A tale of two cities and blocked pension reforms

san diegoA San Diego city attorney urged an appeals court last week to order talks with unions on repaying 4,000 employees for pensions illegally replaced by 401(k)-style plans under an initiative, a cost some estimate could reach $100 million.

If the talks result in agreement, the city attorney suggested the pact could go back to voters for approval. Though not mentioned by the attorney, that’s what happened to another cost-cutting pension reform in San Jose also approved by two-thirds of voters in June 2012.

The two reforms had different cost-cutting curbs. But both had trouble in the courts. The San Diego reform was overturned. The San Jose reform lost a key provision. Both also were found by a powerful state labor board to have failed to bargain with unions in good faith.

In the end, San Diego seems likely to have increased pension costs, not cut them. San Jose got some cuts in pension costs, but not the big one. The winner, for better or worse, seems to be the status quo in pension protection.

Last August the state Supreme Court ruled that former San Diego Mayor Jerry Sanders, the city’s designated bargaining agent, violated state labor law when he did not bargain or “meet and confer” with unions before pushing the reform initiative.

“He consistently invoked his position as mayor and used city resources and employees to draft, promote, and support the Initiative,” the ruling said. “The city’s assertion that his support was merely that of a private citizen does not withstand objective scrutiny.”

The Supreme Court ordered a three-justice appeals court panel, which upheld the San Diego reform two years ago, to “address the appropriate judicial remedy.” The appellate court had not done so previously because of its ruling of no violation.

At the hearing last week, Travis Phelps, a city attorney, urged the court to order city bargaining with the unions on the reform initiative and any repayment for losses, possibly resulting in an alternative to the reform initiative that could be placed before voters.

An attorney for four city unions, Ann Smith, urged the court to adopt the state Public Employment Relations Board traditional order to “make employees whole for any losses” with an interest rate of 7 percent, the pension fund earnings forecast at the time.

“In every instance the status quo ante must be restored in full or otherwise employers are encouraged to violate the act” that requires bargaining, Smith said, because they could keep some of the gain.

Estimates of complying with the board order have ranged from $20 million to $100 million, depending on a variety of factors, the San Diego Union-Tribune newspaper reported last week.

Smith said the court had not received a compelling argument that the labor board abused its discretion in ordering a make whole remedy. She said the state Supreme Court ruling noted that labor board rulings have received high court deference in the past

In a suggestion apparently not mentioned in the briefs, Smith said the make whole remedy could be applied to city employees represented by unions, but not to managers and other city employees who are not members of unions.

The Proposition B pension reform initiative approved by voters in 2012 has not been invalidated. New city hires are still receiving a 401(k)-style retirement plan rather than a pension.

The state labor board said it lacks the authority to invalidate the initiative. What the state Supreme Court said about invalidating the initiative resulted in a clash of metaphors at the hearing.

Smith said the Supreme Court did not tell the appeals court to invalidate Proposition B but “they dropped all the bread crumbs on that trail.” Justice Richard Huffman said he was “long past reading Supreme Court tea leaves.”

The city attorney, Phelps, argued that a voter-approved initiative can only be overturned through a separate “quo warranto” process filed in superior court. He said citizen backers of the initiative, barred from labor board proceedings, presumably could testify.

Phelps said problems would be created if the appeals court, as the union attorney urged, made a straight invalidation of the initiative without modification or ordering bargaining to seek a solution.

About 4,000 employees hired since the reform have individual vested rights to the matching employer contributions to their 401(k)-style retirement plan, 9.2 percent of pay for miscellaneous employees and 11 percent of pay for firefighters and lifeguards.

“You can’t simply take that away,” Phelps said.

Retroactively enrolling employees in the city pension plan who have been in the 401(k)-style plan would require approval of the IRS, he said, which is not a given. He said tax exemption for the city and its employees could be at risk.

Smith said a quo warranto hearing is not needed because of the Supreme Court ruling of a procedural error and that hearing from the citizen proponents doesn’t matter at this point, drawing a rebuke from Justice Huffman.

“The notion that we can invalidate their measure, based on PERB’s facts without the participation of the proponents, strikes me as not the kind of process I’m used to,” Huffman said.

Smith said the state Supreme Court has reiterated that local initiative rights are not absolute. They must be “harmonized” with statewide rights, she said, which proponents had the opportunity to do before and after the initiative passed.

An attorney for the citizen proponents of the initiative, Alena Shamos, said a make whole remedy would gut the intent of the initiative, a response to the “crisis” of high pension costs, and would be the same as invalidation.

“We would agree with the city that meet and confer would be the proper remedy,” Shamos said, which could result in fines and penalties for the city.

A PERB attorney, Joseph Eckhart, said allowing initiative rights to override state bargaining law would undermine the case as much as if there had been no violation. He said any remaining dispute after city and union bargaining would go back to the labor board.

The San Diego reform excluded police and was limited to new hires, avoiding the San Jose reform’s clash with police and the “California Rule,” a series of state court rulings that prevents cuts in the pension offered at hire unless offset with a new benefit.

A key part of the San Jose measure pushed by former Mayor Chuck Reed gave current employees an option: pay more for a pension or begin earning a smaller pension in the future.

The option for current employees who have vested rights, unlike new hires, was overturned by a superior court judge citing the California Rule. But much of the measure placed on the ballot by the city council was allowed.

Reed and other reformers thought the option for current workers might get a long-sought review of the California Rule by the state supreme court. But the superior court ruling was not appealed as the reform battle continued for three more years.

In November 2014 Councilman Sam Liccardo was elected mayor, defeating a union-backed candidate reportedly supported by an $800,000 campaign. A day later two PERB rulings said the reform measure was not bargained in good faith.

Liccardo announced a settlement in 2015 that dropped an appeal of the superior court ruling and avoided a long and costly battle over nine union lawsuits. Reed endorsed the settlement expected to save the city $3 billion over 30 years and aid police retention.

In March 2016 the city used a quo warranto procedure to repeal Measure B in superior court, allowing a more generous pension plan to attract police to a long-depleted force working mandatory overtime.

In November of that year 61 percent of San Jose voters approved Measure F, a replacement for the original reform backed by a coalition of labor and business leaders, including Liccardo and police and firefighter union officials.

Supporters said Measure F would lock in pension savings and end years of bitter union-management fighting and litigation. Opponents said it was a capitulation to unions that allowed retroactive pension increases and other cost increases.

As San Diego awaits the appeals court ruling on a Proposition B remedy, the U.S. Supreme Court announced today that it will not review the city’s appeal based on the state Supreme Court ignoring Sanders’ First Amendment free speech rights.

Click here for video of the appeals court hearing, March 11 beginning at 2:30.

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune.

This article was originally published by CalPensions.com

Gavin Newsom’s threat to localities is extortion by any other name

Shortly after his inauguration, Gov. Gavin Newsom announced that he would withhold funds designated for transportation from local governments that didn’t comply with his vision for affordable housing. His move could be characterized as either the height of hypocrisy or extortion. Take your pick.

Let’s start with the hypocrisy. Our new governor has complained bitterly about how the federal government — i.e., the evil Trump administration — threatens to withhold funds from California. He has criticized the withholding of high-speed rail funds from the feds because of California’s failure to meet benchmarks imposed as a condition for the receipt of those funds and he complained about the withholding of law enforcement dollars because of the refusal of California to cooperate with ICE.

In his ongoing war with the federal government, Newsom has bragged about how many times he has sued the federal government, alleging that Trump is engaging in heavy-handed pressure against progressive states like California. It is apparently lost on the governor how hollow his protests appear when he threatens local governments in the same manner.

As for the extortive threat itself, it is little wonder that Newsom has received copious amounts of blowback from other elected officials across the political spectrum. Sen. Jim Beall, D-San Jose, chair of the Senate Transportation Committee, called the move “very unwise.” Likewise, the chairman of the Assembly Transportation Committee, Jim Frazier, D-Discovery Bay, challenged the idea that new conditions should be placed on road maintenance funds. “It is not fair, or in good faith, to deny them the benefits of [gas tax money] after they have paid for it, based on local government decisions they have no control over.”

To read the entire column, please click here.

Rent Control Comes Roaring Back to Life in California

Rent ControlCalifornia legislators are trying to revive rent control. This week, state lawmakers introduced a package of new bills that would roll back existing state limits on the policy, and impose new regulations on how much landlords can charge tenants and when they’re allowed to kick them out.

The bills are light on policy meat at the moment, but there’s enough gristle to give us an idea where the legislature is headed.

“Millions of Californians are just one rent increase away from becoming homeless,” said Assemblyman David Chiu (D–San Francisco), one of the legislators who introduced rent control bills Thursday. “This legislation will help bring some peace of mind and predictability to renters, allowing them to plan for their future and stay in their homes.”

Chiu’s bill, AB 1482, is the most ambitious of the set. It would cap rent increases across the state at a yet-to-be-determined percentage, plus inflation. If this passed, California would become the second state behind only Oregon to have statewide rent control.

Assemblyman Rob Bonta (D–Alameda) introduced his own sweeping proposal with AB 1481, which would ban no-cause evictions and require landlords to show a government-approved reason for kicking out a tenant renting month-to-month. Yet again, the bill contains no specific set of government-approved reasons, though you can bet lobbyists and activists will help figure them out.

Assemblyman Richard Bloom (D–Santa Monica) introduced a bill which would allow local governments to impose price controls on single-family homes and rental units that were built more than 10 years ago. If passed, Bloom’s bill would overturn major portions of California’s Costa-Hawkins Act, which largely forbids local governments from passing their own rent control policies.

Assemblymember Buffy Wicks (D–Oakland) has also introduced legislation that would create a statewide database of all rental properties.

This legislation comes a few short months after Proposition 10—a ballot initiative that would have repealed Costa-Hawkins and allowed cities to impose whatever rent control policies they wanted—was absolutely crushed at the polls. Nearly two-thirds of voters rejected the measure in November 2018.

That result, lopsided as it was, did not necessarily signal Californians’ absolute rejection of rent control as a solution to the state’s mounting housing affordability problem. In polls before the election, large pluralities of voters pointed to a lack of rent control as the source of high housing costs.

Post-election analysis pinned the blame for the loss on the confusing nature of the ballot initiative, and divisions within the ‘yes’ side, many of whom reportedly thought running a ballot initiative in 2018 was premature. A promise from then-gubernatorial candidate Gavin Newsom that he would take up rent control if Prop. 10 failed also lowered the stakes.

As one might expect when faced with an unprecedented degree of government regulation, landlords are not happy.

“The proposals outlined today distract from the solutions,” said Tom Bannon, CEO of the California Apartment Association, in a statement. “Applying rent control statewide and allowing rent caps on single-family homes and newer construction would only worsen our housing shortfall. We need to encourage new housing, not create policies that stifle its creation.”

Economists also generally take a dim view of rent control, saying that it discourages new construction by capping the return developers can expect from their investment. This is an especially acute risk in California, where ever-increasing land and construction costs make all but the ritziest developments unprofitable.

State politicians would be far better off attacking restrictions on new rental housing, whether that’s restrictive zoning, urban growth boundaries, or a cumbersome permitting process that gives development opponents ample opportunities to delay or sabotage projects.

SB 50, a bill that would upzone land near transit stops and in some wealthier neighborhoods, is a better approach. It has its flaws, but would allow more housing construction and improve on the status quo. Rent control, especially of the kind proposed yesterday, would be a huge step back.

This article was originally published by Reason.com

A First Look at the Governor’s Housing Budget

house-constructionDuring his campaign for Chief Executive of California, then-candidate and now Governor Newsom promised three and a half million new housing units would be built in the state by 2025. He promised a majority of those units would be affordable to lower-income households, as well. He also promised he would make it profoundly easier to get those housing units approved for construction. Governor Newsom knows it’s now time to deliver on those promises.

With the release in January of his Fiscal Year 2019-2020 Budget, the Governor is signaling he’s going to at least try. He’s still sticking to the three-and-one-half- million-unit goal (though many are disputing that possibility), he still wants to help lower-income families, although he proposes increasing assistance to moderate-income households, as well. And, his budget appears to reflect interest in helping local governments approve housing faster.

But, the Governor’s housing proposals for the next fiscal year fall short of meeting the state’s needs. An analysis of the proposed budget – summarized here with a little help from the Legislative Analyst’s Office (LAO) – shows how despite aiming at the real problem with housing production in California it punts the ball and intentionally or not misleads with the data and definitions it presents.

For example, Governor Newsom during the campaign and afterward accurately pinpointed the main source of why California so woefully under-produces housing: he rightly concluded that all power to okay a housing development – vast and prodigious – rests with local government. Yet, in an apparent attempt to be persuasive, the Governor goes after localities with kid gloves – litigation and a modest funding award. He knows better. Lawsuits take precious time and cost a lot of money. And, they simply enrich lawyers. Moreover, $3 million in planning grants to the state’s major cities and $7 million more if they build new housing is both wasteful and mere pittance when it comes to rewarding them.

In addition to its timidity, the Governor’s budget is misleading in its portrayal of increasing state benefits to higher-income persons. Example #1 is the suggestion that a revised state low-income housing tax credit will now “target households with relatively higher incomes” – allowing beneficiary incomes to rise to laughably higher levels – to 80 percent of median – then pretends that a mere $200 million boost in the state program will lead to the ability to “target households with relatively higher incomes”. In truth, the state credit program rarely operates without the much richer federal credit which, for competitive reasons, rarely assists households with incomes above 60 percent of median.

Example #2 comes from the Governor’s proposal to add $500 million in authority to the existing CalHFA program which lends money to developers for building housing affordable to lower and moderate-income families (50 percent of area median to 120 percent) – a very good thing. But, the program will not assist middle-income families (up to 150 percent of median), as the Governor claims.

A bold budget, which reflects the high priority that the Governor has made housing – and which will give him a good head start in building those three and a half million units in six years – starts with rich, meaningful incentives to local governments. “Plan and zone for your housing need for the year and get a sizeable cash reward” should be the message from the state to local governments everywhere. Instead of the locals getting $10 million – much of which goes to re-inventing the wheel – a true housing budget would allocate ten times that amount or more to them for, say, a variety of infrastructure – not just road repair. Indeed, $100 million to $200 million apiece to fund their priorities ought to get the attention of most localities.

The Governor shouldn’t be shy about defending the limits of how far state funding should go, either. He doesn’t have to worry about the households earning more than the so-called moderate-income tranche (120 percent of median income). He just needs to uphold his pledge to truly streamline the local project-approval process. If the Governor sticks to his guns and does that, he can be assured that the market-rate developers will take care of the rest.

This first look at his budget for Fiscal Year 2019-2020 examines only what the Governor has proposed. Subsequent analyses will be made and published in this space before it is due in its final form, June 30, 2019. But, his current spending plan makes a genuine effort to treat California’s housing crisis after it appropriately highlights the substantial need – particularly among lower-income households and, to a lesser extent, the dislocation of a million or so middle-income families that pay more than 30 percent of their income for housing (the average is 26 percent).

In so many words, it’s clear the Governor genuinely wants more housing for California and he remains steadfast in maintaining getting it as a high public-policy priority. But, there are ample reasons to be doubtful. First, his budget could be a more dramatic set of proposals. That it’s not should signal his Department of Finance (DOF) won’t let him – DOF never liked housing much.

Second, at this point it looks like lawmakers don’t like the impact the proposals may have on local governments – they want him to back down somewhat. And, early indications are that it’s the Governor who will blink first.

onsultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily

Green New Deal Would Cause a New Depression

Solar panelsThe legislation’s title is fitting. The original New Deal failed to create jobs and actually prolonged the Great Depression. This Green New Deal would be no different — it will destroy millions of jobs and push working-class Americans into poverty.

The bill seeks to transition America to nearly 100-percent renewable energy sources. Right now, those sources account for just 11 percent of America’s total energy consumption. To achieve this green future in just a decade, the proposed law would have to create huge subsidies for wind and solar power and place new restrictions on oil and natural gas drilling.

Such subsidies and restrictions have already been tried on much smaller, less ambitious, scales — yet they’ve still failed miserably.

Consider California. Back in 2015, the state passed a bill calling for a transition to 50 percent renewable energy by 2030. The Golden State required power plants to generate more electricity from green energy and lavished millions in subsidies on wind and solar companies.

California consumers are paying the price for those measures. From 2016 to 2017, electricity prices in California “rose three times more than they did in the rest of the United States,” according to policy group Environmental Progress. California now has the highest average electricity prices in the continental United States, according to my recent study from the Pacific Research Institute, a San Francisco-based think tank. The state also has the highest poverty rate and second-highest gas prices nationwide.

This big-government approach to fighting climate change isn’t merely expensive — it’s ineffective. States like West Virginia and Ohio, which haven’t enacted such policies, have actually seen greater emissions declines than the Golden State.

Germany’s renewable-energy push has similarly failed. “An average four-person household has to pay more than double for power in 2017 compared to 2000,” the head of a consumer lobbying group told German radio.

Despite spending billions to phase out fossil fuels and subsidize renewables, Germany is on track to miss both its European Union and national clean energy targets for 2020.

Ontario politicians’ green dreams have also turned into a nightmare for consumers. The Canadian province passed a law promoting green energy in 2009. From 2008 to 2016, electric prices spiked more than 70 percent — prices jumped 15 percent between 2015 and 2016 alone. The provincial legislature recently repealed the law.

The Green New Deal would replicate such failed schemes, but on a much grander scale.

If electricity prices surged here, working-class Americans would be clobbered. The poorest 20 percent of U.S. wage-earners spend nearly 10 percent of their income on electricity, while the richest 20 percent spend around 1 percent.

Fossil-fuels help keep energy bills affordable for working families. Natural gas production has surged roughly 50 percent in the past decade, causing electricity and cooking fuel prices to plummet. This production boom saved the average American family more than $1,300 in 2015.

The oil and gas sector also provides good jobs to working-class Americans. Oil and gas firms support over 10 million jobs across the country — the Green New Deal would eliminate nearly all these positions. By comparison, the Great Recession of 2007 to 2009 eliminated fewer than 9 million jobs.

The Green New Deal is an expensive exercise in futility. Its signature policies have already caused energy prices to soar from California to Canada. Scaling up these failed policies would wreck the U.S. economy and destroy millions of workers’ livelihoods.

This article was originally published by the Pacific Research Institute

A Lesson For Americans From The Armenian Genocide – Don’t Give Up Your Guns

Armenian GenocideThe Armenian-American culture inside California is very prevalent – especially in Southern California – and plays a large societal role. Other Americans enjoy our foods, appreciate our heavily religious culture, and benefit from our competitive businesses. Over the years, Americans of Armenian descent have also made many political achievements.

George Deukmejian, former Republican Governor of California, was of Armenian-American descent, as was Kenneth L. Khachigian, the chief speechwriter for President Ronald Reagan. Armenian-Americans hold their cultural values to a high standard – and it’s important to point out that our culture still stands strong over the course of thousands of years because of our cultural conservatism.

There are many modern day controversial issues about which Armenian-Americans have a strong viewpoint. One of these issues is the constant war on our Second Amendment. Our Armenian ancestors learned the importance of firearm ownership and self-defense the hard way.

After the start of World War I, the Ottoman Empire made Armenian citizens turn in their weapons. Armenians were told that they needed to turn in their weapons in order to help fight the war. Being loyal to their government, a majority of them did as told. A move they would soon regret.

On April 24, 1915, the Ottoman Empire rounded up all the writers, educators, politicians, musicians and other important figures that the Armenians looked up to. In one night, 235 to 270 Armenian intellectuals of Constantinople were arrested, were never to be seen again. The Armenians soon realized what was actually happening – the Ottoman Empire was performing a systematic extermination of their Christian Armenian citizens.

In July of 1915 the Ottoman forces reached the mountain on which my great grandparents live, in one of six villages on the Musa Dagh mountain, located in modern day Turkey, on the shore of the Mediterranean sea. The villagers, who were already aware of the previous Turkish atrocities, gathered their necessities and made their way to the top of the mountain. For 53 days, from July to September of 1915, 250 Armenian Warriors  armed with their privately owned firearms, protected 4,000 Armenian civilians from an army of about 20,000 Ottoman soldiers.

While it is unknown exactly how many casualties the Armenians suffered, the Ottomans suffered heavy losses. In September of 1915, Allied warships under the command of Louis Dartige du Fournet spotted the Armenian survivors and were aware of the atrocities that were taking place. The French and British ships evacuated around 4,200 men, women and children, my great grandparents among them. They moved to Damascus, Syria, then to Erevan, Armenia, where both my father and I were born, and then, blessedly, to America.

Although the Second Amendment may be a big part of the culture for generations of Americans, that sacred right is a part of my history as well and it is part of the values I try to uphold every day. The reason is pretty simple – if my great grandparents had given up their guns to the government, I would not be here today.

I know my Jewish-American colleagues will empathize with me when I say that I will not make the same mistake some of countrymen did of turning in their weapons.  Everyday I am grateful and proud that my great-grandparents took a stand against their oppressors, and fought for their lives. After all, their slogan was “Freedom or Death,” not all that different than America’s “Don’t Tread On Me.”

So I implore my fellow Americans to learn the hard lessons of the Armenian genocide. In order to defend your birthrights and your families, you must defend the 2nd Amendment right to keep and bear arms.

God rest the souls of the 1.5 million Armenians who were slaughtered. We can’t bring them back, but we can honor their memories by honoring our Constitution.

David Ter-Petrosyan is a college student in Glendale, CA – and a delegate to the California Republican Party

Latest Pension Ruling Likely To Create Future Uncertainty

CourtFor the second time in two years, the California Supreme Court has released a ruling on a large state issue that analysts say creates new uncertainty going forward.

Last week, the court issued its long-awaited decision in a court case involving a Sacramento local firefighters union that alleged a provision of the 2012 pension reform measure approved by the Legislature and signed by then-Gov. Jerry Brown was illegal under the “California Rule.” That’s the legal concept stemming from a 1955 state Supreme Court ruling that holds the terms of a public employee’s pension benefit cannot be reduced for years not yet worked, only kept the same or increased.

Cal Fire Local 2881 said that the pension reform’s ban on “air time” – the purchase of service credits to enhance pensions – violated the California Rule. But a unanimous state Supreme Court said “air time” was not a comprehensively bargained or legislatively approved vested right.

Yet in the lead opinion, Chief Justice Tani Cantil-Sakauye (pictured) explicitly said she was not taking a position on the California Rule question of whether pension terms could be changed going forward for years not worked.

This mixed message produced media confusion. Some news bulletins declared the justices had approved allowing a rollback of local benefits. Others suggested the California Rule had dodged a bullet.

Was ‘California Rule’ weakened or untouched?

Interest groups were similarly split.

Officials with the League of California Cities saw the court’s willingness to change the terms of pensions on a relatively minor issue as a sign it was open to a significant weakening of the California Rule. The league and many like groups hope for a state Supreme Court ruling that echoes a lower court’s ruling that pensions are not “immutable.” They were heartened by Cantil-Sakauye specifically noting the state had raised the retirement age from 67 to 70 for current as well as prospective employees.

But the Californians for Retirement Security, which represents 1.6 million public employees and former public employees, declared victory after noting that Cantil-Sakauye had specifically said “air time” was changeable because it was not a vested right – unlike basic pension formulas basing retirement checks on years worked times a percent of late-career salary.

The group and others also cited a concurring opinion written by Justice Leondra Kruger and joined by Justice Goodwin Liu that held that government employers could not “withdraw” from the pension terms established upon initial employment by “an implied unilateral contract.”

The state Supreme Court is expected to eventually take up at least two more cases involving union objections to the 2012 pension reform, so the sanctity and extent of the California Rule is likely to remain in the news. In his final year in office, Gov. Jerry Brown repeatedly urged the court to give governments the option to change future pension terms as pension costs have crowded out local, county and school programs and services. Brown’s office defended the 2012 reform law before the high court because of concern that state Attorney General Xavier Becerra was not eager to defend it.

Like 2017 case, ruling seen as murky, not clarifying

But in the meantime, last week’s ruling seems as murky as the court’s decision in the 2017 California Cannabis Coalition v. City of Upland case. Previously, Proposition 218, approved by voters in 1996, had been understood to require that any tax whose revenue would go to a special purpose – building a sports arena, adding libraries, etc. – had to be approved by a two-thirds vote.

Upending decades of precedent, the state Supreme Court held in a 5-2 decision that the two-thirds threshold applied only to ballot measures initiated by local governments. Because they were not local government measures, those qualified by citizen initiatives only needed simple majority support to be enacted.

In dissent, Justice Kruger took square aim at the idea that this interpretation was what voters expected in 1996 when they made it harder for local governments to raise taxes.

Kruger wrote, “A tax passed by voter initiative, no less than a tax passed by vote of the city council, is a tax of the local government, to be collected by the local government, to raise revenue for the local government. None of this could have been lost on the electorate that, also by initiative, amended the California Constitution to set ground rules for voter approval of local taxes.”

This article was originally published by CalWatchdog.com

Green New Deal Will Have Destructive Effect on Housing Market

http://www.dreamstime.com/-image14115451“The world is going to end in 12 years if we don’t address climate change.”  That’s what congressional newcomer Alexandria Ocasio-Cortez (D-NY) is saying about the latest existential threat to the planet (and the well-being of its inhabitants) – best known as global warming.  To back up her claims she recently presented a “Green New Deal” – a modern-day, environmentally friendly proxy for FDR’s Depression-era war on unemployment and poverty.  Yet, it’s nothing less than a plan to transform the U.S. society and economy as we know them.

The Green New Deal (“the Plan”) has sparked a nationwide controversy.  Maybe it’s for the clever “green” tapestry Ocasio-Cortez has hung on this mix of high-school-like platitudes and warmed-over Marxist ideals.  Maybe it’s the outrages, contentious designs or silliness expressed in the Plan, including proposals for federal compensation for even persons “unwilling to work” or to ban jet travel and flatulent cows by the end of the next decade.  Maybe it’s controversial because of the resolute defense Ocasio-Cortez – a controversial person herself – and other self-styled socialist Democrats have given to the Plan of late.

The Plan is also controversial for the things it says.  Like:

We spend billions every year . . . turning our planet uninhabitable while imposing the greatest harm on communities of color and the poor.  The Green New Deal will instead redirect that money to the real job creators who make our communities more . . . sustainable and secure at the same time.

Who are these “real job creators”, we’d like to know, and how are they making “our communities more secure”?

These controversies notwithstanding, the following concentrates just on what the Green New Deal does for the nation’s housing crisis, both indirectly and directly:

First, the Plan’s call for the availability of only renewable energy by 2030 will have a sweeping impact on housing affordability, particularly the Plan’s express prohibition against nuclear power and clean coal.  What remains – solar, hydro, geothermal and wind – by most sober estimates doesn’t generate nearly enough energy to power the nation.  So, at a minimum, much of what’s on the drawing board for new housing today won’t be viable under the Plan tomorrow.

Second is the profound dislocation of workers currently employed by a company or industry that will soon be forced to shut down due to the Plan’s scarcity of fossil fuels.  (Maybe this is partly why the Plan’s cost is estimated to run as high as $93 trillion over the next ten years).  And for the U.S., now having achieved the status of net exporter of energy – an important national accomplishment for a lot of reasons – the Plan would make that all but disappear.  This one aspect of the Clean New Deal will have an incalculable impact on employment in the country which, in turn, will be extraordinarily damaging to housing affordability.

Third, is the Plan’s answer to this dramatic rise in unemployment:  How about 20 million new public sector jobs – all funded by you and me – to close the wound?  And, to these job beneficiaries would also go a “living wage”.  Not surprisingly, the Plan stays away from determining a “living wage” or what qualifies as a bona fide living expense.  Take housing, for example.  Does the “living wage” recipient rent or own a home?  Or, would a family earning a “living wage” be able to decide what type of housing they dwell in on their own?  It seems quite likely this economic uncertainty will have a telling impact on housing markets.

Fourth, requirements of the Plan having a more direct impact on housing affordability are the energy-saving apparatuses – fixed or otherwise – to individual homes of the future.  For example, under the Plan, all existing buildings – commercial and residential, both – are envisioned to be physically upgraded to meet new energy standards.  That means retrofitting tens of billions of square feet of developed real estate over the next 10 to 12 years.  Even if it were possible to acquire the labor and materials to accomplish the task during that period of time, what would be the cost?  And, would local governments in California allow those costs to be passed through – in the form of rents – in the five million or so rental properties in the state?  What about new housing?

Fifth, since the new energy standards will require rooftop solar systems – much like California’s impending mandate for all new homes – how are the middle-income families living from paycheck to paycheck, barely making their mortgage payments each month, going to afford a dramatic cash hit to the family pocketbook?  It’s likely they cannot.  Nor can they afford the tax hike that’s sure to come to cover their lower-income neighbor’s higher rent or retrofitting expense when that household can’t pay.  What happens to them?

Finally, it’s been speculated that the “social justice” advocates will get the Plan’s framers to include tenant-friendly eviction protections and new rent controls.  Who’s covering those costs?

In the end, the Green New Deal will be so disruptive to the nation’s economy – and housing markets – that the trauma will weaken the country and further divide it with hostility and fear.  We, the people, don’t need it now or ever.

onsultant specializing in housing issues.

This article was originally published by Fox and Hounds Daily

Battle Over Federal Funds for California Bullet Train Intensifies

High speed rail constructionThe battle between California and the Trump administration over $3.4 billion in federal funding that was committed nearly a decade ago to the state’s bullet-train project escalated last week when a key state leader rejected federal criticisms of the project’s progress.

California High-Speed Rail Authority Chief Executive Brian Kelly sent two letters defending Gov. Gavin Newsom’s January remarks that he would focus on completing a 119-mile segment now being built in the Central Valley – backing away from a promise to state voters in 2008 and to the federal government in 2009 and 2010 to build a statewide bullet-train system. Kelly said the state was comporting with key federal regulations.

The limited segment linking Bakersfield and Merced is expected to cost up to $18 billion. Were it ever built, the costs of the originally envisioned statewide bullet-train system – ranging along the coast from San Francisco to Los Angeles to San Diego and inland to Sacramento – could have been 10 times as much or more. The cost of each end of the Los Angeles to San Francisco segment was so extreme that in 2012, the rail authority gave up on true high-speed rail in those links – opting for a “blended” system that relied on regular rail to cover the final 45 miles or so into each of the population centers.

The Trump administration has already canceled a $929 million grant issued to the project in 2010 by the Obama administration. It has indicated it hopes to recover $2.5 billion the federal government has already allocated to California as part of the 2009 economic stimulus package on the grounds that the project is far behind schedule and no longer meets promises of sound planning and financial viability made to secure the $2.5 billion.

But Kelly argued that the Federal Railroads Administration under the Obama administration and for the first two years of Trump’s administration concluded that the project was meeting minimum benchmarks to qualify for federal funding.

“Any clawback of federal funds already expended on this project would be disastrous policy,” Kelly wrote. “It is hard to imagine how your agency – or the taxpayers – might benefit from partially constructed assets sitting stranded in the Central Valley of California.”

LAO questioned project’s finances in 2010

Kelly’s letter hinted at but did not explicitly suggest the DOT’s attempts to recover the $2.5 billion were motivated by President Donald Trump’s two-year-plus war of words with California’s governors, which began under Jerry Brown and has continued with Gavin Newsom. In that span, state Attorney General Xavier Becerra has filed or joined in nearly 50 lawsuits against the Trump administration. Newsom has called the targeting of California’s project politically motivated.

Kelly’s argument that the “clawback” of that much in federal funds would be unprecedented appears correct. But the state’s arguments are weakened by the difficulty it will face in asserting it acquired the federal funds while acting in good faith. Despite telling the U.S. Department of Transportation repeatedly, beginning in 2009, that the bullet-train project was in good shape financially, rail authority officials couldn’t persuade state watchdogs that was the case in the same time frame.

In January 2010, the Legislative Analyst’s Office warned the authority didn’t have a legal business plan because it anticipated that revenue or ridership guarantees could be provided to attract private investors to help fund the project. Because such guarantees amounted to a promise of subsidies if forecasts weren’t met, they were illegal under Proposition 1A, the 2008 state ballot measure providing $9.95 billion in bond seed money for the then-$33 billion project.

The LAO and the California State Auditor’s Office have been uniformly critical of the project for a decade.

Rep. McCarthy: Move $ to other transportation projects

If the Trump administration takes steps to recover the $2.5 billion by withholding unrelated federal dollars bound for California, the dispute seems certain to end up in federal court.

Meanwhile, the California congressman whose district has arguably been most affected by early construction of the bullet train on Thursday introduced a bill that would “repurpose” all $3.4 billion in federal funds for the project to water infrastructure projects in California and other Western states. The measure by House Minority Leader Kevin McCarthy, R-Bakersfield, faces long odds in a chamber in which Democrats retook control in January.

This article was originally published by CalWatchdog.com

What Recent Pension Ruling Means for California’s Taxpayers

pension-2Last week, the California Supreme Court issued a ruling in Cal Fire Local 2881 v. CalPERS, a case involving public employee pensions. For taxpayers, the decision was a mixed bag. On the plus side, the court refused to find a contractual right to retain an option to purchase “air time,” a perk that allowed employees with at least five years of service to purchase up to five years of additional credits before they retire. Under this plan, a 20-year employee could receive a pension based on 25 years of contributions.

On the negative side, the high court left intact, for now, the so-called California Rule, which has been interpreted as an impediment to government entities seeking to reduce their pension costs. The rule, unique to California, provides that no pension benefit provided to public employees via a statute can be withdrawn without replacement of a “comparable” benefit, even as deferred compensation for services not yet provided.

The unanimous 54-page opinion by the Supreme Court resulted in a wide variance of headlines and social media posts. The Associated Press read “California’s Supreme Court upholds pension rollback.” Ironically, a conservative reform group sharply criticized the decision for failing to repeal the California rule outright while another conservative policy organization called it a “victory for taxpayers.”

So what was it?

To read the entire column, please click here.