Page 2: The gathering storm
Just because the Town of Mammoth Lakes has reduced its number of staff over the past several years, this doesn’t mean that the Town’s employee pension obligations have been reduced in any meaningful way.
According to the CalPers Actuarial Valuation as of June 30, 2012, which sets the Town’s required contribution rate for 2014-2015, the Town continues to fall further and further behind in its pension obligations.
The pension fund for the Town’s public safety employees was 68.6% funded as of June 30, 2012. It was 73.2% funded as of June 30, 2011.
On a market value of assets basis, the unfunded liability for puboic safety, as of June 30, 2012 was $5.46 million.
The pension fund for the Town’s other employees [the “miscellaneous” plan] was 65.9% funded as of June 30, 2012. It was 69.2% funded as of June 30, 2011.
On a market value of assets basis, the unfunded liability for this plan as of June 30, 2012 was approx. $10.6 million.
The minimum employer contribution rate continues to rise. For public safety, the contribution rate was 32.3% in 2013-2014 and is expected to rise to 38% by 2015-2016. For miscellaneous employees, the rate was 21% in 2013-2014 and is expected to rise to 24.3% as of 2015-2016.
Basically, what the Town has been doing and continues to do, like so many other municipalities, is to make the minimum payment on its pension obligation credit card.
Town Finance Manager Cyndi Myrold said one change that has not helped the Town’s pension outlook was the sweetener in benefits adopted during the disastrous Charlie Long era, circa 2004 (remember, Long was also the one who sent the fateful letter to the FAA which sealed the Town’s doom in the airport litigation). Councilmembers at the time: Wood, Eastman, Barrett, Stapp, Harvey.
During the Long era, employee retirement benefits were raised to 2.7% at 55 years of age (up from 2% at 55).
According to the CalPers actuarial report, “At the time your plan joined the Risk Pool, a side fund was created to account for the difference between funded status of the pool and the funded status of the plan.”
What is this “side fund?” It basically is a loan CalPers extended to the Town to fund its generous new adopted benefits.
The side fund is absorbed into the Town’s contribution rate for the purpose of the CalPers calculation, so unless you actually read the full report, all you’re gonna see is the minimum payment for the credit card (the minimum employer contribution rate).
So you’re not going to realize that the side fund “loan” has an interest rate of 7.5%.
A public records request by The Sheet determined the following:
Per the October 2013 Actuary, the Side Fund balances are as follows:
Miscellaneous Employees: $2,615,527
Public Safety Employees: $1,039,174
Meaning the Town pays $275,000/year to merely service the interest on that side fund loan.
So why isn’t this a priority? I asked Cyndi Myrold. “We talk about refinancing the airport litigation terms, but this side fund loan is two points higher.”
Myrold said it was always former Finance Director Brad Koehn’s plan to pay off the side fiund loan first if he ever had the means to do it. Unfortunately, she said the REU (Reserve for Economic Uncertainty) is really too low right now. “I would increase the REU before I started paying down anything else,” she said.
Myrold describes next year’s Town budget as “fair,” but she would not call it “conservative.”
A sliver of silver lining. CalPers enjoyed an 18% return last year. Even though returns are “smoothed” over a 20-year period, the banner year CalPers had last year will be helpful, even if it doesn’t enter the calculations until 2016-2017.
So I’m reading Wednesday’s Wall Street Journal and there’s this little story entitled, “Men With Wide Faces Have Edge as Negotiators.”
And I suppose this story catches my eye because I don’t think I know anyone with a wider face than Mammoth Mountain CEO Rusty Gregory.
“New research finds that men with wide faces tend to take a more competitive approach to negotiations than do their counterparts with smaller facial width-to-facial height ratios, helping them claim a bigger slice of the proverbial pie in negotiations that have obvious winners and losers.
Researchers at the University of California-Riverside, London Business School and Columbia University conducted a series of simulated male-male negotiations in real estate transactions and salaries – often considered zero-sum deals – and found that men with wider faces entered these negotiations with a competitive rather than cooperative mindset.
… In one experiment, men with wider faces negotiated a signing bonus of nearly $2,200 more than the bonus won by men with narrower faces … in another simulation, a property went for a higher price when the wide-faced participant was the seller.
However, the researchers found that when a situation calls for compromise and creative solutions – say when one party’s ceiling price is lower than the other’s absolute floor and alternative concessions might be needed – wide-faced men don’t fare as well.”
The article noted that “past studies have linked large facial-width-to-height ratios to aggressive, self-interested and even unethical behavior.”
Hmm. I suppose what this means is that in future negotiations with the Mountain, perhaps the Town should hire its own wide-faced hard ass as its lead negotiator. Someone like … Mickey Mouse. Or maybe Arnold Schwarzenegger. If they’re not available, I’d say Shields Richardson has the widest face of a current Councilmember. And below, from Charles James …
The recent press release to local media from the Inyo County Employees Association (see this issues Letters) explaining their side of the pay raises which are adding to the County’s budget woes, raised a few eyebrows of critics already skeptical of the Board of Supervisors approval of equity pay raises given to some employees and the cost of living adjustment pay raises given to all county employees last year.
According to ICEA President Renee Rodriquez, “There may well have been a different voting result had the union known that the pay equity increases, which we were told were “earmarked” for inclusion in the budget by the Board of Supervisors, did not extend beyond the first year.”
The union is concerned that they may be unfairly targeted with accusations that they are “greedy public employees,” “only care about their pensions” and “do not care that pay raises may result in loss of services to the public.”
“Nothing could be further from the truth according to Rodriquez, “We care very much about what happens to public services and to our members’ jobs, some of which are now under threat of elimination through layoffs as a result of the raises.”
In short, they feel that they have been deliberately misled and had they known the effects the approval of the raises would create, there would likely have been a very different outcome in the vote to approve the MOU.
Union representatives say that the equity pay raises may have been taken off the table had they been given a better, more honest explanation of the County’s budget situation,. According to union sources, the matter of pay equity raises sat on the desk of the County CAO Carunchio for several years and discussions on the subject go back as far as 2008. It was not until the county itself brought the issue to the negotiating table that the union even considered it. It seemed like a good deal at the time…and it seemed to be paid for. Obviously, it wasn’t.
