TriMet contract arbitrator decides on contract that ‘best promotes the interest … of the public’ |

At first glance, the 42-page decision issued Friday by a Seattle arbitrator seemed to augur a win for TriMet’s union.

The arbitrator, who was deciding between rival contract proposals from TriMet and the Amalgamated Transit Union Local 757, appeared to side with the union on nearly every contested issue that came before him.

But it was the massive expense of retirees’ health benefits saddling TriMet — and the union’s more-costly proposal — that ultimately guided his verdict. Arbitrator David Gaba concluded that no matter how much he disliked parts of TriMet’s contract, the transit agency’s cheaper solution to retirees’ health care “best promotes the interest and welfare of the public.”

“Simply put, additional service cuts or fare increases will have to occur if the (union contract proposal) is accepted,” wrote Gaba. The cash-strapped transit agency has already hiked fares and greatly scaled back bus routes and train runs, and further cuts could plunge the system into “a vicious downward spiral.”

By the numbers

Transit operator top wages

Portland $25.13*

Seattle $28.47

San Francisco $29.50

*TriMet and the union have agreed on $26.40 in the next contract. After 15 years, employees get “longevity pay” starting at 30 cents extra an hour and topping out at $2.30 extra an hour at 35 years.

Contract offers

TriMet and Amalgamated Transit Union 757 took their labor impasse before Seattle-based arbitrator David M. Gaba in May. At the heart of their long-running dispute was a disagreement over health benefits for active employees and retirees. On Friday, Gaba sided with TriMet’s final best offer for a contract. Here were the key elements of both proposals.

TriMet’s offer (Goes into effect immediately)

10% co-pay

$5 prescriptions or 20% of cost – whichever is greater

$150/member or $450/family deductible

No premium contribution

Out of pocket maximum: $1,500

ATU’s offer

$5 co-pay

$5 prescriptions

No deductible

*1.5% monthly premium contribution (average over three-year contract)

Out of pocket maximum: $1,000

*The union wanted to preserve the health care package that has existed since 1994, save for paying into monthly health-care premiums. Union officials have said TriMet’s offer will likely cost its members an average of $4,000 a year.

Note: This is the Regence Blue Cross Blue Shield preferred provider plan. TriMet also offers a Kaiser plan, which is has reduced costs.

The decision means that TriMet, which said it faced an additional $5 million in cuts if it lost arbitration, can breathe a little easier now that its three-year contract will go in effect. The decision resolves — for now — a labor saga that dates back to Nov. 30, 2009, when the last contract for TriMet’s 2,000 unionized employees expired. Employees have continued working without a contract.

“Today’s ruling is terrific news for the entire region,” said General Manager Neil McFarlane in a statement. “It provides quality benefits to our union employees, while beginning to rein in unsustainable health care benefits.”

But he warned that it’s just “the first step in realigning our benefits to be in line with the market” and that the agency will continue to face financial problems.

Union president Bruce Hansen said they are studying the decision and determining next steps.

“This issue is not over or settled yet,” he said.

The two sides made their arguments last May to Gaba, who was authorized to select one contract, in its entirety, as the one that best met “the interest and welfare of the public,” among other criteria.

The two contracts, both three-year pacts that are about $12 million apart, are largely similar except for pension and medical benefits.

Under TriMet’s proposal, the transit agency will continue to pay 100 percent of the monthly premiums for employees and retirees in plans offered by Regence and Kaiser. However, the employees and retirees enrolled in the more-costly Regence health plan will now have to kick in 10 percent of the cost of health care services that they receive up to a cap.

In addition, employees and retirees would also have to pay deductibles and increased prescription co-insurance for brand-name drugs.

The union had offered to have employees pick up 1.5 percent of the premium in 2011 and 3 percent in 2012.

“TriMet’s retiree medical benefits appear to be the most generous offered by any public employer in the Northwest,” Gaba wrote, causing in part the agency’s unfunded liability. Health benefits for active employees and retirees are the “two-headed Siamese twin elephant” in the room, he said.

But TriMet may not be out of the woods. The agency’s offer included elements he called “unwarranted, poor public policy and simply unfair” and said the union may well see opportunities to sue about some of the proposals that are “riddled with legal questions and other infirmities.”

Among the problems: TriMet wants to make the health care contribution changes retroactive to December 2009, triggering questions of fairness and logistics, he said. Employees made decisions about their health care services based on the benefits they had at the time, and how, he wondered, will TriMet collect the payment due from employees no longer with the system?

TriMet said it is reviewing the decision, but believes “that the award is sound.”

via TriMet contract arbitrator decides on contract that ‘best promotes the interest … of the public’ |

My City Went Bankrupt. Should I Flee? – Forbes

Trulia’s Chief Economist takes a deep dive into what causes a city to file for bankruptcy and whether homeowners living in those city should get out of town.

In recent weeks, three California cities have filed for bankruptcy: Stockton, in the Central Valley; Mammoth Lakes, near Yosemite and the Sierras; and San Bernardino, in the sprawling Inland Empire east of Los Angeles. If you live there, should you get out of town? And if you don’t live there, should you worry that your city is next?

In short: no, and no. Here’s why.

What does it mean for a city to be bankrupt? Cities can file for bankruptcy if they are insolvent or are unable to pay debts that have come due. When in bankruptcy, the city doesn’t have to pay its creditors while it negotiates a plan for dealing with its debts. Despite the recent bankruptcy filings in California, municipal bankruptcies are extremely rare. Because cities have the power to tax, most have a hard time convincing a bankruptcy court that they truly cannot pay their debts. Few cities file for bankruptcy in the first place, and in the past few years, only Vallejo, CA, and Central Falls, RI actually went into full-fledged bankruptcy. Despite predictions of recession-stressed cities falling like dominos, the vast majority of cities have managed their finances well enough to avoid default or bankruptcy.

What causes cities to file or go bankrupt? The housing crisis played a supporting role: lower home prices led to lower property tax revenues, which many cities depend on for revenue. But other revenues that many cities depend on, like sales taxes, fell too. Most importantly, pensions and other long-term financial obligations have increased, stressing city budgets. Random factors trigger city bankruptcies, as well: Mammoth Lakes, CA, and Boise County, ID, filed for bankruptcy after losing big lawsuits, and Orange County, CA was pushed over the cliff in 1994 by risky investments. Most places with huge home-price declines, including Arizona, Nevada and Florida, haven’t had municipal bankruptcies. Why the recent rash of bankruptcy filings in California? One reason is that California’s cities have less control over their own revenue than cities in most other states do: Proposition 13 – which caps both the property tax rate and annual assessment increases — and other rules severely limit California cities’ options for raising revenue.

What happens when a city files for bankruptcy? It’s hard to say what’s typical since bankruptcy is so rare. One thing we can say is that city employees – including retirees – take a big hit. As a result of bankruptcy, Vallejo cut back its contributions for retired city employees’ health insurance premiums, and Central Falls reduced employees’ pensions. Even if a city doesn’t go bankrupt, the bankruptcy filing itself can be enough of a threat for unions, creditors and others to whom the city owes money to re-negotiate contracts so that the city can lower its expenses. In other words, filing for bankruptcy can be a “catalyst for generating serious dialogue regarding a city’s finances.” At the same time, bankruptcy is not an instant or easy solution to a city’s fiscal problems. In Vallejo, the bankruptcy process took three years and was painful, with cutbacks to police and other local services. And bankruptcy makes it more expensive for the city to borrow in the future.

Back to our original questions: Should you flee? Should you worry? If your city has filed for bankruptcy, don’t panic. There may be more pain to come, but the big price declines or cutbacks in services probably already happened. Bankruptcy should be the beginning of a solution to a city’s financial problems; it is not itself the problem. Bankruptcy means your city now might have a chance to get its fiscal house in order. What about your own house? By the time your city files for bankruptcy, it’s too late: declining home values are more cause than effect of city bankruptcy. Poor city services reduce housing demand and can hurt prices, but bankruptcy itself doesn’t cause city services to disappear. Struggling cities will cut back on services long before they go bankrupt.

And if your city hasn’t filed for bankruptcy, remember that bankruptcies are extremely rare. Instead, worry about your city’s financial health long before it files for bankruptcy. Although some bankruptcies are sudden or surprising, the declining revenues and – especially – the rising pension and retirement obligations have often been going on for years, long before bankruptcy is even considered.  Better to worry when there’s still time to do something about it.


Note: this post draws heavily on a report by Tracy Gordon, a municipal finance expert at The Brookings Institution, and a report published by Michigan State University.

via My City Went Bankrupt. Should I Flee? – Forbes.

Expert: City Bankruptcies Not Surprising – Local News – Los Angeles, CA –

Stockton, Mammoth Lakes and San Bernardino all filed for bankruptcy protection within two weeks. But that doesn’t mean the pain is confined to California.

“I would say that this should not come as a surprise to people,” said Perry Wong, director of research for the Milken Institute, a nonpartisan economic think tank.

Cities have not been immune to the effects of the prolonged economic downturn and the housing bubble. People who aren’t paying their mortgages usually aren’t paying taxes to the city either and those taxes are an important source of revenue for all cities — including San Bernardino, officials from which say part of their decision to file Chapter 9 bankruptcy stemmed from a loss of $16 million in tax revenue.

“So the only thing they can do, the city, while providing continuing service to the public, they have to reorganize,” Wong said.

The disturbing trend is giving many people reason to wonder about all cities, even Los Angeles, but Mayor Antonio Villaraigosa says that won’t happen.

“We’re never going to be in the situation that some of these cities find themselves In because we’re making the tough decisions,” Villaraigosa said.

Still, Wong sees it getting worse before it gets better with more cities finding they have no other options than to restructure.

“Because the smaller the city or region, the more likely that they lack the ability to deal with their own finance problem,” he said.

With all the financial worry, experts say bankruptcy filings are not the end of the world. Orange County managed to file for bankruptcy in the 1990s, when the economy was in much better shape.

“I think the most enduring effective method is to rebase your business,” Wong said. “Keep getting your book in order – that’s pretty much what any government has to do now.”

via Expert: City Bankruptcies Not Surprising – Local News – Los Angeles, CA –

Reader’s view: Review board destroys effectiveness of police officers | Duluth News Tribune | Duluth, Minnesota

Duluth police administration and the City Council destroyed the morale and the effectiveness of police officers in Duluth by creating a citizens’ board to review complaints made against the police department (“City Council approves citizens’ review board,” July 3).

Law-abiding citizens should be screaming about a review board, possibly occupied by convicted felons, keeping watch over the police department. If there is a lack of trust between certain people or groups in Duluth and the police, maybe we should examine the behaviors of the complainers, not the police. People who have been involved in criminal behavior and caught tend to hold grudges against police.

Over the years, officers have received discipline and even have been terminated without any action from a review board. The police do a great job of self-policing. Police are hired to protect citizens from criminals, especially felons. Now the felons have power over the police? This is a terribly misguided decision. Police respond to 911 calls and investigate with all the information given by 911, witnesses, observations made by officers when they arrive on scene and information obtained during interviews. This is not a racial issue, as some believe. It is simply the police doing their job, handling calls and keeping the citizens of Duluth safe from criminals.

During the council meeting when this was approved, several uniformed officers were asked to leave the room because certain citizens felt “uncomfortable” with the police presence. What country is this? I am deeply ashamed of the administration for creating this board. I wonder how many good, law-abiding citizens won’t get a spot on the board because spots are occupied by felons.

Time to take a strong stand, Duluth. Support your police officers; they are a great group of men and women.

Greg Dannenbring


The writer is a retired Duluth police officer.

via Reader’s view: Review board destroys effectiveness of police officers | Duluth News Tribune | Duluth, Minnesota.

Local leaders flummoxed by San Bernardino bankruptcy – Hi-Desert Star: News: san bernardino, geography of california, inland empire, san bernardino california, andrea miller

Posted: Saturday, July 14, 2012 5:30 am | Updated: 3:27 pm, Fri Jul 13, 2012.

By Rebecca Unger Twentynine Palms Correspondent | 0 comments

SAN BERNARDINO — This city’s impending bankruptcy has some Morongo Basin leaders wondering how things got so far.

The San Bernardino City Council announced Tuesday it intends to pursue Chapter 9 bankruptcy protection as a fix for a $46 million budget shortfall.

At the same time, longtime city attorney James F. Penman alleged budget information presented to the council over several years was suspect, something only recently discovered by the interim city manager, Andrea Miller, and finance director, Jason Simpson.

San Bernardino Mayor Patrick Morris told reporters Wednesday it was “a revelation” that the city’s general fund and cash flow were in trouble.

“It’s bizarre,” Twentynine Palms City Manager Richard Warne commented. “I would have to ask, where are the city’s audits? Weren’t the council members presented with annual audits, as well as budget documents? And if there were no audits, why?”

Neil Derry, 3rd District county supervisor, was a two-term San Bernardino city councilman for the northeastern 4th Ward until 2008.

“I don’t believe we were audited; I don’t recall it,” Derry said Thursday. “Our finances seemed to be in great shape when I left the council in 2008, but the nail in the coffin for San Bernardino was the loss of its redevelopment agency.”

Derry warned that “more shoes will drop” as the recession continues to grind on, and named Redlands, Rialto and Victorville as the next potential victims.

“I don’t think anyone understands the full picture of this,” he said.

“How San Bernardino got to this point is obviously a question of much concern, and there is no easy answer to that,” the interim city manager said in an official statement released Thursday. “There are numerous factors that contributed to the development of this situation over a number of years. Many of the city’s practices have been less than ideal and it has been slow to make drastic adjustments as needed to correct its course as the economy continued to decline. Having reached a breaking point, the city now must take action.”

“It’s very sad for the residents of San Bernardino, and for those in other cities across the state who are struggling,” Curtis Yakimow, director of administrative services for Yucca Valley, commented.

“My thoughts and prayers are with the city of San Bernardino,” Yucca Valley Town Manager Mark Nuaimi said.

via Local leaders flummoxed by San Bernardino bankruptcy – Hi-Desert Star: News: san bernardino, geography of california, inland empire, san bernardino california, andrea miller.

Redding ready to declare intent on pension changes » Redding Record Searchlight

Redding City Council on Tuesday will consider a resolution that establishes its intent to offer more modest retirement packages to new police officers and firefighters.

The question that remains once the new benefit formula kicks in for public safety employees hired after Sept. 8 is how much savings the city can expect, Mayor Dick Dickerson said.

“I would say, though, there is no question that going forward, not only the city of Redding but every city and county in the state of California will need to make adjustments in their retirement and health benefits,” he said.

“This is an indication that the city is addressing this issue and will continue to address costs.”

If the resolution is approved, it will return to the council for a final vote in August.

As set in the two-tier contracts recently negotiated with bargaining units, the retirement age is pushed back from 50 to 55. New hires will be able to take 3 percent of the highest three-years’ salary for every year worked.

The contract approved last year with Redding Peace Officers Association was expected to save the city $1.5 million over four years.

The four-year contract approved this spring with the Redding Police Managers Association is estimated to generate savings of $660,000.

City Manager Kurt Starman on Friday said the city has made progress since voters passed Measure A in 2010. The initiative curtails pension benefits.

The city implemented a two-part strategy to contain costs associated with the California Public Employees’ Retirement System and other retirement costs.

“This change to the CalPERS program will generate immediate savings for the City’s budget,” Starman wrote in an email in reference to efforts to curb pension benefits.

He said the two-tiered retirement system will not generate immediate savings, but it is a key element in the city’s long-term plan to contain future-retirement related costs.

Redding’s efforts to squeeze bigger concessions from public employees are in line with what other local governments across California — some facing insolvency — are doing to get a handle on retirement expenses.

The council’s review of the resolution comes as three cash-strapped cities in the state file for bankruptcy.

San Bernardino had a budget deficit of nearly $46 million and could not pay its employees this summer.

Earlier this month, Mammoth Lakes faced a $43 million court judgment it is unable to pay to a developer.

Stockton last month was unable to come to an agreement with its bargaining units and creditors to close a $26 million general fund deficit.

Dickerson said it is not lost on city officials that recent developments have heightened residents’ concerns. He wanted to point out the city is financially healthy.

To that end, Starman plans to deliver a report in August showing where the city’s revenues and liabilities stand. A date for the report has not been announced.

“We have a good reserve,” he said. “We have managed to reduce our costs through the contracts we have negotiated. I feel confident we are in good shape. And we are nowhere near bankruptcy.”

via Redding ready to declare intent on pension changes » Redding Record Searchlight.

San Bernardino, Calif., to Seek Bankruptcy Protection –

SAN BERNARDINO, Calif.—Like other aging California communities, this city about 60 miles east of Los Angeles has struggled with plummeting tax revenue, slumping housing values and rising public-employee costs. On Tuesday night, the municipality succumbed to its financial troubles when the City Council authorized a bankruptcy filing.

San Bernardino, home to 210,000 residents, will run out of cash to pay its 800 employees within 90 days, said Jim Morris, the mayor’s chief of staff. San Bernardino expects its deficit to rise to $45 million in this fiscal year, Mr. Morris said.

Writing on the Wall: Snakebitten in Present, California Bond Investors Speed Ahead

A bankruptcy filing by San Bernardino, immortalized in the lyrics of the 1946 hit “Route 66,” would follow a string of such filings by California cities.

Last month, Stockton, an agricultural community about 85 miles east of San Francisco, became the largest city in the U.S. to file for bankruptcy protection as it grappled with the aftermath of the housing bubble and high public-pension costs. Earlier this month, Mammoth Lakes, a ski destination near Yosemite National Park, filed for bankruptcy protection after it lost a lawsuit in a soured real estate deal.

Unlike those situations, San Bernardino’s bankruptcy vote came as a surprise, setting off alarm bells throughout the state. Economists and elected officials say other California cities with similar dynamics—falling revenue and pricey police and fire departments—could seek bankruptcy protection.

San Bernardino is among the hardest hit cities in a region that is still making a slow and uneven comeback from the recession. The city is part of the Inland Empire, a collection of communities that stretches from the edge of Los Angeles County to the Arizona border. The unemployment rate in the region is 11.8%, compared with 8.2% nationwide.

At Business Solutions, a print shop near City Hall, 60-year-old employee Ralph Hernandez gestured to two file cabinets filled with his clients’ paperwork—90% of them, he said, are out of business. “Just drive up D Street,” he said referring to the street that City Hall is on, “and all the businesses are gone.”

80% Portion of the city budget that goes to police, firefighters and other labor costs

Mr. Hernandez, who has lived in San Bernardino his whole life, blamed the city’s troubles on lack of leadership and spending on fire and police. “The street lights are out, but [the fire and police departments] have got the city,” said Mr. Hernandez, making a fist to finish his sentence.

The city’s retail sales fell to $2.3 billion in 2011 from $3.28 billion in 2005, a 30% decline, according to John Husing, an economist who studies the Inland Empire. Retail sales taxes are a pillar of local budgets, Mr. Husing said. By comparison, retail sales in the county fell by 13% during that period.

Meanwhile, the assessed value of the city’s homes dropped to $10.3 billion in 2011 from $12.2 billion in 2008. About 70% of the homeowners owe more on their mortgages than their homes are worth. About 43.2% of residents are on public assistance, including welfare, food stamps or the state’s medical program, according to county records., the mayor’s chief of staff

And the city’s labor costs have ballooned. Labor represents 80% of the city’s budget, said Mr. Morris, the mayor’s chief of staff, who is the mayor’s son. His position is unpaid.

San Bernardino’s portion of its employee pension costs has risen to $2.2 million in the current fiscal year from $1 million in fiscal 2006-2007, according to a report on the city’s website.

The city is hamstrung by a decades-old, voter-approved amendment to its charter that disallows the mayor or City Council from negotiating salaries with its police and fire unions. Those salaries instead are based on salaries of police and firefighters in cities of similar size—except the cities used for comparison are much more affluent.

City unions have agreed to concessions and salary cuts over the past two years, city and union officials said.

“We have become the villain in this economic crisis and it’s just sad,” said John Marini, a San Bernardino firefighter and union official. Mr. Marini said the union, with 122 members, agreed to concessions one year, but sued the city and won after it tried to impose salary cuts a second year. He blames the city for spending money on “unnecessary” programs, like a high-speed bus line.

Mr. Marini said he and other city workers weren’t sure what bankruptcy would mean for them, and were still absorbing the news. “It’s a surprise to come in and find out the city you’re employed by is bankrupt,” he said.

Another blow to the city was a state decision to abolish California’s redevelopment agencies. San Bernardino obtained about $6 million a year in such funds, which it used to repair roads, trim trees and “back fill” its general fund, city officials said.

San Bernardino is considering bypassing a new state mediation process under which a distressed city negotiates with creditors for up to 90 days before filing for bankruptcy, said Gwendolyn Waters, a police captain who was assigned to speak for the city manager’s office.

“There’s a series of conditions that affect this city that…affects other cities,” said Mr. Husing, the economist. “I absolutely think you’re going to see more” bankruptcies.

via San Bernardino, Calif., to Seek Bankruptcy Protection –

Buffett: Muni Bankruptcies Are Set to Climb – Businessweek

Warren Buffett, the billionaire chairman of Berkshire Hathaway Inc. (BRK/A) (A), said municipal bankruptcies are set to rise as there’s less stigma attached after three California cities opted to seek protection just weeks apart.

The City Council of San Bernardino, California, a community of about 210,000 east of Los Angeles, decided July 10 to seek court protection from its creditors. The move came just weeks after Stockton, a community of 292,000 east of San Francisco, became the biggest U.S. city to enter bankruptcy. Mammoth Lakes, California, also sought the shelter this month.

“The stigma has probably been reduced when you get very sizeable cities like Stockton or San Bernardino to do it,” Buffett, 81, said in an interview today on “In the Loop with Betty Liu” on Bloomberg Television. “The very fact they do it makes it more likely.”

Cities and towns across the U.S. have been strained by rising costs for labor, including pensions and retiree health benefits, while the longest recession since the 1930s crimped sales- and property-tax revenue.

“Once people find that the city works the next day, it makes it easier for the city council next time they have a problem with pensions — or whatever it is — just to say, ‘well, we’ll declare bankruptcy,’” said Buffett, whose company is based in Omaha, Nebraska.

No Precipice

He said the nation isn’t on the brink of hundreds of billions of dollars in defaults, as banking analyst Meredith Whitney predicted in 2010.

“I don’t think we’re at the precipice,” Buffett said. “People will use the threat of bankruptcy to try and negotiate, particularly pension contracts, with their employees.”

Berkshire held municipal bonds valued at about $3 billion as of March 31, or about 9 percent of the fixed-maturity portfolio, according to a regulatory filing. That’s down from about $3.6 billion at the end of 2010. The company also had as much as $16 billion at risk in derivatives tied to such debt at the end of the first quarter, the filing shows.

The billionaire predicted a “terrible problem” for municipal bonds in coming years in testimony to the U.S. Financial Crisis Inquiry Commission in June 2010.

‘Too Early’

Forty-two municipal issuers have defaulted for the first time in 2012, down from 68 in the same period last year and 83 in 2010, according to Municipal Market Advisors.

“It’s too early to say that there’s a lack of stigma,” John Hallacy, head of municipal research at Bank of America Merrill Lynch in New York, said in a phone interview. “Municipal bankruptcy is a gut-wrenching process. There’s nothing easy about it.”

Tax-exempt mutual funds have continued to attract investors, who added about $653 million to U.S. municipal bond funds in the week through July 11, the most since mid-May, Lipper US Fund Flows data show.

Yields on 10-year benchmark munis fell to 1.77 percent as of noon in New York, the lowest since May 15, according to Bloomberg Valuation data.

via Buffett: Muni Bankruptcies Are Set to Climb – Businessweek.

The bankrupt California cities tour, unions: Opinion roundup |

A San Bernardino, Calif., police officer drives through the Southern California city on Thursday. San Bernardino, facing a budget shortfall of $45 million, is considering bankruptcy.

In Oregon, the audit division of the Secretary of State office has identified nine counties in economic peril. As usual, California is a little bit ahead of us. There, the economic problems are concentrated more in the cities, and they are lining up to file for bankruptcy like Hollywood stars at divorce court.

The most recent to fall San Bernardino, which hasn’t filed yet but is expected to do so. The Los Angeles Times looks for lessons to be learned from San Bernardino, and focuses on a question that more than a few governments in Oregon have had to consider: When do you dip into your reserves?

In The Sunday Oregonian, we will take another look at the plight of Oregon’s timber-dependent counties in light of the most recent annual report on timber harvests in the state. Look for the editorial on The Stump Saturday afternoon.

Other links:

Unions: We’ve written more than a few editorials scolding public unions for intractable demands in the face of a weak economy and deteriorating state budgets. Occasionally, we find one worth commending for taking a more collaborative approach to the negotiations. The Seattle Times says the new head of the Seattle teachers union favors the collaborative model.

via The bankrupt California cities tour, unions and Joe Paterno: Opinion roundup |