How will unfunded "pensions" affect the local economy?

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Submitted by phaster on September 1, 2014 - 7:48am

Here is a simple question, how do you think unfunded pensions affect the economy, specifically RE prices?

To illustrate specifically what I am concerned with, below is an outline of a local unfunded public pension issue....

*** WHAT YOU NEED TO KNOW ABOUT PUBLIC PENSIONS IN SAN DIEGO ***

A recent wall street journal article essentially said the SD county pension system was using derivaties to manage their portfolio.

"Simply put, it could have a market exposure of $20 billion despite only managing half that amount."

http://online.wsj.com/articles/san-diego...

To show why the current SD county pension "operations" is a bad idea, google "buying stocks on margin" and check out the first search result.

The math is pretty simple to understand (just add "000,000" to the following $ figures):

A Buying Power Example
Let's say that you deposit $10,000 in your margin account. Because you put up 50% of the purchase price, this means you have $20,000 worth of buying power.

http://www.investopedia.com/university/m...

Returning to our example of exaggerated profits, say that instead of rocketing up 25%, our shares fell 25%. Now your investment would be worth $15,000 (200 shares x $75). You sell the stock, pay back your broker the $10,000, and end up with $5,000. That's a 50% loss, plus commissions and interest, which otherwise would have been a loss of only 25%.

Think a 50% loss is bad? It can get much worse. Buying on margin is the only stock-based investment where you stand to lose more money than you invested. A dive of 50% or more will cause you to lose more than 100%, with interest and commissions on top of that.

http://www.investopedia.com/university/m...

A good basic math education, is all that is needed to understand the "downside" risk of a margin account (but all the reports in the media so far do not show this simple "downside" math).

Adding the "options" account variable complicates matters, but kinda explains the lackluster single digit portfolio returns of the SD county portfolio (i.e. the various options w/in the portfolio of "puts for downside protection and "calls" to try and win big on the upside" cancelled each other out - so far, in a market that has gone up), the big unknown is how the "options" are structured within the portfolio and how it react if there is sudden and dramatic turbulence.

Consider all it might take for the "local" house of cards to fall is some kind of foreign black swan event that drops the market towards 10% down, and because of leverage things could suddenly get ugly for the local economy (for example LTCM, which happened in a less complex world, now one has to factor in some thing akin to high speed robo traders, that will sell off a position because of a trigger event, thus converting a "paper" loss into a real loss for the pension portfolio??).

10 billion dollars placed into a margin account to play the options market IMHO is "insane" if anyone was investing their own money, but think I uncovered the motive.

The reason the county pension board might have taken such drastic action is the change in accounting rules which put public pensions on the balance sheet next year.

Few even in the investment community know that:

PUBLIC "Pension liabilities must be included on the balance sheets of the agencies responsible for funding their employees' pensions. Until now liabilities have been buried in arcane footnotes that few read and even fewer understood"

http://articles.latimes.com/2014/apr/09/...

NOTE if San Diego's pension board margin-option strategy fails, the tax payer is on the hook!

One other thing, there is a youtube video (starting at 3:24), where san diego is mentioned at the being at the top of the list (for being the deepest in the hole overall for unfunded pensions and having an unfunded health care plan)

https://www.youtube.com/watch?v=BRr49iAgI9g

If pensions and health care costs have to both be included on the balance sheet, the bond markets are in for a real shock which will ripple through the economy and affect everyone on main street.

If you want understand why there is a problem with pensions in San Diego, read the history of pensions at the state level (which started out well managed and over the years turned corrupt and mismanaged):

http://www.city-journal.org/2013/23_1_ca...

The local(s) (city and county) basically followed the CalPERS model, and what might be telling is the former CEO of CalPERS just plead guilty to a fraud, corruption charge

http://www.latimes.com/business/la-fi-ca...

Submitted by EconProf on October 1, 2014 - 4:16pm.

Thank you for telling us what you have done in the past. What about your spouse?

Submitted by harvey on October 1, 2014 - 5:05pm.

CA renter wrote:
And I've already stated many times what I do/have done. I was a public school teacher many years ago, but spent most of my time in the private sector...management in the tech industry, to be specific.

For years on this forum you have claimed extraordinary, detailed knowledge of public sector labor economics, such as pension investment strategies and compensation rules. You have claimed to have been intimate with union and contract negotiations.

And now you are saying you have had little affiliation with the public sector and spent most of your career in private industry?

It doesn't jibe.

Quote:
I advocate for the people who make the world go 'round -- the workers.

Then why are you arguing so hard for the guy making an income in the top 2% who isn't working at all?

And what would you know about "the workers?" You just said you were in management.

Submitted by CA renter on October 1, 2014 - 9:04pm.

EconProf wrote:
Thank you for telling us what you have done in the past. What about your spouse?

Also in the public sector after working for years in the private sector.

If you were a full-time, faculty professor, are you also receiving a pension and, possibly, retiree healthcare? How about your spouse?

Submitted by CA renter on October 1, 2014 - 9:23pm.

harvey wrote:
CA renter wrote:
And I've already stated many times what I do/have done. I was a public school teacher many years ago, but spent most of my time in the private sector...management in the tech industry, to be specific.

For years on this forum you have claimed extraordinary, detailed knowledge of public sector labor economics, such as pension investment strategies and compensation rules. You have claimed to have been intimate with union and contract negotiations.

And now you are saying you have had little affiliation with the public sector and spent most of your career in private industry?

It doesn't jibe.

Quote:
I advocate for the people who make the world go 'round -- the workers.

Then why are you arguing so hard for the guy making an income in the top 2% who isn't working at all?

And what would you know about "the workers?" You just said you were in management.

Yes, I've been following the pension issue for many, many years (far, far, far longer than you have), and I have also worked with negotiating committees and have done research for public employee unions. Yes, I've also spent most of my working years in the private sector.

I've never let my own self-interest get in the way of what I thought was right, which is why I advocate for eliminating Prop 13 protection for non-owner-occupied properties, even though we have benefited from it in the past and stand to benefit greatly in the future. It's why I've advocated for changes to the pension systems that would go very much against my own interests. There are many things that I advocate for and against that go against my own self-interest. How about you?

See, I actually do research and make sure that I know what I'm talking about before spouting off, unlike you.

FYI, a person who makes $120K/year [about the average for a public safety worker with many years of experience, often in a management position (captain, etc.), including benefit costs and some overtime] in San Diego is in the top 21%, not the top 2%. Also in the top 21% in Vallejo. For the example in the story, which is probably an outlier, they are in the top 8% in both areas. See map with income percentiles. And they most certainly are "the workers."

http://www.nytimes.com/interactive/2012/...

Submitted by EconProf on October 1, 2014 - 9:39pm.

CA renter wrote:
EconProf wrote:
Thank you for telling us what you have done in the past. What about your spouse?

Also in the public sector after working for years in the private sector.

If you were a full-time, faculty professor, are you also receiving a pension and, possibly, retiree healthcare? How about your spouse?


Someone told me he is a firefighter. Is that correct?

Submitted by harvey on October 1, 2014 - 11:25pm.

Quote:
Yes, I've been following the pension issue for many, many years (far, far, far longer than you have)

I've been following the pension issue since the steel industry began collapsing in the 1970s. But go ahead and tell me more about myself since you seem to know so much.

CA renter wrote:
FYI, a person who makes $120K/year ]about the average for a public safety worker with many years of experience,

You specifically defended the $180K compensation of a retired Vallejo police officer.

The $180K figure is retirement income, which means the total income pre-retirement would need to be far more.

(Have you taken the time to understand the value of an $180K lifetime fixed annuity for a 50 year old? It turns out to be quite a nest egg!)

Quote:
For the example in the story, which is probably an outlier, they are in the top 8% in both areas. See map with income percentiles. And they most certainly are "the workers."

The data in your link is for household income, not individual.

And do you think someone retired with that level of income is going to live in a city with inadequate public services and and crumbling infrastructure ... a place like Vallejo?

You see, the people of Vallejo - the ones that don't have the option to move to the golf course community in a low cost of living area - did "take a hit" ... a big one!

The retirees can live wherever they want. And $180K is in the top 2% of the nation.

(If you don't like the 2% figure please don't bother to dig up links so that you can split hairs - everybody knows that $180K is a very good income.)

As for EconProf's question: What you personally do for a living doesn't alter the merits of your arguments which have consistently been self-contradictory and nonsensical.

But he did call you out, and you showed your true character with your answer. The claim that your support of public sector pensions has nothing to do with your "self interest" is blatantly dishonest.

Submitted by CA renter on October 2, 2014 - 2:02am.

harvey wrote:
Quote:
Yes, I've been following the pension issue for many, many years (far, far, far longer than you have)

I've been following the pension issue since the steel industry began collapsing in the 1970s. But go ahead and tell me more about myself since you seem to know so much.

I know by the claims you've made about public sector pensions that you know nothing about them. There is no way you've been following them for any amount of time, and what you do know about them, you've only learned from propaganda pieces put out by the Privatization Movement. We're not talking about steel mills here, we're talking about pensions in the public sector.

harvey wrote:
CA renter wrote:
FYI, a person who makes $120K/year ]about the average for a public safety worker with many years of experience,

You specifically defended the $180K compensation of a retired Vallejo police officer.

The $180K figure is retirement income, which means the total income pre-retirement would need to be far more.

(Have you taken the time to understand the value of an $180K lifetime fixed annuity for a 50 year old? It turns out to be quite a nest egg!)

Quote:
For the example in the story, which is probably an outlier, they are in the top 8% in both areas. See map with income percentiles. And they most certainly are "the workers."

The data in your link is for household income, not individual.

And do you think someone retired with that level of income is going to live in a city with inadequate public services and and crumbling infrastructure ... a place like Vallejo?

You see, the people of Vallejo - the ones that don't have the option to move to the golf course community in a low cost of living area - did "take a hit" ... a big one!

The retirees can live wherever they want. And $180K is in the top 2% of the nation.

(If you don't like the 2% figure please don't bother to dig up links so that you can split hairs - everybody knows that $180K is a very good income.)

As for EconProf's question: What you personally do for a living doesn't alter the merits of your arguments which have consistently been self-contradictory and nonsensical.

But he did call you out, and you showed your true character with your answer. The claim that your support of public sector pensions has nothing to do with your "self interest" is blatantly dishonest.

I didn't "defend" anyone's compensation. We're discussing the reasons for Vallejo's financial problems and how these problems affect their pension obligations. And I've never claimed that $180K isn't a good income, whether one is retired or not.

BTW, $180K is still not in the top 2% for men, even for individual income, but it is in the top 4%, and that's for the U.S. ;) And where a person lives dramatically changes the percentile ranking; this guy is still living in the Bay Area (Napa), and has moved to an even more expensive area, so he's nowhere near the top 2%, or even the top 5% for the area.

http://politicalcalculations.blogspot.co...

The residents of Vallejo are losing what was gained during the Fed's bubbles. Services and infrastructure were greatly enhanced as a result of the bubbles; now, they are losing some of those things. These financial losses are in addition to the losses (and additional expenditures) sustained as a result of the base closure. These residents were the ones who were begging the city council for a larger and better-paid police force, among other things. I would also point out that while the city is claiming that they can't afford to pay their employees as promised, they've managed to militarize their police force, as have many other "broke" police departments across the country. While much of that money comes from the federal govt, it would have been better if the same money could have been used to actually improve these departments instead of gearing them up for a war against "domestic terrorists" (a.k.a.: people who don't agree with the current corporatist regime).

Please show me an example of my "self-contradictory and nonsensical" posts. The only ones who've made self-contradictory and nonsensical posts about this topic are you, econprof, and paramount. While others might have opinions that differ from mine, at least they appear to be trying to better understand the issues. You just spout pure nonsense.

And econprof, the former public sector worker of 18 years who, if he was full-time faculty, is probably getting one of those awful pensions (and, quite possibly, retiree healthcare) didn't call out anything. Let's revist my post and show, once again, how poor your reading comprehension skills are, shall we?

CA renter wrote:

I've never let my own self-interest get in the way of what I thought was right, which is why I advocate for eliminating Prop 13 protection for non-owner-occupied properties, even though we have benefited from it in the past and stand to benefit greatly in the future. It's why I've advocated for changes to the pension systems that would go very much against my own interests. There are many things that I advocate for and against that go against my own self-interest. How about you?

I have ALWAYS been 100% in favor of DB pensions for ALL workers (and single-payer healthcare, among other things), even when I was working in the private sector. I have been arguing *for years* about the insane, and growing, wealth/income gap between capital and labor. I have participated in the (original, when it was opposed to bank bailouts) Tea Party movement and the Occupy Wall Street movement, even though it doesn't affect me, personally. This has nothing to do with my own self-interest; I have always been an advocate for doing the right thing, period.

Submitted by harvey on October 2, 2014 - 6:55am.

CA renter wrote:
We're not talking about steel mills here, we're talking about pensions in the public sector.

If you don't understand the relationship between defined-benefit pensions, labor unions, and the collapse of one of the most important industries in the United States, then you don't have a clue about "the pension issue."

Submitted by CA renter on October 2, 2014 - 8:37am.

That would be globalization. Because in a world where some people are willing to work for pennies on the dollar (and where environmental protections are low to non-existent) vs. American labor, the U.S. will continue to lose jobs.

So, do you think we should continue to spiral down until we are all living in mud huts and eating a bowl of rice per day (while our corporate masters get wealthier and more powerful), or do you think we should protect our industries and our way of life by enacting trade laws and tariffs that offset the differences between our environmental and labor standards and the standards of others?

Submitted by EconProf on October 2, 2014 - 8:45am.

CAR, the (apparent) fact that your husband is a firefighter explains your strong defense of government sector unions. We all get that. I don't know why you won't admit it. Piggs are smart enough and fair-minded enough to look beyond that fact and weigh the arguments and evidence based on their merits.

Submitted by harvey on October 2, 2014 - 10:03am.

CA renter wrote:
So, do you think we should continue to spiral down until we are all living in mud huts and eating a bowl of rice per day (while our corporate masters get wealthier and more powerful), or do you think we should protect our industries and our way of life by enacting trade laws and tariffs that offset the differences between our environmental and labor standards and the standards of others?

A strawman and a false choice in one sentence! Nice use of logical fallacies!

What I think is that any attempt to guarantee investment returns decades into the future is folly. I think we should base policy on the realities that history has taught us, not the fantasies that some would like to believe.

Submitted by joec on October 2, 2014 - 6:42pm.

EconProf wrote:
CAR, the (apparent) fact that your husband is a firefighter explains your strong defense of government sector unions. We all get that. I don't know why you won't admit it. Piggs are smart enough and fair-minded enough to look beyond that fact and weigh the arguments and evidence based on their merits.

Because CAR likes to believe she is a good person and isn't out to get what's best for herself and her loved ones.

I don't blame CAR, but this is true for pretty much everyone in society including all the wall street, big business types, etc...Everyone just wants their piece of meat and screw the hells with everyone else.

That's life...honestly. It doesn't hurt to look in the mirror and admit it (I know I do and can care less for plenty of things/people/etc...).

Best course of action for everyone is just find ways to avoid getting taxed I think and be able and flexible to move...If you can find ways to like get solar, your own water, police/fire protection, etc...do it...or find tax advantaged ways to generate very to 0 income, and live off capital gains, tax exempt bonds, etc...

Since her husband is a fire fighter, that makes her whole argument biased already since any change will greatly affect her own life so take anything mentioned with buckets of salt.

Submitted by CA renter on October 2, 2014 - 7:53pm.

EconProf wrote:
CAR, the (apparent) fact that your husband is a firefighter explains your strong defense of government sector unions. We all get that. I don't know why you won't admit it. Piggs are smart enough and fair-minded enough to look beyond that fact and weigh the arguments and evidence based on their merits.

I've never said what my husband did, only that he works in the public sector. I have often mentioned that on this site; it's no secret. My father also worked in the public sector, as did I.

But I'm definitely calling you out on your bullshit. Some of us are quite capable of doing the right thing, irrespective of whether or not we benefit or lose as a result of any changes. As I've said before, I ALREADY HAVE advocated for things that would go against my own best interests. And I have spent a lot of time, money, and energy on improving things for others when I never stood to benefit one bit from my actions; oftentimes, I would lose. How about you?

--------

BTW, nice diversionary tactics, econprof. Once again, were you full-time faculty? Do you have a pension? How about retiree healthcare? How about your spouse?

Let me guess, you tried to get a faculty position at a *public* institution because of the pay and benefits, right?

And we're STILL waiting for you to cite some facts to back your claims about how the high teacher attrition rate is due to unions, or how non-union schools outperform union schools, or how private sector workers are underpaid relative to public sector workers, or how privatization saves money, etc.

I've cited many sources over the years that totally refute what you've said (even from right-wing think tanks, just for the sake of fairness). You've never done so.

Submitted by CA renter on October 2, 2014 - 7:34pm.

harvey wrote:
CA renter wrote:
So, do you think we should continue to spiral down until we are all living in mud huts and eating a bowl of rice per day (while our corporate masters get wealthier and more powerful), or do you think we should protect our industries and our way of life by enacting trade laws and tariffs that offset the differences between our environmental and labor standards and the standards of others?

A strawman and a false choice in one sentence! Nice use of logical fallacies!

What I think is that any attempt to guarantee investment returns decades into the future is folly. I think we should base policy on the realities that history has taught us, not the fantasies that some would like to believe.

Not at all a false choice or a straw man argument (you like to make these claims a lot, pretty much anytime you don't have an answer to someone else's challenge). Do you seriously not understand the trajectory that we're on? Do you honestly not know where our corporate masters are driving the global economy? Do some research for a change!

And if we were to all lose Social Security and DB pensions (and Medicare, since we're throwing everything out there that is backed by taxpayers), how do you think that would play out? Do you not understand that we would still have to pay for these people when they run out of money (and they would run out of money), or risk serious social and civil strife?

In the past, a large and strong family unit was the social safety net. With industrialization and globalization, that can't happen. What do you propose *that would actually work*?

Submitted by phaster on October 2, 2014 - 8:18pm.

CA renter wrote:

You're also clearly ignorant about the differences between DB and DC pensions. DC plans have higher administrative costs and lower returns; DC plans have access to fewer investment options; DC plans don't pool longevity risk; DC plans have lower contribution limits than DB plans (for employer and employee); and DB plans can remain in higher-yielding and more diversified investments and can better manage the ups and downs of the market over time because they are continuously funded by the contributions of current employees and their employers, and benefits are staggered well into the future (pooled investment risks over time and number of people).

News reports about CalPERS and the SD pension board, leads me to believe idiots who over estimate their own management abilities AND have no basic understanding of math or the investing paradox, are at the helm.

Given your logic since CalPERS and SD have "professional" managers, elected board(s) to provide oversight and access to diversified investments, then why haven't they beat the market benchmarks (i.e. the index of the DJ30 or S&P500)?

http://www.marketwatch.com/investing/ind...

http://www.marketwatch.com/investing/ind...

IMHO its because of the "investing paradox."

Simply stated a disciplined small/individual investor can beat market averages over long periods of time, because their trades fly under the radar and are "un-noticed" by the market.

However when the portfolio is in the BILLIONS (as is the case w/ SD), or the HUNDREDS OF BILLIONS (as is the case w/ CalPERS), any trade they make I'd argue is the market (so a different investment style is needed).

phaster wrote:

livinincali wrote:

The one benefit of defined benefit contribution plans, retention, isn't worth the risks, the frauds, the vote buying, and everything else it enables. That's the bottom line. The rewards (reduced training costs retention, etc.) don't outweigh the risks and therefore they should be scrapped..

Agree! And after doing some research, seems the best way forward is to follow the example set by the Thrift Saving Plan (a federal government 401K style program, that can't be corrupted/mismanaged like what happend at CalPERS or as what is happening with the SD pension program)

https://www.tsp.gov/investmentfunds/fund...

The Thrift Savings Plan, used by millions of federal workers, is like a 401(k), except it's a lot cheaper. Last year it charged an average expense ratio of a mere 0.03%. That means just $3 in fees for $10,000 in savings, or $30 for a $100,000 portfolio.

John Turner, an economist and director of the Pension Policy Center and a former federal worker himself, said "Unless they're advanced investors, I think they should leave their funds in the TSP because it's simple and it's easy enough that most investors can do it and do it well"

http://money.cnn.com/2014/10/01/retireme...

Submitted by phaster on October 2, 2014 - 9:20pm.

CA renter wrote:
Additionally, we can reduce the waste, fraud, and abuse that goes on in the public sector...like building a road or bridge to a well-connected "friend" of a politician. Note the stories posted by phaster to see how the corruption was specifically concentrated around entities in the PRIVATE SECTOR. No unions or boots-on-the-ground public employees were mentioned in the story where millions were diverted to various parties.

Actually I think the role about unions or boots-on-the-ground public employees remains un-answered,

http://www.washingtonpost.com/local/us-s...

then re-read what I actually posted...

phaster wrote:
CA renter wrote:

And that KPBS link regarding the software that would allow for "fraudulent" transactions? NO FRAUD WAS FOUND. The issue here is that the auditors thought some employees had access to certain modules in the software that they shouldn't necessarily have access to. It's like people in sales having access to the accounting modules. The apparent reason for this is that the building/planning department is understaffed, and people are trained to do more than one thing when necessary. It also looks like they are working on fixing this.

"Luna recommends 13 changes to the Development Services Department including restructuring its management to create greater internal controls, separating employees’ responsibilities so they can’t access as much of the computer system and documenting more changes to individual permits. He attributed much of the failures to inefficient staffing, high workloads, limited supervision and deficiencies with the computer system itself.

http://www.kpbs.org/news/2012/jul/03/citys-development-system-major-fraud-risk-says-aud/

What's the old saying "where there smoke there is fire"

In general, people don't like bad news so they don't dig for it. Then there is tendency of people not wanting to admit anything thing is wrong (if they missed something the first time around), so if the root cause of a problem is not fully understood, it can't be fixed!

IMHO TPTB are in denial (much like an individual who has a substance abuse problem), unfortunately for me I inherited an issue that required me to try and figure out the root cause of a bad news problem.

If ya first look at the MLS for the property (which was sold in 2006), it shows no structure (because it was torn down after a homicide investigation back in 1988), therefore the plans submitted to the city for a permit that show a "termite infested detached garage" to be replaced is a fraudulent statement!

Given all the historical documents (like a 1929 documents showing an easement, along with city maps indicating utilities in place), news reports that the the city has software that allows fraud and the statement from an eMail dated 9/23

"In addition, based on preparation of a thorough historical report on our property to apply for a historical designation of the residence, no existence of any sewer line or associated easement was noted on any of the historical documents/maps we researched."

there as you can see, lots of "interesting" questions one can ask about the "integrity" of the building permit process, along with questions about "historical property" designations.

Being god fearing and honest all their lives, the last thing my parents wanted to do was be an accessory to insurance fraud (because an offer was given to fix the mess from the builders/owner of the construction project)

Because there were lots of questions/concerns my parents parents "informally" worked their way up the chain of command to eventually goldsmith and gloria, asking for an investigation.

So after my parents died, I inherited the whole damn mess which legally put me between a rock and a hard place.

The city IMHO basically swept the whole problem under the carpet, because after the scandal allowing a skyscraper (the sun road building) to be built too tall next to an airport (as per FAA regulations) to fix the software that won't allow fraud has a pretty high price tag (financially and politically), then there is the tricky question what about all those tax credits based on "historical property" status.

Trying to do the right thing, cost me well into six figures of legal and repair costs (basically had to cave in because it was my only survival option after I was sued for "quiet title" )

I've been more financially fortunate than most, having a legacy my parents left me as well as managing to save and invest my own monies, so I can survive a six figure hit. But I've learned the game is rigged, and its not only wall street "greed" that is causing the economy to hurt those in the so called 99%...

I am not a lawyer, but was able to piece together case law "logic" that seems to fit the fact pattern...

"Obtaining Recovery for Property Damage through Inverse Condemnation"
http://www.lacba.org/files/lal/vol33no10...

ARREOLA v. MONTEREY COUNTY
An entity with the power to control a project need not actively participate in it to suffer liability.

BOOKOUT v. STATE OF CALIFORNIA
a five-year statute of limitations applies only where a public entity has physically entered and exercised dominion and control over some portion of the plaintiff's property.

Main body logic...

HARSHBARGER v. CITY OF COLTON
1) there is a mandatory duty for building inspectors to enforce building codes because of public safety concerns
2) an exception to the rule of sovereign immunity is fraudulent inspection

BLAIR v. MAHON
3) failure to speak is a species of fraud

HORWITZ v. CITY OF LOS ANGELES
4) "Just as the city has no discretion to deny a building permit when an applicant has complied with all applicable ordinances, the city has no discretion to issue a permit in the absence of compliance"

Is section 1983 Applicable???

MAXWELL v. COUNTY OF SAN DIEGO
5) the court ruled that the officers were not entitled to qualified immunity because of the danger creation exception

(9th circuit has addressed the legal standard issue in "danger creation" cases and agrees with the majority view that a heightened level of culpability, i.e., more than mere negligence is required. Specifically, in Grubbs II, the court held a plaintiff must plead and prove "deliberate indifference."

pleadings and briefs are available upon request see:

www.mcnicholaslaw.com/CM/Custom/MSM_PMc-...)

The silver lining, in this whole mess is I have had my eyes opened to looking at issues (like public pensions, etc.) in a whole new light.

I made a promise to my dad to find out exactly what happened, so any legal experts care to share their opinion...

FWIW just listened to a podcast story that involved the "old boys club" (another economic term I discovered is "regulatory capture")

The Secret Recordings of Carmen Segarra

An unprecedented look inside one of the most powerful, secretive institutions in the country. The NY Federal Reserve is supposed to monitor big banks. But when Carmen Segarra was hired, what she witnessed inside the Fed was so alarming that she got a tiny recorder and started secretly taping

http://www.thisamericanlife.org/radio-ar...

Getting back to the question "how will unfunded pensions affect the local economy," I googled the term "san diego pensions" and found a 2010 article that stated the san diego region is on the hook for 45.4 BILLION (in public pensions and related health care costs)

http://www.edchoice.org/CMSModules/EdCho...

I also googled how many parcels in SD/SD county, and the number I found was just over a million. So if you own a home/condo in the region (on a parcel), your share of the "unfunded" pension debt amounts to about $45,000....

Couple of last news items, it was just reported that CalPERS is no better than bondholders in the stockton bankruptcy

California cities may turn to bankruptcy courts to ease pension obligations after a judge ruled the California Public Employees’ Retirement System doesn’t deserve special protection

http://www.bloomberg.com/news/2014-10-01...

Given all the facts, what does everyone think the odds are of SD going the bankruptcy route?

Personally, I think its not a matter of if, but when something in the overall US economy has to give...

Largest Public Pensions Face $2 Trillion Hole, Moody’s Says

http://www.bloomberg.com/news/2014-09-25...

Submitted by harvey on October 2, 2014 - 9:33pm.

Thanks for the data, phaster.

DB plans will go down in history as a failed economic experiment.

Submitted by CA renter on October 3, 2014 - 12:30am.

phaster wrote:
CA renter wrote:
Additionally, we can reduce the waste, fraud, and abuse that goes on in the public sector...like building a road or bridge to a well-connected "friend" of a politician. Note the stories posted by phaster to see how the corruption was specifically concentrated around entities in the PRIVATE SECTOR. No unions or boots-on-the-ground public employees were mentioned in the story where millions were diverted to various parties.

Actually I think the role about unions or boots-on-the-ground public employees remains un-answered,

http://www.washingtonpost.com/local/us-s...

then re-read what I actually posted...

phaster wrote:
CA renter wrote:

And that KPBS link regarding the software that would allow for "fraudulent" transactions? NO FRAUD WAS FOUND. The issue here is that the auditors thought some employees had access to certain modules in the software that they shouldn't necessarily have access to. It's like people in sales having access to the accounting modules. The apparent reason for this is that the building/planning department is understaffed, and people are trained to do more than one thing when necessary. It also looks like they are working on fixing this.

"Luna recommends 13 changes to the Development Services Department including restructuring its management to create greater internal controls, separating employees’ responsibilities so they can’t access as much of the computer system and documenting more changes to individual permits. He attributed much of the failures to inefficient staffing, high workloads, limited supervision and deficiencies with the computer system itself.

http://www.kpbs.org/news/2012/jul/03/citys-development-system-major-fraud-risk-says-aud/

What's the old saying "where there smoke there is fire"

In general, people don't like bad news so they don't dig for it. Then there is tendency of people not wanting to admit anything thing is wrong (if they missed something the first time around), so if the root cause of a problem is not fully understood, it can't be fixed!

IMHO TPTB are in denial (much like an individual who has a substance abuse problem), unfortunately for me I inherited an issue that required me to try and figure out the root cause of a bad news problem.

If ya first look at the MLS for the property (which was sold in 2006), it shows no structure (because it was torn down after a homicide investigation back in 1988), therefore the plans submitted to the city for a permit that show a "termite infested detached garage" to be replaced is a fraudulent statement!

Given all the historical documents (like a 1929 documents showing an easement, along with city maps indicating utilities in place), news reports that the the city has software that allows fraud and the statement from an eMail dated 9/23

"In addition, based on preparation of a thorough historical report on our property to apply for a historical designation of the residence, no existence of any sewer line or associated easement was noted on any of the historical documents/maps we researched."

there as you can see, lots of "interesting" questions one can ask about the "integrity" of the building permit process, along with questions about "historical property" designations.

Being god fearing and honest all their lives, the last thing my parents wanted to do was be an accessory to insurance fraud (because an offer was given to fix the mess from the builders/owner of the construction project)

Because there were lots of questions/concerns my parents parents "informally" worked their way up the chain of command to eventually goldsmith and gloria, asking for an investigation.

So after my parents died, I inherited the whole damn mess which legally put me between a rock and a hard place.

The city IMHO basically swept the whole problem under the carpet, because after the scandal allowing a skyscraper (the sun road building) to be built too tall next to an airport (as per FAA regulations) to fix the software that won't allow fraud has a pretty high price tag (financially and politically), then there is the tricky question what about all those tax credits based on "historical property" status.

Trying to do the right thing, cost me well into six figures of legal and repair costs (basically had to cave in because it was my only survival option after I was sued for "quiet title" )

I've been more financially fortunate than most, having a legacy my parents left me as well as managing to save and invest my own monies, so I can survive a six figure hit. But I've learned the game is rigged, and its not only wall street "greed" that is causing the economy to hurt those in the so called 99%...

I am not a lawyer, but was able to piece together case law "logic" that seems to fit the fact pattern...

"Obtaining Recovery for Property Damage through Inverse Condemnation"
http://www.lacba.org/files/lal/vol33no10...

ARREOLA v. MONTEREY COUNTY
An entity with the power to control a project need not actively participate in it to suffer liability.

BOOKOUT v. STATE OF CALIFORNIA
a five-year statute of limitations applies only where a public entity has physically entered and exercised dominion and control over some portion of the plaintiff's property.

Main body logic...

HARSHBARGER v. CITY OF COLTON
1) there is a mandatory duty for building inspectors to enforce building codes because of public safety concerns
2) an exception to the rule of sovereign immunity is fraudulent inspection

BLAIR v. MAHON
3) failure to speak is a species of fraud

HORWITZ v. CITY OF LOS ANGELES
4) "Just as the city has no discretion to deny a building permit when an applicant has complied with all applicable ordinances, the city has no discretion to issue a permit in the absence of compliance"

Is section 1983 Applicable???

MAXWELL v. COUNTY OF SAN DIEGO
5) the court ruled that the officers were not entitled to qualified immunity because of the danger creation exception

(9th circuit has addressed the legal standard issue in "danger creation" cases and agrees with the majority view that a heightened level of culpability, i.e., more than mere negligence is required. Specifically, in Grubbs II, the court held a plaintiff must plead and prove "deliberate indifference."

pleadings and briefs are available upon request see:

www.mcnicholaslaw.com/CM/Custom/MSM_PMc-...)

The silver lining, in this whole mess is I have had my eyes opened to looking at issues (like public pensions, etc.) in a whole new light.

I made a promise to my dad to find out exactly what happened, so any legal experts care to share their opinion...

1.) Regarding my comment in your quote, I was referring to the problems with the Detroit schools from your other post.

2.) Responding to that first link of yours, though, this has nothing at all to do with the Mills Act. The Mills Act is a California state program; the program in your link is federal.

If you have some issue with a particular property having a Mills Act designation, you should look up why they have that designation.

3.) Again, the issue with the software does not point to any fraud. There was no fraud found when they *tried* to find problems with the system. There is no smoke, nor any fire, from what I can see. If you have any evidence or reason to believe that there was fraud, please make your case. The fact is that fraud *can* be committed all over the place -- in the public and private sectors -- but we don't get to randomly accuse people of fraud when there is no evidence nor reason to believe that any fraud was committed.

4.) I'm not sure how your parents would have been accessories to insurance fraud if the owner of the other property was willing to fix the problem and pay for it. Are you saying that he was filing a claim? That's not made clear based on your posts. Quite frankly, if the owner was willing to pay to fix the problem, I'm not sure what the complaint is about.

Unrelated anecdote: A property we've owned had a decades-old easement that was never used. When I went to inquire about it, the building/planning department had different maps, and only one of them showed the easement. So, it's entirely possible that the map that the owner used didn't show the easement. Not sure if that's the case in your situation, but it's not like people in the planning/building departments are trying to commit fraud.

5.) The other owner probably sued for quiet title because you gave him no other option. It sounds like he did try to remedy things. I'm still not sure about what you were trying to accomplish with this. Were you trying to get him to tear down his garage? Why, when he offered to fix the sewer problem (re-route it?), would you want him to do that?

By the way, I'm very sorry for you loss. Your parents sounded like very nice people.

My 2 cents on this? Have the problem fixed, and be done with it, especially if the owner has offered to pay for it. It's not worth the headache to try to prove a point when things are stacked against your winning. I think the other owner has some legitimate claims, as well. You both probably do; which is why it's always better to try to setting things outside of court if at all possible. Compromise, and get it done.

Submitted by CA renter on October 3, 2014 - 11:55pm.

phaster wrote:

FWIW just listened to a podcast story that involved the "old boys club" (another economic term I discovered is "regulatory capture")

The Secret Recordings of Carmen Segarra

An unprecedented look inside one of the most powerful, secretive institutions in the country. The NY Federal Reserve is supposed to monitor big banks. But when Carmen Segarra was hired, what she witnessed inside the Fed was so alarming that she got a tiny recorder and started secretly taping

http://www.thisamericanlife.org/radio-ar...

Yes, I'm aware of this story. "Regulatory capture" is pretty much they way everything works WRT regulations. Find me a regulatory agency that doesn't have a revolving door to the very same companies/entities that it's supposed to regulate. Yes, it's a problem. The only solution I can think of to expressly prohibit anyone from going from a regulatory agency to any related company in the private sector, and vice versa...and prohibit it FOR LIFE. Not only that, but you'd have to prohibit spouses or other friends/relatives (or mistresses, or "buddies" who are owed favors) from being employed with the regulated companies and ALSO prohibit them from being employed by anyone who has connections to these companies, even if they're not in the same industries (I hope you can imagine how complex this can get).

Feel free to share any solutions you might have...there's a dearth of ideas out there.

Submitted by CA renter on October 3, 2014 - 2:32am.

phaster wrote:

Getting back to the question "how will unfunded pensions affect the local economy," I googled the term "san diego pensions" and found a 2010 article that stated the san diego region is on the hook for 45.4 BILLION (in public pensions and related health care costs)

http://www.edchoice.org/CMSModules/EdCho...

I also googled how many parcels in SD/SD county, and the number I found was just over a million. So if you own a home/condo in the region (on a parcel), your share of the "unfunded" pension debt amounts to about $45,000....

Couple of last news items, it was just reported that CalPERS is no better than bondholders in the stockton bankruptcy

California cities may turn to bankruptcy courts to ease pension obligations after a judge ruled the California Public Employees’ Retirement System doesn’t deserve special protection

http://www.bloomberg.com/news/2014-10-01...

Given all the facts, what does everyone think the odds are of SD going the bankruptcy route?

Personally, I think its not a matter of if, but when something in the overall US economy has to give...

Largest Public Pensions Face $2 Trillion Hole, Moody’s Says

http://www.bloomberg.com/news/2014-09-25...

1.) Just so you know, EdChoice's full name is "The Friedman Foundation for Educational Choice." Why does this matter? Because the "Friedman" behind this foundation is none other than Milton Friedman. Not saying that I think his theories are wrong, as he's totally correct about many things, just that certain aspects are incredibly damaging our country and its workers. IMHO, many of his policies, brought to life under Reagan, are what has brought this country to its knees.

Milton Friedman has long been an advocate for the public funding of private schools (privatization). There is no question that they want to take down the public pension systems because that is one of the main reasons that people choose public employment over private, and it's a huge reason for the support and existence of unions. This is why the Privatization Movement is attacking pensions.

BTW, I've written many posts on this site -- full of facts, data, and research -- that show how privatization does NOT save money, nor does it provide better goods/services for the same, or less, money. Even the right-wing think tanks can't come up with anything to support their views on this. They admit to getting "conflicting results."

---------------

As for San Diego and its risky bets, note that it's the public employees and retirees who are asking them to reduce leverage:

The day’s developments marked a significant turn-back in a years-long trend. Since hiring Partridge as an outside consultant in 2009, the pension system has been transferring more responsibility, more staff and more money to him. The agency has also loosened its policies to allow more risk, with more leeway to borrow against current assets to make additional investments, a process known as leverage.

That mix of risk and leverage — uncommon among conservative public pension funds — landed the agency on the front page of The Wall Street Journal this summer, lending weight to concerns some board members have had for some time.

A number of retirees testified in front of the pension trustees on Thursday, pleading with them to dial back the risk and do away with relying on so much leverage to boost returns. Cheers and applause followed most of the testimony.

“The current leverage strategies are too risky and are not yielding the results that were anticipated,” retiree Phyllis Elkind told the board as many in the audience clapped in support.

Some trustees were already convinced the strategy is flawed.

“I think risk-parity needs to say bye-bye, and we need to say bye-bye to it, ” said Dan McAllister, the county treasurer who serves on the board as part of his elected duties.

http://www.utsandiego.com/news/2014/sep/...

Unfortunately, they are going to continue outsourcing with them:

McAllister, the treasurer, said it’s unusual for a retirement system as large as San Diego County’s to delegate its investments to a private firm.

“This is an exorbitant amount of taxpayer dollars being spent and is unprecedented in any other county in California,” McAllister said by e-mail before the vote. “I have strongly opposed the adoption of an outsourced government structure.”

http://www.bloomberg.com/news/2014-10-02...

============================================
============================================

Additionally, that propaganda piece from Friedman's foundation was from 2010. Investment assets have risen significantly since then; they're at an all-time high:

"SAN DIEGO — The San Diego County Employees Retirement Association (SDCERA) reported an all-time high of $10.1 billion in assets under management with a one-year estimated net return gain of 13.43% that exceeds the 7.75% rate of return needed to fund the benefit for the fiscal year ended June 30, 2014. SDCERA’s investment portfolio generated an estimated one year gross return of 13.82%."

http://www.sdcera.org/news.aspx

From your Friedman propaganda piece:

"In this policy brief, I estimate that
San Diego faces total of $45.4 billion, including
$7.95 billion for the county pension system, $5.4
billion for the city pension system, and an estimated $30.7 billion share of unfunded liabilities for California state retiree benefits. These estimates are made by correcting the state and local pension plans’ figures, which use a too-optimistic assumption that their investments will grow by about 8% per year for the indefinite future."

http://www.edchoice.org/CMSModules/EdCho...

In other words, he just pulled some numbers out of his behind and threw them at the wall, hoping they'd stick.

.........

Here's the reality:

"Conclusion

Origins and Severity of the Public Pension Crisis
Center for Economic and Policy Research

In the post 2008-2009 economy, public pensions have been the subject of scrutiny as a way to explain budget shortfalls. The main contributor to the current funding challenges facing some public pension funds was the collapse of the housing bubble and the subsequent downturn in the economy and the stock market, not inadequate contributions. Today, public pension plans remain a financially sound and cost effective mechanism for providing retirement benefits.

A number of studies have assumed that pension fund portfolios will earn a return of 4.5% annually; however, neither historical fact nor current data support this assumption.

SDCERA's average rate of return over the past 25 years is 9.4%. Fiscal year 2013 (which closed June 30, 2013) realized returns of 8.3% and fiscal year 2012 returned gains of 6.5%."

http://www.sdcera.org/pension_facts.htm

======================

Now, as for that "$2 Trillion Hole," many public agencies are already addressing the unfunded liabilities. CalSTRS just enacted a new plan to pay off their unfunded liabilities over 32 years (because they can...because it's not a DC system) by increasing contributions from all stakeholders. Most of the other pension funds are working on the numbers and legislation to pay off their unfunded liabilities, as well.

---------------

And one final note about something that has not been made public yet is that the retirement age for many employees will naturally go up over the years (in addition to the new regulations under PEPRA, and as contracts are renegotiated) as the employees who do NOT get retiree healthcare (again, phased out by many public employers up to 20 years ago) stay employed longer in order to keep their health insurance. This has the potential to result in huge savings for the pension funds over the years.

Submitted by CA renter on October 3, 2014 - 2:39am.

You're welcome (for the *actual* data), pri.

Submitted by CA renter on October 3, 2014 - 2:36am.

harvey wrote:
Thanks for the data, phaster.

DB plans will go down in history as a failed economic experiment.

LOL! And you think that DC pensions will go down in history as a successful experiment? Good luck with that.

Submitted by livinincali on October 3, 2014 - 7:09am.

CA renter wrote:
harvey wrote:
Thanks for the data, phaster.

DB plans will go down in history as a failed economic experiment.

LOL! And you think that DC pensions will go down in history as a successful experiment? Good luck with that.

Long comfortable retirement for the masses will go down as a failed experiment. Hope you didn't burn too many bridges with your kids because it's live with them or get the living equivalent of 3 hots and a cot. That's what's eventually going to happen. The top 20% may be able to experience comfortable retirement, but the rest will be living pretty damn broke in retirement. Surviving but not thriving. There's just not enough disposal income from the productive members of society to provide comfortable retirement for the masses.

Submitted by livinincali on October 3, 2014 - 7:12am.

CA renter wrote:

Now, as for that "$2 Trillion Hole," many public agencies are already addressing the unfunded liabilities. CalSTRS just enacted a new plan to pay off their unfunded liabilities over 32 years (because they can...because it's not a DC system) by increasing contributions from all stakeholders. Most of the other pension funds are working on the numbers and legislation to pay off their unfunded liabilities, as well.

Problem is those plans are still counting on 7%+ average returns for today's current levels in the stock and bond market. A 50% crash in the stock market or a long bear market in bonds blows those projections up. The cold harsh reality, the pension funds are screwed and most people expecting to receive a defined benefit will probably see somewhere between a 30-50% cut in benefits when it's all said and done. They'll go down kicking, screaming, and suing but the money just isn't there.

Submitted by scaredyclassic on October 3, 2014 - 7:49am.

either the future is so bright we're gonna have to wear sunglasses or
the future is so bright we're all gonna have our eyeballs irradiated and melted from the nuclear blast of debt.

I'm getting tired of predicting disaster, which makes me want to think everything's gonna be ok, but, from a contrarian point of view, it's usually safest for me to think the opposite of what i'm thinking or want to think.

So I'm going with the melted eyeball scenario for the future.

Submitted by harvey on October 3, 2014 - 8:08am.

You'll probably live longer:

http://www.apa.org/news/press/releases/2...

Pessimism About the Future May Lead to Longer, Healthier Life, Research Finds

Submitted by CA renter on October 3, 2014 - 11:37pm.

livinincali wrote:
CA renter wrote:
harvey wrote:
Thanks for the data, phaster.

DB plans will go down in history as a failed economic experiment.

LOL! And you think that DC pensions will go down in history as a successful experiment? Good luck with that.

Long comfortable retirement for the masses will go down as a failed experiment. Hope you didn't burn too many bridges with your kids because it's live with them or get the living equivalent of 3 hots and a cot. That's what's eventually going to happen. The top 20% may be able to experience comfortable retirement, but the rest will be living pretty damn broke in retirement. Surviving but not thriving. There's just not enough disposal income from the productive members of society to provide comfortable retirement for the masses.

Agree, to a large extent. That was my point about historical social safety nets being familial. But how do we reconcile this with the trends related to industrialization and modernization -- non-agrarian lifestyles where children are expected to sever ties with parents, siblings, and other family members at a fairly early age in order to pursue their own education and interests, etc.? It just doesn't bode well, especially for most American families.

Submitted by CA renter on October 3, 2014 - 11:39pm.

livinincali wrote:
CA renter wrote:

Now, as for that "$2 Trillion Hole," many public agencies are already addressing the unfunded liabilities. CalSTRS just enacted a new plan to pay off their unfunded liabilities over 32 years (because they can...because it's not a DC system) by increasing contributions from all stakeholders. Most of the other pension funds are working on the numbers and legislation to pay off their unfunded liabilities, as well.

Problem is those plans are still counting on 7%+ average returns for today's current levels in the stock and bond market. A 50% crash in the stock market or a long bear market in bonds blows those projections up. The cold harsh reality, the pension funds are screwed and most people expecting to receive a defined benefit will probably see somewhere between a 30-50% cut in benefits when it's all said and done. They'll go down kicking, screaming, and suing but the money just isn't there.

I'm generally at least as bearish as you are, but will admit that things have, as of yet, not been nearly as bearish as I would have predicted.

Submitted by harvey on October 4, 2014 - 7:50am.

CA renter wrote:
CalSTRS just enacted a new plan to pay off their unfunded liabilities over 32 years (because they can...because it's not a DC system) by increasing contributions from all stakeholders. Most of the other pension funds are working on the numbers and legislation to pay off their unfunded liabilities, as well.

Whew! That's a relief!

It's good to hear that CalSTRS has a 32 year plan that will fix the problem.

Their execution for the past thirty years has been a total failure, but I'm sure they'll get it right after a a few more decades.

And "most of the the other" fiscal time bombs are "working on the numbers and the legislation" ...

Sounds like everything is under control. No worries!

Submitted by scaredyclassic on October 4, 2014 - 10:10am.

We have a very worried cat. I am never nervous when she stays outside for the night. I know she's paranoid and scared beyond all reason.

We have a different cat who is confident and oblivious. We get really nervous when he stays out for the night.

Income inequality. No income. Poverty. Climate change. Humanity huddled in environmental refuge camps in Alaska eating the last canned goods and tree bark.

I just hope we continue to produce Floss so I can have teeth.

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