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