The Nascent Financial Crisis at Coastside Fire
On August 16, 2011 the Coastside Fire Protection District(CFPD) Board held a Special Meeting. It was called on short notice. Darin Boville was not notified to video record it. So, citizens won’t get to see what the Board did. Two citizens were in the audience that day, spoke and saw what happened. I was one of them.
The Coastside Fire former employee retirement CalPERS debt was thought to be about $5M in 2009. This year it was estimated to be $9M to $13.2M. According to the actuarial consultant the Coastside Board hired, John Bartel, the CalPERS’s Board’s August 17, 2011 action raised Coastside’s termination debt to $13.5M to $19.8M. CalPERS pools are black boxes. When a CalPERS customer asks what the size of their debt in a pool is, it can take half a year for CalPERS to provide a range like $13.5M to $19.8M. When CalPERS unilaterally moves a customer agency’s contract form one pool to another, the customer can get hit with millions in additional debt. When the CalPERS Board votes like they did on August 17 to change actuarial assumptions, a contracting agency debt can go up 50%. The current interest rate CalPERS charges on debt is 7.75%.
Today, the total combined Coastside Fire liability for former employee CalPERS retirement plan and former employee family medical plan is larger than the HMB Beachwood settlement. Coastside Fire has roughly $8M in annual revenue. For comparison, the City of HMB has roughly a $10M budget. Compounding the problem is the City of Vallejo’s experience in Federal Bankruptcy Court. Even under dire conditions for Vallejo, the CalPERS obligation had seniority. Four of eight of Vallejo’s Fire Stations have been closed. As one citizen in Vallejo quipped, “Our Fire Department is a pension plan masquerading as a Fire Department.” So, bankruptcy or dissolving Coastside Fire District won’t extinguish Coastside’s CalPERS obligation.
Over the past few years, Director Burke has led the effort to terminate the CalPERS debt from former employees, transfer the liability to CalPERS and restructure the final termination payment to CalPERS with a pension obligation bond. Other Board members sandbagged his efforts culminating in calling the pivotal August 16 Special meeting, once he was safely out of town. For the past year, other Board members have feigned displeasure with CalPERS and concern over the ballooning of the District’s CalPERS debt. For over a year, other Board members went through the motions of accepting CalPERS’s excuses for not responding and looking at options with no real sense of urgency.
At the end of June, CalPERS had formally estimated a $9M to $13.2M range for the debt and the Coastside Board had passed two roll call resolutions to terminate unanimously. But, at another Special Board meeting on July 13, the Coastside Board majority voted to “reconsider” their previous two CalPERS termination resolutions. On August 16, the Coastside Board was informed by Staff that the CalPERS Board intended to change the actuarial assumptions in the termination pools and that CalPERS action would increase Coastside’s cost to terminate by 50%, if no action was taken to move forward with termination at Coastside’s meeting.
The Coastside Board unanimously voted to stay in CalPERS, effectively locking Coastside Fire into CalPERS forever. The cover justification the Coastside Board majority used in the meeting was the debt had grown so large, the bond would impact operations in a year or two. Don’t believe it. John Bartel said the termination cost would likely be closer to $9M, if executed before August 17 and one of Chief Cole’s scenarios showed servicing a ten year bond at 7% would have resulted in a $50K short fall which could have been easily covered by ERAF rebates. On August 17, the CalPERS Board voted as expected.
I’m sure many will wonder what was the motivation of the Board to tie the District’s future to a ballooning CalPERS debt? A majority of the Board have clung to their 2007 and 2009 campaign promises of getting rid of CalFire, reconstituting Coastside Fire with its own employees and hiring their cronies again. The Board majority’s cronies want and expect a CalPERS pension plan. Despite years of trying and failing to work up the justification to get rid of CalFire and come up with a plan to hire their cronies back into the country club, that hope refuses to die. Just watch any of Director Riddell’s many tirades on MontaraFog.com and the deference the other Board members show him. But, more importantly see how the Board members ultimately vote on the major issues.
So, what happens now? After putting the District irrevocably on the path to financial hardship, what citizen would want to run against the two incumbents up for reelection in November? It would be a fool’s errand. The Board majority now have a pension plan ready to go for their cronies, but no revenue to pay their cronies a salary. Because, if the CalPERS debt continues to balloon as it has in the past four years, it will grow beyond the ability of the Coastside Board to service it. Ultimately, CalFire is not going away. The citizens of the Coastside can be reassured, because CalFire has minimum safety standards, that will limit the cuts the Board can make and there are contractual obligations to the the San Mateo County JPA. For the next year or two, Coastside Fire’s fund balance will probably cover what is essentially interest only payments to CalPERS and current operations at current service levels. After that, possibly browning out Station 41 in El Granada. Not cutting service and funding a $2M annual payment to CalPERS would result in a new $200 per parcel tax. When the unpleasant choices are presented to the citizens of Coastside Fire, ask Michael Alifano, John Draper, Greg Hosfelt, Doug Mackintosh, Ginny McShane and Gary Riddell how they voted on August 16, 2011?