A One-in-Four Chance

On Tuesday the Council will discuss the fiscal reform proposals that Mayor Reed has researched and constructed. It will not be not an ordinary city council meeting but instead a major discussion being held in big cities across the country.

Last week, the Council had a study session regarding the City’s retirement system.  From my view, the presentation given by staff, which included the director of retirement services, Russell Crosby, was one of the best I have seen.  A step by step explanation of the retirement system was provided.

It is clear that the retirement system itself does not scale. Through no fault of the individual retirement participant, the system itself is structured on a poor foundation that will eventually collapse . 

The meeting included candid comments from Mr. Crosby.  The most notable comment was the “death spiral,” which is when you have employee-to-retiree ratio parity. For example, in the past, the City has had as many as six employees supporting each retiree. That has now dropped to approximately 1.3 employees-to-retiree and continues to fall as the baby boomers retire and live longer.

The city pension system is like a mini Social Security system that constantly requires new people paying in to keep it afloat.  Some use the “Ponzi scheme” analogy when it comes to defined benefit plans and there appear to be similarities. San Jose has funded a portion of the total amount it needs to cover all those who are eligible, which is unlike Social Security, which is not funded but rather has a file cabinet in Virginia of IOU’s passing it on to the next generation.

Some say just don’t worry and pay later. The City cannot emulate the issuing of IOU’s as the Federal government has done and raise the national debt to pay retirees. If San Jose stopped paying the minimum annual payment the pension fund would run out of money in approximately eight years. So, some might say, well let’s just pay half the payment. Well, that would allow the payments to go further past eight years but not much more as there will be additional costs to not making the full annual payment.

To some extent you may think of the pension system as something one could walk away from, like a mortgage payment on a house that is underwater. But since the taxpayers are on the hook and retirees are dependent that changes the analogy.  It would be like walking away from a house, however, the difference is you have left your friends inside the house with no food or utilities and they are bed-ridden.

One stat that basically admits the retirement system does not scale is that the fund has only a 25 percent chance of actually earning the assumed rate of return. Anytime it does not hit the assumed rate of return, it creates an unfunded liability. Personally, I would not do something so important in my own life if I only had a 25 percent chance of making the goal. If we want a higher likelihood of hitting the assumed rate of return then we must lower the rate. But that will require more revenue going into the pension system in the short term, which equates to more cuts in services, thus layoffs or raising taxes and seeing the new revenue only going to the pension system.

The Retirement Reform Budget Study Session is available here. I highly recommend downloading the presentation and reviewing it as I feel it is one of the best presentations given to the Council on the retirement system and contains much more information than I have written in this short blog post. I have already shared it with a few retirees that have emailed me on the topic. Accurate information is beneficial as demonstrated by the police union hiring an independent actuarial who confirmed that changes must happen to the pension system.

On another topic the total amount of sick-leave liability on the books today is $114,825,100. Approximately $20 million could be paid out this year based on individuals with the ability to retire.

On to happier matters: Congratulations to the Lincoln Glen Little League for hosting the 2nd Annual Challenger Game. The Challenger Game includes mentally and physically challenged 5-18 year olds who each get a buddy from the Little League to play a baseball game.  Puts life in perspective.

100 Comments

  1. The only reason I enjoy Monday mornings is Pier’s column.  I look forward to it.  Always a straightforward explanation of a pertinent topic. 

    Very refreshing, like that first cup of coffee in the morning.

  2. Yes, Pierluigi, it is very annoying; the fact that all these people are living longer lives after retirement.  What these retirees need to do is realize what a burden they are placing upon the system and the taxpayers.  They need to hurry up and DIE.  Then all that money that they didn’t collect will get folded back into the system.  Sound like a good plan?

    • “They need to hurry up and DIE.  Then all that money that they didn’t collect will get folded back into the system.  Sound like a good plan?”

      Actually other countries are doing that. Pension and medical benefits ends at age 70.Then you are on your own. So after 70 years old you are forced to die and fade into the system. What they do the retirees above 70 will hook up to their daughter/sons’s health insurance coverage.

      Circa 2016. City of San Jose Department of Retirement Service and Death Panel Review Committee:

      Sir, our system pays you benefits at 1.5% at 65. Do you like the lump sum payment or your checks to go to your funeral services account?

    • Living longer is a good thing however demographic trends affect actuarial costs and must be funded by either current employees, taxpayers or retirees. Same is true with Social Security.

      Pierluigi

      • No, actually it is the City’s responsibility. San Jose contracted an employee to do job X with the expectation of certain pay/benefits.

        Simply becuase San Jose failed to estimate how many future employees would be paying into the system is not justification to abandon your contractual obligation.  The City already got 25-30 years of the service they expected and contracted and the City must live up to their end of the bargain.  It’s very simple.  The failure of past or curent City leadership to spend prudently does not absolve that contract nor obligations.  You sir, and your elected comrades are on the hook- NOT the employees. 

        You are responsible for telling your constituants the truth.  That City management erred and created a STRUCTURAL defecit.  Paying billions for SJC, City Hall, redevelopment, low income housing… list goes on.  Our elected have not prioritized necessary services for in excess of 10 years, and are not positioning themselves to do so in the future.

      • Pierluigi,

        Thank you once again for the informative post. I too look forward to Mondays to read your new blogs. (And no, SJI readers I do not work for him: I am an unpaid fan. wink )

        However Pierluigi, I am not sure I agree w/your comment that “living longer is a good thing…” because quality of life is the deciding factor as to whether one enjoys their “golden years” and living longer. With senior services dissapearing and “shut ins” getting few if any visitors, well, I’m not sure myself that I would be looking forward to blowing out yet another candle come my birthday. If services were restored and seniors started getting the care, attention and respect they deserve, well that would be a different story. (Bring on the candles!)

        Tina

        • Johnmichael,

          Yes, I do believe people (all people) are entitled to respect, simply for the fact that they are human beings with feelings.

          As for as my “generation?” I’m in the murky area between the Boomers and the GenXers. What does that make me? Probably confused. :-D
          Cheers,

          Tina

  3. “For example, in the past, the City has had as many as six employees supporting each retiree. That has now dropped to approximately 1.3 employees-to-retiree and continues to fall as the baby boomers retire and live longer”

    …and don’t forget all the people you have laid off and are GOING to lay off in the future-those are less employees to pay INTO the system. Talk about cutting off your nose to spite your face.

  4. Can you tell me why the city cannot sell the 92 million police substation that has been mothballed and will never be opened.  Not when we don’t have the manpower now and your city council plans to lay off hundreds off officers?

      • Why dont you have the police move into the new up to date substation and close down the nasty dirty ugly and outdated station they are in now! Sell off the old station as one big parcell with the old city hall!

        • No worries……the citys plan is to fire/layoff as many cops as they can, then move the skeleton crew that is left down south, so the city can either sell or give away the land the current station sits on

        • the building was never completed,  wiring and such.  It is just a big useless building the city could sell for 50K at least.  The city has never updated the old building, cannot tell you how many times the bathrooms, elevators and numerous other things don’t work.  People working in 4X4 working spaces. Your right about the building, problem is the city does not care.  Of course, no problem building a new city hall for where can watch the birds and name them.

      • It’s a empty building!  I am sure some company would love to take over a new, never been occupied building. Heck, if you sell it for 50K that’s almost half of the city deficit.

        • Retired, or mathematically challenged? 

          $50K is not half the city deficit, Einstein.  $50k is $50 thousand, not $50 million.

          Can we retire your dumb ass from this blog?

          And to think that after your years of “dedicated service”, we’re now paying you a pension.  The mind boggles.  Please don’t tell me that you worked for the City of San Jose, and we’re now paying you big bucks in retirement.  Although, I guess it’s better that you’re retired and can do no more harm.

          Oh, I must have missed it—you were being sarcastic.  Nah, you’re just ignorant, that’s all.

      • This is just what I am talking about.  Give us an honest answer.  The building is not fine tuned for a police station, any major or growing company could take over this building and add a huge $$$$ to the city.

        what is wrong with taking a hit but add money to the general fund?

      • You and your gang are hypocrites laying down your decrees of fiscal reform from the HALF-BILLION $ city hall inside a one of it’s kind glass dome. The, “I was not on the council to vote for it” BS does not hold water. You sure do enjoy the leather don’t you. At the PD we can’t even afford certain invesigative tools that would help us solve crimes. We turn away victims unless a councilman calls a chief and so on,…to do your bidding. You are hypocrites and NOW,…the entire city sees you without your masks. Wake up! Your decrees are stirring the masses to anger. Even now you are fueling the fire of your next opponent. Enjoy your ride, this could very well your only term as a city councilman.

  5. And just who put us in this mess?  Yup, ghosts of past city council, the very one you sit on.  And Pete Constant wants to work on a plan?  What plan to pad and protect the very pension he receives.  And why punish those who barely get by on their pensions by lowering their COLA to 1%.

  6. What do you suggest the council do with all the sick time, vacation and comp time that has been rightfully earned by city employees.  Do they just need to not show up to work in order to burn it down.  They have a right to be paid for time they have earned.

    • Burn it, Baby burn…let the muthaf%$#*& burn (sick leave)!!!

      If I were a City employee, I will burn all my sick leave and save some in case of catastrophic illness. At least, your accrued sick leave monies are not doubly taxed upon retirement. Use your sick leave now, its at 100% rate compare maybe zero if Chuck Reed’s plan goes through…imagine 1.5% at 65 years old to retire?

      Also you can help your fellow city workers in deep financial needs by your taking sick leave, vacation or comp time creating overtime to cover you.

      Oh no, I spilled the beans!!! I hope the unions will put a clause for its union membership that sick leave abuse err , I mean usage cannot go against his/her job performance.

      • In theory, that sounds like a good plan for some.  But from what I understand, the police department is already short staffed, so that really wouldn’t be creating overtime, it would be creating unsafe situations for the officers without having “fill” units, and less units to respond to calls for service. Not to mention I would think the pd has rules in place for “x” amount of days taken as sick leave where you would have to prove some sort of malady to account for your absence.

    • I copied and pasted the post I wrote in another thread:

      To eliminate the need to pay out unused sick leave, why not let the employee take those hours and put them toward their retirement hours? For example, if I have 800 unused sick leave hours, why not let me apply those hours to my time in service, so that I can retire earlier? That way, you do not have to pay it, I can retire at a percentage of my salary and City can rehire someone under reformed structure. People are saying employees are not offering solutions, but these blogs are full of solutions. Nobody is listening, so here is yet ANOTHER solution that is win-win, instead of the City’s take-take. I would bet that many, many employees would agree to this.

  7. Pierluigi,

    Based on the power point you provided it looks like the only way to guarantee a realistic rate of return is 4 percent after after paying fees.  This makes sense. The retirement board should be honest and set a rate of return that can actually be achieved.

  8. Pierluigi,

    Wondering if you could, in the scope of your neighborhood meetings, schedule a presentation on the sources and uses of funds within both the Capital and Special Accounts?

    Like many SJ residents, I’m perplexed about how and why money goes into those accounts and why, seemingly, darn near every dollar has some sort of legal restriction attached to it in terms of where it can be spent.

    Many residents greatly resent the continued loss of neighborhood services and, were we equipped with a better knowledge of the approximately two billion dollars of budget beyond the General Fund, we could likely innovate methods to change the course of this “restricted money” through charter amendments, local ordinances, etc.

    For far, far too long, SJ taxpayers have been on the short end of the stick, with politicians, developers and lobbyists controlling a giant portion of our tax dollars.  As the City Council overtly ignores this issue, it’s time for a grassroots movement to take back control of our hard-earned money.

    • Greg,
          Great comments.  I would also like to see the NON PROFITS operating in the city of San Jose.  I would like to see the support that the city pays into them and the returns for the last five years.  We know the power of them.  Currently in San Jose you can get stopped with no license and not get your car towed. (4 TIMES) This epidemic of give aways is the down fall of the city.  At one time if you had no license your car got towed and held for 30 days.  Release was met by having insurance license and current registration.  I don’t even think that is required.
          GRASS ROOTS IN SAN JOSE NEEDED NOW!

    • Greg,

      How do you feel about the RDA getting shut down by Jerry Brown? 

      I have mixed feelings.  On the one hand, there is a benefit to having tax spending decisions made by local government.  On the other hand, we’ve seen years of boondoggles and developer kickbacks such as the yet to be opened San Pedro open market, we gave Mc Enery $6m for what was it.. 5 years ago?

      How hard is it to bulldoze a site level and lay some concrete?  Not like they’re building the adobe towers there.  I bet a trip to home depot, a few day laborers, and a cement mixer full of concrete would have it done in a day.

      You’re right Greg.  I feel shortchanged.  Monies going to empty promises, nothing ever getting built.  Council blaming pensions and deflecting litigatious decisions to the voter while throwing a huge media blitz to sway votes?

      And stealing signs. 

      How much did McEnery, Swenson, and other big name developers contribute to the V & W stuff I wonder? 

      It just seems to me that these guys want “Business as usual” when times have changed.  Economy has changed.  I can barely afford to pay my property tax every year, yet these developers get my tax dollars and don’t have to build anything?

      So when we fire everyone, cut services, and destroy pensions, what promise is there that what’s left will not go to these clowns?

      I think this is the message that voters need to be aware of.  Sure, we’ll let you make cuts if you say we need them, but we need assurance that no more money will go into developer boondoggles.  Nobody gives me a break on my property tax, why should they get free money?

      Giving 200 cops the pink slip while saying “Sorry guys, we had enough money to save you but it was “restricted money” so we’re gonna use it on a Stadium” is BS.

      Real leaders suffer with their troops.  Here’s an example of Douglas Mac Arthur doing just that.
      http://mypetjawa.mu.nu/archives/Douglas_MacArthur-returning.jpg

      Knee deep in the muck like everyone else. 

      Maybe our leaders just lack that moxie that generation had.  Our society has moved on from substance to image.  How many “Don Rocha is handsome” articles were thrown around in the d9 race? (not hating, he is very handsome, but I just don’t think good looks = substance for leadership)

      I stopped going to open forum the same reason I’m probably going to stop living in San Jose (planning on a nice riverside house in Rio Vista) and the same reason at some point I’ll stop reading SJI.  It’s all just going through the motions, but with no real substance.  No matter what any of us do or say, these folks are going on with their plans.  Not really anything we can do to stop the machine that’s been created.

      They’re just going through the motions here, like the pope waving hello from the safety of his popemobile.  Or the council pretending to pay attention during open forum.

      All a bunch of little popes, sitting up there in the safety of their council chairs. Waving at nobody in particular, yet waving at everyone.

      Yah, I’ve had enough.  Within 2 years I’m out of here if I don’t see a change.

      • Robert,

        The RDA has been nothing more than a slush fund for the City Council to stuff money into the hands of developers.  The developers, in turn, give wads of dough back to the Council Members under the guise of campaign contributions.  Those contributions are truly quid pro quo, nothing more.

        The hugely fat Capital and Special Accounts pay for big city attributes – a statement of stupidity – the Gonzo Dome and City Hall, a stadium to memorialize Reed, rail projects for choo-choo engineer Diridon’s personal amusement, and the never ending blackhole of money pits, the airport.  Most of our politicians need these things because they have small winkies, and big city trappings make them feel better about themselves.

      • “we gave Mc Enery $6m for what was it.. 5 years ago?”

        And look what he built.  I can’t decide whether the new building with the corrugated plastic facade looks more like a muffler shop, a quick lube shop, or a tire shop.

        It sure blends in great with the Peralta Adobe, too, doesn’t it?

        “It just seems to me that these guys want “Business as usual” when times have changed.  Economy has changed.”

        That’s exactly why the public employee pension system and their vacation time accrual system must change.

        “No matter what any of us do or say, these folks are going on with their plans.”

        Yup, all these BS community meetings on what we taxpayers want is just so much BS.  Bread and circuses.

        They may listen, but they implement what they wanted all along.

        I’ve lived in Willow Glen since 1980; worked in SJ since 1973.  I like my home, but this city sucks.  Thinking of moving to Campbell.  They’ve got it goin’ on.  Check out the difference between Old Campbell Avenue and Lincoln Avenue, where car and parking are four letter words.

        • >>And look what he built.

          He finally built it?  Jesus that took a long time (he was given the money when cousin Dave was still in council)  What’s the address?  I’ll check it out today.

        • Robert:  It’s at San Pedro & St. John, right across from Tom McE’s other monument to his historical predilection—The Fallon House, which now lies fallow, after a rehabilitation cost to the taxpayers in excess of $5million.

          Oops, I almost forgot the Statue of Capt. Fallon, another McEnery boondoggle, which resided in a warehouse in Emeryville or thereabouts for a dozen years or more at some undisclosed cost to the taxpayers (before it was installed at Julian near Hwy 87) because the Mexican lobby was pissed off that SJ had a statue of Tom’s favorite almost nobody white guy instead of their favorite almost nobody Mexican guy. 

          So what great Mexican hero did we end up memorialized in a statute, in order to assuage the Mexican lobby for being dissed by Tom and his white guy friends in government, at a cost to the taxpayers of $500k—Quetlcoatl, the regionally famous giant turd across from the Ste. Claire Hotel @ Market & San Carlos.

          When you’re an insider, good stuff happens for you. Get used to it.  It’s been happening for millenia.

        • Investigate what?

          We’re talking about masters of spin, policy and law here.  Everything they’ve done is legal.

          An investigation would just cost money and lead nowhere.  I’m sure the Grand Jury already knows this.

    • I think that is a good idea Greg. Would like to have the people who are active on this blog attend.  Restricted money can be a good thing since guarantees government delivers certain items or services.

      • So you can guarantee that SJC will operate because of specialized untouchable funding, however cops and firefighters must be laid of because of the structured nature of the General Fund?  That sounds almost 180 degrees incorrect.

  9. Be honest! Even if ALL Unions gave more than the City wanted back, Pensions are going to the ballot. This is all about eliminate
    The middle class! Give up your “AAA” bond rating, then I will vote for reform!

    • Once mayor files for fiscal emergency, the City’s municipal bond market will be disrupted. Property values will decline. It will depress the business market. No one is going to want to do business with SJ, fearing SJ will not be able to pay it’s debts. What is this mayor thinking?

  10. Pier,
        Can you outline the benefit plan of Council?  Time in tenure and what they get.  Medical pension etc.  Can you also outline the same for the City Mgr.  I understand city gov is under a different fund.  I just cannot find it on the computer.  Thank You

    • A current or former councilmember serving two 4 year terms would qualify for a pension at 60 for approximately $12K.  No eligibility for health care after their time on the Council.

      I cannot speak of the City Manager position as most come and go from cities every 5 years or so.

      Pierluigi

  11. “…the City has had as many as six employees supporting each retiree. That has now dropped to approximately 1.3 employees-to-retiree and continues to fall as the baby boomers retire and live longer…”

    How much has the (1) years of eliminating positions in the City affected this ratio, and (2) how much did the huge number of layoffs in the last couple of years affect this ratio and, (3) After the City completes the next round of layoffs (in about 5 weeks) how low will the ratio be?

    I understand there is some sort of balance required to fund this system – employees/city contributions/minimum rate of return on investments to retirees drawing a check. But by the CIty DRASTICALLY reducing the employee/city contributions through layoffs combined with the $1bil loss due to the market crash it could be honestly argued that the City exacerbated the problem and artifically accelerated the death spiral.

    The question is: WHY would the City do such a thing? 

    The answere is: Because when the City refunds the employee contributions after they lay that employee off, don’t they also refund themselves the City ‘s portion paid for that employee?

    It is a Win/Win for the CIty Layoff and collect what they paid for every laid off employee.

  12. Love the “death spiral” slant! LOL,…sounds like a completely UNBIASED presentation. Did the POA attorney participate or was it simply the music YOU wanted to hear. The absurdity coming from the 1/2 BILLION $ city hall just never stops. The hypocrisy will never stop. Save the money now,…the CSJ will need it to fund a defense from the multitude of lawsuits…

    • > Did the POA attorney participate or was it simply the music YOU wanted to hear.

      The POA attorney?

      That’s certainly not an unbiased contribution.

      What the hell would that add to the discussion?

      We wouldn’t be in this mess if the first Governor Jerry Brown Thing hadn’t given the public employees the “right” to unionize and hold the public hostage.

      • Every worker has the right to unionize, public or not.  Specifically, public safety employees cannot strike, for obvious reasons.  The “check & balance” present in our government that accounts for the inability to strike is binding arbitration.  That is, a State arbitrator decides which group has the most fair offer.

        Jerry Brown did not give anyone the right to unionize.  He also had nothing to do with binding arbitration. He may have been the Governor when public employees began getting better benefits- we could certainly debate that… You appear to be ignorant of the history and specifics of this portion of the discussion though.  The folks on this board would be glad to educate you on the facts, but your spouting of half-truths is not helping to find a solution.

    • I do not believe the POA attorney attended.
      From what I understand the debt service on the new City Hall will increase over time perhaps why then CM Reed voted against.

      Pierluigi

      • It is true that Reed voted on one occasion against a new city hall, but thereafter he maintained his silence if he had any genuine reservations about the new city hall.

        He refused to oppose Measure I and was silent on that political campaign.

        He supported every one of the bizarre finance moves including the move to “capitalize interest” on the bonds sold to collect design and construction money. [Capitalized interest meant that the interest owed to be bond-holders was simply added to the debt, not paid off, and that was decided right away with Reed’s support.]

  13. ” One stat that basically admits the retirement system does not scale is that the fund has only a 25 percent chance of actually earning the assumed rate of return. Anytime it does not hit the assumed rate of return, it creates an unfunded liability.”

    Sounds like decades long Ponzi scheme by labor union controlled retirement boards that stuck taxpayers with billions in pension costs, sick leave payouts excessive benefits and pensions

    Rather than ” pay as you go ” where BOTH city / taxpayers and employee pay now for future pensions  

    Council went along with underfunding so they could payoff Council’s political friends who not have gotten their tax millions

    If you think pension underfunding problem was $2-3billion political sweetheart deal go look at many billions taxes wasted and lost on Council political friend’s sweetheart deals:
    -  under market property sales( like Baseball and Soccer Stadium land with tax millions city paid improvements
    - 100’s under market city property leases many at $0 and $1 to political insiders
    - very highly profitable sports team, parking, city and airport building contracts

  14. Tell us what all council members make with all your benefits and what is your pension package after serving only 4+ years compared to city employees who have worked for 30 years.

    How about some real truth?

      • Could you answer in simple facts please. 

        How much retirment to you earn per year worked in your retirement plan.  ie; 1%, 2%, 3%.

        How much do you pay into your retirement plan

        How much do you pay for your medical.

        When are you vested.

        And the main question I have is why are your benefits posted on the city web site for all to look at when all the other bargining groups are posted?

  15. We either eliminate the defined benefit system, or it will end itself.

    Adjusting retirement ages, return assumptions and benefit amounts only prolongs the inevitable.  Even the most draconian adjustments might prolong it one generation.  It’s a ponzi scheme and we all know what eventually happens.

    Should it end itself, there will be more pain to retirees, employees and residents than anyone can possibly imagine.  The very people you bureaucrats are trying to help will be ruined.

    Do what’s right and not what’s politically expedient.

    • So the total sick leave liability is approximately $114 million. The $20 million number are employees that could retire this year. However some will not so it may be lower however we do not know until it happens.
      For example I have a friend in PD that may retire early to save the job for someone with less seniority. That than increases the sick leave payout. Or someone who could retire chooses to stay longer lower the sick leave pay out in this fiscal year.

      Pierluigi

  16. Pier,
        You seem to answer all the questions that best moves your political agenda.  Why not the one’s on this todays topic?  Could it be that fresh cop of coffee is cold?

  17. Guess you’ve never read the story about Pandora’s box. We readers are smarter than the mayor gives us credit for. And no, I don’t work for the city. There is a threshold city hall is reaching any day now. You can only get away with so much Tom foolery before we all stop what we are doing and take a moment to ask what you are doing. I for one would not want to have to face re-election with all of these basic questions unanswered because they surely will be asked again during campaign season.
    Keep asking the tough questions of the rest of the council. I’d also suggest distancing yourself from the mayor. His time is almost up. But your career is still young.  Like the cowboys say, “careful you don’t hitch your wagon to the wrong horse.”

  18. Let me guess part of the GOP to privitize Police fire Ect.. Keep buying these idiot lines and watch you will have black water issuing you tickets. Right now you have a police force that aside from what he mostly bull mercury news is doing a really good job. In San Jose you had the safest City for many years with fewer cops than any other City its size. Why because of proper management and hirring standards. You had good people who wanted to do a good job. sure there were a few issues granted but as a whole the residents pay far less than most Cities as the City grew the police force grew slower and still maintianed its service.
      Now the greedy 1% want everything. They want to get ride of unions. why because big power and big oil do not like paying union wages. If city employees worked for mimium wage those elected officals would have vast amounts of cash to steer into their rich friends pockets in trade for fundraisers.
      The very first thing San Jose needs to do is get rid of Reed and the entire city council city manager as well. elected people who have never held office and are not corrupt. Then do the math.
      Reed has done the math and it shows he needs to get rid of 300 plus cops so he can show where there money will come from to build his standium. a stadium for the rich. tickets will cost at least $50 each a hot dog $8 a family of four will spend $400 to see a single game. in this economy I will watch on TV.
      Maybe its time for the elected officals to stop spending money on their rich friends and start paying bills. Oh wait that will never happen because rich people like money and if they Mayor will not give them great deals where they get tax payer money for free they will not hold fundraisers.
      Reed and his staffers collect what a million dollars a year in fundraising in a bad economy? so when the money goes into his pocket he is able to manage very well.

  19. City employees have finally gotten religion! They are now preaching the Word that the City should run it’s finances responsibly. Hallelujah!!
    For years the City mismanaged taxpayers money and you never heard a peep of protest from our hardworking union employees. They were cashing in big time so don’t rock the boat, right?
    Now that they’re own portion of this spending orgy is threatened they suddenly seem indignantly concerned that the City has been wasting money.

    An objective observer might conclude that these city employees are a bunch of spoiled whiners whose opinions now count for nothing.

    • John,
          I think the unions have been fighting the city every contract.  I can remember the big flap about the downtown wrap around snake.  I can remeber why we hired a city MGR.  I can remember when they took most of the power from the mayor.  I can remember when almost every 6-8 years we had one of our elected officials leave out the back door of City Hall.  I can remember the steady growth of Non Profits being supported by the city and then running the city.  The list goes on.  I think an independent audit with a break down of ALL money coming into the city will show the city pours more money to these non profits and others than meets the eye. 
          I also remember people laughing at my slave wages as a union person when people were riding the dot com ride.  Now that it’s over we now have to listen to people like you. With your thinking it won’t be long before someone buys a car and the car company comes back and takes the car back.  Your car lasted more than 5 years sir.  We think it lasted to long and we want more money.

      • DC,
        I agree with you about the non-profits.
        I agree with you about the turd statue.
        For the past 20 years I have actively told my councilperson, “You will not get my vote if you continue to waste money in this fashion.”
        I was in a tiny minority. The candidates for whom I vote usually get less than 1/3 of voter support and I know that city employees are not among them. And don’t give me this, “Show me your data- You can’t prove that.” BS. I know. 
        Along with the non-profits, the developers, the racial minority activists, and the turd sculptors, the public employee unions were telling these same councilpersons, “You’ve got our support as long as you keep approving more money for us.”

        The public employee unions have a lot of power. Had they used their influence to help elect responsible spenders we would now have a San Jose that knows the proper duties of a city government and could afford to generously pay and fully staff our police, fire, libraries, public works, and parks departments. The people you guys have endorsed have been ‘big government’ types and have recklessly gotten the City involved in many areas in which it has no legitimate business. Now the City’s spread so thin that we can’t afford even the basics.
        You all have had a big part at my expense. I would have treated you fair and square- I DID treat you fair and square. But you got greedy. Now, if you’ll permit me to mangle and mix my metaphors, your greedy chickens are coming back to haunt you.

      • CG – I remember most of the same stuff, but its all a little muddled and confusing in terms of who hired whom and when and why and all that payolla stuff.

        But I really like your comment about the car at the end.  It reminds me of an interest and true policy development that the auto industry has agreed to not support cars over 10 years old with parts as a way of forcing people to retire and replace.  Interesting…I guess it does help the environment with reduced emissions and improved fuel economy, etc, but its another example of our forced consumerism where we have to buy the goods we’re given and like it.

        Speaking of which, do we get still have to pay taxes toward the city if they stop providing us real and tangible services (libraries, parks, pot hole repair, etc.)?  Just wondering…

  20. ROBERT CORTESE
    “REAL LEADERS SUFFER WITH THEIR TROOPS”

      YOU WERE OBIOUSLY NOT AROUND FOR THE BONUS REBELLION, UNDER HOOVER AND GENERAL DOUGLAS MCCARTHUR. IT WAS THE SADDEST TIME FOR OUR VETERANS,AND OUR COUNTRY, AND INSURED THE ELECTION OF ROSEVELT.
    I FIND A CORELATION TO THIS VERY FACTUAL TIME IN OUR HISTORY TO WHAT IS HAPPENING IN OUR VILLAGE OF SAN JOSE DE GUADALUPE.
    I HAVE WATCHED THIS NONSENCICAL CHARADE OF AN A’S STADIUM FOR YEARS. AT WHAT PRICE? 200 YOUNG COPS, 700 PUBLIC SERVANTS? COMMUNITY SERVICES CUT, LIBRARIES AND FIRE STATIONS CLOSED. WE WILL ALWAYS REMEMBER THE EGO OF “GONZO THE GREAT”.
    OK, I WILL AGREE WE HAVE TO WEED OUT THE AGRESSIVE FOLKS THAT ARE COSTING THIS CITY BIG BUCKS IN LAW SUITS FOR ABUSIVE BEHAVIOR., AND MANY OF THE COUNTY AND CITY’S GOOD OLE BOY’S APPOINTMENTS.
      WHEN I SENCE THAT A BASEBALL STADUIM WILL BE BUILT ON THE BODIES OF HUNDREDS OF UNSUSPECTING CITY EMPLOYEE’S FAMILIES,AND SERVICES, I AM ABOUT TO GET SICK TO MY STOMACH.
    LIKE MCCARTHER, WE ARE ABOUT TO DRIVE THE FOLKS THAT GAVE THEIR ALL TO ENSURE THIS NATION WOULD BE SAFE, FROM OUR ENEMYS, TO THE END OF THEIR ENDURANCE. ONLY TO FIND THAT WE WERE THE ENEMY TO OUR OWN.  PLO YOU HAVE A GIFT FOR SUCKING UP.
      I cannot attend the city council meeting tomorrow , as I had planned. My Grand Daughter is graduating from James Lick.
      My hope is that you will give those that are passionate about their community their two minutes and not dishonor them by limiting them to 1 minute, as you have done in the PAST. It’s never to late to support community,even at that late in the evening. I was to speak on, given a chance , entirely NEW leader ship will give us hope for the future of our community.
      RDA? Who goes down town any more these days. We have become San Francisco like. We are like 6th and Market in that great city.
    SANTANA ROW IS THE SPIRIT OF SILICON VALLEY NOW!
    DEAL WITH IT!
      GO SHARKS!!!!!! BRING IT HOME!!!!

      THE VILLAGE BLACK SMITH

  21. The issue isn’t that there is a 25% chance of achieving the target return. The issue is that when the targeted return is achieved, some is paid out to retirees as a “bonus” and some is used to reduce the city’s payments into the system.

    Over the past 30 years, the S&P 500 has returned an average annual return of 10.74%. There has been significant variation, from a low of -37.22% in 2008 to a high of 38.05% in 1995. 6 years were negative, a total of 12 were less than the 8% target.

    Markets go up and down. It’s the euphoric behavior prevalent when markets go up significantly that creates the problem. People assume things have changed, and therefore decide less can get paid in and more paid out.

    It’s not an issue of inadequate or risky returns. The actuarial numbers would work if the system were on autopilot and not subject to the meddling of commissions and politicians.

  22. Mr. Oliverio:

    Thank you for sharing the Powerpoint download.  I might have been more impressed with the slideshow if I were to have heard the presentation that went with it.  I’m not impressed with random slides that show quotes from the different studies.  I would like to see a counter presentation to be better informed.  I hope you would too.

    Also, this information is based off last years figures.  We have had quite a rebound in the stock market.  How will this affect the charts and figures in that presentation? 

    Just for the recorded, I subscribe to the notion that there is an unfunded liability but I’m less convinced as to what degree.  Moreover, I’m less convinced with Mayor Reed and his ability to handle the problem.

  23. It should be noted that during “surplus” times the City’s normal contribution to the plan was offset.  That is to say that the City paid less into the retirement fund during good times.  This would have resulted in $120 Million and even more in today’s market (rather then a year ago)

    Legal, but just not wise.  It is my understanding that employees contributed the same during these times and didn’t payless into the system.

    My point: Sticking it to the employees who have planned on these retirement pensions just isn’t right.  My opinion.

  24. Thanks for posting the Study Session slides, Pierluigi. It actually seemed like a grown-up presentation, and I hope the Council will be serious about considering it.

  25. San Jose will NEVER solve it’s budget problems until

    1) Average resident can read and understand where all taxes go without having someone having to explain it to them  

    Council and City Hall has for years purposefully hidden where taxes go because if taxpayers knew they would be very upset and would demand changes or recalls   Budget problems are because City Hall lied to public about when taxes were going or what were true costs of city services

    2) Pay as you go for all city expenses and put money aside for future expenses

    To replace police cars divide cost by number of years before replacement, then put aside that amount each year, same for pensions, streets etc –

    Otherwise Council and City Hall will always play political games and spend taxes, run up debt and have taxpayers in future have ” bad choices ” of higher taxes , low services and city staff as we now have

    3) Compare San Jose against other cities and publish San Jose nationally used performance measures

    Stops the political game plating and lying to public about what really happens when San Jose developed standards are used ( SJ Fire response time 8 min at 80% coverage ve national standard 6 mim at 90% coverage )

    4) Fix low jobs, low numbers of businesses and low tax revenue historical problems causing most of structural budget deficits

    Compare San Jose tax revenues per resident and we are in middle of many other cities but we have very low numbers of employees with average cost per employee until recently

    If pension system would of been “pay as you go ”  to fund pensions instead of using taxes for 100’s millions per year for political payoffs to insiders, campaign contributors, non essential city owned buildings many of which should never been built and non city organizations

    History will repeat structural budget problems unless we stop political diversion of taxes and pay for adequate staff at reasonable pay and essential city services first before everything else Whicgh San Jose has been TOTALLY UNWILLING TO DO – in past and NOW

  26. It’s about time you and your cronies start telling us the truth.  I am sick and tired about putting the blame on the unions.  You and the mayor have wasted millions, and you want to add a downtown ball park. Please, get real, what is more important – wasting more money on buying land which MLB will not approve or saving us our basic services.

  27. Close the airport for three years. It cost over a one billion dollars a year to operate. Adding up to 3.5 billion dollars in savings. It’s an unfunded liability! Time to pay the bills Chuck.

    • Actually the airport is funded by the airlines if I am correct.  The parking alone makes big bucks for the city.  It’s the only money maker the city really has.

    • > Close the airport for three years.

      Sorry.  I haven’t been paying attention.

      Could someone please explain what is the heartburn over the airport?

      To me, it’s unthinkable to close the airport, even if it is named after a dubious and mediochre Democrat politician.  Without a major hub airport, San Jose would probably turn into Coalinga or Chowchilla.  The passenger traffic is, of course, important.  But every day zillions of packages and technical experts fly out of the airport to destinations all over the world to deliver vital parts and expertise to industrial operations and businesses all over the world.

      Delaying the dispatch of those packages and experts by an extra hour probably would cost the world economy billions of dollars over the long run.

      I will grant that San Jose Airport might be mis-managed, and that braindead politicians and “smart” urban planners may have screwed things up monumentally, but, to quote the great transportation policy guru Jesse Jackson: “mend it, don’t end it.”

    • Really? The City of San Jose should close the Airport?
      The expansion was all approved before I got on the Council however it is what it is and we should try and compete since we will have the same mortgage payment whether it is closed or open.

      Pierluigi

      • Yes.  Good thinking.  Let’s just keep throwing good money after bad, and keep feeding this albatross. 

        Geez.  Don’t you see the irony of your statement?  It is that mentality that has led us into this mess, and apparently we are going to stay in this mess.

      • Just last week, I was traveling through the San Jose Airport. It is just beautiful. But it was a bittersweet experience, as I mulled over the fact that it is overbuilt, thus expensive to maintain, that it’s hard to get places outside San Jose on non-stop flight, and that flights are sometimes more expensive than from Oakland or SFO. Oliverio is correct that we have what we have and must manage it, but these facts will always keep us at a competitive disadvantage. He is incorrect, however, that the stadium is another subject that we need to debate later. The airport is the model for the mistake that San Jose is heading into when it builds a stadium. The time to understand that is now, with the airport as a blatant monument to the willingness of the political leadership in San Jose to bow to private interests. I’m being polite in my language here. Some of you might come up with something more colorful than “bow to.”

      • Using your same logic, we sould open up the police sub-station, fire stations, librarys etc because we have morgages for them.  Oh brother!  I have lived her for 30 years and have flown out of SF or Oakland much more than SJ.  Closeing the airport actually makes sense when examining the cost benefit to everyday citizens.

  28. Amazing.  The Mercury News reports the city council will pay the Mexican Heritage Plaza $600,000 next year.  How many police officers will lose their jobs to keep this failed experiment limping along.  Do the unions support this reckless spending? If the city can mothball the Southern police substation, we should do the same for the Mexican Heritage Plaza until the financial crisis is resolved.

  29. That was a fun and entertaining council meeting.  Rode the motorbike down and parked it next to expensive new motorcycles in the garage and took the elevator up to the council level where some nice girls from the labor council gave me an agenda and asked me if I wanted a “shame” sign or “not wisconsin” sticker to wear.

    Ended up sitting next to someone holding the aforementioned “shame” sign on my left and a guy sporting the wisonsin sticker on my right while I watched the political theater for about an hour.

    I was actually impressed with the depth of engagement and knowledge both at the dais and in the audience.  As I was jotting notes about the reform study points on the overhead I asked my neighbors about an acronym and they explained the SRBR.  One neighbor even pulled out a 67 page briefing packet marketed up with questions and notes and showed me the couple of pages on the issue (Talking about the balance in both public safety and non public safety balances in the Supplemental Retiree Benefit Reserve.)

    Left after public comments got going with the first few speakers because I felt like it would be nice to get some coffee and watch the debate but the council chambers have a no food/beverage rule.  Luckily the overflow chamber wasn’t so strict so I strolled into that with a coffee and enjoyed a little more political theater in comfort before growing bored and wandering out to rediscover downtown.

    Popeye’s has a nice deal on Tuesdays/Thursdays, but its a little crowded and dirty.  Ernie Glave is still holding court on the 2nd floor of the Bank of Italy building and regailed me with war stories from Saipan and WW2.  Wandered back to city hall and collected my motorbike and felt like it was an nice way to spend an afternoon in San Jose and probably a better deal than paying for Pirates 4 in 3D/Imax.

    Oh, and about the pensions and stuff, I downloaded the power point and took notes from the council meeting, but would like to digest all this for a few days before getting passionate or political.  But I do love a good public policy debate and hope it turns out well for the future of our community.  Seems like prudence would best be served by careful consideration followed by deliberate action to attain positive long term and sustainable outcomes.

  30. Ha i chuckled a little when Oliverio stated that he had a friend in PD. Oh there I go laughin again. The city leadership are seriously driving this city into the ground and it has been really sad to watch this happen over past couple years. And Chuck and city council seem to not care. Pathetic!!!

  31. I looked at your picture slide show.  I suggest you fire all police officers and fire fighters and hire private security officers so we can all live in fear or just move to
    Oakland.