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WatchSonoma
WatchSonoma Watch

GUEST OPINION: The train wreck ahead for Sonoma County

By KEN CHURCHILL

Here is the gravity of our county’s financial situation. From 1991 to 2000, the county spent $108 million on pensions, an average of $10.8 million per year.

From 2001 to 2010, the county spent $302 million on pensions, but ended the decade with a $330 million liability and $515 million in pension bond debt. Added together, the average cost was $114.5 million per year, 10 times more than the previous decade.

Ken Churchill.

These numbers may sound shocking, but the reality of the situation is much, much worse because these numbers are based upon accounting gimmicks and overly optimistic investment return assumptions.

Now Moody’s, the credit rating agency, is proposing to recalculate unfunded pension liabilities when it provides credit ratings for government agencies. This will not change the amount the public agency has to pay for pensions, but it will affect the credit rating of the agency by significantly increasing their debt and future borrowing costs. The new formula also gives us an idea of what pension costs would be if we were responsibly funding pensions.

Moody’s is proposing to use a 5.5 percent rate of investment return (versus the 7.75 percent currently being used in Sonoma County), a 17-year amortization period (versus the 27-year period currently being used) and the market value of pension fund assets (versus a method that smooths losses over five years).

Here is how these changes affected Sonoma County’s pension liability when financial expert John Dickerson ran his model:

The county’s unfunded pension liability more than tripled from $330 million to $1.1 billion. Add on the $515 million the county owes on its pension bond debt and the number grows to $1.6 billion.

As a result of the additional unfunded liability, the annual employer contribution to responsibly fund the plan tripled from $57 million to $168 million per year. Adding on the debt service for the pension bonds of $47 million, the total amount the county should be paying into the pension fund per Moody’s would increase from $94 million per year to $215 million per year.

So using the Moody’s approach, the county’s pension costs have grown to an amount that exceeds all the property taxes collected each year ($210 million), and is almost equal to the annual county payroll ($225 million).

But it does not end there. The supervisors predicted in last year’s ad hoc committee pension report that pension costs will climb an average of $10 million per year over the next decade. So using Moody’s method, the cost to responsibly fund the pensions will reach $315 million per year by 2020.

What do these pension numbers mean to all of us? So far, our roads and infrastructure have absorbed the spending cuts, and as a result 53 percent of the county’s roads have failed and are beyond repair. But there is no money available to reconstruct them, so they will eventually turn to dirt. This will have a huge economic impact on our quality of life and the value of our homes.

And it does not end with roads. In the years ahead we will lose more and more services as more and more money is directed toward an unaffordable pension system.

For the sake of our future and our children’s future, and also for the future of county employees and retirees, we need to work together to solve this crisis in a fair and responsible manner. Right now, that is simply not happening.

Ken Churchill is the director of New Sonoma, an organization of financial experts and concerned citizens working together to reform our government and solve the county’s financial problems.





29 Responses to “GUEST OPINION: The train wreck ahead for Sonoma County”

  1. County Worker says:

    All county workers pay into Social Security in addition to their retirement. If you are suggesting you give me all my money back and let me take my chances in the market, PLEASE. My personal investments are up 16% this years and 140% in the last 5 years. It not so much the retirement payments, it is the dismal performance of their accounts, and the fact they didn’t pay in anything for 19 years. Oops.

  2. homegirl says:

    EVERYONE! should pay into Social Security and have a 401K. Simple but fair. The politicians take good care of themselves and the voter blocks they buy with government pensions. If SS and 401K’s are good for everyone else they should be good for our “masters.”

  3. Annie Erving says:

    There have been suggestions that MANAGEMENT give up their DEFERRED COMPENSATION monies that the County of Sonoma pays management – this alone would save 4.9 million dollars.

    Line staff get ZERO dollars in Deferred Compensation into retirement.

    While we have pot holes, roads in years of distress, parks neglected etc the list goes on

    … please keep this in mind:

    The actual line staff at the county has lost 579 positions permanently… while Management has lost ONLY “3″ positions.

    If we SERIOUSLY look into the Oregon government system their ratios of line staff PER manager are 11 to 13 per one manager.

    Here in Sonoma County we have LESS than 6 lines staff PER each manager.

    Just imagine what great things COULD be done and COULD get done.

    Just thing of the SAVINGS.

    Oregon FOUND a better way to DO GOVERN and save SERVICES AND … taxpayer money.

    Please visit http://www.FIXSONOMA.ORG

    County taxpayer

  4. Annie Erving says:

    Please take ACTION to FIX…..Sonoma County now!

    While our community’s roads are deteriorating, parks going unmaintained, and county workers have been laid off (579 positions gone) please keep in mind that …. only “3” MANAGEMENT positions have been lost.

    Management positions have been protected. In fact, there is LESS than 6 line staff for EACH manager – and it is commonly accepted that there should be between 9 and 11 line staff per manager. (Please check out Oregon and other state government systems out on line).

    Oregon has FOUND a better way – PLUS MORE services are AVAILABLE to the BOTH the public and taxpayers.

    If Management gave up their DEFERRED COMPENSATION THEY get it would save taxpayers 4.9 MILLION ALONE.

    Line staff DO NOT get ANY DEFERRED COMPENSATION MONEY towards retirement.

    Sonoma County CAN maintain, preserve and protect public services through SMART budget decisions.

    It CAN reform structural inefficiencies and invest in OUR roads, libraries, public and mental health services, and law enforcement.

    In these though economic times, I URGE…you… to invest in OUR community by stopping the structural MISMANAGEMENT.

    Please visit http://www.FIXSONOMA.ORG

    We want and NEED to hear from YOU.

    Taxpayer

  5. Concerned Taxpayer says:

    The first problem to me is the Supervisors making decisions on pensions are themselves in line for those pensions, so how can we expect them to be impartial?
    The very first step to correcting this inequity in government worker pay and pensions versus private workers is to eliminate pensions from supervisors – give them 401Ks like non-government taxpayers.
    When they are no longer at the trough themselves, they will be less inclined to keep feeding the fat pigs.

  6. Skippy says:

    Revenge. Payback. Get even. These are the motivations of the Left today.
    Normal people don’t want to steal their neighbor’s wealth, only liberals.
    Like the Occupy losers, providing for themselves through hard work is just too tough.
    Liberal takers want the breeze to blow all they need into their laps.
    They will reap the whirlwind.

  7. Steve Humphrey says:

    Those are interesting comments FOLLOWER. Sadly, your party and ideology has been in charge for quite some time. Despite your claims of being misled, it is you and yours who have been leading us down the road to ruin.
    The day is coming, very soon, when you will go out to your mailbox and there will be no check. Then we can return to normalcy.

  8. Fiscal Conservative says:

    Many thanks to Ken and several others who have been diligent in bringing this issue to the light.

    I have lost confidence in our Counties leaders to provide basic services that include health and safety. Our roads are just one example. Our County has become one of the most expensive places to live in the U.S. in part due to the increased revenues that the County imposes upon each business and taxpayer, weather they be codes, fees or other direct or indirect cost. Our infrastructure is quickly becoming the ruins of a past civilization.

    Based on this new independent data, Sonoma County has the highest debt per capita of any municipal government in California. This is the answer to why business leaves Sonoma County and new ventures avoid investments here. Sonoma County has become Bankrupt and insolvent. Municipal Bonds have been illegally sold to float the listing ship. Bonds that the taxpayer is paying high interest on and that will not be re-newed.

    Our County Supervisors have chosen and continue the actions of ‘failing to act’ or in ‘full support’ in response to increasing the depths this financial emergency. The entitlement for them, outweighs due diligence for basic health and safety concerns.

    I believe it is time to begin investigations, involving the California Department of Justice. I think those responsible for selling bonds intended for infrastructure, but used for illegal pensions should sit before a judge and jury. In the meanwhile I think it would be prudent to have a special election that simply limits the amount equal to one quarter of property tax revenue to be used towards pensions and benefits. The removal of the defined benefit program and implementation of employee options including individual retirement and heath care packages.

    In my opinion, when our elected officials chose ‘failing to act’ or ‘full support’ as a response to indebting our grandchildren in the name of nepotism and illegal gains, it is time for the citizens to take control.

  9. Bill me says:

    @bear. Yes, I know the Supes are setting precedent for their own pensions. I also know the negotiators for the unions misrepresented the costs back when they were voted in and almost nobody realized what was happening back then except the union negotiators. They were smarter than all of us. I also know Grey Davis made a huge problem an insurmountable one with his payouts to those that support the Democratic machine. It is what it is and those folks keep electing foxes to guard the henhouse. Until there is a party that represents smaller government spending, we will keep shutting down.

  10. Don't let them off the hook says:

    Thank you Ken and others for keeping this discussion alive and in the public eye. The county would like to trick the public into thinking they have solved the problem. The press helps them by actually printing county prepared news releases that crow about the insignificant pension savings that will occur as a result of new state law. Don’t let the current board and administrators off the hook. The board members have all been in office at least two years, some four. That is surely enough time that they too now bear responsibility for the problem.If they have not been able to make progress on the counties most pressing problem in two to four years we should replace them.

  11. bear says:

    @bill me

    You object to higher fees for planning and building permits? Tears.

    Perhaps you don’t realize that the County General Fund has been subsidizing ALL public service fees for decades?

    Yes, we must support development, which will bring lots of jobs and generate enough taxes to support all the services that everyone demands?

    WHAT IS WRONG WITH THIS PICTURE?

    Give it up. Thirty years of economic data reveal the death of the middle class, thanks to vulture capitalism and vast tax loopholes that profit only
    the one percent.

    No one has responded to my prior e-mail that raised issues of politics, rank and economic policy.

    DO YOU REALIZE that elected officials are voting on their own pensions? The little people just take the crumbs they are given.

    I’d support most of you if you would alter your arguments just a bit?

    Your thoughts are right, but your aim is off?

    Blessings on the principal and the staff and the teachers who took bullets in the name of public service.

  12. bear says:

    @bill me

    You object to higher fees for planning and building permits? Tears.

    Perhaps you don’t realize that the County General Fund has been subsidizing ALL pubic service fees for decades?

    Yes, we must support development, which will bring lots of jobs and generate enough taxes to support all the services that everyone demands?

    WHAT IS WRONG WITH THIS PICTURE?

    Give it up. Thirty years of economic data reveal the death of the middle class, thanks to vulture capitalism and vast tax loopholes that profit only
    the oen percent.

    No one has responded to my prior e-mail that raised issues of politics, rank and economic policy.

    DO YOU REALIZE that elected officials are voting on their own pensions? The little people just take the crumbs they are given.

    I’d support most of you if you would alter your arguments just a bit?

    Your thoughts are right, but your aim is off?

    Blessings on the principal and the staff and the teachers who took bullets in the name of public service.

  13. Rick says:

    Everyone should check out New Sonoma. Study the site, not just the talking points. This would be out of the pan and into the fire. I quote from the website set up by Ken “Solendra” Churchill,
    “We will also work to ensure the County is properly managed by making New Sonoma an important part of our local government. Its purpose will be to monitor our government’s actions, provide input into important financial decisions, and ensure the interests of citizens and taxpayers are properly represented in all important financial decisions. ”

    Unelected bankers and solendra type public money scammers want control of Sonoma county’s government. Good luck.

  14. James Bennett says:

    There should be plenty of funds.

    We don’t have a math problem,
    we have a loyalty problem.

  15. GAJ says:

    @Bear, the Republicans are responsible for this mess??

    If you read today’s article on Santa Rosa’s problems you will see that CalPers claims its investments grew by 22% in the most recent period yet Santa Rosa unfunded liability increased by $15 million.

    Obviously if those kind of returns can’t bring down runaway liabilities then the problem lies with the increased benefits which, as you may recall, were voted in base on CalPers’ lies in 1999!

    CalPers and their lies, and politicians willing to give government Unions an ever increasing chunk of State budgets in order to stay in office continue to be the problem.

    How a system based on corruption is allowed to remain in place is beyond me.

    Certainly the Courts, (government employees all), won’t step in to save the taxpayer.

    Good news is that when the chickens come home to roost taxpayers with assets can flee it before they are sacrificed at the altar of Union corruption and greed.

    I hear North Carolina is beautiful and their average government debt per person 1/4 that of California.

    I’ll be there visiting friends this summer; maybe I’ll buy some property there and leave this mess I had no hand in creating behind.

    Believe me, I won’t be the first or last person to think such thoughts…and many of those who’ve moved happily cash their CalPers checks while chuckling at the problems we face here.

  16. Accountable says:

    @Snarky – That Sac Bee article also reports the following:

    “A $245 billion heavyweight, CalPERS has helped shape the very structure of public employee benefits in the state. It has the UNILATERAL AUTHORITY to set annual contribution rates from the state and participating local governments…

    Six of CalPERS’ 13 board members are elected by current or retired public employees…

    The city’s bondholders, in a separate filing, scoffed at the idea that CalPERS – which just announced it will hire 86 high-salary employees at a total annual cost of $16 million – will be weakened financially by delays in the city’s payments.”

    No entity should be allowed to exist without checks and balances, especially an entity that can demand payments from taxpayers should it’s investments fall short.

    @Bear – why don’t you go to the newsonoma.org website so you can see the vast financial and business experience of the individuals who sit on the board. They far outweigh the hacks who sit on the Sonoma County Board of Supervisors or the Santa Rosa City Council

  17. Bill me says:

    Public pensions are a big part of our spending problem-but not the whole story. Our County PRMD continues to raise fees every year while the workload (number of active permits) continues to decline. At a time when we should welcome well designed projects being built locally, the applicants for those permits continue to be told they need to fund higher and higher fees. That is not economic development. It is economic suicide. Those projects, if built, would increase the values of the properties and give us more taxes (in the long run) for all services. Fixing the pension issue is hard. Not raising PRMD fees each year is easy. Let’s START with easy. Start cutting the top admin salaries at PRMD rather than the clerical worker’s pension. You get 10 times the impact.

  18. Taxpayer says:

    It seems bankruptcy is the only solution to get these pensions more in line with the real world.

  19. R. B. Fish says:

    @ Dan. Your thinking is going down a good path. $100K for pensions is far too high and not sustainable. Salary cap at $100K for key personnel and 50% or less for pension cap that is $50K.

    First terminate public service unions.
    Second reduce management staff.
    Third is that public safety personnel work for the better good of the community within it’s ability to pay. The ability to pay is expressed through a mandatory budget and salaries and pensions cannot exceed the budget. Thus these personnel would have to perform within this monetary amount with the exception of diasasters.
    All personnel can only work for 20 years with no retires in any other categorie or department.

  20. Follower says:

    Another Republican trick, playing with the numbers to make your point.
    In the midst of your alarmist number twisting you seem to ignore the FACT that you Republicans have been sent packing.
    No longer will you be allowed to stand in the way of US making your filthy rich friends skate on their social responsibilities.
    You arrogance will never allow you to admit that YOU didn’t create that wealth, WE DID!

    And we deserve our fair share!!

    In case you were out of town last month, I have news for you and all your slimy rich friends…
    YOUR TAXES ARE GOING UP!

    And when they do, all these problems will go away and we will finally have the revenge we voted for.

  21. Snarky says:

    The following is an article that everyone should read in the Sacramento Bee regarding the public pension fiascos brought upon us by greedy government workers and inept bureaucrats.

    http://www.sacbee.com/2012/12/16/5057342/calpers-fight-tries-to-salvage.html

    The mess is predicted by some to actually reach the US Supreme Court and we all know that means the mess will be with us FOR YEARS… festering… and creating havoc in local and state government operations.

  22. Snarky says:

    How about we terminate ALL public pensions and put them on Social Security retirement?

    Why should public employees be allowed to retire, as they currently are allowed to do, 17 years before the rest of us can apply for social security?

    Government workers are allowed to retire at age 50.

    YOU, and every other private sector worker must wait to apply for social security until age 67.

    Just another example of how government STEALS our money for its own purposes.

  23. Jim says:

    I’ve been preaching the demise of every city, county and the federal government for years on this site. The numbers are the numbers. Moody’s calculations are barely less ridiculous than the county’s and look at those numbers. Every dollar of property taxes collected is needed to fund just the liability for future pension payments with nothing going to run the county.

    Oh well, doesn’t matter. This same story can be told about every city in the state, the state itself and the federal government.

    The elected thieves in Washington are fighting about raising taxes on the “rich” that will collect a measly $800 billion OVER 10 YEARS!!! The annual deficit is $1.5 TRILLION. $80 billion in extra taxes (estimated, we all know they won’t collect that) on a $1.5 TRILLION deficit is freaking pennies.

    The voters are being duped into thinking any of the posturing will do something. The Democrats won’t cut spending. The deficits CAN’T be reduced without MASSIVE spending cuts.

    Eventually the bills will come due and there won’t be any money. THERE ISN’T ANY MONEY NOW PEOPLE!!!

  24. steve says:

    Thanks Ken for the analysis… Yes, we have a big problem coming up.. The government has promised their employees TOO MUCH… When times were “good”, everyone was getting big raises and big promises, however unlike the private industries, when economies tighten up, the unwaivering public employes give no care… they want was promised and don’t care how they get it… In the real (private) world, we must cut back and renegotiate ALL contracts… It’s real simple… Wish the government could do the same… I assume they’ll act like the parasites they seem to be and take from the private companies via higher property taxes, higher sales tax and increased income tax… sad.

  25. stewart chaimson says:

    Our elected officials over-promised benefits but are compounding the problem by waiting so long to deal with it. And how safe is 5.5%? If you contract with a financial company to invest your money with a guarantee, they will only commit to half that amount.

  26. James Bennett says:

    Unfortuneatly, in order to understand and reconcile what’s going on fiscally requires a forfeiture of common sense and good will.

    From that day on December 23rd, 1913 when the Federal reserve Act was slipped in while many of the boys were home on holiday to its ultimate culmination which is now-ish.

    From Obama giving billions to the U.N..

    From billions in “diplomacy” to other countries.

    To any governmental acronym they can contrive as black hole of waste.

    Pensions are just another time bomb lit long ago.

    The perspective of the well intentioned piece from my friend Ken Churchill is addressing the symptom. Even though Ken forgot more about accounting and finance that I’ll ever know, I would submit this.

    Our fiscal, civil, political, moral problems are all systemic of our official’s loyalty.

    Who do they work for?

    The Fed? ICLEI, both of which have dark globalist interests. I believe unions are another instrument of business sabotage.

    This is just another manifestation of deliberate sabotage.

    Our original governmental model has been insideously contaminated as to be unrecognizable from its original principals and mechanism.

    Like I’ve said, they don’t want to remodel. The Globalist Agenda is to build a whole new structure.

    So there is demolition to do.

    What we are currently witnessing is the carefully orchestrated, socially, civally engineered incremental demo of our Country.

    The UN along with their partners in crime the Federal reserve are doing a great job of it.

    Globalist or American, that is the question that has been posed to our leadership.

    Guess we got our answer.

  27. bear says:

    Mr. Churchill:

    What are your qualifications to say anything on this subject? How about some specifics? Degree in Economics or some other relevant field? Ever work for government? What have you ever done?

    Have you compared State vs. County vs. City pay and benefits? Have you compared the pensions of “little people” vs. those of managers and politicians?

    Given the courage of the principal and other staff in the Conn. shootings, maybe you can begin to understand the risks of being ANY public employee.

    Only then, with all the data, might you BEGIN to understand how much common public employees risk and sacrifice for you and your family.

    Funny how these problems did not exist until republican economic policies crashed the economy.

    You are on the losing end of this debate.

    Please post an intelligent reply.

  28. Dan Drummond says:

    Sorry to do this again, everyone. But I am the Dan Drummond who serves as Executive Director of the Sonoma County Taxpayers’ Association and periodic guest contributor to the Press Democrat. The person using my name above is not He has apparently stopped using his middle initial to distinguish himself from me making it impossible for readers to know the true author. As embarrassing as it is to have people I respect attribute this other fellow’s prosaic comments to me, it is unfair that readers are misled as to the writer’s true identity as well. Accordingly, this will be my last post on WSC. Best wishes to you all.

  29. Dan J. Drummond says:

    Since a fair solution is simply not happening in a responsible manner, how about we pass a resolution/law that all current pensions be capped at let’s say $99,999, and let the attorneys fight it out in court.
    It would be settled before the County goes bankrupted – thumbs up
    The County would go bankrupted before it’s settled- thumbs down