Home > Uncategorized > Is Eureka headed for bond trouble?

Is Eureka headed for bond trouble?

Hank Sims at the LCO reports: http://lostcoastoutpost.com/2012/dec/12/city-eureka-looks-sell-bonds-fund-pensions-high-in/

His piece begins “County eyes have widened…” The eyes may have widened, but the feet haven’t moved.  Only twelve people showed up at Wednesday evening’s McK USD meeting, according to the T-S.  In a democracy, the people get what they deserve.  When a democracy turns into a kleptocracy, the best device to use to find the responsible party is a mirror.

Meanwhile, Carrie Peyton Dahlberg of the NCJ offers good advice to anyone involved with school funding who actually cares about getting money for childrens’ educations, as opposed to rolling the dough out for their developer and financier friends.

  1. Sigh
    December 14, 2012 at 8:04 am

    Kleptocracy? Seriously? Is that what you think of the trustees? They’re faceless people you don’t know, which is why you so flippantly toss around such terms. You’ve been hanging around Heraldo for far too long.

    FWIW, 12 members of the public at any school board meeting is a huge turnout. That only 2 of the spoke, well, get used to the fact that not everyone is fired up about everything that fires you up. Maybe they accepted the explanation of why they did what they did and believe the district plans to restructure the debt as soon as allowed.

  2. Anonymous
    December 14, 2012 at 8:12 am


    This needs to be investigated. Mitchell, Hooven, all of them, KKM, Piper Jaffray all need to be investigated. This whole thing stnks. The DA must investigate this seriously. This CAB deal must be undone and the exorbitant fees returned to the taxpayers.

    If Gallegos fails to do this (at least seriously investigate this stink) then yes, we do indeed live in a kleptocracy.

  3. Anonymous
    December 14, 2012 at 8:13 am

    Eureka isn’t issuing CABs

  4. Anonymous
    December 14, 2012 at 8:19 am

    The BS court decision that Tyson’s minions are fishing for includes the authorization for CABs and an array of other toxic arcane financial products.


    I hope that the council will vote on their next meeting to put this bond issue to a vote of the people as is required by state law. If they don’t there will be lawsuits.

  5. Anonymous
    December 14, 2012 at 8:52 am

    819 the action filed in court lists many financing instruments but again cabs are not before the council for approval.

    Read the item up for approval. There are no cabs. Issuing cabs would require a separate city council approval.

  6. Anonymous
    December 14, 2012 at 8:55 am

    State law requires bond issues to be submitted to the voters for approval by a 2/3 majority.

    Is the Brady Bunch smart enough to understand this?

  7. HUUFC
    December 14, 2012 at 9:06 am

    It’s ridiculous to issue bonds to pay for ongoing expenses, it’s dereliction of duty, a misuse of the the public trust. The outcome has been demonstrated by the actions of the State of California and the Federal government, disaster.

  8. Anonymous
    December 14, 2012 at 9:16 am

    I agree for once with HUUFC. Am I crazy?

    When my paycheck doesn’t stretch til the end of the month, I can cut my expenses or try to raise my income.

    Charging up my credit card to buy groceries is my road to financial disaster. Same with the city of Eureka.

    Tyson and Brady and Paul Rodrigues are trying to throw a little dirt over a stinking turd.

    Paying off the entire calpers debt can be done in five years with monthly payments of around 150k, and it will save a million $ over this bonded servitude.

    You just need to raise taxes, or cut expenses. Lay off the city manager for a start. Cut out the blueberry muffins for “staff” start a weight loss program, keep it positive!

  9. Just Watchin
  10. Just Watchin
    December 14, 2012 at 9:53 am
  11. Anonymous
    December 14, 2012 at 10:29 am


  12. Anonymous
    December 14, 2012 at 10:45 am

    This needs to be investigated.

    Right, so you want local DAs investigating how many hundreds of school districts in the state? Don’t jump to conspiracy theories when plain old benign explanations are more likely. CABs are a mainstream funding tool (by virtue of their widespread use)… hey, not a good tool by any measure, but these are not ordinary times.

  13. Anonymous
    December 14, 2012 at 10:50 am

    Watchin, you should expand your news consumption out of rightwing websites. A company doesn’t lay people off because a tax is placed on the items it sells. The cost of the tax is transferred to the entity buying the item. And with medical devices, we’re talking about an essential, needed item, not a luxury item. There’s no reason on God’s Green Earth to believe the tax will put any business out-of-business. More likely, such a company was already doing poorly and tried to save face by blaming Obama.

    Or, please explain how this tax will put a manufacturer out of business.

  14. Anonymous
    December 14, 2012 at 10:56 am

    The Troll, “Just Wankin”, continues his provocations by posting a bunch of crap from Fox news. Remember these are the same people who were entirely wrong about the last election and who keep telling us lower tax rates will create jobs (even though they haven’t). Please disregard the nonsense from this Florida wanker – LMFAO, OMG, LOL!

  15. A pesky fact
    December 14, 2012 at 11:49 am

    Math is a liberals worst enemy.

    The reality of the unfunded benefit liabilities is staggering. Debts that can’t be repaid, won’t be repaid.

    And in Cali courts can permit bonds (w/o voter consent) if the money is going to union pension funds. Often times the buyers of these particular bonds are… Union pension funds.

    Even though the Dems have supermajorities, the courts, and the governorship, no amount of feel good legislation can suspend the basic laws of math.

    Debts that can’t be repaid won’t. On a long enough timeline the survival rate for everything drops to zero.

  16. A pesky fact
    December 14, 2012 at 11:55 am


    The market of available dollars to purchase medical devices is finite, not infinite.

    The device tax reduces the overall consumption rate because there is a finite market of dollars to purchase them.

    Where company X had revenue of Y, now their revenue is Y-N, as a function, because the available dollars are finite.

    What you’re not getting is that dollars are a finite commodity.

    It’s the same reason Cali’s public sector pensions will never be paid. Dollars are a finite commodity.

  17. ChuChu
    December 14, 2012 at 12:01 pm

    Dollars are a finite commodity because they’re finite, see? Everything is the same, see? X was Y but now it is X-Y, see? Dollars are a finite commodity!

  18. Anonymous
    December 14, 2012 at 12:04 pm

    A pesky fact :
    Math is a liberals worst enemy.
    The reality of the unfunded benefit liabilities is staggering. Debts that can’t be repaid, won’t be repaid.

    first of all pesky, are you calling Dave Tyson a libral? Coz he is the one who is sneaking this bs through.

    second, are you saying the city of eureka should just admit it is broke and declare bankruptcy right now? that would be the honorable thing to do, right?

  19. Just Watchin
    December 14, 2012 at 12:26 pm


    Anon…..what makes you think I give a rats ass about Humboldt Republicans? But I am glad you’ve taken the lead libtard position away from Blame Jane. She was getting boring, and you know I just come here for the fun !!

  20. December 14, 2012 at 1:01 pm

    Actually, dollars are not a finite ‘commodity’.

    That I think is what those holding a lot of them.

    Besides that justice would take a proportion of dollars away from those who pay attention only to having too many, or to thinking they would like to have so.

    In an ecological sense, press on the unfair distribution of ‘dollars’ in a ‘market’, and you will soon enough get some form of collapse, gentle or otherwise. This collapse takes the value of dollars away, and thus puts exchange of effort between one person and another back to a fairer balance.

    Inflation is a gentler form of this, on a scale.

    Economics I believe specifically states all of these facts, and more — even in its simplified stories that dollar-hoarders like to use.

    In its more realistic forms, our future gains its chances. We’ll come up with how to do it, and then a lot of things will relax to their better, more naturally satisfying arrangements. We’ll again be happier.

    It’s not only a sunshine tale, but reaches rightly for some.

    Chiefofnotsomuch have spoken.

  21. December 14, 2012 at 1:03 pm

    ‘That I think is what worries those holding a lot of them.’

  22. A pesky fact
    December 14, 2012 at 1:20 pm


    I’m speaking of more than the nickels and dimes of the local bond issuance.

    Cali, the counties, and the munis have a combined unfunded liability of 4 trillion. The vast majority of owed pensions are never , ever, going to be paid.

    As for bankruptcy, it doesn’t matter. Debts that can’t be paid won’t be paid.

    It is possible, on paper, for places like Eureka to escape the Armageddon by switching over entirely to defined contribution pension systems, along with dumping 100% of employees into ObamaCare and eating the 2k/y penalty.

    But, it is unclear if ObamaCare let’s munis do that, and more importantly, the unions wouldn’t agree to either of those.

    But as a whole, the state is boned. 4 trillion in unfunded liabilities.

  23. December 14, 2012 at 1:38 pm

    So, ‘owed pensions are not going to be paid.’

    However, what is the number now, skywards of Thirty Trillion, of dollars being held offshore these days?

    Chiefnotholdingontomuch, not being actually a revolutionary, still sees fundamentals like this that suggest pesky’s arguments and his are on exactly the same basis.

    A nod of respect for the better class of awareness pesky does show consistently.

    It’s only a problem where it doesn’t allow any solutions but the ones that make most poorer, and the poor desperate.

    If a deliberate attempt to ‘drown government in a bathtub’ could actually have the effect a nut like Norquist could only have predicted in his odd dreams, why not consider how rapidly admitting to the present larger realities, beyond the locked-investor-circle-of-belief, could reverse this same thing as was engineered — and bring us out again?

    Just thoughts. Any chief would have them, one thinks.

  24. Union pensioner
    December 14, 2012 at 2:10 pm

    You have pension envy. It’s being done for the kids.

  25. Union pensioner
    December 14, 2012 at 2:16 pm

    Tax the rich, raise dmv fees, add gas tax, create an insurance tax, abolish prop 13, tax food sales, raise utility taxes, and if that still doesn’t fund it you can eat your neighbor when your hungry. I’m moving to Florida with my pension, it will take decades before CalPERs runs out of money, you can deal with it then.

  26. A pesky fact
    December 14, 2012 at 3:57 pm

    A subtext to all this is our shift off the gold standard entirely under Nixon.

    Defined benefit pensions can work out when the defined benefit can always be boiled down to some variation of a fixed amount of a commodity. 100 or 1000 bucks a month is all the same if it is the same amount of gold.

    It’s the same with wages and the CPI. By having an asset (as opposed to a liability, which is what debt/bonds is/are) backing the currency, it doesn’t matter if min wage is 2 or 20 per hour, because the ratios of purchasing power and disposable income stay in the same range of each other.

    Not saying we need a gold standard. Just trying to illustrate this point: the public pension systems (both public union and social security) were designed and launched in an era when the basis of out entire economy was different. We’ve switched from currency and economic growth being about savings and assets, to being about debt and devaluation.

    And our pension systems didnt make the switch. Thus the current black hole of doom in Cali.

    We used to have a currency system that allowed nearly everyone to have a comfortable retirement. Now we have one that pillages the elderly, the mid aged, and the young, and future generations unborn, to enrich bankers while leaving the entire world bankrupt and shafted.

    I liked the old one better.

  27. Anonymous
    December 14, 2012 at 4:24 pm

    A pesky fact :

    We used to have a currency system that allowed nearly everyone to have a comfortable retirement.

    If you are saying that when the USA was on the gold standard that nearly everyone had a comfortable retirement then you are a buffoon. Why do you think Social Security was invented? It was invented to alleviate the poverty of the elderly. Just imagine this last economic downturn with an additonal 50 million old folks living in absolute poverty.

    In fact, the 50 billion $ pumped into the economy each month by social security recipients probably went a long way in preventing an even deeper depression.

    Get a clue.

  28. Skippy
    December 14, 2012 at 4:38 pm

    Thanks for your post informing us of Hank’s news and nice catch again, Mitch. We wonder why the Times-Standard isn’t reporting on this. It’s fairly outrageous on a number of levels.

    For reader’s awareness, the Sentinel took a small look into ‘The Surprising Sums of Eureka City Hall’ today as an adjunct to Hank’s post and the column here.

  29. Anonymous
    December 14, 2012 at 5:14 pm

    You wonder why the Times Standard isn’t reporting on this?

    They do what they are told. That’s what’s good for them.

  30. Anonymous
    December 14, 2012 at 6:01 pm

    Pension bonds risky for state and local governments-Moodys

    Tue Dec 11, 2012 12:49pm EST

    Dec 11 (Reuters) – Municipal bonds that states and local governments use to pay for some of their public pension obligations rarely improve the issuer’s credit quality, Moody’s Investors Service said on Tuesday.

    “If bond proceeds substitute for annual contributions to pension plans or are used to pay pensioners, we consider it a deficit borrowing and would view the financing as credit negative,” Marcia Van Wagner, the senior Moody’s analyst who wrote the report, said in a statement.

    Cities and counties in the United States seem to have gotten this message, even though many face big unfunded pension liabilities. Despite some large state pension obligation bond deals in 2012, issuance has declined from 2011.

    In the first seven months of 2012, there were just 14 such deals worth $604 million, compared to $4 billion issued in 2011, according to Thomson Reuters data.

    The negative credit implications hold especially true if the borrowing is large relative to the issuer’s budget, for example over 5 percent. The bonds are also viewed negatively if they are part of a pattern of one-time fixes or don’t come alongside a plan to restore budget stability, Moody’s said.

    “Pension bonds are often a red flag associated with greater rigidity of long term obligations, failure to find sustainable solutions to pension funding and a pattern of pushing costs off into the future,” said Van Wagner.


  31. Anonymous
    December 14, 2012 at 6:22 pm

    How Plan to Help City Pay Pensions Backfired


    Published: September 3, 2012

    Jeffrey A. Michael, a finance professor in Stockton, Calif., took a hard look at his city’s bankruptcy this summer and thought he saw a smoking gun: a dubious bond deal that bankers had pushed on Stockton just as the local economy was starting to tank in the spring of 2007, he said.

    The City of Stockton, Calif., sold about $125 million in bonds to try to close a shortfall in its pension plans for city workers like police officers.

    The plan was unsuccessful, and the city is now in Chapter 9 bankruptcy.

    Stockton sold the bonds, about $125 million worth, to obtain cash to close a shortfall in its pension plans for current and retired city workers. The strategy backfired, which is part of the reason the city is now in Chapter 9 bankruptcy. Stockton is trying to walk away from the so-called pension obligation bonds and to renegotiate other debts.

    After reviewing an analysis of the bond deal, underwritten by the ill-fated investment bank, Lehman Brothers, and watching a recording of the Stockton City Council meeting where Lehman bankers pitched the deal, Mr. Michael concluded that “Stockton is entitled to some relief, due to deceptive and misleading sales practices that understated the risk.”

    “Lehman Brothers just didn’t disclose all the risks of the transaction,” he said. “Their product didn’t work, in the same way as if they had built a marina for the city and then the marina collapsed.”

    Financial analysts and actuaries say essentially the same pitch that swayed Stockton has been made thousands of times to local governments all over the country — and that many of them were drawn into deals that have since cost them dearly.

    Since virtually all pension obligation bonds turn on the same basic strategy that Stockton followed, Mr. Michael’s research could be a road map for avoiding more such problems, or perhaps for seeking redress. His analysis was part of his August economic forecast for the region, which he prepares as director of the Business Forecasting Center at the University of the Pacific.

    There are about $64 billion in pension obligation bonds outstanding, and even though issuance has slowed, more of the bonds are coming to market, even now.

    Officials in Fort Lauderdale, Fla., are scheduled to vote on a $300 million pension obligation bond on Wednesday, for instance. Hamden, Conn., has amended its charter to allow for the bonds to rescue a city pension fund that is wasting away. Oakland, Calif., recently issued about $211 million of the bonds, following the lead of several other California cities and counties.

    The basic premise of all pension obligation bonds is that a municipality can borrow at a lower rate of interest than the rate its pension fund assumes its assets will earn on average over the long term. Critics contend that municipalities that try this are in essence borrowing money and betting it on the stock market, through their pension funds. The interest on pension obligation bonds is not tax-exempt for this reason.

    Alicia H. Munnell, director of the Center for Retirement Research at Boston College, looked at outcomes for nearly 3,000 pension obligation bonds issued from 1986 to 2009 and found that most were in the red. “Only those bonds issued a very long time ago and those issued during dramatic stock downturns have produced a positive return,” Ms. Munnell wrote with colleagues Thad Calabrese, Ashby Monk and Jean-Pierre Aubry. “All others are in the red.” Only one in five of the pension obligation bonds issued since 1992 has matured, so the results could change in the future.

    Among the places where the strategy has failed miserably is New Orleans, which sold about $170 million of such debt in 2000 to produce cash to finance the pensions of 820 retired firefighters. Until then, New Orleans had never funded their benefits and simply paid them out of pocket, leaving the retirees fearful that in a budget squeeze, the city might renege.

    City officials based the deal on the expectation that the bond proceeds would be invested in assets that would pay 10.7 percent a year — an unusually aggressive assumption, but one that made the numbers work. New Orleans’s credit was weak, and its borrowing rate was expected to be 8.2 percent. To get the rate on the bonds down as much as possible, New Orleans also issued variable-rate debt, combined with derivatives in an attempt to hedge against rate increases.

    But instead of earning 10.7 percent a year, the bond proceeds the city set aside for the firefighters’ pensions lost value over the years, first in the dot-com crash and then in the financial crisis. And instead of hedging against interest rate increases, the derivatives failed, leaving New Orleans paying 11.2 percent interest. The city also has a $115 million balloon payment coming due on the debt in March.

    “We might as well hand over the keys to the city,” New Orleans’s chief administrative officer, Andy Kopplin, told reporters in July, after meeting with the Louisiana State Bond Commission to seek permission to refinance the debt. He said the next batch of pension obligation bonds would have an investment-grade rating, because they would be backed by property taxes instead of investment returns from the firefighters’ pension fund. The commission approved the new bonds unanimously.

    Stockton got a similar pitch in 2007 — that it could issue municipal bonds with a lower interest rate than the California state pension system, known as Calpers, expected its investments to return annually, on average.

    The year that Lehman Brothers made the pitch to Stockton, for example, the city had a shortfall of $152 million with Calpers, which administers benefits for Stockton’s retirees. The gap appeared because in 1999, Stockton increased the value of the pensions its workers were earning, without making a corresponding increase in the yearly prepayments it sent Calpers to cover the cost.

    No one thought it had to; Calpers’s actuary had projected that investment gains would pay for most of the increase. Then the dot-com bubble burst, blowing that expectation to bits. But Stockton’s workers kept on building their retirement benefits at the richer rate, so by 2006, Stockton was $152 million short of what it should have had on hand at Calpers to pay for all of its current and future retirees’ pensions.

    Calpers, meanwhile, was assuming that its investments would earn 7.75 percent a year over the long term. And when a city, like Stockton, had a shortfall, Calpers treated it as if that city had borrowed from the pension fund — and it charged that city 7.75 percent interest on the loan.

    Not only that, but the Lehman bankers also explained that Calpers had recently switched to a new way of billing its member cities for these “loans.” It wanted to help them preserve their cash in the wake of the technology crash, so it had slowed the cities’ payments to Calpers. The bad news was that it had slowed them so much that the bills were compounding before any city could pay them down. That meant Stockton’s debt to Calpers was just going to get bigger and bigger over the years, the bankers said.

    After laying out this daunting situation, the Lehman bankers said there was a way out: Stockton could raise the $152 million all at once in the municipal bond market, send the money to Calpers and get rid of the unpayable loan. The municipal bond market would charge Stockton just 5.81 percent interest. The city would come out way ahead.

    What the bankers did not say was how seldom such pension bets ever pay off.

    A recording of the Stockton City Council meeting where Lehman recommended the pension obligation bond shows that members sensed there was a catch, but they had trouble nailing down what it was.

    “I don’t understand the bond market,” one said as he struggled with the projections showing that Stockton could never pay down its debt to Calpers. “Are these projections realistic?”

    Another wondered whether Calpers might lower its assumed rate of return, eating into the spread Stockton hoped to achieve between the 5.81 percent and the Calpers assumed rate.

    One of the Lehman bankers agreed there were risks.

    “This is not a guaranteed deal,” he said. He explained that no one would know whether Stockton had come out ahead until all the bonds had matured, 30 years in the future. He said “the ultimate benchmark” for Calpers’s investments was Stockton’s own borrowing rate, 5.81 percent.

    If Calpers’s investment earnings 30 years from then did not average out to at least 5.81 percent a year, he said, the bond would have been a bad idea. But then he dismissed this possibility, saying that if Calpers could not earn that much over time, “you have much bigger problems.”

    Calpers’s investments lost about 25 percent of their value in the financial turmoil that began in 2008. That meant the city had a new debt to Calpers, compounding at 7.75 percent, on top of its debt to the bondholders. Stockton was worse off than ever, with 29 more years to go.

    Mr. Michael, of the University of the Pacific, said Lehman Brothers had not let on that such an outcome was possible, and had, in essence, talked the City Council into making a huge gamble with public money.

    Federal regulations require municipal bond underwriters to deal fairly with cities and not mislead or deceive them.

    Mr. Michael said the fact that a troubled city like Stockton was able to borrow at a rate so much lower than Calpers’s assumed rate of return should have raised questions. Now that the bonds are in default, it is clear that the investors who bought them were not compensated enough for the risk they took on, he said.

    The investors might thus have a case against Lehman, except that Lehman is now bankrupt.

    The company that insures the bonds, Assured Guaranty, will make the bondholders whole, but the policy it issued allows it to file a claim in bankruptcy against Stockton for the money it pays the bondholders. Assured Guaranty will be an unsecured creditor for the claim. It said in a statement that Stockton was trying “to transfer the cost of lucrative, above-market employee wages and benefits, granted when tax revenues were flush, to capital market creditors by haircutting bond principal,” which it said was unprecedented.

    In another statement, the insurer said Stockton might have avoided bankruptcy entirely if it had taken steps like restructuring its debts, selling assets and “pension reform.” But Calpers argues that the pensions it administers cannot be reduced for current workers or retirees — only for workers hired in the future, and Stockton is bankrupt today.

    “If the city believes that third parties misrepresented the risks of the pension obligation bonds transaction, the city should seek recourse against the persons or firms responsible,” Assured Guaranty said in a statement.


  32. A pesky fact
    December 14, 2012 at 6:24 pm


    SS came about in 36, becoming effective in 40. Nixon took us off the gold standard in 71.

    I explicitly pointed out SS and public union pensions. They were created under the gold standard, and we now have 2 massive retirement systems with astronomical unfunded liabilities (4 trill for Cali, 60 +trill for SS) because the currency they were created to use is gone and was replaced with IOUs.

    Thus we went from a currency system capable of providing retirements for vast swaths of the population (SS, other defined benefit pensions), to a system where everyone is robbed blind.

    To put it in concrete terms, the purchasing power of the dollar has declined by 86% in real terms since 71. In actual purchasing power, 14k in 71 dollars is 100k today.


    Thus the money put in the pension systems (which were designed around a more stable and valuable currency) is never enough to fill the gaps. Unfunded liabilities.

  33. Anonymous
    December 14, 2012 at 6:39 pm


    I am not arguing with you about the gold standard. It has some advantages and disadvantages. Just don’t give the gold standard magical god like powers. There were lots of poor people under the gold standard. That’s the point.

    No one likes the gold standard except for a few people who have gold. The rest of us like inflation. No one likes deflation. NO ONE. But we like Goldilocks inflation – just the right amount, not too much not too little.

    Democrats have never liked the gold standard. Most Republicans hate it too. Have you heard of the Club for Growth?

  34. A pesky fact
    December 14, 2012 at 7:29 pm

    I’m trying to point this one thing out:

    SS and public union pensions were designed under a different currency system then we have now. We changed currency systems, but not pension systems. Now we have 4 trillion in state unfunded pension liabilities.

    Defined benefit pension systems are not viable under our current currency system.

    I’m a big believer that we only make progress towards resolving problems when people better understand the origins of those problems. We have a 4 trillion dollar unfunded liability in this state that is going to bring about Armageddon if some serious changes aren’t made. Read my post at 357 for more specifics on why the pension scheme here is boned.

    The snark at the end of the 357 post was intended to point out that the currency shift itself is part of the problem, because our current currency structure lends itself to bankers pillaging everything with reckless abandon.

    However, as for the cali pension crisis, I’m trying to convey that the status quo on it died in 1971. Defined benefit can no longer work, and it’s going to implode this state if fundamental changes aren’t made.

  35. Cheers
    December 14, 2012 at 7:41 pm

    “In a democracy, the people get what they deserve. When a democracy turns into a kleptocracy, the best device to use to find the responsible party is a mirror.”

    Utter nonsense! Mitch knows damn well that a true democracy relies on an informed electorate. They are not.

    In fact, if a local reporter hadn’t scoured the L.A. Times for local news, this story would remain hidden…. where it will soon return for another generation…

    Just watch…..

  36. Anonymous
    December 14, 2012 at 7:48 pm

    Social Security would function pretty poorly as an old age pension if it weren’t a defined benefit plan. Isn’t that clear to almost anyone?

    What would be the point of letting a 75 year old lose all their money in an ill advised 401k? Just to prove to them that they made bad choices in life?

  37. December 14, 2012 at 8:45 pm

    … the gold standard…has some advantages and disadvantages.

    What would be the advantages?

  38. Anonymous
    December 14, 2012 at 9:15 pm

    One advantage is that the government can’t print it, so it is an impediment to fiat money expansion, but not a perfect one. Also if one has it in ones possession there is some irreducible value to the stuff, the gov can’t legislate its devaluation. Human beings have been using it for a few thousand years for this purpose.

    But I am not a defender of the gold standard. Pesky is. I think the gold standard is antiquated as is fiat money. Some kind of digital money is in our future, something like bitcoin.

  39. A pesky fact
    December 15, 2012 at 7:08 am


    From a pragmatic perspective, it discourages government deficit spending and debt accumulation. It also encouragers people to be savers instead of consumers.

    I think, as a pragmatic matter, those 2 things lead to a better society, more job creation, and less poverty.

    Was Brenton Woods perfect? It had flaws too. No, nothing this side of Heaven is perfect. What I am saying is that what we have now is substantially and objectively worse than what we had in the past.

  40. ThreadJack
    December 15, 2012 at 7:21 am

    CPR owns not one ounce of silver or gold?

  41. Anonymous
    December 15, 2012 at 8:09 am

    ALL PERSONS INTERESTED IN THE MATTER of the Issuance and Sale of Bonds
    for the Purpose of Refunding Certain Obligations that the City of
    Eureka Owes to the California Public Employees Retirement System Arising
    Under Section 20000 et seq. of the California Government Code, and of
    the Certain Proceedings Leading Thereto, Including the Adoption of a
    Resolution that Authorizes the Issuance of Taxable Pension Obligation
    Funding Bonds and the Execution and Delivery of an Indenture Relating to
    the Issuance of Such Bonds, Defendants.


  42. December 15, 2012 at 9:58 am

    What is going unsaid is that CalPers has set the 7.5% interest rate that high in order to benefit cities like Eureka. If CalPers lowers their anticipated rate of return, then Eureka along with other cities will have to raise its contribution in order to make up the difference.

    You see how this works?

    How many of you think that CalPers will actually have a 7.5% compounded positive annual return on their portfolio ten years from now? C’mon class, Raise your hands.

    At the stated 7.5 per cent expected return Eureka is substantially underfunding its pension liabilities each year and it is compounding underfunding that is outstripping interest growth.

    Now they are secretly trying to convert this chronic underfunding into long term debt and without fixing the underlying problem.

    You need to do something, make the tough choices. Raise taxes, cut spending, or a combination of the two, do something besides kick the can down the road.

    And at the least you need to give the taxpayers a chance to vote on this. What the fuck? All these 2/3 tax raise thresholds are there because you republicans wanted them.

    have a peaceful day,

  43. December 15, 2012 at 10:04 am

    Here’s an idea. An extra 1% sales tax in the city of Eureka for the next five years and use the proceeds to pay down the *current) CalPers obligation.

    We could call it the “Pension Obligation Tax” or POT tax for short.

    It still won’t solve the underlying problem but at least it won’t cost the taxpayers $2,000,000 in unneccesary interest payments to wall street parasites.

  44. A pesky fact
    December 15, 2012 at 10:22 am

    One of the unstated subtexts of these bond issuances is that, in many cases, CalPers also buys some of the bonds as an investment.

    It’s a real circle jerk.

    A few years back the LA Times did an expose on Cali pension funding. The state had been assuming 7.5% growth ad infinitum, that the dow would’ve at 30,000 by now, and all sorts of other craziness.

    There will soon come a day when no one will buy the bonds Cali, the counties, or the munis issue. That will be a very very bad day.

    It will mean things like EBT cards won’t reload. That will be a very bad day in Cali.

  45. December 15, 2012 at 10:28 am

    Do you get it? The interest paid to CalPers actually helps fund Calpers while the interest paid on long term Pension Obligation Bonds (POBs) is paid to speculators, interest arbitragers, thieves and wall street parasites.

    This is one instance where the interests of the workers and the interests of the taxpayers are clearly aligned.

    Just tighten your belt, and pay off CalPers in five years. The interest you pay to CalPers will in the long run be in your best interest. And you will save the taxpayers over a million dollars, or about 590 oz of the pretty yellow metal at todays quote.

    have a peaceful day,

  46. A pesky fact
    December 15, 2012 at 10:40 am


    Yes I do get it.

    I’m trying to point out that in many cases it is CalPers that buys the bond, which raises money, to pay CalPers.

    That’s the definition of kicking the can down the road.

    Further, what we have is an unfunded liability. Which means there is currently no plan in place to pay what will be owed in the future to CalPers, to the tune of 4 trillion dollars for the state/counties/munis.

    It can’t be paid off “in 5 years” because the amount owed to CalPers goes up every year. This loan is just to cover what wasn’t paid in past years. It does nothing to address what is owed tomorrow, nor would the tax you speak of.

    If you really want to see progress made, we need to obtain a clear statement from the county and 7 cities to answer, “what are the total unfunded liabilities?”

    Thats the money gap that needs filling.

    I’m not trying to disagree with you. I’m trying to show that smoke and mirrors tricks are being used to hide more smoke and mirror tricks.

  47. Anonymous
    December 15, 2012 at 1:01 pm

    It looks like the conclusion of Hank Sims is that this is a good deal for the city. I suppose that I am not as financially sophisticated as Highboldtage, but if the city is going to save over a million bucks, in my mind that’s a good thing.

  48. December 15, 2012 at 2:00 pm

    There’s a pertinent commentary in the Santa Rosa Press- Democrat regarding Sonoma County’s pension tsunami. It might be interesting to juxtapose Eureka’s pension and bond figures with Sonoma’s in order to compare. Keeping in mind their numbers are for all county employees and not just one city.

    I’m sure we’d all be interested in throwing Humboldt County’s numbers into the mix for comparison as well:

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


  49. December 16, 2012 at 11:12 am

    Pension Obligation Bonds: Financial Crisis Exposes Risks

    by Alicia H. Munnell,Ashby Monk,Jean-Pierre Aubry andThad Calabrese.


    The brief’s key findings are:
    •Some state and local governments issue Pension Obligation Bonds (POBs) to raise cash to cover their required pension contributions.
    •POBs allow governments to avoid increasing taxes in bad times and could reduce pension costs, but they pose considerable risks.
    •Those who issue POBs are often fiscally stressed and not well-positioned to handle the investment risk.

    Surprisingly, POBs re-emerged in the 1990s. The 1strong performance of the stock market led some governments (and bankers) to see a potential arbitrage opportunity for taxable POBs. Two factors were important. First, taxable interest rates had come down considerably, which meant that POB borrowing costs were lower as well. Second, pension funds had increased their equity holdings substantially over the decade,9 which generated higher returns for the plans and, thus, led actuaries to assume higher future returns. The combination of these two factors was enough to convince some governments that POBs offered an attractive “actuarial arbitrage.”

    While the actuarial arbitrage highlighted above may be persuasive, the issuance of POBs poses serious risks:

    1) Financial: The success of POBs depends on the premise that pension returns are on average more than the cost of financing the debt. However, these assumptions may not turn out to becorrect, as the recent financial crisis has shown. Even over 15 to 20 years, the duration of most POB debt, interest costs can exceed asset returns.

    2) Timing: POBs involve considerable timing risk, as the proceeds from the issuance are invested en masse into the pension plan. Dollar-cost averaging would be the more measured approach to investing large sums of money. Alternatively, some suggest that governments should issue POBs only during recessions, when stock prices are depressed.17 However, this requires having some sense of what the “top of the market” or the “bottom of the market” looks like.

    3) Flexibility: While the issuance of a POB does not change the total indebtedness of the sponsor, it does change the nature of the indebtedness.18 Requirements to amortize unfunded pension liabilities may be relatively flexible obligations that can be smoothed over time, while the POB is an inflexible debt with required annual payments.

    4) Political: If the government uses the POB to fully fund the pension, it may end up with a pension system having more assets than liabilities. Such overfunding may create the political risk that unions and other interest groups will call for benefit increases, despite the fact that the underfunding still exists; it was just moved from the pension plan’s balance sheet to the sponsor’s balance sheet.19


  50. Anonymous
    December 16, 2012 at 12:23 pm

    2 percent vs 7.5 percent sure looks like a good deal for the city Bill.

  51. Anonymous
    December 16, 2012 at 12:30 pm

    OMG, #4 is priceless; essentially, if things go too well financially then better benefits might be sought by employees. Again, not a bad thing, especially for one who, when he isn’t “highboldtage” is a “eurekaworker” who has actually never worked in Eureka.

  52. December 16, 2012 at 12:42 pm

    Its going to take a half dozen Eurekans to hire a lawyer and fight this. It will take a half dozen of you that care enough about the future of your town to do this. You can fight this.

    It is a ponzi scheme. I don’t care who is behind it, Republcans or Democrats.

    I proved yesterday that the city can pay this down in five years by increasing the payment only $70,000 more a month. Can’t afford this minor adjustment to the budget? It’s less than 1 percent and will save you $2 mllion in interest payments that you will pay on this junk bond. If you can’t afford 70k a month to fix this then God help you you are close to bankruptcy.

    All I can do is give you the information. I am busy trying to raise wages for the working poor. Why don’t a half dozen of you who care about this step up and stop this?

    have a peaceful day,

  53. December 16, 2012 at 12:44 pm

    I think every working person in America should get 3 @ 55. Its time to lower the retirement age and open up some jobs for young people.

    have a peaceful day,

  54. December 16, 2012 at 12:45 pm

    51, that’s not what #4 says.

    What it does say is that if POBs make it _look_ like things are better (which with POBs they are not), then there could be unreasoning and unreasonable political consequences.

    I.e., as Pogo timelessly said, ‘We have met the enemy, and he is [otten] us.”

  55. Anonymous
    December 16, 2012 at 12:52 pm

    ummm, the city is going to save close to a million and a half dollars, Bill/high/eurekaworkless.

    You did not “prove” anything; you made a statement without knowing or considering all of the facts.

    Calling this a “junk” bond is downright silly. Please explain how this is a ponzi scheme; it simply is not.

    The city is doing to cut costs, and you throw an uneducated shit fit. Go over to the LCO and see the conclusion Hank Sims comes to – that is a good deal for the city and its residents.

    I trust Sims reporting over you constant belligerent tripe.

    If there was really something bad here, he would’ve reported on it, and Hank is certainly not going to cover the city’s ass and hide it if this was something that would harm Eureka.

    You crack me up Bill/High/Workless; you constantly and consistently offer up solutions, or present your opinions as facts, but when you are proven wrong, you move to try and change the subject.

  56. December 16, 2012 at 12:52 pm

    I don’t know who you are Mr. 50 but really the city of Eureka is not going to issue POBs for 2 per cent are they?

    First of all, they are taxable not tax free municipals and secondly Eureka’s tax base is not promising and thirdly POBs are considered highly risky by investors and rightly so.

    More likely 5 per cent plus. Or of course some exotic fine print sweeteners for the wall st parasites.

    have a peaceful day,

  57. December 16, 2012 at 12:55 pm

    Math is math asshole. I did the math and anyone with a high school education can understand it. Just go back up the thread and educate yourself.

    have a peaceful day,

  58. December 16, 2012 at 12:58 pm

    The idea that issuing these bonds will save a million and a half dollars is once again a flat out lie. They will actually cost a million dollars more than simply paying them off in five years.

    As I proved above. Mahematics is not an opinion.

    The people of Eureka need to understand that they are being lied to.

  59. A pesky fact
    December 16, 2012 at 1:08 pm

    Bill is correct on the math end of it, anon.

    It saves money in relation to what is currently owed, but only through a type of accounting gimmickry.

    It, as with most defined benefit systems, is an accounting ponzi scheme that requires ever increasing amounts to be paid– tomorrow– to cover debt issued to pay out today.

    And the rate of interest for the bonds does indeed constitute junk status, indicating a high risk of default.

    You see the headline “money saved!” but what you’re missing us that this is actually “slightly less money paid for debts that were due 5 years ago, with no plan in place for the unfunded liabilities.”

    Anon, I’m not trying to be a jerk here, but do you understand what an unfunded liability us? If you don’t, it would explain your confusion in this thread, and it would help you to make sense of Bill’s position and why it has evolved through the thread.

    The debt is still accumulating daily as pension liabilities– and no plans are being made by anyone to do anything about it.

  60. Anonymous
    December 16, 2012 at 1:15 pm

    Well asshole,

    You prove my point – throw out something, in this case, paying additional principal on the debt, without even knowing if that option is permissable with PERS, and you treat it as a fact.

    Of course you call everyone liars when they don’t subscribe to your particular point of view.


    This link shows that the City will save almost a million and a half over what they are CURRENTLY doing, not what you think they should do. Hell, they would save even more if they just paid the whole thing off with one payment.

    Now I should shout to the rooftops that the City is actually doing a bad thing.

    Math IS math, asshole, but you can’t insert your own variables when you don’t know the whole equation.

    Who do I trust here, Bill/High/Workless, or Hank Sims, the best investigative journalist in the county?

    One final thought, and really, I’d be interested to hear your deluded opinion on this – what do the city manager, city finance director and city attorney stand to gain by doing something nefarious that in your opinion would harm the city?

  61. December 16, 2012 at 1:26 pm

    What do the city manager, city finance director and city attorney have to gain by not putting this junk bond issue to the voters for approval? What do they have to gain by suing every citizen of Eureka?

    Go find your self.

  62. Anonymous
    December 16, 2012 at 1:39 pm


    Here’s what this thread has devolved into – first the naysayers tried to say that these were the same type of bonds the school districts have been issuing – CABS.

    Then, when shown that these bonds are NOT CABS, Bill presents his own solution – pay off the existing liablility sooner, and therefore save more money over the life of the debt, and then tries and then begins the false argument that the action that the city may take by issuing these new bonds will not save money.

    They WILL save money over what is currently being done. Period.

    I think an apt comparison is this: I refinance my home to take advantage of better interest rates and keep the same 30 year payment life.

    My know it all sister in law points out that if I paid an extra XX per month I would pay the mortgage off in 18 years and save XXX in interest. She then insists that I am not saving any money by refinancing, when in fact I am, just not as much as her option.

    However, she has no idea if I can afford the extra money upfront, because she really has no idea what my financial situation is, taken as a whole.

    Are there other or better options? I really don’t know – I mean, optimally the city would just pay off everything they owed money on – that would save a ton of interest expense – it would be great for the city to have no debt.

    There is absolutely no doubt that pensions are a huge financial burden for counties and cities throughout the state, as well as the state itself, one that is driving several cities towards bankruptcy – we agree on that.

    However, to state that nothing is being done about it is simply false. Calpers is lowering benefits and the contribution rates, and many cities independent of calpers are giving new employees lowered benefits, which also will lower costs.

    Will that be enough? I don’t know; hopefully those steps, along with an eventual market turnaround will help us out of this mess.

  63. Anonymous
    December 16, 2012 at 1:53 pm

    “What do the city manager, city finance director and city attorney have to gain by not putting this junk bond issue to the voters for approval?”

    They are taking this to the City Council, you know, the representatives of the people, for a vote; using your conveluted logic, we should just abolish the city council and bring every issue to the voters. But, to answer your question, the gain would be money, Bill/High/workless – I assume it costs quite a bit to place something on the ballot, that the County doesn’t do an election measure for free.

    Hell, let’s not stop there, let’s become a country of referendums decided by the voters and get rid off all the legislative bodies in the country.

    “What do they have to gain by suing every citizen of Eureka?” Yeah, that language troubles me as well, though I don’t think the verbage is actually suing every single citizen of the city. Again, go back to the LCO. According to the LCO article this is something that is standard language that is placed with whatever they had to do with the local court.

    See, unlike you, I don’t pretend to know everything about this, like you do. Unlike you, however, I trust our city employees as well as the city council to do the right thing. I will watch closely to see what my favorite council person Linda Atkins does. I believe that she voted for this earlier this month and thought it was a good thing.

  64. A pesky fact
    December 16, 2012 at 1:57 pm


    Do you understand what an unfunded liability is?

  65. Union pensioner
    December 16, 2012 at 2:21 pm

    “The debt is still accumulating daily as pension liabilities– and no plans are being made by anyone to do anything about it.”

    Plans are being made and performed. Decades of communism sought to confiscate all property for public use and enrich the leading class under the profession that it was being done for the community as a whole with equality and liberty. But open assault against free societies such as America failed much to our chagrin. But now we can do it by saddling the freedom loving capitalist pigs with huge debt which will surely fail the system and lead to out all class warfare and overthrow. We can do it while flying the American flag on our porches and being looked to as the savior of the people. Heil public servants!

  66. December 16, 2012 at 3:01 pm

    Anonymous :
    OMG, #4 is priceless; essentially, if things go too well financially then better benefits might be sought by employees.

    We need to remember that’s how much of this pension tsunami started. Back in ’99 or ’00- whenever they passed SB400 that gave public safety the lavish retirement upgrade- the reason it passed so easily was because state coffers were overflowing from the .com boom.

    I believe it was that fiscal year or the next that was the last time the budget was actually passed on time. The state had so much money nobody on either side of the aisle felt like arguing about how they should spend it. There was enough for everybody! They spent all of it and more. The rest is history.

  67. Just Watchin
    December 16, 2012 at 4:28 pm

    I could care less about the local bond issues,but I tend to agree with anyone calling anonymous an asshole!

  68. December 16, 2012 at 5:06 pm

    Linda Atkins may have voted for this in the ;past and she may vote for it again, so what?

    She is a labor Democrat, a moderate traditionional Democrat, and union labor represents a big constituency in the Democratic Party. If she votes for something like this it is because she sincerely believes it is in the interest of her consttiuents. She may be wrong in this case but I won’t hold that against her. These are complicated issues.

    These bonds are not good for labor. Calpers has filed suit against one or more cities over these kinds of bonds because it puts two whole new classes of secured creditors (the bondholders and the bond guarantor) in front of calpers unsecured claims against bankrupt cities and that is proving costly.

    This hasn’t worked out too well for municipal workers. Some of the rose has faded from the retirement dream for them.

    I know a lot of spin will drift towards blaming pensions for this. But pensions can be negotiated, they can be fixed. The real underlying problem here is prop. 13. Prop 13 needs to be fixed. Sure, lets keep granny from being taxed out of her home, but lets end the free prop13 ride for immortal corporate persons.

    Prop 13 was designed to fix a problem but now it is a serious drag on Californias economy.

    have a peaceful day,

  69. December 16, 2012 at 6:12 pm

    Bill wrote, “Prop 13 was designed to fix a problem but now it is a serious drag on Californias economy..

    If you think government is the most important aspect of human society, I’m sure you would think so.

  70. December 16, 2012 at 6:28 pm

    Fred its a drag on the economy. Lots of buildings are sitting empty because people don’t want to sell them and lose the tax benefit. Have you looked around Eureka lately? Prop. 13 is perverting the operation of the free market since the tax benefit outweighs the markets natural imperative to reallocate idle capital into productive enterprises.

    This is the real world not some libertarian fairy land. Sorry.

    have a peaceful day,

  71. Ruch Limbo
    December 16, 2012 at 9:14 pm

    SUPERIOR COURT OF THE STATE OF CALIFORNIA COUNTY OF HUMBOLDT CASE NO. DR120811 AMENDED SUMMONS (CITATION JUDICIAL) CITY OF EUREKA Plaintiff, V. ALL PERSONS INTERESTED IN THE MATTER of the Issuance and Sale of Bonds for the Purpose of Refunding Certain Obligations that the City of Eureka Owes to the California Public Employees Retirement System Arising Under Section 20000 et seq. of the California Government Code, and of the Certain Proceedings Leading Thereto, Including the Adoption of a Resolution that Authorizes the Issuance of Taxable Pension Obligation Funding Bonds and the Execution and Delivery of an Indenture Relating to the Issuance of Such Bonds, Defendants. NOTICE! YOU HAVE BEEN SUED. THE COURT MAY DECIDE AGAINST YOU WITHOUT YOUR BEING HEARD UNLESS YOU RESPOND NOT LATER THAN JANUARY 3, 2013, WHICH IS TEN (10) DAYS OR MORE AFTER COMPLETION OF THE PUBLICATION OF THIS SUMMONS. READ THE INFORMATION BELOW. AVISO! USTED HA SIDO DEMANDADO. EL TRIBUNAL PUEDE DECIDIR CONTRA USTED SIN AUDIENCIA A MENOS QUE USTED RESPONDA NO MAS TARDE QUE EL DIA 03 DE ENERO DE 2013, QUE ES DIEZ (10) DIAS O MAS DESPUES DE TERMINACION DE PUBLICACION DE ESTA CITACION JUDICIAL. LEA LA INFORMACION QUE SIGUE.

    TO ALL PERSONS INTERESTED IN THE MATTER OF THE ISSUANCE AND SALE OF BONDS FOR THE PURPOSE OF REFUNDING BONDS THAT FUNDED OR REFUNDED CERTAIN OBLIGATIONS THAT THE CITY OF EUREKA OWES TO THE CALIFORNIA PUBLIC EMPLOYEES RETIREMENT SYSTEM ARISING UNDER SECTION 20000 ET SEQ. OF THE CALIFORNIA GOVERNMENT CODE, AND CERTAIN PROCEEDINGS LEADING THERETO, INCLUDING THE ADOPTION OF A RESOLUTION THAT AUTHORIZES THE ISSUANCE OF TAXABLE PENSION OBLIGATION FUNDING BONDS AND THE EXECUTION AND DELIVERY OF AN INDENTURE RELATING TO THE ISSUANCE OF SUCH BONDS: Plaintiff has filed a civil complaint against you. You may contest the validity of the above matter by appearing and filing with the Court a written responsive pleading to the complaint not later January 3, 2013, which is ten (10) days or more after the completion of the publication of this summons. Your pleading must be in the form required by the California Rules of Court. Your original pleading must be filed in this Court with proper filing fees and proof that a copy thereof was served on Plaintiff’s attorney. Unless you so respond, your default will be entered upon Plaintiff’s application, and the Plaintiff may apply to the Court for the relief demanded in the complaint. Persons who contest the validity of the matter described below and in the complaint will not be subject to punitive action, such as wage garnishment or seizure of their real or personal property.

    DETAILED SUMMARY OF THE MATTER THAT PLAINTIFF SEEKS TO VALIDATE: The City has contracted with the California Public Employees Retirement System (“System”) pursuant to the Public Employees’ Retirement Law commencing with Section 20000 of the Government Code of the State of California, as amended (the “PERS Law”) to provide its employees with pension benefits. The City participates in separate risk pools within the System for the City’s fire and police retirees, pursuant to which the System has established “side funds” (“PERS Side Fund Obligations”) which are obligations to be funded by the City pursuant to a contract between the City and the System dated April 1, 1970, as amended thereafter from time to time (the “PERS Contract”). The PERS Law obligates the City, among other things, to: (a) make annual contributions to the System to fund the value of pension and other retirement benefits for City employees (the “Normal Contribution”); (b) amortize the unfunded accrued actuarial liability of the City under the PERS Law, which is the liability that the System’s actuary has determined to have accured under the PERS Law, but which the City has not yet paid to the System (the “Unfunded Liability”); and (c) appropriate funds for the purpose of making such contributions and meeting the City’s obligation to the System under the PERS Law. The obligation of the City to make contributions to the System pursuant to the PERS Law represents an obligation imposed by law and, as such, the City is required to satisfy such obligation from any money available in the City’s treasury. The City’s obligation to make payments to fund such retirement benefits is exempt from the debt limitation of Article XVI, Section 18 of the California Constitution. On November 6, 2012, after public notice, the City council of the City of Eureka (the “Council”) adopted the Resolution No. 2012 (the “Resolution”). The Resolution authorized the issuance of pension obligation bonds in one or more series (the “Series 2013 Bonds”) and the issuance of future additional pension obligation bonds in one or more series (the “Additional Bonds”). As authorized and approved in the Resolution, the City will issue the Series 2013 Bonds (in an aggregate principal amount not to exceed $8,250,000, an interest rate not to exceed 6% per annum and a maturity date not later than 30 years from the date of issuance). Pursuant to the Resolution, Additional Bonds shall be issued pursuant to a Supplemental Indenture subject to limitations contained in the Indenture and Resolution. Pursuant to the City’s obligation to the System under the PERS Law, the City must pay the System interest on its Unfunded Liability at an interest rate established from time to time by the System in consultation with the System’s actuary. As of June 30, 2012, based upon the actuarial report issued by the System, the PERS Side Fund obligation of the City is approximately $7,782,683. The City desires to issue Series 2013 Bonds in an aggregate principal amount equal to the sum of (a) the principal amount not to exceed the total combined amount of the PERS Side Fund obligations, (b) the costs of issuance of the Series 2013 Bonds (including underwriters’ discount), and (c) the original discount (if any) on the Series 2013 Bonds, for the purpose of refunding the PERS Contract and thereby providing funds for the System to invest. In addition, the City desires to authorize the issuance of the Additional Bonds for the purpose of refunding any additional obligations under the PERS Contract in the future from time to time. The City has filed this validation action to obtain a judicial declaration of the validity of the matters alleged in the City’s Complaint and described herein. In this action, the City seeks a declaration from the Court that, among other things, all proceedings by and for the City in connection with the Resolution, the Series 2013 Bonds, any future Additional Bonds, and the other related agreements, all as described in the Complaint and as authorized by the City pursuant to the Resolution, were, are and will be valid, legal, binding and enforceable in accordance with their terms, and that the Series 2013 Bonds, any future Additional Bonds, and the other agreements authorized in connection therewith, are obligations imposed by law and are valid, legal and binding obligations of the City under the Constitution and laws of the State of California.

    YOU MAY SEEK THE ADVICE OF AN ATTORNEY IN ANY MATTER CONNECTED WITH THE COMPLAINT OR THIS SUMMONS. SUCH ATTORNEY SHOULD BE CONSULTED PROMPTLY SO THAT YOUR PLEADING MAY BE FILED OR ENTERED WITHIN THE TIME REQUIRED BY THIS SUMMONS. SI USTED DESEA SOLICITAR EL CONSEJO DE UN ABOGADO EN ESTE ASUNTO, DEBERIA HACERLO INMEDIATAMENTE. TAL ABOGADO DEBERIA SER CONSULTADO PRONTO PARA QUE SU REPUESTA ESCRITA PUEDA SER REGISTRADA DENTRO DEL TIEMPO REQUERIDO POR ESTA CITACION JUDICIAL. The name and address of the Court is (El nombre y direccion del Tribunal es): Superior Court of the State of California County of Humboldt 825 Fifth Street, #231 Eureka, California 95501 The name, address, and telephone number of Plaintiff’s attorneys are (el nombre, la direccion y el numero de telefono del abogado del demandate, o del demandante que no toene abogado, es): Cyndy Day-Wilson City Attorney City of Eureka 531 K Street Eureka, CA 95501 (707)441-4147 Cynthia J. Larsen Cameron L. Desmond Orrick, Herrington & Sutcliffe LLP 400 Capitol Mall, Suite 3000 Sacramento, California 95814 (916)447-9200 Date: November 28, 2012 Clerk, by Cecile Nesslage, Deputy 11/30,12/7,14

  72. Cheers
    December 16, 2012 at 9:49 pm

    You have to know, Bill, that your posts include numerous credible references on this issue that are far more enlightening than anything offered locally, (the NCJ editor’s current “advice” opinion is excellent). And it pisses people off! Especially those connected with the deceivers.

    “Anonymous” keeps referencing Hank Sims’ rural blog that broke the CAB story, but Sims couldn’t get a response from David Tyson on how Eureka fell so far behind in the first place, Sims has been wading through this complex (expanding) issue for the first time, like the rest of us.

    As usual, mistakes gain credibility by their mere longevity. The problem is trying to convince taxpayers that the way things have been done for so long are wrong…similar to other untold stories, like the corruption of local politics.

    Bottom line….current bureaucrats issuing risky POB’s will keep Eureka “in the black”, thereby retaining their jobs, while protecting their own lifetime of fat retirement checks. The extraordinary public costs and risks to this city and its future retirees decades from now…will be others problem.

  73. Just Wankin
    December 16, 2012 at 11:19 pm

    I don’t know anything about bonds or care about bonds, but I keep ‘coming’ here.

  74. Just Watchin
    December 17, 2012 at 6:47 am

    Poor anonymous, getting schooled by everyone on the bond issue. They make you look like a fifth grader. But keep debating with them….it’s fun to watch!

  75. December 17, 2012 at 7:21 am

    Exclusive: Pension fund slams California’s San Bernardino for ‘sham’ bankruptcy


    By Tim Reid and Jim Christie

    LOS ANGELES/ SAN FRANCISCO, Dec 14 (Reuters) – A high-stakes legal battle intensified Friday as the largest U.S. pension fund filed court papers denouncing the financially troubled California city of San Bernardino for what it called a “sham” bankruptcy and accused the city of “criminal behavior” in withholding payments to the pension plan.

    The filing by the California Public Employees’ Retirement System, or Calpers, came 10 days after San Bernardino city officials traveled to Sacramento to plead with top Calpers executives for more time to make its payments.

    At issue is whether the pensions of government workers take precedence over other payments in a municipal bankruptcy – which could have ramifications for municipal creditors, including Wall Street bondholders, as more cities and towns have trouble meeting their obligations.

    In a closely related action, bond insurers who are responsible for the debt of Stockton, California, filed papers in that city’s bankruptcy case denouncing Calpers’ efforts to be treated differently from other creditors. Stockton has continued to make payments to Calpers while halting payments to some bondholders.

    Both cities went bankrupt in the wake of the housing bust and years of financial mismanagement, and the two comparatively rare municipal bankruptcy cases are expected to set important precedents as to who gets paid when a government goes broke.

    But while Stockton was well prepared when it filed for bankruptcy protection last June, San Bernardino’s finances and government operations are in deep disarray as political factions battle one another, according to an ongoing Reuters investigation. The city filed for bankruptcy on Aug. 1 with no plans as to how it would meet its obligations.


    Calpers, which manages $241 billion in assets and serves many California cities and counties, said in its legal filing that San Bernardino appears to have been operating for more than a decade without necessary financial controls and lacks even basic mechanisms such as monthly cash-flow reports.

    Calpers said San Bernardino’s proposed plan for operating in bankruptcy, filed last month, was “no plan at all.”

    “It is merely an attempt to buy time, at the expense of Calpers and other post (bankruptcy) petition creditors,” Calpers said in arguing the city was not entitled to bankruptcy protection. Calpers has already filed actions in state court, which could end up arbitrating the situation if bankruptcy protection is denied.

    Calpers accused the city of “criminal” conduct for not making pension payments that are part of employee compensation agreements.

    In markedly aggressive language, Calpers said the city had “buried its head in the sand,” rather than deal with a long-standing financial crisis.

    “The city gravely needs to get its house in order… Ten years of history suggest that the city is not going to implement meaningful change until forced to do so. This court needs to hold the city’s feet to the fire.”

    Calls and emails to San Bernardino’s city manager and budget chief went unanswered. Most city employees do not work on Fridays.

    San Bernardino, a city of 210,000 about 60 miles (97 km) east of Los Angeles, is broke and can barely make payroll, city officials have said. It has not made its $1.2 million biweekly payments to Calpers since the bankruptcy filing and now owes at least $8 million, in addition to a long-term debt to the fund that the city pegs at $143 million.

    Calpers argues that under California law it has primacy as a creditor, asserting that it is in essence an “arm” of the state and must continue to be paid in full, even in a bankruptcy.

    Wall Street bondholders and insurers vehemently disagree, arguing that federal bankruptcy law trumps state authority and should allow them to fight with Calpers in court as equal creditors.

    Both sides have told Reuters they are willing to fight this issue all the way to the U.S. Supreme Court, which could take years.


    In a filing late Friday in the Stockton case, bond insurers Assured Guaranty Corp and Assured Guaranty Municipal Corp argued that Stockton should not be eligible for bankruptcy because the city “cannot provide sufficient, persuasive and credible evidence of insolvency.”

    The bond insurers also hammered the city for not seeking concessions from Calpers.

    Stockton aims to unfairly restructure its finances “on the backs of those from whom it previously borrowed hundreds of millions of dollars,” the insurers’ lawyers said in their objection.

    A Calpers spokesperson said the bond insurers were aiming to “cover their business losses by raiding the retirement funds of hard working employees who serve the people of California.”


  76. A pesky fact
    December 17, 2012 at 8:46 am

    SB and Stockton also each have billions (!!!) of unfunded liabilities. Debts that can’t be paid, won’t.

    As for prop 13, (without prejudice to what should be done with it), just be aware that it also keeps property prices artificially high by reducing market supply.

    Which has a downstream e/affect if repealed. Dropping property prices further can really mess up all sorts of balance sheets. Lots of folks depend on artificially high prices (Aja the bubble) to get home equity loans to buy more iStuff.

  77. Anonymous
    December 17, 2012 at 8:28 pm

    As a member of the class of citizens being sued by my own city I hereby request that this lawsuit be moved into the jurisdiction of Federal Court under provisions of the Class Action Fairness Act of 2005, since this involves an amount greater than $5,000,000 and other thresholds may easily be confirmed.

  78. Cheers
    December 17, 2012 at 11:38 pm

    There’s a huge difference between retiree’s home value in acquiring reverse mortgages for health care and senior housing needs…..and the profiteers keeping commercial property in Great Granddaddy’s name to exploit Prop. 13.

    Artificially high home prices impede the only chance that the majority of American family’s have to acquire capital in a capitalistic society, in their lifetimes.

    If all Americans had universal health care and affordable senior housing, retirees wouldn’t be pitted against young family’s need for home ownership….another clever “false choice” benefiting corporate predators. Many seniors are being forced back to work when few jobs are available to the young families that need them most.

    Short-term losses to speculators by gradually eliminating commercial property from Prop. 13 comes nowhere-near the public costs from the generation of divestment Prop. 13 has inflicted on our infrastructure, schools, senior housing and health care.

    The fate of U.S. economy rests with the fate of its middle class.

  79. Just Watchin
    December 18, 2012 at 5:34 am

    When did the city file a lawsuit against all the low class citizens??

  80. Anonymous
    December 18, 2012 at 6:01 am

    Stockton Should Raise Taxes, Sell City Hall, Judge Told

    By Steven Church – Dec 17, 2012 1:10 PM PT.

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    The bankrupt city of Stockton, California, should raise taxes, cut employee benefits and close or sell city hall to repay bondholders, Assured Guaranty Corp. said in court papers.

    The city could raise $9.6 million in taxes and save $24.4 million through cuts to services and labor costs, Assured said in a court filing made public today. The bond insurer is among a group of creditors trying to persuade a federal judge to dismiss Stockton’s Chapter 9 bankruptcy case and force the city to solve its financial problems outside of court protection.

    Assured accused Stockton of ignoring budget options to justify filing bankruptcy and forcing bondholders and other creditors to take less than they are owed.

    “A municipality cannot budget itself into insolvency to gain access to Chapter 9 or use Chapter 9 to harass or target certain groups of creditors,” Assured said in papers filed Dec. 14 in U.S. Bankruptcy Court in Sacramento, California.

    The city and bondholders will be in court in February for a trial-like hearing over whether Stockton is legally entitled to remain in bankruptcy after elected officials sought court protection in June.

    ‘Specific Objections’

    “The city looks forward to analyzing the specific objections and information,” Stockton said in a statement released Dec. 14. “We are not going to argue this in the media.”

    Under Chapter 9 of the U.S. Bankruptcy Code, governments, unlike corporations, must first prove to a judge that they are eligible to be in bankruptcy before they can use the court process to try to cut debt through actions such as canceling contracts.

    U.S. Bankruptcy Judge Christopher Klein will hear testimony about whether the city is insolvent as it claims, whether it negotiated with creditors in good faith before filing the bankruptcy petition, and whether the city followed California state law in seeking court protection.

    Assured insured about $161 million in pension obligation bonds that the city says it cannot repay in full.

    National Public Finance Guarantee Corp. also asked Klein to dismiss Stockton’s bankruptcy case, arguing that the city is unfairly forcing bondholders and other creditors to take excessive cuts. In its filing, the company repeated its argument that the city should force cuts on its biggest creditor, California Public Employees’ Retirement System.

    The case is In re Stockton, 12-32118, U.S. Bankruptcy Court, Eastern District of California (Sacramento).

  81. Anonymous
    December 18, 2012 at 6:18 am

    A Great Deal?

    This is an update on an old story. This is about Munis and leverage.

    Towson MD did a deal recently where it borrowed $256m for 30-years at a very sweet 3.43%. The money raised went into the Towson municipal employees’ retirement fund. Some details.

    Last summer the financial deep thinkers in Towson re-calibrated their investment returns on their $2b investment fund. The assumed rate of return had been a ridiculously high 7.875%, it was changed to a much more “conservative” assumption of 7.25% (It should be 5%). The drop in the benchmark return produced a whopping $760m hole in the Fund (Vs. the $2.4B it would be at 5%). The net present value of that hole comes to a much more manageable $250m.

    Rather than raise taxes on the citizens, or cut future benefits for employees, Towson took the “bold” action of just borrowing the money and hoping like hell that it all sorts out over the next twenty odd years.

    I don’t get it, and I don’t like it. Think of this from the perspective of the taxpayers. They are borrowing money at 3.43% in the hope that they can earn a much higher return. I think Towson is gambling. Consider the investment portfolio:

    Note that 27% is fixed income. Towson is a high-grade yield buyer:

    The “stuff”that Towson invests in has a yield today that is less than the cost of the new debt. This means that the results on the the other 73% of the portfolio have to be that much higher in order for Towson to achieve its new hurdle rate of 7.25%. I look at this 15-year chart of the S&P and wonder what happens if stocks don’t go up a steady 8%+ for the next many years.

    Anyway, Mr. Kamentz, the County Exec. for Towson had this to say when his borrowing deal got inked:

    “Funding the pension fund in this manner protects employee benefits and shows taxpayers that we are serious about managing our budget”


    Wall Street loves pension obligation deals. The Street makes money in every direction. WS gets paid to issue and place the debt, it makes money trading the debt after it’s issued, it makes more money selling the stocks and bonds that Towson buys with the debt, it earns custodial fees for all the paper that is created and it gets nice advisory fees. Towson spent $14m in 2011 on fees, that number will go up every year for the next 30.

    I don’t have a list of the munis that have done Pension Obligation bond deals, nor the gross amount of this swill that is now outstanding (does anyone?) I do know that most big munis have done this, the amounts are huge. It’s a time bomb.


  82. Anonymous
    December 18, 2012 at 12:48 pm

    Creditor: Stockton city manager, staff put self interest first

    By The Record

    December 18, 2012 12:00 PM

    STOCKTON – A creditor seeking to block Stockton’s bankruptcy in its most recent arguments takes a shot at City Manager Bob Deis and his management team, accusing them of putting their personal interests first.

    National Public Finance Guarantee Corp. argues that Deis opted not to take on California Public Employees’ Retirement System because as city officials he and his executive team personally are members of the retirement fund. This tainted their decisions, National Public Finance says in court papers.

  83. December 18, 2012 at 5:07 pm

    From David E. Mix (On Court Validation of Oakland POBs)

    Critical Legal Issues

    1) Validation Action – The City’s Validation action in 1996, City of Oakland vs. All Persons, Case No. 772719-7 (as noted in the staff report), is not valid or binding for any other purpose except for the 1997 Bond Series Issue for which it was filed and to have judicially approved. California Code of Civil Procedures, Section 860 et. seq. clearly does dot allow for, or provide for, hypothetical or non determined future public agency actions to be pre-piggy-backed or pre-packaged and pre-validated as a single judicial action as the City is presently attempting to do with the present Bond Issue Resolution and Ordinance.

    As is expressed in the Finance and Management Report the judicial order is by “default” (no opposing party and going unchallenged). It is also understood that the City authored the default order which was written and designed to apply to not only the action filed August 28, 1996 but to all other like pension bond proposals (issues) in the near or far flung future. Be that as it may and besides the City’s best efforts – it can’t be done. The 1996 filing was a “single” Validation Action, and there are no other kinds. The 1996 validation (of the then 1997 $436.3 million Bond issue) clearly cannot be arbitrarily held to encompass any and all possible future actions of or by the City simply because they may vaguely relate to the PFRS Fund or System.There simply is nothing under the law or precedence to allow or even entertain such a far flung notion. Lastly, the “default” order and the Superior Court case does not represent any kind of hearing or judicial inquiry nor determination (factually, there was no hearing or case heard by the court) or in depth analysis of the issues. Lastly, the lower court does not hold the weight of the appellate court or the supreme court and clearly the 1996 default ruling may not be cited or relied upon in any future legal challenge.

    2) Property Owner Override Taxes – The City cites Valentine vs. City of Oakland (1983) 148 Cal.3d 139, as authority to assess and collect the 0.1575% in property tax revenue to meet its obligation to support the (now closed) Police and Fire Retirement System (PFRS). However, the Court ruling does not provide that the City may or is permitted to use those specific tax funds to pay or support pension bonds, the principal and interest or to service the bond issue in any other way. The tax revenue is strictly restricted to the “system”, pensioners direct retirement payments and benefits. There is absolutely no law or precedence that allows those funds to be used for any other purpose other than as expressed in Valentine.

    The Valentine decision (1983) predates the first Pension Obligation Bonds (1985) as introduced by the City of Oakland, thus there is nothing found in Valentine that specifically addresses the pension bond issue or that can be said to sanction or approve it. As a practical matter it is absurd to contend that the City may legally use tax revenue (public funds) assessed and collected for a very specific and limited purpose (Police and Fire Retirement System) for any other purpose other than the original intent. To use those funds to speculate on the open stock market, engage in questionable interest rate SWAP agreements, or to support bond Issues or the service thereof, or the proceeds thereof, which are in turn used for market speculation, must not be permitted and cannot be permitted. It is unquestionably a misuse of public funds.

    Unfortunately, there is a clear indication that the City has been using those funds to service several different bond issues (pension obligation bonds, New York Life annuity purchases, SWAP agreements, convoluted transactions (lease backs etc.) between the Redevelopment Agency and the City, etc.) and, additionally using portions of the override tax and bond proceeds to pay Cal PERS premiums along with other non-authorized expenditures. It is estimated by the Retired Oakland Police Officers Association (ROPOA) that the City of Oakland has diverted (misused) more than $450 million in NYL Annuity proceeds, in violation of the NYL Annuity agreement, laws governing pension funds, and clearly the provisions of the Valentine Court. See ROPOA request for an Independent Inquiry Regarding the Expenditure and Use of New York Life Annuity Reserves (February 21, 2012).

    3) Override Tax “Reserve Fund” – The City has unlawfully created a Tax Override Reserve fund in excess of $115 million which it used this past year to pay down its obligation to the system or to service the outstanding bonds. As in #2 above there is nothing under the law or precedence that allows reserves or the stockpiling of excess funds or the purposeful collection of excess funds in order to create reserves or stockpiling. All funds assessed and collected are to be strictly used in support of the system (the fund) and specifically for retirement benefit payments. The City is not legally permitted to assess or collect excess override tax funds beyond or over and above what is proven to be needed to fund the system for direct retirement payments. The Override Tax may only be used for a pre-determined voter approved financial support mechanism of the PFRS fund and any annual excess amounts assessed and or collected must be returned to the taxpayer. Lastly and in addition, funds are prohibited from being used for enhanced benefits over the original provisions of the voter approved system.


  84. Anonymous
    December 18, 2012 at 5:27 pm

    Are you coming tonight Bill?

  85. December 18, 2012 at 5:30 pm

    Anonymous :
    Are you coming tonight Bill?

    I will be at the regular Eureka Fair Wage act meeting at 615 at the Labor Temple. I hope that people will take the real info I have posted here and on my blog and stop this bullshit. At the very least, demand that the voters have a say on this.

    have a peaceful day,

  86. Anonymous
    December 19, 2012 at 9:22 am

    Les Carey says:


    December 19, 2012 at 9:15 am
    Paul Rodrigues:

    “Further, Eureka is not making “an end run around the normally required 2/3 ballot vote by having the bond issue remain off the ballot by seeking court approval instead of having taxpaying voters decide upon the measure.”

    The Validation Action is required as part of the approval process, but the bonds themselves need City Council (not Voter) approval.

    As this issuance is refinancing an existing indebtedness and not creating new debt, it only requires City Council approval, so in this instance, the 2/3 ballot vote is not required, nor is it normal in this case to seek voter approval.”

    This is a lie. California law allows local governments to refund bonds that have been voter approved in the past. Calpers obligations are not “bonds” that are to be refunded, just short term obligations that have never been approved by the voters.

    Nice try we will see you in court. This is just another David Tyson clusterfuck.

  87. December 21, 2012 at 7:57 am

    The economy is cratering in Eureka. How many empty storefronts in Eureka? Anyone keeping tabs?

    Its time to tax empty storefronts. How about a monthly 25 cent per square foot tax on empty storefronts? That would cost the landlord (many of them absentee landlords) of an empty 1,000 square foot shoppe about $250 per month and would incentify them to reduce their rents and rent to entrepreneurs.

    This would bring needed revenue to the city and it would stimulate the local economy.

    Any landlord who failed to pay the tax would have a lien slapped on and the city could take the property and sell it on the open market to someone who is serious about renting the property,

    What do you all think?

    have a peaceful day,

  88. Mitch
    December 21, 2012 at 7:59 am

    I think that’s a brilliant idea.

  89. Anonymous
    December 21, 2012 at 9:15 am

    Asinine idea. Landlords can’t give bargain price rents to some of their properties. To do so would have their other tenants demand equally low rents. The entire downtown/Old Town area would eventually suffer as landlords would no longer be able to afford the upkeep on their properties.

    That is the problem with the uninformed thinking they are qualified to give business advice or make financial decisions.

  90. December 21, 2012 at 10:26 am

    Well Mitch, since the city council probably wouldn’t pass such a vacant building tax, do you think it would be worthy of an initiative campaign?

    have a peaceful day,

  91. December 21, 2012 at 10:27 am

    So 915 you are saying that landlords can’t afford to rent out at lower rents but they can afford to let their properties sit vacant and rentless?

    That is a tall tale.

    have a peaceful day,

  92. December 21, 2012 at 10:38 am

    Anonymous :

    That is the problem with the uninformed thinking they are qualified to give business advice or make financial decisions.

    Come back here and post this with your own name so we can judge what weight to assign to your opinion. Cmon walk the talk.

    have a peaceful day,

  93. December 21, 2012 at 10:43 am

    Anonymous :
    Asinine idea. Landlords can’t give bargain price rents to some of their properties. To do so would have their other tenants demand equally low rents. The entire downtown/Old Town area would eventually suffer as landlords would no longer be able to afford the upkeep on their properties.

    Let’s just be clear. How can a landlord “afford the upkeep on their properties” when there is NO RENT COMING IN?

    This is a moronic argument and I look forward to seeing your name attached to it.

    have a peaceful day,

  94. December 21, 2012 at 11:12 am

    highboldtage :

    Anonymous :
    . To do so would have their other tenants demand equally low rents. .

    This is what they call “the Invisible Hand” of the “Free Market” to all you money worshippers.

    Meet your Market.

    have a peaceful day,

  95. December 21, 2012 at 11:39 am

    highboldtage :
    The economy is cratering in Eureka. How many empty storefronts in Eureka? Anyone keeping tabs?
    Its time to tax empty storefronts. How about a monthly 25 cent per square foot tax on empty storefronts? That would cost the landlord (many of them absentee landlords) of an empty 1,000 square foot shoppe about $250 per month and would incentify them to reduce their rents and rent to entrepreneurs.
    This would bring needed revenue to the city and it would stimulate the local economy.
    Any landlord who failed to pay the tax would have a lien slapped on and the city could take the property and sell it on the open market to someone who is serious about renting the property,
    What do you all think?
    have a peaceful day,

    Actually, Bill, this feels like quite a clever idea.

    The owners of wealth at all levels fear most that there will be a mass movement to redistribute by taxing them severely. Thus they resist even an increment on their privileges, as in the current Christmas pantomime in Washington.

    However, actually incremental taxes could do a great deal of good. A prime one would be a friction tax to slow down the mad derivatives money machine which brought the 2008 collapse and remains unregulated and highly dangerous where it counts.

    This empty rentals tax idea similarly presses where pressing can be healthy. Empty storefronts (or apartments) without a real market to use them is not in principle different from 30 Trillion dollars being held out in places like the Cayman which are not invested (or taxed) so that jobs are created.

    It’s interesting to consider what other incremental taxes could be levied to get that money capital into play. How about some ratio on individual or company profits total, vs. how much investment or wages paid in production in the US?

    Season’s greetings…

  96. December 21, 2012 at 11:42 am

    ‘individual income’, it should be towards the last in the above.

    And I meant to remind also that the entire stated purpose of the labyrinthian US tax code has been that incentives (and pressures) would be applied to promote useful behaviour by those who have money to be spent.

  97. December 21, 2012 at 5:06 pm

    update DEC 21. I received this email from Mr. David Mix, ccd to Hank Sims, Paul Rodrigues and Ms. Day-Wilson.

    to: humboldt.organizer@gmail.com, hank@khum.com cc: cday-wilson@ci.eureka.ca.gov, prodrigues@ci.eureka.ca.gov

    Coast Outpost

    Firstly, allow me to openly thank Mr. Rodrigues for responding to my inquiry concerning Eureka’s proposed POBs. However, his contention that the proposed Validation (CCP 860) Pension Bond petition language is somehow standard verbiage, is disingenuous at the least and bordering on deceit. There simply is no such thing as standard language employed in Pension Bond Validation Petitions or procedures – they very considerably depending on the presumed municipalities’ needs and the document drafters.

    The concept of a “Validation action” permitting any type of bond issue humanly possible and extending it into the depths of an unknown future, is duly credited to and promulgated by Orrick, Herrington & Sutcliff LLP, (believed to be the leading authority on Pension Obligation Bonds) and Eureka’s Bond Counsel. The City of Eureka Validation filing (Complaint For Validation, No. DR120811, Dated Nov. 21, 2012) is the epitome of a “Blank Check”. It is completely “open-ended” with “no holds bared” and most assuredly designed to be exactly that.

    With this Validation the City of Eureka need “never” come back to the people of your community for approval of any future kind or type of financing of City employees pension benefits. By this Validation action you give up your rights forever. But of course (as prompted by Mr. Rodrigues) you wouldn’t want to tie the hands of future City Councilmembers.

    Without citing particular parts of the City Attorney’s filing, paragraph No. 15 (page 4) and First Cause of Action, Para No. 26, subparagraph “b.” (page 7), pretty much sums it all up by including every type of bond issue known to man. Additionally, please take note – re Para No. 15 must be read with extreme caution. The stipulation that Bonds will not exceed six percent (6%) or exceed thirty years (30 yrs) is patently false. Firstly, a stated annual percentage rate is a misnomer. Regardless what is stated the rate is dependant on the term length, the amortization schedule, and other factors. The real or actual rate is largely dependant on the pay -back schedule. As most people know, loans (bonds) that are end loaded or with end balloon payments with no periodic principle payments (although at the same rate) end up costing a great deal more in interest. As has been recently revealed, the School District’s CABs real interest rate (actual pay-back) can go through the roof. There is absolutely no way of determining the real interest rate without a complete “Maturity Schedule” (actual amortization of entire amount of principle and interest over the full term).

    The 30 year stipulation is as phony as the 6% interest rate. While permitting rewrites, extensions, new and additional issues, adjusting rates, etc., etc., in the same Validation document, the possibilities are unlimited. Oakland, Stockton, and other cities are prime examples of the blatant manipulation that is possible. See City of Oakland City Auditor Report. As far as I know, the City has not provided or included any such bond payment schedule in its petition for Validation nor has it provided one for public review.

    Additionally, despite Rodrigues’ protestations, the justifiably feared CABs,are in fact (along with every other conceivable bond issue) included in the City’s Validation Petition – (See Para No. 15, page 4).

    Lastly, the issue is not necessarily whether or not the proposed pension bonds are good or bad, but rather, do the City taxpayers have or deserve the right to vote on the issue as provided for by the (1879) California Constitution, Article XVI, Section 18. The City says NOT, and is attempting to circumvent the Constitutional requirement with its CCP Validation Action and by erroneously claiming the “obligation is imposed by law”, (Para. No. 8, page 3 and elsewhere) and is therefore exempt from the Constitutional 2/3 vote requirement. The City is simply wrong – clearly, the City’s obligation to its employee pension system (Cal PERS, or whatever) is not an, “Obligation Imposed By Law” and thus, NOT EXEMPT from the Constitutional requirement. (See: State ex re. Pension Obligation Bond Com. v. All Persons Interested etc. City. (2007) 152 Cal.App.4th 1386; 67 Ops.Cal.Gen. 349,351 (1984); County of Orange v. Association of Orange County Deputy Sheriffs et al. (2011) 192 Cal.App. 4th 21). The City is gambling that no one will bother to file an opposition to their Validation Petition and the court will simply rubber stamp it. Respectfully submitted for your consideration.

    David E. Mix

  98. Dollars and cents
    December 26, 2012 at 8:40 am

    highboldtage :
    So 915 you are saying that landlords can’t afford to rent out at lower rents but they can afford to let their properties sit vacant and rentless?
    That is a tall tale.
    have a peaceful day,

    Yes it does make perfect sense and if you had any business sense you would understand. But you don’t so you can’t.

  99. December 26, 2012 at 8:44 am

    If letting a building sit vacant makes business sense it can only be because of Prop 13s perversion of the free market or else the exploitation of a tax entitlement gimmick like tax loss carry forwards, which also pervert the free market.

    You see I am well grounded in the dismal science.

    In civility, your turn.
    have a peaceful day,

  100. December 26, 2012 at 8:59 am

    Anyone who wants to join in a court action against this illegal bond issue please email me at humboldt.organizer@gmail.com put “bogus bonds” in the subject. I understand that opposition to this illegal bond issue will cut across the normal political divides. I am a libertarian socialist but when it comes to government I am a fiscal conservative.

    have peaceful day,

  101. December 26, 2012 at 9:28 am

    Let me add that I support good wages for workers and decent old age pensions – for all workers – for all people. We just need to pay for these things as we go and as we can afford. That would be our best gift for the generations to come.

    have a peaceful day,

  102. Anonymous
    March 25, 2013 at 10:53 am

    CalPERS gives tentative okay to 50 percent employer rate hike

    By Ed Mendel | 03/25/13 12:00 AM PST


    The CalPERS board last week tentatively approved an employer rate hike of roughly 50 percent over the next half dozen years, replacing a policy that kept rates low during the recession with a plan to reach full funding in 30 years.

    While giving unanimous “first reading” approval to the proposal by Chief Actuary Alan Milligan, the board asked for more information before final approval scheduled next month.

    “Any addition to the schools (rate) is likely to result in layoffs to employees,” said the board president, Rob Feckner, who represents the largest group of CalPERS members, non-teaching employees in 1,488 school districts.

    Feckner’s request for options for a “longer horizon” for phasing in the rate increase, softening the blow to employers, was joined by Treasurer Bill Lockyer’s representative, Grant Boyken, and board member Michael Bilbrey.

    The proposal for a new actuarial method would show state and local government employers the new rate plan in their next annual valuation report. But a five-year phase in of the rate increase would not begin until fiscal 2014-15 for state and school employers.

    The rate increase would not begin to phase in until fiscal 2015-16 for the local governments in the giant California Public Employees Retirement System, 1,567 public agencies with 2,044 retirement plans.

    “Contributions that we need for the system really depend on the funded status of the plan and matters that are unrelated to their (employers) financial ability,” Milligan told Feckner. “Having said that, I will take a look at what we can do in the way of providing options.”

    The CalPERS funding level has not recovered from a $100 billion loss during the deep economic recession and, under the current rate policy, is not projected to reach full funding in 30 years.

    The CalPERS investment fund, expected to provide about two-thirds of future pension payments, peaked at $260 billion in the fall of 2007, dropped to $160 billion in March 2009 and was back up to $256 billion last week.

    The total CalPERS fund had 101 percent of the projected assets needed to cover future pensions in 2007. The funding level dropped to 60.8 percent in 2009 and in the last valuation (as of June 30, 2011) was back up to 73.6 percent.

    Under the current rate policy, the funding level in 30 years is projected to reach 79 percent for most state workers, 86 percent for most local governments and 82 percent for non-teaching school employees.

    A funding level of 80 percent is adequate, some experts think. But CalPERS officials, shaken by the huge investment loss five years ago, worry that another deep recession could drop funding low enough to make reaching full funding impractical.

    “Some academicians have said if you go much below 55 (percent) you never can recoup or regain your status,” said board member Henry Jones. “The option of looking at not having that happen is therefore very important.”

    Board member George Diehr said he was concerned that even with the proposed rate increase, the CalPERS funding level would still have a high probability of dropping below 50 percent in the next 30 years.

    “I think falling below 50 percent creates a high risk of political attacks, changes to the defined benefit (pension) system that might be not just what happened, the reform that was just passed, but more likely what happened in San Diego or San Jose,” Diehr said.

    Gov. Brown’s pension reform, AB 340, took effect in January, giving new hires smaller pensions and raising some employee contributions. Voters in San Diego and San Jose approved more sweeping pension reforms last June.

    Both measures attempt to cut pensions earned by current workers in the future. The San Diego measure switched new city hires from pensions to a 401(k)-style individual investment plan widely used in the private sector.

    Even with the proposed new rate policy, the CalPERS funding level has a 52 percent probability of dropping below 50 percent during the next 30 years, according to 1,500 projections of randomly simulated investment returns.

    “They make some significant changes,” Diehr said, “but I think a fiscal conservative would say they don’t go far enough.”

    He asked Milligan for an estimate of rate increases needed to lower the probability of a 50 percent or lower CalPERS funding level during the next 30 years to 40 percent, 30 percent “and if it doesn’t crash your software, 20 percent.”

    Diehr said CalPERS has been “too protective” of employers who raise pension benefits. He said employers should take the responsibility for any sharp increases resulting from higher benefits, whether through reserves or borrowing.

    “In the end, what it might come to, as the head of Human Resources in the city of Palo Alto has suggested, they may need to seek legislation to go after the other lever here that we can’t touch — and that’s the liabilities themselves, the pension benefits which drive the liabilities,” Diehr said.

    Milligan’s proposal would end the current complicated rate policy that uses a radical 15-year period for “smoothing” investment gains and losses, a “corridor” to limit smoothed values and rolling “amortization” that refinances debt each year.

    The chief actuary wants to use a “direct” policy that would determine the rate increase needed to reach a funding level of 100 percent in 30 years, then phase in the rate increase over five years.

    Under the five-year phase in (“Method 5” in the charts), the current employer rate for most state workers, 19.7 percent of pay, would increase to 29.2 percent, schools from 11.4 percent of pay to 18.9 percent, and public agencies from 14.9 percent to 23 percent.

    Dan Pellissier, president of California Pension Reform, told the CalPERS board the proposal would undo “nearly a decade of fiscal negligence” that Milligan’s predecessor, Ron Seeling, said in 2009 was “unsustainable.”

    “Method 5 would produce the dramatic changes in CalPERS funding policy needed to protect the beneficiaries and reduce the long-term cost of benefits for all,” he said.

    Pellissier, a CalPERS pensioner with 24 years of service credit, said he was concerned the board had failed in its fiduciary duty to protect assets. His group unsuccessfully tried to put a pension reform initiative on the statewide ballot last year.

    CalPERS is considering other changes that could increase rates: Later this year completion of a risk-reduction study that may result in more conservative investments, and next year factoring in longer life spans and a review of the earnings forecast.

    At least one board member, J.J. Jelincic, disagrees with critics who say the CalPERS earnings forecast, 7.5 percent a year, is too optimistic and conceals massive debt. He asked Milligan for the probability of reaching 120 percent funding.

    Jelincic cited a 2011 report that the 100 largest corporate pension funds had an average earnings forecast of 8 percent. “Our return assumption is not unreasonable,” he said.

    Ed’s Note: Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at http://calpensions.com/

  103. April 2, 2013 at 9:12 am

    For my fellow Eurekans who treasure their right to vote.

    The Constitution of the State of California has guaranteed since 1879 the voters the right to approve by 2/3 majority the sale of long term obligations. (Bonds)

    In the dark of election night last November the Eureka City Council passed a resolution that in effect filed a lawsuit against “All Persons Interested.” In effect every citizen of Eureka was sued, but more importantly the 14,000 voters of Eureka were sued to strip them of their right to vote on an $8.5 million bond issue – and ALL PENSION BOND ISSUES IN THE FUTURE.

    We have one week to fix this. Trial is next monday april 8 and I have asked for a jury trial. I am not a lawyer the best defense I will be able to mount will be a few simple constitutional arguments and hope that the jury rules in our favor.

    If you want the details go to my blog. http://highboldtage.com

    This is a bizarre reverse class action lawsuit and I was the only one to answer it. Am I the only one in Eureka that cares about the right to vote? I don’t think so but where are you?

    This issue cuts across party and left/right lines. My issue is that I am a small “d” democrat who wants to protect democracy. I think the bonds are crappy junk bonds but the city has the right to issue crappy junk bonds – if the voters approve. That’s my issue.

    Call the city council and demand that they end this farce NOW! Demand that they WITHDRAW THE LAWSUIT AGAINST YOU AND PUT THE BOND ISSUE ON THE BALLOT.

    have a peaceful day,

  104. Anonymous
    April 9, 2013 at 6:47 am

    “My County – Mendocino – incurred hundreds of millions of past pension expenses they never reported to the people. Across the nation hundreds of billions of past government pension expenses have been hidden by a “Fatal Flaw” in how governments report pension finances.”

    That’s about to change.


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