Op-ed: Pension problem fairy tale

Berkeley has more than a half-billion dollar pension problem deficit which will increase substantially for decades to come. This appears to be an insurmountable problem. But it need not be. Consider:

The city has about 216 miles of roads and 300 miles of sidewalks according to the Public Works website. The city website says Berkeley has 400 miles of sidewalks. It costs between one to two million dollars a mile to rehabilitate a badly deteriorated road – therefore I assume that you could build a new road for roughly the same price.

The city should deed its roads and sidewalks to Public Employee Pension Fund ( PERS ) in exchange for PERS forgiving Berkeley’s half billion dollar debt and all future contributions.

This transaction would generate a 1.5% transfer tax to the city of Berkeley immediately ($7.5 million) which the city could squander at the pleasure of the council and staff.

Alameda County would collect annually from PERS 2% of the value of the roads in this transaction –or $10 million annually which would increase 1% per year. Alameda County could use this windfall. The county has an affordable housing bond on the ballot which indicates that the affordable housing will cost about $650,000 per unit. The bond measure doesn’t have this cost per unit in it but it is what you get if you divide the amount of the bond by the number of units they propose to build. It is difficult to see how society can afford to house the homeless with these costs. The taxes from PERS would build fifteen units a year.

Berkeley has about 800 homeless people so in 50 years they can build enough housing to house all the homeless and it will be fully paid for housing. Of course, this housing will be trashed in 30 years just like the 75 units of scattered site housing the city built in 1984 at a cost of $8 million.   The Housing Authority collected basically market rents for 30 years and then sold the property to a REIT in Florida who spent $15 million rehabbing the units. (Twice the original cost) What happened to 30 years of market rate rents?

Note that of the $10 million the county collects the city would get back approximately $3 million each year.

PERS could put up Dean/Bates toll gates on most roads to collect money to support the pension costs of the city employees if their investments don’t earn enough to cover pension costs. Thus every time you went shopping or to work you would contribute some small amount that would go to PERS for city employee retirement costs. If PERS investments didn’t make sufficient returns to pay pensions and repair streets and sidewalks then PERS could just raise the tolls. Just like the Metropolitan Transportation Commission (MTC) does to pay for billion dollar bridges.

This proposal would allow the police and fire personnel to retire with pensions of $300,000 or so per year for the rest of their lives plus health care and cost-of-living adjustments and many other city workers would be right behind them. This seems reasonable as Obama will get  $190,000 next year when he terms out. He also gets a few other perks that retired city employees don’t get.

Voila! The pension problem is solved. And the city doesn’t have to maintain the roads and sidewalks. Why didn’t staff think of this?

Note if this doesn’t solve the pension problem then the city still has the sewers that they could sell to PERS and put a meter on the sewers to collect money every time you took a shower or flushed the toilet. This approach has limitless possibilities to solve the pension deficit problem. Maybe staff could put it in an initiative for the next election.

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Ted Edlin, who has lived in Berkeley for more than 50 years, was formerly president of the Council of Neighborhood Associations, vice-president of NEBA, chair of the Housing Advisory Commission, and a member of the Fire Commission, now known as the Disaster and Fire Safety Commission.