Sonoma County voters are being asked to raise taxes to fix
roads—while public workers savor sweet retirement deals. By STEPHEN EIDE, May 29, 2015
It takes a lot of effort to botch Sonoma County, Calif., an
earthly paradise north of San Francisco Bay that is home to some of the world’s
most outstanding winemakers. But massive pension obligations seem to be doing
the trick. On Tuesday, voters will be asked to raise county sales taxes by a
quarter-cent to fix their roads.
California has the highest gas taxes in the nation, a
portion of whose revenues is specifically dedicated to local transportation.
Yet Sonoma estimates that it needs to spend nearly $1 billion over
the next two decades to keep its roads in shape. The county routinely ranks at
or near the bottom in surveys of state and regional pavement
conditions.
In 2010, the county director of transportation and public
works warned that, without more investment in pavement, some local roads would
soon “feel and look like a loose cobble road. ”All this cannot be chalked up to
a weak tax base or punishing winters. But retirement-benefit costs for its
public employees are skyrocketing.
Between 2005 and 2014, Sonoma’s annual required pension
contribution more than doubled, to $52 million, while tax revenues increased
25%, to $247 million. Thanks to state balanced-budget requirements, something
had to give. In Sonoma it was basic infrastructure.
At the height of the dot-com bubble in 1999, the California
legislature enacted a retroactive pension increase, Senate Bill 400. Calpers, the state’s massive retirement
system, assured lawmakers in Sacramento that returns on the system’s
investments would easily cover the cost of the richer pensions. The benefit enhancement
applied to only state workers, but numerous counties and cities, including
Sonoma in 2002, followed suit at the urging of government unions.
The new benefit formula for Sonoma’s public-safety
employees, such as cops and firefighters, was “3% at 50.” At the age of 50,
workers became eligible for a pension equal to their years of service times 3%
of their highest salary—so 90% for someone who had been on the job for 30
years. The formula for non-safety employees was boosted to 3% at 60. (Sonoma County
retirees also receive Social Security benefits.)
Between 2002 and 2006, the average pension for new safety
retirees increased by 69%, according to an analysis by New Sonoma, a
citizens group that claims the retroactive pension increases were illegal, as
they were enacted without public notice of the future annual cost. Retirees
made energetic use of opportunities to “spike” pensions by taking
advantage of the formulas so that their unused vacation and sick days were
counted in their pensionable earnings. Through such tactics, some county
employees have even been able to retire with pensions over 100% of salary.
Defined-benefit pensions are often touted as a powerful tool
for employee retention, but a wave of attrition followed Sonoma’s pension
boost. Between 2003 and 2004, when the increase went into effect for general
employees, the number of annual retirements doubled. Why keep working past the
age of 50 or 60 when one can bring in close to as much income in
retirement—especially since Sonoma extends its health-care coverage to
retirees?
The county’s unfunded pension liability—the gap between
assets and liabilities—is $350 million. Sonoma owes an additional $460 million
in “pension obligation bonds,” borrowing from credit markets to backfill unfunded
pension liabilities, a risky financing maneuver that the Government Finance
Officers Association recently advised state and local governments to steer
clear of.
For the sake of context, the county’s annual spending
is about $800 million. Some progress has been made. California’s 2012
Public Employees’ Pension Reform Act rolled back benefit formulas for county
employees, and the county itself has restructured retiree health care. But the
important changes applied only to new hires.
This will help the county’s finances in the future, but not
its current woes. The best-maintained roads in Sonoma are the 360 miles
eligible for federal funding, which the county rates as “good to very good.”
The county’s other 1,010 miles are rated “poor.” To bring all its roads to
“good” condition, the county would need to spend $954 million over the next 20
years. Basic road maintenance should be considered among the more manageable of
a local government’s responsibilities. And Sonoma County, whose poverty rate is
about 30% lower than the statewide average, seems better-positioned than most
to fulfill its ordinary duties to the taxpaying public.
Yet Sonoma now must perform expensive reconstructive work on
miles of deteriorated roads which years earlier would have needed only minor
resurfacing touches. Sonoma officials blame declining gas-tax revenues,
caused in part by greater fuel efficiency, and a state funding formula that
unfairly favors dense areas such as Los Angeles County.
Some roads advocates are also critical of the county’s
commitment to the Sonoma-Marin Area Rail Transit, which will offer
passenger rail service between low-density Sonoma and Marin counties when it
opens in 2016. The rail-transit construction is being financed by a special quarter-cent
sales tax sold to the two counties’ voters in 2008 in part for its potential to
“fight global warming. ”But these two factors—insufficient gas-tax revenues and
an overemphasis on service expansion over basic maintenance—can’t account for
the local roads’ deterioration.
The math is simple: Last year Sonoma spent $26.1 million on
retiree health care, exactly three times what the county expects to receive
from the new sales-tax increase. In short, Sonoma’s road woes are not a revenue
problem. “Fix it first” is the rallying cry for transportation advocates—but
when it comes to basic road maintenance in Sonoma County, what really needs to
be fixed first is the pension system.
Mr. Eide is a senior fellow at the Manhattan Institute and
author of the recent report “California Crowd-Out: How Rising Retirement
Benefit Costs Threaten Municipal Services. ”Public-Pension Potholes in Wine
Country Paradise
Source: WSJ, Public-Pension Potholes in Wine Country, In The
Wall Street Journal, Stephen Eide writes that public-pension potholes have hit
the wine-country.
Comments
The same neglect of roads and highways has
infected Metro Atlanta. For decades, Georgia overspent on public education and indigent
healthcare and underspent on roads and highways.
Norb Leahy, Dunwoody GA Tea Party Leader
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