ATWATER CITY COUNCIL REJECTS MAYOR’S ATTEMPTS TO PUT CITY BUILDINGS UP FOR COLLATERAL TO SECURE LOAN TO PAY CALPERS LIABILITY

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“Good luck, guys.” – Atwater Mayor Jim Price’s response to the council’s vote to pay its debts without sacrificing it’s infrastructure to banks.

ATWATER, CA – The city took a bold step toward its outstanding unfunded liability to CalPERS during their May 9th meeting. After much debate about how the city would benefit if they collateralize city buildings in order to reduce their payment obligations to the fund, the Atwater City Mayor Jim Price put the item up for a vote which resulted in a 3 to 2 defeat.

The motion to adopt Resolution No. 2880-16 approving the form and authorizing the execution and delivery of certain lease financing documents in connection with the refinancing of a portion of the City’s outstanding unfunded accrued actuarial liability to the California Public Employees’ Retirement System. The unfunded accrued actuarial liability is an actuarial (the examination of risk by highly educated and certified people) term that refers to the difference between the actuarial values of assets (AVA) and the actuarial accrued liabilities (AAL) of a plan. Essentially, the unfunded accrued actuarial liability is the amount of retirement that is owed to an employee in future years that exceed current assets and their projected growth.

The frustrated and beaten mayor looked out at his fellow council members and paused before saying, “Good luck, guys.”

First, what is CalPERS and why should you care?

Greg Wellman

Greg Wellman

The California Public Employees’ Retirement System or CalPERS is an agency within the California executive branch of government that manages the pension and health benefits for more than 1.6 million California public sector employees, retirees, and their families. In fiscal year 2012 through 2013, CalPERS had paid over $12.7 billion in retirement benefits, and in fiscal year 2013 CalPERS will paid over $7.5 billion in health benefits.

But the CalPERS program has been under fire for allowing “double-dipping” and is not limited just to top executive positions with a local government. How it works is employees of cities, counties, school districts and other entities retire at 50 years old and then take another public sector job, either part-time within the same agency or full-time with another organization.

Take a retired Atwater City Manager who has been the subject of many national news articles covering the double-dipping practice. Wellman, who first retired at age 55 as a Merced County administrator collecting $186,000 per year from the Merced County tax payers, then went to work for 8 years as the full-time Atwater City Manager. But like so many before him in Merced County, Wellman looked to the future and before retiring from the City of Atwater, and helped negotiate pension enhancements shortly before his own retirement. This ensured Wellman would receive an extra $60,000 a year from the Atwater taxpayers which brings his total Atwater and Merced County taxpayer-funded pension to $246,000 per year. And he now works for ALGIX, Inc., collecting a nice salary on top of his taxpayer-funded pensions.

Some people say that double-dipping helps keep the people who have expertise on staff. But what the data really shows is the failure of each local and state government to recruit and groom replacement workers who can infuse new ideas with knowledge and practice of current technologies to help the city run more efficient and cost effective.

“We need to stop!” – Councilman Rivero addressing the mayor’s decision to use Atwater city buildings as collateral for banks to loan the city more money.

The Mayor has suggested that the city restructure its CalPERS debt by placing city buildings like the fire department as collateral to secure a loan from banks to pay its CalPERS debt explaining that it would give the city some breathing room. The city would then lease back the buildings from the banks, which could cause some serious problems if the city were to default on a payment since the bank could then take ownership of the building(s) to recoup its loses.

“With Measure H and looking long-term,” the Mayor Jim Price explained, “we are going to have to go to the voters to extend it.”

The mayor’s solution of just taxing Atwater residents again did not sit well with at least three council members who had to remind the mayor of their promise to their constituents.

“If you are going to the voters to solve this problem again,” Councilman Rivero said to Price, “then there is something deeply wrong here. There was a time when the city started selling its buildings to itself and I said back then pretty soon we’ll be selling everything including the toilet seats. We need to stop.”

Mayor Price tried to help quell the council’s concerns and said “Is anybody ever going to take those facilities away?” meaning the city buildings that would go up for collateral to the banks then leased back from the banks, “Highly unlikely. But the fact is CalPERS debt we have is the rock around our neck.” He went on to say “this is a way to get some breathing room and I’m going to support this.”

“That’s the point,” Councilman Raymond replied. “we still have this increasing debt payment. If there was any indicator that the city is in trouble, it’s when we start mortgaging our kids future.”

“On the numbers,” said Councilman Rivero, “$1.9 million after restructuring and without restructuring it’s $2.2 million. Then by 2022 it’s $2.7 million which is a few hundred thousand dollars more and we are talking about kicking the can down the road? I have told you we have $1.1 million we can get from at least one contract re negotiation and at least another $500,000 from others. When we say we have to do this, that’s not true. I say we fix it now.”

Atwater City Manager/Police Chief has never had to explain to State Controller’s regarding millions in financial discrepancies under his watch…

Atwater City Manager/Police Chief Frank Pietro

Atwater City Manager/Police Chief Frank Pietro

The city of Atwater has been awash in debt for many years and with every new council comes creative ways to fool the city taxpayers. Like when the city, knowing it was faced with this debt, cooked their books, shuffled a few nuts around and fooled the taxpayers into believing they were going to be fine. But that was just not the case as the State Controllers Office announced in April 2014 that it would conduct an investigation into the City of Atwater’s finances. So who was controlling the City’s finances during these times? Interestingly enough, the same guy who was also just appointed as the city’s police chief in 2011, Frank Pietro.

The audits division has been alerted to issues related to the 2011- 21012 and 2012 through 2013 documents filed by the city. And in a letter to the city manager Frank Pietro in 2014 from the State Controllers Office the city had operating shortfalls of 53 percent in 2010-11 and 40 percent in 2011-12 while the city’s budget deficit in the general fund balance saw an increase from $3.9 million in 2011-12 to $4.2 million in 2012-13.

The first audit report in was released in December of 2014 and showed the city understated revenue in 2011-2012, which means that the city manager did not report all the money his office actually received, to the tun of $7.5 million. The City Manager also failed to report revenue (money) of $5.6 million from the dissolved Redevelopment Agency and that they also overstated spending their spending by $14.5 million.

Then in 2012-2013, the city manager overstated revenue by $349,339, but then understated their spending by about $1.6 million. The city also made adjustments of $4.9 million after submitting their paperwork “without an explanation,” which triggered the audits.

So what’s the solution?

MCNTV News recommends that the city council look closely at its hiring practices including the hiring of family members. This only allows for the same old ideas that these kids of city workers were raised around and does not allow for new and innovative ways of thought.

We would also recommend that the city consider investigating City Manager/Chief of Police Frank Pietro and remove him from the position of City Manager and police chief. His failings in both positions are quite clear and do not allow for a healthy community to grow.

And finally we recommend that the people of Atwater realize that they do not need to come from money, have a relative who works for the city, own a house, or a business to get involved and make positive change for Atwater now before it is too late. Run for mayor and city council, attend the meetings and voice your opinion. Just a few years ago it was very difficult to have great ideas heard because Merced County’s news and information resources were limited and if they didn’t like you or see you as someone of wealth or leadership then your voice was silenced. But not any longer. We are your voice, Merced County News Television.

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