08-03-10, Herbert Molano Reflects on the Coverage of Glendale Financial Issues by the Glendale News-Press

It's no accident that even the president of the Glendale Homeowners Coordinating Council had no clue on Glendale's Pension mess!

Years ago, maybe ten or fifteen years ago, the Glendale News-Press (GNP) ran an expose on those at Glendale city hall who earned over $100,000 per year. That story carried the pictures of each of the managers who earned that much. From my conversations with the publisher, she got an earful from the city manager then. It was another contentious experience in addition to the Will Rogers' column. Apparently the city management wanted him out. Eventually the GNP's only investigative reporter was let go, and my understanding is that it was not an amicable parting.

Now a few years later we find very few such articles on the budget, city finances, payroll issues from the GNP. This subject is a fresh one today in as much as tomorrow on the city council agenda is the decision on the contract for the city's announcement and other publication needs. Maybe it is time to have the Glendale Management show in public how much the contracts with the GNP have been for each of the past five years. There is a solid reason we should ask. 

For all intents and purposes, it is the GNP that still reaches the frequent Glendale voter and in my opinion, those GNP pages have been sanitized too often now to the point that few controversial topics get on its front page. So should it come as any surprise that so few people in Glendale, taxpayers, ratepayers, voters and the rest of the stakeholders have no clue on what the pensions really cost the city and what the benefits are. 

I've interviewed current and past council members about their understanding of the pension system, and I found that, invariably, they don't really know how it works, and often have not bothered to understand the pages on the Comprehensive Annual Financial Report (CAFR) that summarizes that information with tables and other actuarial information. Yet, if we bother to understand it, the information is incomplete and vague. It will take several attempts at giving the general public an understanding of the process and it's why Mr. Al Hoffman is in for a bigger and more dismaying surprise when he finds out the real costs to the city and the real benefits to public sector retirees. Let's take the pension of Safety Personnel - Fire and Police.

First: The city claims and the GNP reported that the employees pay 9% of their salaries as their contribution to the pension. But the agreements with both the GFFA and the GPOA show that the 9% (that the city used to pay) is now added to their salaries (as of 1991) and then they "contribute" it to the pension. 

CalPERS then takes the money and calculates the longevity of the retirees and the amount of the pension each will receive. That amount is based on their highest annual pay and the age at which they can be expected to retire. The higher the salary and the earlier they can retire, the higher the assets that CalPERS must accumulate to pay off for the expected life span of the retiree. If the city allows them to retire five years earlier and increases their pay before retirement, the pension obligations calculated by CalPERS and the corresponding assets must increase. Well, in 2001 Glendale increased both by huge margins. There was a nearly 50% increase in the obligation. It was voted by Quintero, Yousefian, Manoukian, Weaver and Gomez. It was also voted just two weeks after the election of Quintero and Yousefian. They, in effect, were clueless. But what is even more damaging is that they made the benefits retroactive to 1971. 

On those changes alone Glendale taxpayers would have a huge financial time-bomb. But if CalPERS investments were to tank in a recession, we could be on the hook for huge unfunded obligations. The pension obligation now stands at over 1.2 Billion but the assets to cover them have dropped precipitously in the last two years. 

The real damning problem is that we guarantee a 7.75% return on CalPERS investments - We guarantee increasing it if they should fail below that threshold. No amount of logic, common sense, or propriety could make any sensible person agree to be bound for someone else's actions. Yet our city council agreed (as many others did) to such an arrangement. It is not just folly. To me it is stupidity bordering on the criminal. The damage each year is now in the tens of millions of dollars to Glendale's budget. Now go ask the man on the street to see if they have any idea. The GFFA and the GPOA knew what they were doing. They were perpetrating the most unimaginable transfer of taxpayer money into their pockets for an earlier and rich retirement - In the millions of dollars each.

Hoffman would not be the only one to be aghast.

Herbert Molano