Unfunded liabilities prompt initiative, council resolution

Street repair is one of the major deferred maintenance costs the city faces. Photo: Tracey Taylor

A ballot initiative to force the city to do biennial reports on obligations for employee and retiree expenses and for Berkeley’s physical infrastructure and capital assets appears likely to appear on the ballot in the November election, according to supporters of the plan. At the same time, at tonight’s City Council meeting a similar measure is being proposed by four councilmembers, led by District 5′s Laurie Capitelli. The council measure, however, lacks the penalties for failing to produce the report that the initiative draft contains.

The ballot initiative is called the Berkeley Fiscal Accountability, Clarity, Transparency and Sustainability Ordinance of 2012, which shortens to FACTS. It would require biennial reports on the city’s financial obligations for the next 20 years, and would prohibit the City Council or the voters from “incurring any debt financing, or imposing any new tax, assessment or property-related fee, or increasing any existing tax, assessment or property-related fee, or scheduling an election to impose or increase and tax, assessment or property-related fee” unless the report required in the ordinance has been published and certified.

“We have enough signatures,” said Jacquelyn McCormick, coordinator of Berkeley Budget SOS, which has promoted the measure. “We’re well over the minimum number required.” Alameda County officials say that it takes 30 business days to validate signatures.

The City of Berkeley’s unfunded liabilities have been the focus of a series of City Council workshops over the last year, covering areas such as pensions, streets, storm drains, and park and recreational facilities. Both Berkeley Budget SOS and Capitelli agree that the total of unfunded liabilities and deferred maintenance is around $1 billion.

“I’ve had an ongoing frustration with information not being available in a single location and not being understandable,” Capitelli said. “I agree with most of the thrust of the [initiative]. But I’m concerned about the clause ties the hands of the council. My fear is that we might be inviting litigation.”

McCormick said the council resolution would be satisfactory “if they follow through.” She pointed out that a similar resolution passed in January, 2010, requiring a 30-year study, but nothing has resulted.

“People don’t believe that they’re going to follow through,” she said. “They want to have something with teeth in it.”

Related:
Berkeley faces difficult path to funding pension liabilities [02.16.12]
Berkeley city salaries track neighbors closely [03.16.11]
City budget faces $1.8 million mid-year shortfall [02.15.11]
Council faces tough decisions on unfunded liabilities [01.19.11]

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  • TaxPayingSerf

    That’s right Capitelli, it will invite litigation because that’s the only thing you guys understand.  Berkeley residents should prepare to be horrified at the state of the city’s financial situation if this passes, we are truly screwed.

  • bgal4

    Thank you fellow citizens from Berkeley SOS, this in important work keeping the council attentive to the fiscal responsibility that is critical to how our city operates.

  • Concerned Taxpayer

    The question to be asked is why, for over 4 years, has Council and the City Manager rebuffed all citizen efforts to get a clear accounting of Berkeley’s financial status and our accumulated debt and liabilities.  I believe it is  because such an accounting will reveal how grossly self-serving city management has been, particularly under Mr. Kamlarz, and how derelict our “Dear Mayor” and council have been in their oversight duties. Litigation, Mr. Capitelli?  Of course.  And as has happened more and more often in this city, Council and city management will be using tax payer money to defend themselves against taxpayer lawsuits.  Brilliant move if you are council or city management … obviously not so good for Taxpaying serfs.     

  • readytomove

    Why Capitelli is opposed to this is beyond me.  He should be embracing it with everything he has.  This committee is trying to save Berkeley from imminent disaster.   And he is trying to go ahead with a West Berkeley plan that the City doesn’t have the money for and the residents of West Berkeley don’t want!!!!!!!!  Figure that one out

  • Tomales Bay

    Why did the Council wait till it looked like Budget SOS/FACTS would get enough signatures for the ballot initiative to qualify?
    Suddenly they are interested in once again introducing a resolution that they do NOT intend to enforce; anything to avoid a citizen driven initiative which will require action by the council.  When asked why the 2010 resolution was not enforced, one council person said “we pass lots of resolutions that we don’t enforce” and another said
    “we just didn’t—”.  Maybe it is time to have term limits for city council members or some form of recall if they don’t perform as elected officials by the people but not for the people.

  • Anonymous

    More like, maybe it’s time for some indictments. Don’t forget what happened in the city of Bell in 2010, it could happen here too.

  • bgal4

    Lance,

    Glad to see B-Side is now willing to cover city fiscal issues. How about an interview with Berkeley SOS, I know the group has been working steadily  for a couple of years. This would be an apt time to discuss these issues on B-Side since the city is currently in contract negotiations with the various unions.

  • http://caviarcommunism.us West Bezerkeley

    “But I’m concerned about the clause the ties the hands of the council. My fear is that we might be inviting litigation.”

    Translation — the council would hate to be held accountable for not following a voter mandate. The sad thing is that Laurie Capitelli is the only person with a serious challenger so far.

  • StillStunned

    They do pass a lot of resolutions they don’t enforce.  It is the City Manager’s JOB to see that resolutions are enforced.  Kamlarz was too busy feathering his own nest to bother doing his job.  And sadly, the Mayor has just selected a new City Manager who will do his bidding, rather than the job she is supposed to be doing.  All power corrupts; absolute mayoral power corrupts absolutely.

  • Voxhumana

    We have a city staff of hundreds hired to permit, enforce and follow through. Yet I’ve been told directly by CoB Code Enforcement: “we don’t enforce that law, we leave it to the merchants to work that out.” WT?

  • FiatSlug

    “I’ve had an ongoing frustration with information not being
    available in a single location and not being understandable,” Capitelli said.
    “I agree with most of the thrust of the [initiative]. But I’m concerned about
    the clause ties the hands of the council. My fear is that we might be inviting
    litigation.”

     

    What this tells me is two things:

    (1) At a minimum, City Staff is incompetent in the ways of
    efficient record-keeping.  Locating critical information should never be
    difficult.  Other possibilities include some City Staff members
    deliberately withholding information for whatever reason (indifference? embezzlement? fear of job cuts?)

    (2) City Council members fear the scrutiny.  The whys
    and wherefores of this fear have yet to be revealed, but given bond measures
    and special assessment in recent years for services that should be paid out of
    the general fund (like paramedic funding), it would not surprise me that City
    revenues have been mishandled, misappropriated or outright stolen.  It
    also would not surprise me that City Council members don’t know where the tax
    dollars are being spent.

     

    I suspect that the transparency required under the
    voter initiative would reveal the extent to which essential city
    services are being re-prioritized for pet projects or political patronage.

     

    Berkeley’s priorities should be:

    (1) Public Safety – meaning police, fire, paramedic
    services, inspection services (buildings), animal control (incl. animal shelter)

    (2) Infrastructure – Sewers, storm drains, sanitation
    (like garbage collection and recycling), streets, street lights, sidewalks,

    (3) Amenities – parks, and public libraries

     

    Other items will follow, naturally.  But these need
    to be Berkeley’s
    top priorities.  These priorities are what make living in a city not just
    bearable, but desirable and support the commonwealth of the city’s residents
    and businesses.

     

    City Council could obviate the need for any ballot
    initiative by leading the way in providing the information that FACTS would
    require. 

     

    That City Council is considering their own
    initiative with less strict language shows that we do not have leadership on
    the Council, we have people occupying Council seats who fail to grasp the
    significance of an open and transparent government.

     

  • Bishop Berkeley

    Since Berkeleyside has finally running an article in which budget concerns are treated seriously, let’s jump to Chapter 2 — The Other Elephant In the Room.

    FiatSlug speaks for many citizens with this sentiment:

    “Berkeley’s priorities should be:  (1) Public Safety – meaning police, fire, paramedicservices.”

    The Other Elephant is the fact that public safety commitments (or over-commitments) ARE among the biggest causes of our unfunded liabilities.  No one likes to talk about that, which means it’s EXACTLY the sort of thing good journalism should explore.

    If this initiative passes (I pray it does), and if citizens start taking our financial problems seriously (ditto), and if Councilmembers become honest (ditto), then we will have to talk about our irresponsible contracts.  And if we do, we’ll need to talk like grownups about public safety contracts, which are among the most irresponsible of them all.

    It will be very, very interesting to see whether the public safety unions throw their considerable weight AGAINST passage of the FACTS initiative.

  • EBGuy

    For some reason I feel like listening to Dionne Warwick…

  • Bill

    One way to get the attention to this need fairly quickly would be to vote down any June or November bond and or fee changes/increases until we fully understand the city’s situation.  As state before, the elephant in the room are the pension benefits for ALL city employees and I say this as a full supporter of defined benefit plans.  That said, all unfunded liabilities should be clearly defined as direct bond and pension financial liabilities of the city not some made up feel good measurement.  Finally, the world doesn’t end if the report isn’t good.  What it means is that action has to be taken to gradually bring the liabilities down to a sustainable level over time.

  • FiatSlug

    Over the weekend I got a phone call from a pollster (I don’t remember who) asking about potential state ballot propositions on the California November ballot.  Then the pollster asked about potential Berkeley tax measures. A bond measure on Warm Pools and a bond measure on street repair.  In both cases, I answered no which brought on a longer explanation of the bond measure, to which I answered no, again.

    I explained to the pollster that these items are things that should be paid for out of the General Fund, but the only reason that they are being proposed/talked about as bond measures is because the City Council’s priorities are obviously somewhere else.

    It makes no sense to pay for certain thing with capital bonds when you think that they should be amongst your City’s top priorities.

    Unfunded liabilities have become a problem in Berkeley (and other places) precisely because of the mentality that voters will fund essential services with bond measures.  It’s the credit card habit and it gets you on a treadmill that becomes increasingly hard to stop.

  • Berkeleyfarm

    Not really impressed (to put it mildly) with the ability of this council to regulate itself.   If it needs a threat of a lawsuit to get you to do your oversight jobs, so be it. 

  • Bob

    “Part of the high pension costs lies in the fact that the city covers not
    only the employer contribution but also most employees’ 8 percent
    individual employee contribution for CalPERS, a state pension fund that
    uses investment returns to provide for employee pensions. Most city
    employees receive 2.7 percent of their salary at age 55 for every year
    that they worked. Firefighters and police, who do pay their CalPERS
    employee contributions, receive 3 percent at age 50 instead.”

    UC gives us 2.5% per year at age 60, based on highest 3 year average income, quite generous in my opinion.  Would it really be devastating to city (and other state workers) to wait until 60 to retire?  And to use an average salary?

  • Bill

    That last paragraph expresses my view of a statewide problem.  In my view it’s a situation brought on by prop 13 and the 2/3rd’s tax rule which doesn’t allow the state and cities to pay for the services the people want thereby disassociating the cost from the service.

  • FiatSlug

    I agree that the credit card habit applies to Sacramento and throughout California as well.  Tax policy has become ever more patchwork and piecemeal since Prop 13 was passed: there is little unifying the tax code at the federal or state levels, nor is there a unified approach to revenues for the state or local budgets.

    The 2/3rds rule is an artifact of Prop 13 that unfairly hamstrings the majority party in enacting tax policy and legislation and allows the minority party to be obstructionist in passing a budget.  Further, as a result of Prop 13, property taxes were eventually appropriated by Sacramento; they do not necessarily reside at the local level.

    Let’s repeal Prop 13, but then do the following:
    (1) allow a split property tax roll throughout California.  Allow commercial property to be taxed at a higher rate than residential property and allow commercial property re-assessment every two years instead of on change of ownership.  As it is now, commercial property ownership rarely changes because most commercial properties are owned by a holding company.  Ownership in the holding company may change, but not ownership in the building.  As a result, commercial properties escape re-assessment under Prop 13.
    (2) Preserve residential property re-assessment on change of ownership.  It makes no sense to tax people out of their homes just because they’ve owned the property for decades.  
    (3) State budgets pass on a simple majority, including tax changes.  The majority should sink or swim on the basis of policy enacted: that’s why we have a legislature and elections.  The majority should be responsible for their actions and the minority should come to the table ready to propose responsible alternatives where there is disagreement.   The current 2/3rds rule encourages extremist positions, not positions of responsibility, cooperation, and moderation.
    (4) Prohibit Sacramento from appropriating property taxes for the state budget: property taxes stay at the municipal and county level.  If Sacramento wants funding for state programs, they already have personal income taxes, business taxes, state sales taxes, federal grants and fees for state services (like DMV, state parks, etc.)

    Other things I would like to see debated and possibly acted on:
    (1) a unicameral legislature. Is there really a purpose in having two houses of the legislature when all of the members are elected from districts based upon population?  One house or the other is superfluous and only serves to clog the process of creating legislation with another layer.
    (2) remove term limits – Prop 140 was an over-reaction to Willie Brown.  Prop 13 created an environment in which Brown flourished.  Term limits are best exercised at the ballot box.

    Campaign finance reforms are another issue, but one I would not want to open up here.  So, I’ll stop now.

  • Guest

    abolish corporate personhood
    modify prop 13 so it does not apply to corporate holdings

    problem solved

  • FiatSlug

    If your first step were easy enough to accomplish, I would support this approach.

    But it isn’t.  It’s easier to repeal Prop 13 and put a new law in place or modify it.

  • Bishop Berkeley

    While we’re waiting for Prop 13 to get fixed, how about we all agree to try fixing our local problems?  You know, in the meantime.

    Will we commit our time and money to getting the FACTS initiative passed?  Will we be active in the next Council election?  We we pick up the phone, and hold sitting councilmembers acountable for their budgeting?

    Let’s start with changing the things we most easily can….

  • Fed-up (again)

    The Council is only interested in this now because of the pressure from Budget SOS.  The financial problems have been brewing for a long time, and Council has never tried to get a real picture of the long term situation.  They are afraid to follow the trends into the future.  But every year that they delay, things get worse.  Two years ago Budget SOS got two Council members to introduce something similar but it didn’t have any means of being enforced.  Staff didn’t produce the required report, and no one on the council pushed to get it.  They have their heads in the sand.  Now, only because they are under pressure again from SOS, a citizens group, are they introducing something else similar, once again with no teeth.  They don’t
    really care about getting the real data at all.  They just want to look
    good in an election year.  If they cared to make decisions based on
    real data about the City’s financial information, they had years ask for and get it.   They did not.  This is just cynical election year posturing.  The initiative is still needed because without it they will never do the right thing

  • Bruce Love

    So, we’re all concerned about the ~$1B in unfunded liabilities.   The F.A.C.T.S. initiative and council independently respond to this by proposing a new reporting requirement for the City Manager.

    I’m trying to understand the proposed F.A.C.T.S. ordinance and the alternative from council.   The web site of the Committee for F.A.C.T.S. has this to say:

    The ordinance would restrict the City Council’s ability to incur debt
    financing or impose new taxes, assessments or property-related fees
    during any period the Report is not prepared.

    As nearly as I can tell, council’s authority to incur debt and tax is unconditionally established by the charter and state law.   In other words, it is literally impossible for a mere ordinance to “restrict the City Council’s ability to incur debt financing or impose new taxes”.    I’m skeptical that these supposed restrictions would have any teeth.

    The council’s measure, on the other hand, says:

    NOW THEREFORE, BE IT RESOLVED by the Council of the City of Berkeley that th City Manager is hereby required to develop and publish a biennial report of current City liabilities and projections of future liabilities and that the report shall be published in February of the second year of the City’s biennial budget beginning in February 2013.

    I should add that the specific “requirement” here is to publish something similar to a very small spreadsheet described in an appendix to the resolution, along with a few other “summary” numbers.

    This too is a bit problematic.

    First, the proscribed reporting requirement is quite narrow.   It is as if it were designed for ease of compliance rather than to better inform the public.

    Second, nothing in the “requirement” has the council voting to accept the report or in any other way reviewing the City Manager’s performance of this duty.   The CM must merely “publish” it.   The consequences of not publishing are nil unless Council chooses to make an issue of it.   The consequences of the report being technically accurate but so devoid of detail as to be useless are nil.

    Of course (and yes, it’s self promotion)… I think there is a better approach:

    http://www.berkeleyside.com/2012/06/03/city-manager-is-immune-from-oversight-time-for-change/