Tyson’s financial legacy comes back to bite Eureka in the Ass

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We’ve written about Eureka’s financial problems before, especially in regards to long term pension debt. The Examiner is supportive of competitive and fair pay for those who retire from public service. However, those pension costs need to be assessed and taxpayers should be getting the best possible service from their government. They shouldn’t be funding the “pension spiking” and other types of “legal” tricks that many public officials so commonly use. Back in August we wrote:

“Just last month, 2 newly promoted captains from the Eureka Police Department retired (only to be rehired and thereby “double dip” in David Tyson fashion). And now, over the next 6 months, 9 long term employees will be retiring. 8 employees will be getting an additional 2 years of retirement service credit paid for by the city for a total cost of $408,920; John Fitzhugh – Senior Building Inspector, Tom Coyle – Parks and Maintenance Manager, Rusty Goodlive – Assistant Fire Chief, Susan Hutchison – Administrative Technician, Eric Lermo-Senior Equipment Mechanic, Lisa Shikany – Pricipal Planner, Frank Mathes – Public Works Operation Manager and Gary Boughton – Deputy City Engineer. In addition to the 8 mentioned above, Assistant City Manager Mike Knight will be leaving with 2 years of paid health insurance at a cost of $28,601.

Obviously, these long term employees know that it’s time to get out while the “gettin’s good”. We don’t like it but we suspect that Fred Mangels is correct when he states that pensions may have a part in bankrupting the city. The Examiner staff went through the line item budget for 2014-15 and found that the city’s PERS (retirement) expenditures were projected to be around 4.9 million dollars this year! The largest chunk of that came from Public Safety, to the tune of over 3 million dollars.”

https://tuluwatexaminer.wordpress.com/2014/08/04/we-are-loathe-to-admit-it-but-we-suspect-that-fred-mengels-is-correct/

Well, true to form and several months later, the Times-Standard reported on the state of Eureka’s pension obligations. According to their article:

“A recent statewide survey has placed Eureka as No. 10 on a list of 459 California cities with the highest percentage of revenue earmarked for pension funds. For Eureka, that means 11.3 percent of the city’s expected revenue will go toward paying off pension costs, which study author Marc Joffe of the California Policy Center said impacts city services…..

Eureka Finance Director Wendy Howard said that in the past, the city did not need to contribute to the fund as its plan was completely covered by CalPERS.   “When things were great back in the ’90s or 2000s, our rate was zero. We didn’t have to pay anything,” she said. “Their investments covered everything.”

There you are. 10-15 years ago, Eureka didn’t have to pay anything toward “unfunded liabilities”. Now, the City looks to pay $5.1 million dollars this year. That’s quite a jump, and should be concerning. But what wasn’t mentioned in the article, or in the study putting Eureka at #10 on the list, was Eureka’s Pension Bond expenditures. As many may or may not remember, Eureka sold about $8.2 million worth of bonds to pay off it’s debt in unfunded liability to CalPers in 2013. (which local watchdog the late Bill Holmes tried to alert us all to) It doesn’t appear that those numbers are reflected in the 2014 accounting of Eureka’s pension liability, so Eureka could even be higher on the list of Cities that owe big. Paul Rodriquez wrote in 2012:

“In June of 2003, the CalPERS Board implemented a requirement that all plans with less than 100 active members be assigned to a risk-sharing pool with all other agencies in the State with similar benefit packages. The purpose of establishing these risk pools was to establish consistent, less volatile employer contribution rates for smaller agencies like Eureka within the collective pool. Prior to this time the City of Eureka had a stand-alone plans for its “police safety”, “fire safety”, as well as for its “miscellaneous” plan employees. As the City has less than 100 employees within each of the safety plans, it was placed in the 3 percent at 50 benefit pool with other communities.

CalPERS required that all participating agencies in the risk pool have fully funded pension liabilities; each contracting agency was given the option of contributing the unfunded liability with a single lump-sum payment or repaying the unfunded liability as a loan on an installment basis, at a 7.75 percent (equal to the CalPERS long-term investment rate of return). These side fund “loans” are paid off over time by adding the amortization to the employer’s contribution rate.

The amortized amount for these side funds in 2012-13 equates to nearly 13 percent of safety payrolls. Combined with the risk pool’s normal cost, payment on pooled amortization items and a small surcharge, the total rate assigned is nearly 40 percent of safety payrolls. By paying down these side funds the City will lower its contribution rates, which will result in a annual net savings to the City.”

“The total rate assigned (for paying pension obligations) is nearly 40 percent of safety payrolls.” That’s a pretty big chunk of payroll for sure. However, when you look to the root of the problem the majority chunk really comes down to the downturn in the economy. There isn’t much a City like Eureka can do to ward off rising costs of “defined benefit” investment during an economic downturn. However, the City could have, and should have taken some steps. For instance, looking into lowering future costs by not allowing “pension spiking” or asking for larger contributions from employees could have helped.

But Eureka didn’t do those things. Why? Because of the negligence, incompetence, or corruptness of former Eureka City Manager David Tyson. Although it would be nice to just say that Tyson was that stupid, that wouldn’t be honest. In fact, given his history in Eureka’s Finance Department he was probably one of the first to realize the mounting crisis. Did he try and save the day through cost cutting measures and the closing of loopholes? Nope. Instead he figured out the best way for he and his cronys to “get theirs” and then get the hell out. The can was kicked to the next two City Managers and Finance Directors to figure out.

Tyson’s probably feeling pretty guilty though. Especially when he’s counting all the money he’s amassed from his “public service”. His pension was pretty reasonable though. In his first year of retirement he apparently made $137,000 from CalPers and $162,000 from the City of Eureka for “Other Pay”.

http://transparentcalifornia.com/salaries/search/?q=David+Tyson

http://transparentcalifornia.com/pensions/calpers/?e=CITY+OF+EUREKA&s=-pension

http://www.latimes.com/business/la-fi-pension-controversy-20150317-story.html

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17 thoughts on “Tyson’s financial legacy comes back to bite Eureka in the Ass

  1. No need to wonder why Eureka has a crime problem. It begins at the top of city government. City street (as opposed to highway) robbery!

    Liked by 2 people

  2. So what changes have the new Council members made? What changes has Linda Atkins made with a majority now?

    Like

  3. Hello!?!? These are low to mid range paying UNION jobs that these people have worked thier entire careers for. What kind of liberal puts down public sector, union jobs? Are you just following the race to the bottom? We need more and more of these jobs,not less.

    Like

    • Realitymonger:

      Generally speaking, management types are not union workers.

      I agree that if you make a deal with a worker on how he or she is to be paid for that person’s service that deal should be honored. Some of the folks mentioned are probably union workers, but the majority are management, who compared to the salaries of the people who do the “actual work,” make considerably more money.

      Management are also in the better position to “work the system” to maximize their benefits after they retire.

      I think there does need to be a well defined line drawn between what management (like Mr. Tyson or Sheriff Downey) get out of the system as opposed to line employees.

      Now I’m sounding like an IWW agitator… the truth is I’m not as fond of unions as I once was. But I do worry that the average worker’s pension is becoming more and more threatened as time goes by while the retirement futures of many managers just gets brighter and brighter.

      Liked by 2 people

    • What kind of liberal….?

      I don’t know that the TE has ever put themselves our there as being the voice of “liberals”. However, they certainly didn’t put down union jobs as you claim. From the article:

      “The Examiner is supportive of competitive and fair pay for those who retire from public service.”

      Pretty clearly defined point of view in my opinion.

      Liked by 3 people

  4. What is with the Tyson Boogie Man thing you guys are always trying to sell?

    John Fitzugh did not retire and is still working at the City.

    The savings to the City in having the Assistant City Manager retire in October has probably double in the last six months, because they are no longer paying this salary.

    The pension bonds were never sold because of the lawsuit brought by “Have a Nice Day Bill”.

    The employee contributions to CalPERs were increased.

    Don’t let the facts get in the way of a good story.

    If you really want to look at the financial burden to the City’s general fund you might have to start looking at the “Public Safety” section of the budget.

    Like

    • Large Marge:

      Fair enough. I’m ready to hear your version of why the City of Eureka is #10 of over four hundred California cities in pension fund percentage of budget.

      The Tuluwat Examiner went into detail about what it felt was the problem. You seem to have your own viewpoint… please share (in detail).

      Liked by 3 people

      • Mola,

        I would be willing to bet that Eureka ranks #10 out of over 400 California cities the same size as E-Town because they have a Fire Department. Most California Cities the size of Eureka do not have Fire Departments as Departments of the City – they primarily operate as independent special districts. (I believe very recently the City and Humboldt Fire District 1 now operate as a JPA).

        If you factor out the Fire Dept pensions, and made an apple to apples comparison, I am confident Eureka would compare favorably with other Cities its size.

        The TE is trying to have its cake and eat it too – it wants funding to public safety increased, and sounds like they would be happy to have most if not all general fund revenues going to public safety; then it says the City should increase (as LM says, the City in fact HAS) employee contributions to public safety – but if this is done further, it will make Eureka less attractive to potential public safety employees considering Eureka as a place to live and work.

        Further, the TE needs to realize that included in Public Safety costs are pension and benefit expenses. They are not separate costs of the City.
        To try and place blame on past Councils and management is silly, especially when past Council’s and management, including your boogie man David Tyson FULLY FUNDED public safety in the past while cutting to the bone other Departments City Wide. So, in essence, you are critical of what you are advocating now – fully funding public safety, while cutting elsewhere ( a sentiment, BTW, I am in favor of as well).

        The TE and it’s “staff” post this stuff as if Eureka is alone in this fiscal plight, when the reality is that EVERY City throughout California is facing the exact same financial challenges that began with the fiscal meltdown in 2007-09.

        Finally, the TE tries to take the retirement incentives that were offered such as paying for health care insurance or a year or two of PERS and make this some kind of pension spiking issue. The positions from which those employees are retiring from are being eliminated, thus saving the City money as part of the City wide reorganization, but well, that doesn’t fit the narrative the TE seems to want to write.

        Liked by 1 person

      • I don’t know about the #10 for Eureka, is this like the story that says Arcata is #1 of all small cities in California or Eureka’s crime problem is worse than Oakland?

        I would agree that mistakes have been made. Councils have enhanced public safety contracts in hopes of retaining officers, but still officers move around and small cities are left holding the retirement bag.

        I recently heard the City Manager say that Public Safety takes 65% of the General Fund, that is sixty five cents of every dollar. We all want public safety but I think it’s time to start looking at where our Public Safety dollars are being spent. Humboldt Bay Fire is not a City department, the City is part of a joint powers authority, what portion should Eureka’s pay?

        Like

      • ergo:

        I very much appreciate your response.

        My only quibble is the statistic the TE quotes does not say specifically 459 cities of comparable size to Eureka. Now that I think on it, I imagine there are more than 459 cities in this state so I guess that is implied.

        Also, whether you have your own fire department or pay someone else to put out the fires… wouldn’t the pension expense still be part of your budgetary concerns? (You pay the people who pay the pensions).

        To answer Large Marge’s concern… Arcata being #1 or #15 most livable is a subjective rating, based on God knows what. Eureka’s #10 rating would have a bit more of hard math involved.

        As I have said before… I’m not good with math and hate story problems. I appreciate your insight.

        Like

      • San Rafael and San Jose were #1 and #3 on the list. The list included varying sized cities.

        Like

    • The employee contributions were increased because of pension reform legislation from the state legislature, not from any reform in Eureka city hall.

      To quote your comment, “Don’t let the facts get in the way of a good story”.

      Liked by 1 person

      • JP,

        Employee contributions to CalPers were increased a couple years ago during employee negotiations. Don’t let your ignorance of this fact get in the way of your own “good story”.

        Also, PEPRA, which you are referring to, is also in place at City Hall as it is everywhere else in the state, but hey, guess what, that doesn’t change the fact that employee contributions were increased as they City’s percentage to PERS was capped at a certain percentage, with the employees agreeing to pay anything over that percentage.

        Gosh, isn’t this fun?

        Like

  5. JP what does David Tyson have to do with the state legislature? Large Marge makes a good point about facts. The Tuluwat Examiner did raise a good point about Eureka’s high pensions. Will Houston did an article on the same subject.

    Like

  6. I have to wonder why public sector employees, particularly management , earn so much. With all the promised benefits (retirement, health care) and the seeming impossibility of losing their jobs for other than major crime, they should be paid no more than twice the median income of all county residents. It might incentivise them to work a little harder at improving wages for everyone, thus making our county a better and more desireable place to live.

    Like

  7. @ Mola

    Mola, enjoying the conversation.

    I want to see if I can help you with your very valid comment which I have quoted below:

    “Also, whether you have your own fire department or pay someone else to put out the fires… wouldn’t the pension expense still be part of your budgetary concerns? (You pay the people who pay the pensions).”

    When a Fire Department is not part of the City, but rather operates as a special district, then the District typically is funded through some sort of parcel tax, and not part of the City’s budget, thus no budget concerns.
    When it is part of the City, then the general fund is the revenue source that funds the Fire Department, and more recently measure O/Q funds which also go towards funding it. (in this case the City does not “pay someone else to put out the fires” but rather, the residents of the district are funding it directly.

    Now that the city’s fire department has joined the humboldt fire district and formed a JPA, I would imagine that the city will still be responsible for it’s proportionate share of the JPA’s expenses.

    Hope that helps clear things up.

    Liked by 1 person

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