Stopping San Jose’s ‘Death Spiral’

“We must stop this death spiral of increasing pension costs and decreasing numbers of employees,” wrote Councilmembers Nguyen and Herrera in an op-ed published last week by the Mercury News. Nguyen and Herrera explained their reasons for supporting Mayor Reed’s push to confront the city’s runaway pension problem. In terms of the pension problem, the residents of San Jose also get it.

San Joseans can see the results of the structural budget deficit problem all around them; from the poor condition of city streets to the cancellation of public events, the grounding of the police helicopter, and the closing of city park restrooms. Cuts to city services can be seen firsthand in every San Jose neighborhood.

Ten years ago, San Jose’s annual retirement costs were around $63 million. This year, the figure is $250 million! As a result, hundreds of city employees will lose their jobs, and city residents will endure yet another year of diminished service levels.

Is the City of San Jose headed for bankruptcy? Councilmembers Nguyen and Herrera contemplate the possibility. “In bankruptcy court, the judge has the power to slash pension benefits to keep a city out of insolvency—and that’s exactly what we’re working to avoid…wouldn’t it be better to slow down the rate of growth of pensions than to lay people off?”

Projections from the mayor’s office estimate that San Jose’s retirement costs, under the “best case scenario” will soar to $400 million in fiscal year 2015-16. Something’s got to give…a lot.

In a recent letter to the Merc, San Jose resident Don Barich expressed the view that more and more San Jose citizens are coming around to.  “While no one wants to see anybody lose their jobs, public sector pension and retirement plans are threatening community programs. Is San Jose going to let a few thousand union members hold one million citizens, taxpayers, and businesses hostage?”

The City of San Jose may not be bankrupt, but it is certainly broken. For the past 12 years, corrupt leadership, an undedicated press and an apathetic citizenry have ruled the day. Here we live, in one of the wealthiest regions of the country, yet the city government cannot afford to deliver even basic city services.


  1. The City of San Jose has been morally bankrupt for a long time.  The one blessing of having the City declare bankruptcy is that it will force the City to open its books and renegotiate all City contracts…including the sweetheart deals made with downtown developers, lobbyists, and “outside” contractors – otherwise known as, “Getting rid of the deadwood”.

  2. That bought and paid for Wisconsin State Senator Spencer Coggs(he’s received upwards of $170k in campaign contributions from unions)was quoted as saying the mayor and council are “scapegoating” public employee unions for the sad fiscal position we are in.

    A scapegoat is one who bears the blame for others.  The public employee union pension packages ARE the primary reason we are in the fiscal position that we find ourselves.  4900 current pensioners are bankrupting the remaining 940,000 inhabitants of San Jose.  Pensions alone are one quarter of the general fund expenditures…and growing.

    940,000 people should not lose police and fire protection, road maintenance and repair, parks, and libraries to keep 4900 people fat and happy.

    • Really John?  That is the reason we are in this mess?  Come on!

      •  Millions “loaned” to the RDA from our parking fund just so that the RDA can “loan” money to McEnery and Swenson.  So that the RDA could spend millions for baseball land. 

      •  Millions for a Grand Prix that failed yet was touted to bring in millions more in revenue.

      •  Your favorite, the Office of Cultural Affair and the ability to spend millions on “art”.

      •  Millions spent at the sewage plant including a $6000 refrigerator for the break room and fiber optic pipes with no fiber optics.

      •  Hiring a photographer to take pictures of the sewage plant for 6 months. (is that right?)
      •  The City not paying it’s full amount of retirement contributions during the good years.

      •  The City excepting a bid for a phone network system from a company that went bankrupt months later.

      •  Etc. Etc. Etc.

      We are in this mess because of mismanagement of city funds.  Plain and simple.

      • Everything you listed is a waste, and I’m sure we could come up with many other wasteful expenditures that should be eliminated.

        But the cost for employees, current and retired, is killing us.  Loans and one-time expenditures (regardless of how wasteful or wrong) are a drop in the bucket compared to $100k+ retirement & benefit packages guaranteed for life by taxpayers.  We’re approaching billions of dollars here.

        • Joe,
          The Unions realize this and ARE willing to, and HAVE taken cuts. Without stopping wasteful spending, our City is screwed any way.

          Just wait until we cut 200 cops and the State lets thousands of prisoners lose! Now that will be something to complain about~

  3. Pete,

    Don’t forget about the 2+ billion dollars allocated each year to the Capital and Special Funds.  While I’m certain that some of the money is truly restricted, it’s my bet that most of it is “restricted” by local charter or municipal code, both of which can be changed by the voters.

    But, do you think that our politicians will ever tell us that?  Of course not, they love having all that money to throw at developers for memorial icons – the Taj dome for Gonzo, the stadium for Chuck-O, etc.

    I don’t believe any court in the land would approve BK because of the arbitrary shortfall in the General Fund.  Moreover, I don’t believe that changing Budget allocations will ever be initiated by anyone other than the voters… us.

    • Greg, you have absolutely hit the nail on the head.  It would take a change in the City Charter, via the voters, to reallocate the money.  But it’s much more politically expedient to blame public employee pensions.

      Another point that seems to be missed by most, is that public safety employees in San Jose put almost 22% of their OWN pay check into the retirement fund, for a 2.5% per year accrual rate.  Compare this to PERS, into which police officers at many agencies pay 0% and at the most, 9% for a 3% per year accrual rate.  Public employees don’t participate in Social Security, and don’t get stock options, commissions, or bonuses.  Study after study has shown that overall compensation for public employees, is the same at best, and in most cases less than the private sector. 

      The voters need to force San Jose city government to get it’s priorities straight.

      • “Another point that seems to be missed by most, is that public safety employees in San Jose put almost 22% of their OWN pay check into the retirement fund.”

        I’ve heard that said several times, and I just don’t believe it.  If a cop makes, say, $80k, 35% or so would come out in federal and state taxes.  Add 22%, and you have 57% taken out before the cop pays rent/mortgage, food, etc.  All that must be paid for with the $34,400/year that is left.  You can’t live on #33,400/year after taxes and retirement contributions around here. It seems more likely that 22% is paid ON HIS/HER BEHALF into the pension fund.

        • Johnmichael, you are making my point for me.  The information is absolutely true and verifiable.  Please call the city payroll folks, or the POA.  The City Council and City Manager’s Office will also verify it.  I have personally seen the pay stubs.  Ask a cop to show you his/her pay stub.

        • No, sadly it is true…nearly 22% is deducted pre-tax.  Add on top of that the taxes and health care costs and somehow it comes out that I am pulling in 52% of my GROSS pay.  It is true, you can’t live on that here…that is why so many police officers work extraordinary amounts of overtime or are fortunate enough to have working spouses.

        • AND…that is the point we are trying to make. When our salary is reduced, we are not going to be able to make it. We were promised a certain salary and told to live within our means. We did that. Now those “means” are being stripped, causing hardship. That is why there is so much anger.

        • If you look at the pay plan published on the City’s website at:  You will se that a top step Police Officer makes $4,153.60 every 2 weeks.  Then look at the current MOA on the City’s website at: and you will see on page the top of page 3 (page 6 of the pdf) that Police Officers are currently paying 20.82% of their pre-tax salary into retirement.  Take out the State and Federal taxes, health insurance premiums (cheapest available plan is Kaiser at $92.64 every 2 weeks – see: and you see how it really is.

        • Mr. O’Connor,

          It is absolutely the truth. I pay almost 23% of my gross income into the city retirement plan. I made about 100k last year and payed over 22k alone into the retirment plan out of my gross salary. Please call the SJPOA if you need to verify. It is completely accurate. This figure is also due to go up another 3% or so in July for the officers contribution. I agree with you this may be hard to believe and I hope you call to verify this information. I do not own my own house and have few write offs. After paying my retirement, federal and state taxes I had less than 50k left to pay for EVERYTHING else, housing, car, utilities, food, insurance etc etc.

        • Tom,

          Maybe what the police officers fail to appreciate is that paying 23% toward one’s own retirement is not unusual in the private sector. I pay 25% into my own SEP-IRA. But here’s the big difference. That’s ALL that gets put into my retirement. I don’t see the police officers ponying up an additional 39% and depositing into my retirement fund like the city does for the police. A nearly 2:1 match is not something that should be grumbled about.

        • I have no doubt you pay that much into your retirement plan. My point was illustrating the fact that we pay into ours also. Mr. O’Connor thinks we do not pay as much as we claim. My point was to correct that. We pay 23% of our gross paychecks. There is a lot of misinformation put out by the city and media that we pay very little. It is not true. I appreciate how much you pay into your retirment. I was self employed for many years, working 7 days a week, and paying social security tax which I will not collect since I did not pay into that system for 40 quarters. You, and many others, will benefit from those like me who paid into social security but will not collect. I will benefit from the amount you pay toward my salary. It is not a perfect system. I will be willing to take a cut in my pension someday, if I can collect social security for the 9 years I paid into it, but will not collect at this point.

        • OK. I can appreciate that. What annoys me is that of all the workers in this country, why is it that only government workers ar exempt from paying into social security? Either let the rest of us opt out or make everybody participate. Until that happens private sector workers are right to feel that they’re being jobbed by the government and everybody that works for the government.
          I was reading up on the SSA’s website and found that in 1983 Cogress passed something called the ‘Windfall Elimination Provision’. The way Social Security benefits are figured, those with low lifetime social security earnings receive a higher percentage benefit than those with higher lifetime earnings. Workers become highly vested quickly. This is opposite to most government pension programs in which vesting accelerates near the end of a career. Congress recognized the disparity and devised a formula that phases out the highly advantageous benefit that those who work a few years in the private sector and a longer career in the public sector would receive.

        • John,
          I think every pension program, public and private, as well as social security, are all ponzi schemes of sorts. Every one of these programs faces the problem of people living longer and not enough workers coming into the workforce on the other end. Everyone who works and tries to make a living is getting hammered in taxes, whether it be for a pension system, social security, or a SEP. Like I said, I think it is totally inequitable that I paid thousands into social security I will never collect. You think it is enequitable some, but not all, government workers don’t pay into social security (I do still pay into medicare or something like that). It sucks for both of us and honestly I have no idea what is the solution.

        • I can only imagine the hardship this whole thing is going to be for the employees whose salaries are less than yours. If this is going to cause you hardship, it will probably cause them devastation. I feel for you all.

  4. Yet the city continues to fiddle around doing stuff that is outside of what a city government should be doing. Why should the city acquire land to give to a billionaire to build a baseball stadium? Why does the city run golf courses? Let’s sell the hayes mansion. This wouldn’t solve the pension problem but it would show taxpayers that the city is serious about putting its house in order.

    • > Yet the city continues to fiddle around doing stuff that is outside of what a city government should be doing.

      You mean that the government SHOULDN’T be doing vital things like:

      1. Banning plastic grocery bags?

      2. Doing studies on “payday loans”?

      3. Providing distribution outlets for Dr. H. James Cannabis Elixer?

      Think of the plight of helpless citizens who have to get payday loans to buy their Dr. H. James Cannabis Elixer from unlicensed dope pushers and then carry it in planet destroying plastic bags?

      It tears your heart out.

    • Hugh,
      Why should the city acquire land to give to a billionaire to build a baseball stadium?
      Why should the city run golf courses?

      Because the ambitious, unprincipled elected officials that city employees helped elect have championed them of course!

      (Thanks for that easy setup Hugh!)

  5. easy solution, transfer more money from the capital fund and special fund into the general fund! How about 35% like all other cities do! But the city council will never vote on that because chuck     (G)Reeds friends like Tom McEnry, Sobrato and Berry Swenson wont get their millions of dollars of payout GRRRrrr, I mean development subsidized payment! Wake up Sheeple! The council is playing you with their lies! How can a city not function on a 2 billion dollar yearly budget!

    • Bugsy,

      The annual SJ budget is in excess of 3 billion dollars.  The General Fund is about one-third of the total.

      You’re right about the Council not doing anything about rebalancing the budget accounts.  We, the voters, will have to initiate that action.

      The Council Members have small winkies, so building giant icons to themselves is far more important to their egos than maintaining city services.

    • (Best read in a monotone)I have been programmed by Chuck Reed, Deb Figone, and the MediaFlimFlam Group. The public employees and their unions are to blame for the City’s fiscal emergency. Last year the problem was overcompensation. We temporarily solved that problem thanks to great leadership. This year, pension costs are bankrupting the City. The same great leadership will solve this problem. We cannot put a price tag on solving the problem. The City’s chronic underfunding its pensions during bull markets has not caused the dire fiscal emergency. Money cannot be moved from one City fund to another. Capital spending will always lead to greater net revenue. I am a moderate Democrat. I only have a 401(k). Why should any non-leadership public employee get any pension? The City Charter must be rewritten now. Pensions should be a thing of the past except for administrators and councilmembers. We must attract the best leaders. San Jose must be more business friendly. The Redevelopment Agency must be saved. It creates jobs. The Convention Center must be improved. Downtown merchants are relying on us. We must have a major league baseball team. We have to keep up with San Francisco and soon Santa Clara. More development leads to more net revenue for the City. Councilmembers that support public employees are “bought and paid for.” Councilmembers that support developers but not public employees are doing what is best for everyone.

  6. Ah Pete, the irony.  Yes we do live in one of the wealthiest regions in the country.  Yet the employees of this city never reaped the benefits of the era.  They didn’t see any stock options.  What they did see was a promise that if they worked for the city for X amount of years then they would get X amount of retirement.  What they did see was full retirement contributions being taken from their checks while the city “offset” their contributions in the tune of $120 million dollars in today’s dollars.  Now that “The City of San Jose has been mismanaged by a corrupt political machine” you think it is appropriate to lie this at the feet the employees.  This is unconscionable. 

    Pete, I don’t know what your history is, but I know that you have been out spoken about the corruption in this city. You have spoke about politicians helping their friends and putting themselves before the people.  I am not dismissing a pension issue, but isn’t it more about the mismanagement of this city?  Isn’t it more about the city spending $30 million for a customized glass rotunda but can’t find the money to keep community centers open?  But CAN find $4 million for a Grand Prix.  These are YOUR words from the day. 

    If you want to beat the pension drum like everyone else then have at it.  If the well to do white collar politicians want to fix the pension issue going forward then let them find away to make that happen.  But to go back in time to screw the employees is out right wrong.  Especially when we all know it was because of mismanagement then and mismanagement today.

    • Should public servants get increases in compensation that exceed the rate of inflation when the city’s budget is in deficit?  And, should bonuses be paid out in deficit years?  Here, compensation is set, not by markets, but by political “muscle.”  Had San Jose been able to job out 25% of city services (as they do in Chicago) we wouldn’t be in quite the mess we are now in…perhaps no one would have to lose their job.

      • Public employees reap the benefits of negotiating steady increases in salary, locked in benefits, etc. because they don’t reap in the benefits of the boom times.  The private sector is a roller coaster with highs and lows that equate to a fantastic lifestyle some of the time and austerity at others.  The public employee trades the highs and lows for a steady moderate rise in income and benefits.

        If you look back at negotiated contracts you will find that they were generally achieved incrementally after long contentious negotiations with the city.  At no time did the city come to their employees and lavish them with the kind of perks that the private sector enjoyed during the peaks.  Unions argued long and hard that the city had to be competitive in order to attract good candidates. The city grudgingly negotiated better salaries and benefits. 

        While the current pay and pensions seems extravagant now, it was not so during better times.  Now the private sector is at an all time low and this is the filter you are using to evaluate their current pay.  When the boom times arrive again will you argue just as strongly that the public employees need to enjoy the same highs as the private sector?  All this talk of making public service mirror the private sector will no doubt evaporate when private sector employees start making bank once again.  How short memories are…

  7. First off Pete, I think we need a 3rd party to look at these figures. They are projected costs, not actuals, and I don’t think they are accurate any way. Also, they don’t include concessions that have already been made by the majority of Unions.

    Secondly, I for one will NOT support the City paying out 3-4 MILLION dollars for a ballot measure that will ultimately result in hundreds of thousands of millions of dollars in litigation costs, if passed, when it is certain to be challenged in court. That is NOT fiscally responsible in my view.

    Thirdly, the City cannot say it is negotiating in “good faith,” when it is holding a threat of “ my way or the highway” over everyone’s head. I am both a mediator and arbitrator and I can tell you that going into negotiations with a iron clad threat over your head leads to a no win solution, and in no way helps both parties to come together toward a win/win.

    Fourth of all, and most importantly, no one is even acknowledging that Fire Fighters, and other Unions have made all the concessions asked of them, and they are still going to be laid off! The SJPOA took a 4% cut last year, and agreed to other major concessions, this year they offered a 10% cut, and other concessions that were refused by the City. They offered what was asked for and it is still not good enough.

    And finally, why have all other cities in the County been able to work with PD, FD, and other Unions to come to agreements in resolving budget issues, but our City hasn’t?  What are we going to do when prisons comply with court orders to release criminals out into our communities, due to prison overcrowding, when we have lain off over 200 Police Officers?

    Everyone is focused on the almighty buck, power, and politics, yet no one seems to be looking at the harsh realities that this entire BS will bring on all of us. The Mayor and Council need to ensure the City is negotiating in good faith and stop declaring war on the thousands of dedicated employees that serve us.

    I agree with Council Member Oliverio, it is time for PUBLIC negotiations!

    • > Secondly, I for one will NOT support the City paying out 3-4 MILLION dollars for a ballot measure that will ultimately result in hundreds of thousands of millions of dollars in litigation costs, if passed, when it is certain to be challenged in court. That is NOT fiscally responsible in my view.

      Tyranny by threat of nuisance lawsuits.

        • > Libby Ann Queeg-Meyer,“Tyranny by threat of nuisance lawsuits.” Just the facts ma’am! Nuisance, no, the law…


          When in the hands of Democrats, “the law is an ass”.

          Remember, Democrats don’t believe in the Constitution; it’s a “living document”. It doesn’t mean what at meant when the White Slave-Owning Founding Fathers wrote it.  It means what Ruth Bader Ginzburg feels like it means when she sits on the crapper and reads a New York Times editorial.

          The Democrat lawsuit in Wisconson to stop the union reforms is a perfect example of Democrat nuisance lawsuits intended to frustrate—NOT SUPPORT—the rule of law.  The Wisconsin Supreme Court will ultimately uphold the reforms.

          The Democrat appeals judge who blocked the reforms was acting in a lawless, purely partisan manner.  Her ruling that the passage of the law violated the “open meetings” law is a howling joke.

          Since when have Democrats been concerned about open government?  They certainly didn’t have any concern about “open government” when they changed the locks on the committee rooms during the Obamacare legislative debates and excluded Republicans. And then decreed that in order to find out what was in the law you had to pass it.

          The main qualification for being a Democrat is that you have to be a self-serving hypocrite.

        • Libby Ann Queeg-Meyer,
          We most certainly can agree to disagree on ALL points you’ve made. I am a Democrat and I believe in open government, equality, and accountability.

      • Unfortunately for the taxpayers of San Jose, most of the lawsuits will not be frivolous or “nuisance”. 

        As both a former employee, and a long-time resident of San Jose, I understand the need to address the pension cost issue. 

        However, the case law is clear that the City will not prevail in Court with many of the proposals that are currently being proposed.  I am not happy to think that the taxpayers will end up having to pay huge legal expenses (litigation is very, very expensive).

        Chuck Reed is an attorney. I expected him to be more aware of the legal ramifications of what he is proposing.

        • Between Chuck-O, the lawyer, and Doyle, the crack City Attorney, I have every confidence that the costs of litigation and settlements will be in the tens of millions.

        • Why should there be litigation costs in the $$millions?  We have a City Attorneys Office on the payroll.

          Oh, you don’t believe Rick and his staff have what it takes to represent us?  Then why are they still on staff?

        • San Jose actually handles more litigation in-house than other public agencies.  City Attorneys don’t generally have much expertise in litigation so they contract that work out to private attorneys.

          In this case, the City of San Jose would have to hire a firm that is not only experienced in litigation but who has special expertise in labor law.  The cost for outside attorneys for even a simple lawsuit could be $100,000 a month!  For multiple lawsuits with the kind of complexity we are looking at here, we are definitely looking at millions of dollars. 

          Additionally there will be significant staff time taken up with depositions, preparing witnesses for trial etc.

        • Reed and Figone’s bluster is just a negotiating tactic designed to bully the various unions into capitulating on all fronts.  I believe the City Attorney has no doubt told Reed that few of his “proposals” will fly.  Reed knows this but also sees how well he has pulled the wool over the citizens of San Jose’s eyes.  He knows that they will light torches and march on the union halls when they fail because he will continue to vilify the unions and blame all the city’s financial woes on them.

          Keep in mind also that Reed and Figone will never declare bankruptcy.  First, as stated by others it would open all of their financial shenanigans to scrutiny and they certainly don’t want that.  Second, there are several cases that have already been decided that resulted in cities and towns being ordered to fulfill their financial obligations even if they file bankruptcy.  Can you imagine a court order requiring San Jose to sell off libraries, land, equipment, etc. to pay their debts?  There are already many cases that have ruled that pension obligations are a binding contract that doesn’t go away despite a bankruptcy filing.  Reed also knows this but he and his propaganda ministers also know the value of misinformation to control the masses.

        • I am appalled and disappointed that the City has not been forthright. I clicked on this link and what I read was astonishing. If all of what I am reading is true, I certainly do not intend to vote for ANYTHING until I can understand what is going on. As a citizen in this city, I expect the truth from those who are leading this city. How am I suppose to make a comfortable decision when I am so confused? I hear one thing from the mayor and then I read that something TOTALLY DIFFERENT is going om behind closed doors. I want the truth. Is what the City is doing illegal, or not? I want this answered from a representative of the City, not someone posting.

        • > Second, there are several cases that have already been decided that resulted in cities and towns being ordered to fulfill their financial obligations even if they file bankruptcy.


          What do court decisions and rule of law have to do with anything?

          It’s illegal for unionists to beat up people carrying picket signs.  But they do it and get away with it.

          It’s illegal for union bosses to steal from union pension funds and invest in nepotistic investments.  But they do and get away with it.

          It’s illegal for the Democrat Congress and President to pass and enforce an unconstitutional law like Obamacare.  But they do it and get away with it.

          It’s illegal for the Supreme Court to make decisions using foreign law as a precedent.  But they do it and get away with it.

          It’s illegal for States to take private property so they can give it to someone who will pay more taxes.  But they did it anyway.

          The Democrat ruling class doesn’t give a flying fig about rule of law, and when they want things THEIR way, no court decision is going to stop them from getting their way.

          Those “rights” that you’ve been counting on to keep your gravy train on the rails?

          FORGET ABOUT IT!

        • It will be coming out of your pocket when we take the City to court…and win. This time…they WON’T get away with it. Believe it! People/agencies/entities can only get away with what you allow them to get away with.

  8. >>In terms of the pension problem, the residents of San Jose also get it.

    I don’t get it.

    “It’s a robot, that transforms into a building”

    I don’t get it.

    “What don’t you get Josh?”

    “Yah Josh, please, tell us”

    “Well, it’s a robot that transforms into a building, what’s so fun about that?”

    “Go on”

    Well, it just sits there not doing anything.  Can’t it like transform into something that moves, like a bug or something?

    “A bug?”

    “Yah you know, like a giant prehistoric bug, with claws, and wings”

    <sound of excited discussion/brainstorming>

    “Yah, there could be ladybugs for girls”

    “Great idea! we could enter the girls market!”

    “Oh cmon, you can’t be serious?  BUGS?”

    Don’t know why, I’m all about the 80’s movies today.  Sort or paraphrased from the Tom Hanks movie “Big”

  9. The city is in death spiral by failed downtown redevelopment efforts and high pensions.  The city screwed up so badly this time.  All the projects the redevelopment agency invested in are zapping the city tons of wasted taxpayer funds just to get them payed off.  Alot of projects are failing and have failed.  As for the pension funds, alot of city workers are retiring with near 6 figure pension yearly.  Much more city employees will be retiring in droves in the next few years.  The city, because of it redevelopment effort and sky high pension payouts, will certainly have to declare bankruptcy and possibly loses its entity altogether.  It’s a shame that the city puts itself in this predicament.

    • For several years the mayor, council, and city manager have been putting fingers in the fiscal dike.  Well, they’re out of fingers, at least as far as the general fund is concerned.

      If there is money in other accounts to alleviate this crisis, all things necessary should be done to transfer it to the general fund.  if there is not enough such money, stopp the leaking and declare bankruptcy.

      And we need to stop subsidizing failed efforts, such as the mexican heritage plaza, which is getting another $600k/year for 3 more years while we fire cops.  $600k could pay for a few cops or firefighters.  Hayes mansion is another money loser.

  10. Despite my conviction that our local axis-of-evil (Chuck Reed, Debra Figone, and the SJ Mercury) has made facts all but irrelevant in discussing the pension issue, I can’t resist restating that, despite the existence of contributing factors, the fundamental cause of the pension crisis was the City’s failure to hedge its bet on the stock market.

    Participating in the pension fund involved risks. For employees there was the risk of failing to achieve vested rights (through resignation, termination, early death, etc.), which would deprive the employee (or his heirs) of the pension contributions that constituted a substantial part of his annual compensation (already earned); this was a risk of considerable dollars, but hardly catastrophic. For the City the risk was that fund investments would underperform and its required contribution would soar with potentially huge consequences. Not only did the City fail to address this risk at the plan’s inception, this vulnerability was ignored by every subsequent administration—even as the risk itself grew to catastrophic proportions due to increasing market volatility and the growth of the workforce.

    Had the City, during just one of its regular actuarial examinations of the fund, took notice of the growing risk and addressed it responsibly—by making it part of the dialogue of negotiations, it is a certainty that both sides of the table would have made catastrophe-avoidance its number one priority. But by keeping it off the table, and keeping its employee’s and the public ignorant of the potential for a real fiscal nightmare, the City effectively quieted what would have been fearsome political opposition to its reckless spending habits. Just how likely would voters have approved funding a new city hall (or any of those other asinine projects) had they been made aware that their parks, public safety, and libraries were in jeopardy?

    Debra Figone makes big money managing this city, but what it really turns out she and her predecessors have been managing is the electorate—keeping them in the dark to keep the political bosses free to squander the treasury (and lets not forget that this is Debra’s second go-round here; she was the heir-apparent during much of the worst spending).

    Chuck Reed took an oath of office when first sworn in as a councilman a decade ago. Where is there any evidence this born-again fiscal conservative demonstrated upon taking office the courage to uphold that oath and make known—loud and clear, the unacceptable risk and the insanity of spending? Nowhere. At the very same time the employees he so readily insults were upholding their oaths with their very lives, Chuck Reed was demonstrating his true courage by cowering before the megalomaniac Ron Gonzales.

    Lastly, where during these many years was the 4th Estate? To read the Mercury today you’d think that every creep on its staff is a pension expert, yet never once—even when criticizing pensions, did that paper take to task the city for its secret and daunting risk. Instead, it cheered on the spending, the race pandering, and the careers of the very politicians who’ve delivered this city to ruin.

  11. On October 14, 2010l, Peter Campbell wrote that Chuck Reed will soon be mentioned as a candidate for state or national office, and was the most popular elected official in the Bay Area.

    • Outside of the clique of government workers that post here, Chuck is very popular. If he were so unpopular, why would y’all be so afraid of a popular vote. The taxpayers are on the mayor’s side.

      • Friday, 03 February 2006

        This is my last column for La Oferta. I’m leaving the paper to help start a new business, and I hope to get involved as a volunteer in the upcoming San Jose mayoral race. I asked the Editor at La Oferta if I could write one last opinion piece. Here it is:
        I believe that the City of San Jose is at a crucial crossroads, and that this next mayoral election will determine whether San Jose can get back to being a city, or whether it will continue its slow decline.  San Jose is not a great city, but it can be, and it must. For the past seven years, San Jose has been under the thumb of a political machine that has run the city into the ground and burdened San Jose’s next generation with mountains of debt. Over the next few months, the citizens of San Jose will begin to see the extent to which our city has been mismanaged.
        San Jose should be one of the wealthiest cities in the country.  Instead, we have huge annual deficits. The City of San Jose has been mismanaged by a corrupt political machine that has time and time again, placed its needs and the needs of its supporters before the needs of the people.
        But the real source of blame falls at the feet of those of us who live in San Jose, and permitted our city to fall into such hands. We can only fault ourselves for the current situation.
        One definition of the word “corruption” is, “a departure from what is pure

      • I have to disagree, Dad. I’m not in the clique of gov’t workers and have worked the private sector my whole adult life. Chuck to me seems more and more like one of the folks using the recession as an excuse to walk away from obligations, because he doesn’t want to do the real work of sustaining the commitments.

        Like any other “walk-away,” (driving off in their new car, to the mall) he’s gathered all his rationalizations and selective calculations. He’s put on a little “regretful” face, fashioned a story that plays upon the drama of the times and the sympathies of those eager for an easy way out.

        I don’t think the taxpayers, once they learn what he is really doing with our dollars, our future, and our value of integrity, will support him at all.

      • Reed and his cronies have so completely BS’ed the taxpayers that they are going to be in for a rude awakening some day when reality hits.  After Chuck and his minions are long gone only then will the taxpayers find out that they were hoodwinked into supporting all kinds of dubious schemes.  When crime is rampant, the City still in financial shambles, and the morale of public workers so devastated that going to the DMV is a pleasure by comparison, Reed’s legacy will slowly be revealed.  How foolish so many will feel as his dishonest misinformation and scapegoating come to light.  Until then, support away and enjoy that nice refreshing Kool-Aid.

  12. I am impressed with the Mayor and City Leadership of San Jose.  Mayor Reed has worked hard to adopt my style of leadership, and Mr. Campbell has been a stellar example of a pundit worthy of Baghad Bob.

  13. Has anyone heard of a pay out called cost recovery? 
    Why there not be a bankrupt city you will find the council and mayor and manager have been stealing for years.
      Loom at all the banks madoff they only came to light when the economy went sour enough were they could not hide. The mayor is trying to hide I have no doubt that if someone who knew what to look for went thru there books we would find all those CEO bonus deals.  Do you really think they sat back and watch CEO rank in all that money while they were in control of huge some of cash. It’s hard now days to find an honest elected official but still there are some not smart enough to see the obvious.
      Does anyone know the mayors total compensation? Does it include cost recovery?

  14. Why did the City Manager not apply for a federal grant, OR consult the city council about said grant, that would have saved the jobs of 53 officers….and instead applied to save only 10 officers?

  15. I find the comment by Don Barich, a San Jose resident to be ‘out of touch’ with reality.  What a majority of citizens don’t have a clue about is that the city gave these nice salaries and pensions to the the police and fire fighters …… The CITY!
    Shouldn’t their ‘feet be held to the fire’ for allowing such raises and pensions?
    I say YES!!!  The Police and Fire Fighters don’t automatically get raises …… they negotiate for them and the City gives them with tons of considerations.

    The present and past City Administrators have screwed up.  They miss-managed,
    miss-appropriated funds,  and have lied to the public.  They treat Police and Fire Fighters,  in fact all city employees as if they are ‘unwanted step-children’.  I can’t imagine working for an employer who was constantly looking to ‘take back’ what they said they would provide or promised.  Oh,  I forgot …… This is San Jose!

  16. It’s not a pension.  It’s an unsustainable Ponzi scheme.

    – 90% of your last year’s salary
    – 3% annual increases
    – bonus payments
    – and on and on

    The pension ponzi scheme would’ve crashed stock market debacle or not.  The stock market debacle didn’t cause this problem – it just moved up the date at which the city hit the rocks.

    The real cause of this problem are the insanely lucrative quid pro quo back room negotiated pension deals the public employee unions have extracted from union owned city officials – all on the backs of taxpayers.

    The party is over.  Blood, turnips, et al.

    Bring on Wisconsin.

    • My understanding there are many requiremetns placed on these type of grants.  I understand there is a grant for Firefighters of about $15 million that the City is looking at accepting, but the strings attached make it difficult. I hope they accept it.  Also, most grants application requests must go before Coucnil in a memo before they can applied for and are usually voted on in the consent calendar.  Was this latest PD grant request put through this process? 

      It would also be good to know haw many grants the PD currently has and what the cost is to City budget for these grants.

      • Your comment might be interesting if we were talking about whether the city should accept the money if it were offered, but instead the issue here is that the City was eligible to apply for funding for 53 positions and only applied for 10. After applying for such funding it doesn’t magically materialize, there is a review and months later perhaps it is awarded.

        The issue at hand here is the fact that the city manager’s staff failed to allow the council to even have the choice regarding whether to use this money because they failed to even apply for it. If this grant were awarded-in August-then the Council could have debated whether or not sufficient savings were achieved from contract negotiations to pay the city’s share of the bill. Instead, an unelected bureaucrat decided to apply for 10. This at a time when the City is contemplating laying off 20% of the police force—seriously shouldn’t they have at least applied for it—seriously…

        Remove your ideological blinders, sometimes a things is as bad as they seem.

  17. Death spiral? It spins a good picture but hardly the case.
    Think the Council is serious about this? Hardly. Ask that protector of the public purse Pete Constant how serious he is. He has proposed eliminating jobs (real people) and wants to use over $70,000 of that money for poop-bags in city parks.
    There is no money to properly maintain the parks or to keep them safe but Constant wants to provide poop-bags for people who are apparently not responsible enough to carry their own bags.
    This is just one example of how the Council is playing the public for fools.

  18. Ash Kalra has been reported to have said that if we cut current pensions, tghe city will be stuck with $$millions in legal fees. 

    I guess that tells us that the city would hire outside counsel, which means they don’t have faith in The City Attorney to defend them effectively.

  19. Deep breath everyone.  This is called politics.  Reality is: the city is nowhere near broke, not with pensions, not with anything. What they are “strapped with” is trying to continue to dig big benefits for developers out of a tight budget. Bummer.  The real thing that the Mayor and all of his deeply concerned cronies should do is move some of the capital funds and the special funds into the general fund—even if they need a ballot measure to do it. No one in their right mind wants to see new playgrounds getting built while public safety is taking cuts that result in delayed response times, or gutting the promises of those jobs that keep quality people in them for the long term. Really, it’s not hard.

    Politics is the art of making it LOOK HARD to do what you don’t want to do.
    Also, making your enemies tired.

  20. Fed Grant,

    The City has no interest in avoiding layoffs. Reed/Figone intend to use the layoff process to severe from their pension plans the maximum number of employees in order to create, from those rehired, an immediate base of lower cost, 2nd Tier retirement plan members. The cost savings from transferring 15 to 30 percent of the department out of the existing pension plan may well provide Reed the money he needs to cover the millions he’s spending on his billionaire buddy’s ballpark.

    What Reed/Figone don’t know (or don’t care about) is that the best of those rehires, perhaps as many as three-quarters of them, will accept their sentences as discount employees just long enough to find work elsewhere, leaving the department gutted of its youth, its vitality, its promise.

    • In the first place, what business does a federal government that is 14 trillion dollars in debt have going around giving money to municipalities anyway?
      In the second place where do San Joseans get off thinking people across the country should have to pay for our police force?
      In the third place this grant money would have to be matched by the City and it would have strings attached that would make it appear to be a gift from the Democrat party to the unions thanking them for their ongoing political support.

      I don’t think we should accept this money. As a resident of San Jose I’d rather take my chances with the supposed consequences of going with a smaller, less lavishly pensioned police force than see our City become further entangled financially and politically.

      • “In the third place this grant money would have to be matched by the City and it would have strings attached that would make it appear to be a gift from the Democrat party to the unions thanking them for their ongoing political support.”

        From my understanding, the City Manager’s office did not discuss the terms of the grant with anyone, even the council… how can you assert such a statement, unless you have concrete facts that you can produce.

  21. Two comments.

    Ponzi Scheme?

    The police-fire pension fund does not belong to the City of San Jose. The City’s relationship to the fund is as an investor/board member that annually extracts a dividend in the form of police service provided by the fund’s members. About a decade ago the police-fire plan was 100% funded—its assets sufficient to cover all accrued benefits (to every member, active or retired). That measure of financial health, noteworthy as a numerical distinction, was otherwise typical of the fund’s traditional state of health. It was this sound performance that, occasionally, allowed the City the option to reduce or skip its contribution. Hardly the track record of a Ponzi scheme.

    In hindsight this stellar performance proved to be a curse as it allowed a few scheming politicians to seduce union negotiators (shortsighted, misguided, egotistical—take your pick) into accepting enhancements that would ultimately threaten their own fund (and their membership’s security). The 90% retirement benefit, one that few members would ever obtain, was, as were a number of other enhancements, GRANTED by the City but CHARGED to the pension fund. It was, in effect, a hostile takeover in which the fund’s future solvency was capitalized (into immediate political power) by those elected and appointed officials allegedly representing the interests of the public.

    As I’ve stated previously, had this city seized the opportunities of the boom years to prepare its treasury for the years of bust there would be no crisis today and the pensioner’s draw on their fund would not have been turned into a political lightening rod.

    Federal Grants

    These have played a role in staffing for decades, offering the feds a chance to exert some influence in the hiring practices of local governments. In addition to grants aimed as certain classes of applicants (veterans, for instance), hiring grants have targeted drug use, domestic violence, gangs, etc. Whether an agency accepts them or not is typically a budget decision, but certainly, given the current crisis, the decision-making behind this city’s refusal of any public safety grant should’ve been made just as publicly and just as loudly by the same officials (Reed & Fignone) who’ve been making all the doomsday predictions; treated, as they say, as an issue of transparency.

  22. BS,
    Agree with (and appreciate the logic and eloquence) of 99% of what you post – but on this one we’ll have to agree to vehemently disagree.

    • We (taxpayers) can’t afford to pay you.  We are broke.

      Either public employee wages and benefits get reset to something sustainable or deal with layoffs. 

      That’s how it works in the real world.

    • Why is it that you so vehemently disagree with the current pension formula?  At the time it was negotiated nobody threw a hissy fit.  In fact, even with the upgraded salaries and benefits that the unions fought for years to obtain, the private sector didn’t blink an eye.  Why?  Because times were so good for them they didn’t care a whit.  Now when times are tough for the private sector folks they feel the need to turn on the public employees and demand that they fall with them.  I’ll make you a deal.  When the boom times come back, will you strap me to your lucrative pay and benefits when they shoot back up too?  I don’t want to have to go at the city tooth and nail to get them, I should just benefit automatically like private sector workers.  A pipe dream to be sure…

    • Government is the very definition of waste.  Hard earned dollars are taken from the pockets of taxpayers and for what?

      Uber lucrative public employee benefits and pensions.  Fleets of Priuses.  A shiny city hall.  Lightrail to nowhere.  And on and on.

      From the taxpayer perspective these are all indistinguishable examples of waste cut from the same government cloth.  And all the public employee whining, bitching, finger pointing resonates poorly with overtaxed taxpayers that have to pay the bills that our government runs up. 

      If taxpayers were still enjoying dotcom boomtime incomes and a bull market then we could afford to pay the dotcom boomtime era benefits that public employees are receiving.

      But taxpayers aren’t.

      Taxpayers are tapped and are trying to dig themselves out.  The city is broke.  The state is broke.  The country is broke.

      Either public employee wages and benefits get reset to something sustainable and commensurate with current levels of tax revenue – or else deal with layoffs. 

      It sucks but that’s the world we are living in.

      • First of all if you the taxpayer, oh wait let me correct that, we as the taxpayers because public employees are too, can’t distinguish between negotiated salaries that take months of very public wrangling and some city manager’s decision to buy a bunch of Prius vehicles then we are all doomed.  Secondly, public workers are not enjoying the same level of dot com boom benefits now that private sector people enjoyed, not even close.

        My spouse works in the private sector at a large computer company.  My benefits are not even close to what she had during the good times.  As my union fought to get me 3% to 4% raises, I watched others getting 10%-20% raises coupled with profit sharing and other bonuses.  I never got stock options.  I never got beer busts every Friday.  I never got a take home car.  I never got company sponsored junkets to exotic places for “team building”.  I never had free soda machines, free dry cleaning, free day care, a monstrous gym at my work place, a cafeteria with multiple mini-restaurants, food delivered to my desk, a barrista making me free latte’s, Foosball and ping pong tables in the break room, stress counseling and employment referrals at layoff time and all the other perks that existed, and still sometimes exist at many companies.

        Now my spouse has gone without a raise for about 7 years and all those luxuries are long gone.  In fact they lock the cabinets so employees have to ask for a coffee cup, a new pen, or other office supplies.  There are no more profit sharing checks, bonuses, or other benefits.  I am just grateful she is still employed.  As someone else stated, the private sector has higher highs and lower lows.  As a public employee I sit in the middle, but I also stay in the middle.  I am praying for boom times once again because we are hurting too.  But I find it incredibly spiteful that private sector people are essentially saying that public workers are lower class citizens.

        What you are really saying is that we are not worth paying a decent salary to and we certainly don’t deserve a good retirement system.  You are also saying that if you as a private sector worker suffer, then we should too.  But, if the private sector flourishes, then we should continue to suffer.  You want the best of all worlds at the expense of others.  Our public service salaries and pensions won’t seem so plush when the good times come back but by then you will have forgotten these days.  You will go back to deriding those who wear a name tag or a uniform.  You will look down your nose at anyone standing behind a counter providing you service.  You will very quickly have memory loss when a public service employee starts asking to enjoy a rebounding economy.  How do I know this?  Because historically this is exactly what happens decade after decade.  History does repeat itself and in a few short years public employees will be far behind your lifestyle and you won’t care at all.

  23. WB said   “I can’t imagine working for an employer who was constantly looking to ‘take back’ what they said they would provide or promised. ” 

    Apparently you have not read newspaper or magazines in last 10-20 years as hundreds of companies and many government change or cancel their pension and benefits when financial reality show promises made are unsustainable and choice is change or go bankrupt

    ” protector of the public purse Pete Constant how serious he is. He has proposed eliminating jobs (real people) and wants to use over $70,000 of that money for poop-bags in city parks. There is no money to properly maintain the parks or to keep them safe ” 

    Has anyone taken “Poop Bag Pete” seriously in last 3-4 years as he tries to find another political office to run for ?

    ” The real cause of this problem are the insanely lucrative quid pro quo back room negotiated pension deals the public employee unions have extracted from union owned city officials – all on the backs of taxpayers.he party is over. ”  – True absolutely True

    Aa well as union control City Council , now Chamber / McEnery controls City Council –

    How things change but remain the same with Good old Boys and Gals insiders controlling San Jose politics for their benefit not public’s

  24. “The budget should be balanced, the treasury should be refilled,
      public debt should be reduced, the arrogance of officialdom should be
      tempered and controlled, and the assistance to foreign lands should
      be curtailed lest Rome become bankrupt. People must again learn to
      work instead of living on public assistance.”
                                –  Cicero   – 55 BC

                    So, evidently nothing!

  25. John Galt Normally i agree with most of what you say but not this time

    “In the first place, what business does a federal government that is 14 trillion dollars in debt have going around giving money to municipalities anyway?”

    Federal govt since 1950’s has redistributed local funds for years – called politics – agree it should be stopped but no likely to happen so San Jose either takes money or someone else will

    “In the second place where do San Joseans get off thinking people across the country should have to pay for our police force? “

    Actually Californians only get back 78% of taxes sent to Federal gov;t – CA Congress Senators and Reps even when in power are not good at getting our taxes back to California – Need new Congress people

    “In the third place this grant money would have to be matched by the City and it would have strings attached ”

    All govt money has strings attached – always will especially state and fed money It should not go to state or feds for redistribution should stay local for local use political support.

    San Jose is already very low staffed and cuts will increase crime since criminals will stay on street longer before caught

    • Thanks for the civil tone of your rebuttal.

      I’m just an ordinary citizen trying to make sense of the world around me. All I’ve got is circumstantial evidence.
      A police officer sees a car weaving crazily down the road and he begins to suspect- even though he has no direct knowledge of any specific drinking incident- that the driver may be under the influence of alcohol.

      Over the last 15 years or so I’ve watched as the City of San Jose has become more and more dysfunctional. If the City was a car, it’d be seen weaving dangerously and aimlessly. I can’t ‘pull the City over’ to investigate the cause of this erratic behavior but I think I’m well within my rights to have my suspicions. And what I suspect is that much of the dysfunctional behavior displayed by the City is caused by widespread corruption.
      Corruption occurs when money and favors are accepted from strangers. They ALWAYS expect something in return. Corruption is avoided when we pay for the things we want up front, and with our own money.

      And in Friday’s article, ‘Figone Passes On Full Police Grant’ we read, “Jim Unland, Vice President of the POA said the union has reached out to U.S. Congressman Mike Honda’s office to see about filing a congressional inquiry with the Department of Justice to determine the city’s options for reapplying for the full grant”.

      I know it doesn’t PROVE anything, but to me it’s just one more piece of circumstantial evidence. I don’t know how a serious and conscientous police officer can be comfortable with the knowledge that they may be somewhat beholden to Mike Honda and Eric Holder’s vision of justice in America.

  26. I actually think bankruptcy might be the best option.

    In terms of efforts to fix the beast that is our city government, its messed up and there’s so many folks invested in obfuscating the issues to preserve personal perks and such that I don’t know how this is going to turn out.  Probably not real well.

    Second-tier is definitely coming, and all that’s uncertain is if SJ will follow existing 2nd Tier benchmarks or seek a lower threshold.

    On the special funds and “isn’t there a secret pot of gold we can raid” thread.. this reminds me of California state politics.  We love to pass mega-bond measures.  Each 20-30 year bond measure requires revenue to pay back, plus interest.  It looks like free money, but it actually shrinks the general fund every time one passes to “service the bonds.”

    SJ has partaken of some of this “mana from heaven” bond financing which helped fund a bunch of new branch libraries, community centers and I think a police substation.  We took out a really big mortgage.  There actually is, however, a bit of a secret pot of gold in terms of the real estate portforlio of redevelopment and the city. 

    They actually do own land and property worth several hundred up to a couple of billion.  But in a down market, good luck.  There’s some crazy reverse mortgage schemes and you could go crazy selling everything including the new city hall for quick cash at “payday loan” rates and then lease it back at even worse rates.  I’d actually get kinda mad if they tried something like that as it’d be kinda over the top screwing of the next couple of generations to fix an immediate problem and bail out folks who may not deserve it.  I also expect that the traditional 20% graft ratio would balloon in the city real estate “fire (pension) sale” and we’d get fleeced while the usual suspects made a mint.

    BTW – wouldn’t it be hilarious if the bankruptcy judge apppoints some state expert to help us restructure?

    • That’s what will have to happen. If they file for bankruptcy, they will have to sell off property to pay off the debts. You seem to keep bringing it up, like you are hoping that is what they will have to do…so that is my wish for you.

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