," he said about O'Loane. The Councilmembers all know Phil well because he served four years on the Economic Development Advisory Committee and another four years on the Planning Commission.

Perkins considers Abram Wilson, "gifted in the political field." I'm not sure if that's a complement or a criticism.

Since Carol Rowley isn't running for her City Council seat the filing period for City Council is extended to August 17th. Perkins recalled how Ed Cahill filed at the last minute in 2003, and paid his election expenses himself to avoid any appearance of conflict of interest. Cahill later told Perkins it was a mistake. He would have been better off getting donations from supporters.

Perkins has about $9000 left in his past Council account and signed the pledge to keep under the $42,368 voluntary spending limit. I asked since he was walking the City and meeting voters face-to-face if he needed to spend so much money. He said that he still needs the flyers, and even if he walks to another 7-8,000 homes in the next two months that won't cover the whole City.

Perkins sees his position on the Council as two-sided. "I have a responsibility to the 'corporate' San Ramon as a member of the Board of Directors, and to residents as a representative of the citizens. Those two almost always coincide," but Perkins wants to be available to residents when they don't.

The City needs to improve communications. He said that people welcomed Town Hall meeting in their neighborhoods. "I have my phone number and address on the City's website. I want people to know there's a person they can call. I need to listen better. It's an ongoing process."

Comments

Posted by Steve O'Brien, a resident of San Ramon,
on Aug 15, 2011 at 3:00 pm

Roz- Thanks for a very good story on Scott. I've read he is an MBA so I am surprised he doesn't recognize that the city borrowed $17.6 million to pay Calpers for unfunded past pension liabilities. Those bonds will cost the city close to $40 million by the time they're paid off in 30 years. These numbers are from the city's own budget publication. Those pension expenses have already been incurred via services rendered by staff (just like past salaries), and as such there is no corresponding physical asset tied to the debt. Pension obligation debt is not at all like floating debt to pay for a long term capital project (like a new library or pool) which provides decades of future service to residents. And by the way, that $17.6 million did not fully cover everything we owe on outstanding pension liabilities and retiree health benefits. There's at least another $6 - $7 million that remains as unfunded. Those numbers are from the city's audit report from last year and from confirmation I rec'd from Greg Rogers. Scott seems like a pretty smart guy and this issue is really not that complex. So I can only assume he may be intentionally dodging the issue as it highlights council's reluctance to more seriously address worker pension structure for the long term. Alternatively, probably the only council member candidate who fully does appreciate this problem is Phil O'Loane. Fortunately we have the chance to vote him into office this November.


Posted by Eric Wallis, a resident of San Ramon,
on Aug 16, 2011 at 3:21 pm

n his comment on Scott Perkins' election campaign, Mr. O'Brien commented on the City's CalPERS pension obligation without setting forth the relevant facts.
Like most other California municipalities, San Ramon's employee pension obligations are handled through CalPERS, which –not San Ramon - is responsible for making investment decisions and contribution allocations to fund participating municipalities' retirement obligations. Until the market crash of 2008, San Ramon was essentially fully funded on its long term pension obligations.
Because of the investment losses CalPERS sustained in the Great Recession, in 2009 CalPERS sent San Ramon a notice basically stating that due to declines in CalPERS investment portfolio, our City was required to contribute some $17.6 million. The City had three options to do so.
First, CalPERS offered San Ramon a payment schedule with interest at 7.75% which, under CalPERS' terms, would not fully amortize. Second, San Ramon could make a lump-sum payment from its general fund reserves, a move that would have lowered reserves to about $11 million.
The third option was for San Ramon to borrow the funds from the market for its contribution. Because of San Ramon's sterling finances, it was able to parlay its top-notch AAA credit rating – a rating it, unlike the U.S. government, still enjoys today - to issue 30 year pension obligation bonds at 5.25%, far lower than CalPERS' offer. The City Council opted for this last choice.
In hindsight, the City Council's decision was correct – the funds the City borrowed saved significant costs compared to CalPERS' rate, and using general fund reserves would have substantially lowered reserves going into what has been a four year economic downturn. Dipping into general fund reserves would have resulted in across the board reductions to City services – and a consequent diminution in our quality of life – to rebuild the reserves to meet the General Plan's policy of a reserve equal to 50% of the City's annual operating budget.
No one likes to incur debt, but given the circumstances that existed, the use of pension obligation bonds was the most prudent fiscal choice to make.


Posted by TD, a resident of San Ramon,
on Aug 16, 2011 at 9:42 pm

Great explanation Mr. Wallis. It is amazing to see people misinterpret and twist the facts. Just because you post it in a blog, it does not make it true.


Posted by Steve O'Brien, a resident of San Ramon,
on Aug 17, 2011 at 5:03 pm

Mr Wallis- your understanding of the events that led to the city's borrowing of $17.6 million to pay for its pension debts seems reasonable. Your assessment that the city would have run down it's reserves is exactly the point- when the debt is netted out, we don't have any reserves!
You did fail to mention the $3.6 million (per last year's audit report) that remains as unpaid to Calpers, and the additional $3 million unpaid liability for our share of the Dublin Fire District retiree health care liability. If you add it all up, that's a total of more than $24 million we owe in various forms of debt.

Now that we've got the numbers down, here's the point of it all:

1)The city needs to stop talking about having a surplus. Effectively there isn't one. If you have $27 million in cash on-hand yet you have $24 million (and counting) in unpaid liabilities, plus a grossly under-funded building maintenance account (per the latest budget), you really don't have a surplus. Telling residents we have one is similar to you telling your family you have $27 thousand in your savings account and stopping there. In reality, you also had $18 thousand due on your credit card (for which you are making annual payments for the next 30 years), plus another $10 thousand or so in other outstanding bills you haven't even addressed. It's a blatant misrepresentation of the facts and our residents deserve better transparency. I hold Mr Perkins, Mr Wilson and the rest of council responsible for propagating that misinformation.

2)I don't agree that the city made the best decision when it borrowed the money to pay for the pension shortfall. The city should have paid what it owed with its surplus cash. Borrowing at 5%+ interest while earning maybe 1-2% on excess cash is questionable financial judgement. The $17.6 million borrowed will ultimately cost the city $38 million. The city should have used at least a portion of its cash reserves to pay its bills, instead of borrowing at a much greater ultimate cost to residents.

3)Perhaps most importantly, city leadership has ignored a critical warning bell by kicking these expenses (plus interest) 30 years further down the road. If your kids are homeowners here in 20 years, they'll still be paying that bill. That's just wrong. Instead of taking this opportunity to address city worker compensation and pensions across the board for the long term, city council punted and now has the audacity to crow about a "surplus".

Just like our State government and many other municipalities, the bottom line is San Ramon cannot afford the salary and pension structure we have in place today. Borrowing on our good credit to delay the problem doesn't fix the root cause. This council needs to stop blowing financial statement smoke and start the hard work of seriously fixing our cost structure for the future.

They can begin now by paying off at least half the bond debt saving the hefty annual interest expenses, paying off the other $6-7 million in outstanding pension liabilities that haven't been addressed, fully funding our anemic building maintenance account so we have adequate funds to repair our infrastructure, and then admit to residents there's effectively no "surplus" remaining.

Finally, do the really tough work of calling employees back to the bargaining table to hammer out a compensation structure that can be supported over the long term. www.sanramonwatch.com


Posted by Resident, a resident of San Ramon,
on Aug 18, 2011 at 9:12 am

If I understand the above correctly our surplus is actually borrowed money. I don't know if that meets the letter of the policy to maintain a 50% reserve balance or not, but it certainly doesn't meet the spirit of that policy. I think the spirit of the policy is to build and maintain a reserve based on spending less than the city brings in, not taking out loans just to show a high cash balance


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