Tell the Truth about Confire Parcel Tax

Some who have posted on this site in support of the proposed ConFire parcel tax claim they are telling the “whole story.” Nothing could be further from the truth. I’d like to share my research with you and let you know what facts have been missing.

1. ConFire and its employee contributions to their pension has been insufficient since day one, causing a substantial unfunded pension liability. In 2005, ConFire, in its first year of operating at a deficit, decided to issue $130 million in Pension Obligation Bonds to plug the massive whole in its Pension that represents $130 million in pension costs accumulated for a period prior to 2004.

2. ConFire was wreckless when it borrowed money via Pension Obligation Bonds and gambled that money in the financial markets. ConFire has lost on that gamble to date, making their financial situation worse by uncessarily increasing their unfunded liability by losing on their investment of borrowed money. Please note that the bond money borrowed by ConFire of $130 million was deposited into the Pension account, but ConFire is on the hook for paying the bond off. ConFire was betting that the rate of return on the invested bond money would be higher than the interest costs to investors of the bonds. Except…the financial crisis hit, and ConFire’s rate of return on the $130 million is much LOWER than the interest costs. So now ConFire’s unfunded liability accumulated for the period prior to 2004, has increased. I’m seeing a City of Oakland moment right here within ConFire.

3. ConFire sells Pension Obligation Bonds it can’t afford with principal and interest payments as high as $14 million due each year for a term of 2006 to 2023. These bonds were sold when ConFire was operating at a deficit. The only reason they were able to make the payments in 2005 to now, is because they had a “fund reserve” of about $30 million, which they are currently burning through, and there was an increase in property tax revenue (lucky for them) from 2005 to 2007. But now that the Fund Reserve is being depleted, ConFire is seeking a parcel tax so the taxpayer can pay the Bond instead of them. If the Bonds had never been sold, ConFire would be in a better financial position.

4. CoCo Tax has been fair and reasonable in their assessment of this particular parcel tax. Given that ConFire is proposing a parcel tax with a 7 year sunset provision, I can tell you that this is not a solution considering that the $130 million Pension Obligation Bonds, which will cost over $200 million to pay off by the time of maturity in 2023. So how will ConFire pay its bills after 7 years when the parcel tax terminates, when the bond payments will still be due each year through 2023? Further, why would you spend money you don’t have on an election that does not resolve the situation?

Seriously, if you are going for a parcel tax, ask for what you need to keep you afloat until the bonds pays off …but TELL THE TRUTH to the VOTER. For example, Dear Voter, we are seeking a parcel tax because we can’t afford to pay our $200 million in Pension Obligation Bonds that we borrowed to pay retirement costs for our firemen services rendered prior to 2004. Also, we invested this $130 million in borrowed money in the financial markets and lost, so our retirement costs have increased. Further, we estimate our retirement costs will increase substantially in light of the fact that the full impact of the financial crisis has not been fully reflected and we have underestimated our costs.

5. Although some may be unhappy with the parcel tax measure occuring, I do believe it is necessary. I think it is important to show a bankruptcy trustee that ConFire has sought all measures to avoid bankruptcy, including seeking a parcel tax. When this parcel tax fails, ConFire can then file Bankruptcy and work out its debts. This should provide relief without having to close as many stations as planned and to provide the essential services that we all pay for. Further, this will allow for renegotiation of contracts to lower future retirement costs.

~ Bill Pollacek, Contra Costa County Treasurer-Tax Collector, Retired

Comments

  1. TaxDog says

    Thanks BGR for documenting the truth. I read the bond documents. Anyone who wants to read them to back every statement in this article can. The truth is ConFire and our BOS have given away our tax dollars and our children’s tax dollars by gambling with the pension. Even jerk for oakley has been fooled by these self serving bureaucrats. Jerks east county socialistic site has no facts to rebut this deep hole of money overpromised, wasted and now owed. I remember certain idiots in east County bragging how Piepho reduced the unfunded liability by huge dollars. Can that farce be explained by the selling of 130 million dollars in bonds to buy the pension debt down? Are those bonds now actually compounding the debt because they cost more than the fund provides? Any person who votes for this new tax is either stupid or will personally benefit financially from it. It is time for people to get realistic with what is really happening in this county. If you vote for this tax, you are sentencing your children and theirs to less services and more tax debt than ever before in Contra Costa history. This is because the tax does not fix anything but attempts to place a band aid on severed artery that will eventually bleed out all the taxpaying patients. The only cure is a total reorganization of the county fire services. When I read a firefighter position cost $300,000 dollars I think of how many $75 dollar taxes does it take just for that one position. That is 4,000 parcels or about 12,000 people. Well, so much for one firefighter per 1,000 people. You are wasting everyone’s precious time and money on a failed situation. You would be better off using your money to keep you warm or feeding your family.

  2. Kris Hunt, Executive Director says

    If you add up the district’s cost of paying pensions AND repaying the bonds plus interest, it is the reason they need this tax. It is the Pension parcel tax.

    • Brian says

      Kris, this tax is needed to fund an organization that depends 100% on propety tax revenue. Home values have decreased by 100’s of thousands of dollars, of course caused by the great recession and the illegal gambling of Mortgage Notes by the Big Banks, AIG, and your friends on Wall Street, resulting in HUGE property tax bill reductions for most property owners in Contra Costa County. Not to mention that the local RDA’s having been diverting millions of dollars of Con Fire Tax money for a long time.
      Pension Reform? Nice Try Kris, but the state legislature has raised retirement of firefighters from age 50 to age 57, mandates 50/50 cost sharing of pension cost (which Con Fire members actually pay 65 -70% of the total pension cost), and eliminates any spiking or inflating of salary by going to last 3 years average salary and no more that base salary in retirement. I am sorry, but the Pension Reform by the State Lawmakers has taken the wind out of your sails, and makes your measure Q slogan obsolete.

    • VoterandTaxpayer says

      Brian,
      Sorry, They changed that legislation. Read it again. Until your union agrees to it, nothing has changed. Get your union to vote on what you just said, ratify it, impliment it before November, and I will vote yes. I know that will not happen. I know I will have to call them on it by voting NO.

  3. Wendy Lack says

    Fire departments are known as traditional, change-averse. This is one reason why reform of fire organizations is so challenging — change is typically met with strong resistance.

    Here’s an example from Long Beach, CA; note the fire union’s reluctance to adopting the now-standard staffing model:

    • Rob D says

      Great article. Note th FD also provided false info claiming Paramedics can perform tracheotomies. They are very protective of their turf. Some would say ‘overprotective’.
      Our county should explore the deployment model described in this article.
      As others have pointed out, 90% of the FD calls are medical and can be directed to lower cost paramedic providers.

    • Brian says

      Wendy, Only the Richmond Area of Contra Costa has two Paramedics per ambulance, because RFD has no paramedics on their engines. Central and East County have had one paramedic/one emt for a number of years. Comparing CoCo Fire to Long Beach is like comparing apples to oranges. Long Beach Fire responds Ambulances to EMS Incidents and provides Fire Department based Ambulance Transport similar to San Ramon Valley Fire and Moraga – Orinda Fire. Long Beach has 117 Firefighters on per day with 4 firefighters on an Engine, to cover 52 square miles and a population of 450,000. Con Fire has only 84 firefighters on per day (3 per engine) and covers a population of 650,000, and over 300 square miles. I am glad that you are concerned about Paramedic Staffing Wendy, and hope that you are educated by these facts and figures. Here is the link to LBFD: http://www.longbeach.gov/civica/filebank/blobdload.asp?BlobID=34320‘)
      I think that you would have very little support in the community in suggesting removal of the single Paramedic from Con Fire Engines, especially in Rossmoor, Lafayette, and Plesant Hill where Con Fire often arrives in under 4 minutes on a 911 medical call.

    • Wendy Lack says

      Brian, I am aware of the variety of staffing models in use. You miss the point.

      The point of my post re Long Beach was to illustrate the aversion to change that is characteristic of fossilized fire organizations. When organizations are incapable of changing to meet dynamic conditions, they become insular, ineffective, calcified.

      As they say in the change management biz: “Change or Die.” That pretty much sums up where our fire organizations — and most public agencies — are today.

      The imbalance of power resulting from the collusion of elected officials and public sector labor groups has rendered government a bloated, inefficient money pit. This approach ain’t working.

      It’s only a matter of time before Contra Costa voters will use the ballot box to enact necessary reforms, since elected officials have proven themselves incapable of responsible leadership.

    • Wendy Lack says

      Today’s Contra Costa Times editorial asserts the District should streamline operations by adopting alternative service delivery models, before asking taxpayers to pay more.

      This parcel tax proposal is nothing more than a stopgap measure that enables the District to continue doing business as usual.

  4. John says

    This bond debt is likely to affect the publics safety if not managed immediately. The relationship between the Board of Supervisors and the public safety unions may affect the service dollars needed to keep the public safe in a negative way. Why the BOS has only allowed more debt instead of action is alarming. If my insurance premiums go up, I see enough information here for a small claims action. If hundreds of people filed small claim actions due to lack of action resulting in an insurance increase, you can bet someone will listen. I’d rather spend 20 bucks on small claims than throw good money into a bottomless pit. They need to declare an emmergency and meet with the unions to fix this once and for all or the people need to keep turning down new taxes.

    • Tell the Truth says

      John…count me in on your class action suit. I read that San Bernadino expedited their bankruptcy filing because of an impending lawsuit regarding their Police department. Perhaps a class action lawsuit might compel ConFire into bankruptcy, which I believe is the best solution for everyone involved.

      I’ve been researching and can’t find one example where insurance companies unilaterlly raised homeowner’s insurance premiums on all parcel owners in an entire county because of a cut in service. Does anyone know if this has happened, and if so, what kind of increase would we be looking at?

  5. says

    News about Fire Bonds from 2005.

    Quotable quote

    “The two winners here are the politicians, who sidestep political responsibility, and the public employees, who are the beneficiaries of the largess. The taxpayer still has to pay off the entire amount.”

    ~ Steve Frate, Claremont Institute

  6. Bruce R. Peterson, Lafayette says

    Here is something I found in the CCC Civil Grand jury Report for 2010-2011, #1107. ” It would take $12,771 per household to eliminate unfunded pension liabilities.” OUCH!
    Another item states; “It’s not enough to make changes solely for future employees.” OUCH! for current employees.
    What’s worse, they say the State Legislature is responsible for changing the pension rules. OUCH!
    The Civil Grand Jury only notices huge obvious things, right under their noses.
    I notice the obvious fact, that Firefighters are the most likely subject the BOS & their media cronies can hoodwink the public into voting for. Just like the governments of LaMO keep hoodwinking people into thinking they will get better roads, if they vote for higher taxes.

  7. Kris Hunt, Executive Director says

    Contra Costa Taxpayers Association will be writing a ballot argument based on the fact that 1) this problem has long been known to be coming and 2) the tax won’t fix it.

    Even though the Board will likely claim they are working on pension reform, creating a new tier for future employees will not solve the district’s problems.

  8. Bruce R, Peterson, Lafayette says

    The argument against this tax needs to be turned in to the election’s department by Friday afternoon. Who is going to be brave enough to edit all of this information down to 300 words & sign their real name(s) to it?
    Me again?
    Tax opponents are always insulted by the obviously corrupt, commercial media.

  9. VoterandTaxpayer says

    Sorry Rob,
    The $129,000,000 million fire pension link bond credit goes to
    ” Tell The Truth”. Your comment was also enlightning.
    Thanks so much for posting that Tell The Truth.

    • Tell The Truth says

      @VoterandTaxpayer – You are welcome. The Official Bond Statement has all kinds of relevant information, including 5 years of Revenue/Expenses where you will see ConFire sold these bonds in its first year (2004) of operating at a deficit.

      You will also see the balance of the Fund Reserve at about $30 million. The Debt Service Schedule is also disclosed showing the amount of principal and interest that is due each year until the bond matures.

      Additionally, there is a very interesting bond covenant pertaining to ConFire’s “Reserve Policy”. The Reserve Policy restricts the Fund Reserve from being depleted below an amount of 10% of Expenditures. I believe ConFire may have depleted their Fund Reserve below this mandated level.

      Further, there are restrictions on how the Fund Reserve may be used, and dipping into the Fund Reserve requires approvals by the Board and the Board must make recommendations to replenish this reserve. I wonder if such approvals and recommendations exist.

  10. VoterandTaxpayer says

    Rob D I read the link you displayed and am really at a loss for words. How could this ever get so far out of control? The BOS had to be aware of this. I’m now wondering if the bragging by some of the BOS about getting the pension obligation down during those years was actually a hoax. Did they just sell bonds and say the problem was being attended to?

    I remember Mary Piepho and her cohorts blogging the great job she was doing getting the County pension debt down. Is this what was being done? Borrow 129,000,000 million from bonds to make the fund look less in debt? Someone with true knowledge of this act please let us know. This type of underhanded maneuver is the same action that got our ex Governor recalled. The Bond wording states that there can’t be a tax to pay the bonds back. The entire budget is derived from taxes. How will this new tax be separated as not to pay some portion of the bond debt.

    I was told another real farfetched benefit of the ConFire retirees. Supposedly they can transfer their retirement to a direct relative just before they start collecting. The firefighter that I spoke with said he could transfer his retirement to his grade school child and that child would receive benefits from his or her eighteenth birthday for life. What a crock !

    BGR, please research this and let us know.

    I thought my tax dollars were being spent wisely. Why do I work every day ? I should just jump on the public paid tax train a ride first class like so many others. At least until it falls in on itself. If any of this article and comments are true, real out of touch taxpayers will vote another tax.

    • says

      I believe what you are talking about is in most publci retirement systems (my experience was as an analyst for the SF Retirement System in the early 80s) employees can assign a death benefit to family members; perhaps a spouse, or children, or practically any beneficiary, including a grandchild; just as you could with some private term or life insurance policy.

      Different retirement systems have their own calculus but it usually boils down to the longer the death benefit the less monthly payout a retiree would get until their death. But in the case of public safety, especially those who retire on some disability (heart, back, psych, or die in lne of duty) employees usually receive full benefits that then can be passed to some beneficiary.

  11. Rob D says

    I hope Chief Louder will share with us the fallacies in this post. If not, and this s all true, then voting in favor of this tax would be a mistake. If the problems faced by the department are indeed this severe, the this tax is not going to come close to solving the mid-term financial issues.
    And shame on the BOS and fire board for selling these bonds and going after anything more than the most conservative returns with public safety money.
    Pigs get fat; Hogs get slaughtered. This fire department has been managed to the slaughterhouse with this unaffordable bond and retirement system.
    Bankruptcy is a viable alternative, or will be shortly. Who invests in an enterprise BEFORE bankruptcy? Not I.

  12. Millie says

    Great article ! I was not aware that Con Fire purchased bonds to make payments on money it did not have. Wouldn’t that be just like going to Vegas and rolling the dice to win? Wouldn’t that be like the guy who mortgaged his entire home and bought lottery tickets but only won one fiftieth of it back? This parcel tax really does need to fail for the right reasons. Those reasons are to renegotiate the bonds or file bankruptcy. The public should never be subject to gambling with its money by politicians without their consent. Not only am I amazed at the stupidity of gambling the future of firefighters pensions but to hide the truth is unacceptable. So voting for this tax is just another waste to push off the debt down the road only to have it come back even worse? What are these so called leaders thinking? This must stop and these decision makers removed. Voters, please stop feeding this hungry demon and vote no.

    • Tell The Truth says

      As I mentioned in a prior post, I believe the County and ConFire need to attempt a parcel tax. This is necessary to show the Bankruptcy Trustee that they took certain measures to avoid filing for Bankruptcy, such as seeking a parcel tax.

      I only hope that ConFire tells the truth in the ballot by explaining their true need for the parcel tax is to pay their $13 million per year principal and interest payments on $130 million in Pension Obligation Bonds sold in 2005, that will cost ConFire $200 million to pay off by the time the bonds mature in 2023.

      As for the fireman who improperly accused Kris Hunt of being responsible for a person’s death…I refer you to the official bond statement for the $130 million in Pension Obligation Bonds borrowed by ConFire. People will die in Contra Costa County because our tax dollars are inappropriately paying for an unaffordable bond that was used to fund YOUR Pension.

      See the issue docuument for the $129,900,000 of obligation bonds.