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The Wall Street Journal of today (Feb. 18) has an excellent story on Chapter 9 municipal bankruptcies. It focuses on Vallejo, which filed Chapter 9, and Harrisburg, the capital of Pennsylvania, which seems likely to file. "People believe that municipal debt is safe based on assumptions that are no longer true," warns an executive with a firm that works with ailing municipalities. Says the story, "In San Diego, political leaders have faced outside pressure to file for Chapter 9 as a way to get around benefits packages for public workers. San Diego Mayor Jerry Sanders has publicly dismissed the idea." The Journal doesn't mention that City Attorney Jan Goldsmith decided that pension promises could not be touched under the law, and Sanders, the former police chief, bought the idea. But a bankruptcy judge can overthrow state and municipal laws if there is simply no money to pay outrageous benefits, such as exist in San Diego. The Journal story does not mention that at the same time sober people are talking about a Chapter 9 in San Diego, the mayor is pushing for a convention center expansion, new library, new city hall complex, and probably a subsidy of hundreds of millions of dollars for the San Diego Chargers football team. This word should get out nationally. It took a New York Times headline, "Enron by the Sea," to wake up San Diego several years ago.

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Comments

Ponzi Feb. 19, 2010 @ 8:42 a.m.

"Attorney Jan Goldsmith decided that pension promises could not be touched..."

He is as wrong as the toupee on his head.

Bankruptcy can change just about anything and cancel all contracts.

San Diego went from employing a fighter as City Attorney to hiring an idiot.

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Don Bauder Feb. 19, 2010 @ 10:13 a.m.

Response to post #1: I agree with your assessment of a BK judge's power and also your assessment of Goldsmith. Best, Don Bauder

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SurfPuppy619 Feb. 19, 2010 @ 4:21 p.m.

Jan Goldsmith decided that pension promises could not be touched under the law,

Jan Goldsmith is nothing but a tool.

He has no idea how a BK court would treat pensions, b/c no pensions have ever been listed to be cut in BK court. Yet somehow this tool states as a FACT that pensions cannot be touched-as well as making the most ridiculous and preposterous statement ever from a City Attorney-that a BK filing would cost $300 MILLION!!!!!!! Bwhahahahahahah.

This ran in the Voice of San Diego last week, and although I don't agree with some of it, it shows that pensions could indeed be listed as a contract to renegotiate in BK court;

http://voiceofsandiego.org/government/article_0418be36-1aa3-11df-840f-001cc4c03286.html?mode=story

Will it be successful? Who knows, not me and certainly NOT Tool Goldsmith (and by Goldsmith claiming pensions could not even be touched shows how incompetent he really is). My money would be on YES!, the pensions can be cut. Once you submit yourself to the authority of a BK court-that judge has WIDE latitude to do whatever he wants to get the ship righted. That includes cutting pensions. As for the gov employees who claim a pension cannot be touched in BK court per Govt. Code 20487-I have NEWS for you-YES a BK judge can cut pensions b/c STATE LAW is trumped by federal BK law-per the Supremacy Clause of the Constitution. Once the muni submits itself to the authority of the BK court federal law controls, not state law.

This guy is either 1) a knowing, willful and intentional LIAR, or 2) completely incompetent. I have no idea which one he is, but either way he has no business being City Attorney-not even dogcatcher.

Vallejo is 90% through their BK, and they have spent less than $5 million, or LESS than 2% of that ridiculous number of $300 million Tool Goldsmith stated-what a joke.

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SurfPuppy619 Feb. 19, 2010 @ 4:24 p.m.

He is as wrong as the toupee on his head.

Bankruptcy can change just about anything and cancel all contracts.

You are on the money Ponzi-100%.

And thanks for the comic relief, I have to think about that squirrel sitting on top of Goldsmiths head to keep myself from blowing my top over his moron claims.

Him and Sanders are either flat out LIARS or complete incompetents.

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Don Bauder Feb. 19, 2010 @ 4:34 p.m.

Response to post #3: In his analysis, Goldsmith used the usual hedges and dodges to talk out of both sides of his mouth. However, the gist of the advice he gave Sanders -- and that Sanders definitely wanted to hear -- is that realistically, pension promises could not be touched. Best, Don Bauder

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Don Bauder Feb. 19, 2010 @ 4:41 p.m.

Response to post #4: In re the guy with the toupee: there is a reason that the word "lawyer" sounds so much like the word "liar." I know you don't like hearing that, because you are a lawyer. There are good ones in San Diego, but they usually get smeared by the establishment and in the media. Best, Don Bauder

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SurfPuppy619 Feb. 19, 2010 @ 7:56 p.m.

Just read through the "comments" of the 2-18-10 WSJ Ch. 9 article, and they were pretty interesting.

We have plenty of compnay all across the USA, and the general consensus is that muni pay and benefits need to be cut-one comment even mentioned our Mayor's $92K police pension;

http://online.wsj.com/article/SB10001424052748704398804575071591602878062.html#articleTabs%3Dcomments

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Don Bauder Feb. 19, 2010 @ 9:14 p.m.

Response to post #7: The mayor's fat pension should be scrutinized. Is his current refusal to look at the overall pension abuses connected to the manna he will be getting? You know the answer. Best, Don Bauder

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Burwell Feb. 19, 2010 @ 10:57 p.m.

Goldsmith's oral legal opinions are not worth the paper they're written on.

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Don Bauder Feb. 20, 2010 @ 8:08 a.m.

Response to post #9: Riposte! Best, Don Bauder

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JustWondering Feb. 20, 2010 @ 4:03 p.m.

Funny... I thought Mr. Goldsmith said he was unable to find any case, in the nation, where a federal bankruptcy judge had altered the vested pension benefits. I don't believe he said they couldn't be changed, just that he found no case where they had been changed.

In previous municipal bankruptcy cases of Orange County in the 90's and Vallejo, currently ongoing, the court did not and has not changed the pension benefits.

If BillyBobHeny/Johnny Vegas/Surfpuppy619 wants to give us the citation on a bankruptcy case where the court changed the vested pension benefits of government workers I'd love to read it.

Johnny also says Vallejo has spent $5 million on their bankruptcy so far but what he conveniently leaves out info on the size of the bankruptcy. Comparing San Diego to Vallejo is like saying apples and oranges are fruits. They both are but both have completely different favors. San Diego is not insolvent and many people question if Vallejo was too.

Besides how can be anywhere near insolvency when our Mayor, Jerry Sanders, wants to build all these new monuments...a new city hall, a new Charger Stadium, a new Central Library and an expanded Convention Center. Seem we're with flush in cash and plenty of financing according to our Mayor.

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SurfPuppy619 Feb. 20, 2010 @ 5:59 p.m.

Funny... I thought Mr. Goldsmith said he was unable to find any case, in the nation, where a federal bankruptcy judge had altered the vested pension benefits.

Funny, I have been unable to find any case, in the nation, where a federal judge has stated that government pensions were not subject to being cut during a CH. 9., that they are protected-not one judge has ruled they are protected. I guess that means they must be subject to being cut.

You need to stop playing games with words JW. There has been no ruling either way on pensions in BK court under CH. 9 b/c they have never been tested. You know that, and saying you have found no judge that has ruled they cannot be cut means nothing under such facts.

Just b/c they have never been tested does not mean they cannot be struck down.

BTW JW-I am still waiting for you, or your hero Goldielocks, to explain how a BK filing would cost San Diego $300 million- when Vallejo is 90% through theirs and have spent less than $5 million (less than 2% of your $300 million claim). Please, educated me on why it would cost 1/3 of a billion dollars to file a CH. 9.

You do know that Enron was the biggest BK case in US history, and it cost less than $10 million, don't you????????

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SurfPuppy619 Feb. 20, 2010 @ 6:08 p.m.

Goldsmith's oral legal opinions are not worth the paper they're written on.

By Burwell

B-

I think what we are starting to see here with Goldsmith and Sanders, like we have so much in the past, are backroom deals being cut with the Mayor, Goldmsith and other officials. Doing it behind closed doors. And we KNOW how that worked out from the Golding/J. McGrory days.

Donna Frye and Carl DeMaio are the only ones that seem honest to me. Frye says flat out we are going to be BK very soon (maybe even right now) unless major concessions are amde by the muni workforce. DeMaio says we can fix things, but he is calling on implementing basically the same ideas as Frye-cutting spending, in major ways.

Goldmsiths comments, as I stated earlier, are so ridiculous that there are only two places they could have come from; 1) pure ignorance and stupidity or from 2) conspiring with the Mayor and others behind closed doors.

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Don Bauder Feb. 20, 2010 @ 7:38 p.m.

Response to post #11: Goldsmith said he could find no cases in which a BK judge had altered pension benefits. He did say that it was possible it would be done at some point in the future. Basically, he was telling Sanders what he wanted to hear: don't try to fiddle with the pensions. That's why Sanders has said BK wouldn't work. He was relying on Goldsmith. Best, Don Bauder

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Don Bauder Feb. 20, 2010 @ 7:42 p.m.

Response to post #12: I guess no one will know until some BK judge says pensions are excessive and have to be trimmed. This judge will rule in a Ch. 9 that a city's services and infrastructure maintenance cannot be slashed any further. The overpaid city workers will have to cough up. This day will come. Best, Don Bauder

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Don Bauder Feb. 20, 2010 @ 7:49 p.m.

Response to post #13: Frye is making sense, as always. She is saying the City of San Diego is close to bankruptcy right now. DeMaio deserves praise for fighting the employee unions, but he does not deserve praise for pandering to the establishment -- for example, in saying that the convention center expansion could be doable under certain conditions. He knows better. I will be interested to see what he says about the possibility of massively subsidizing (say, $700 million) billionaire Alex Spanos's pro football team when the city is technically insolvent. Best, Don Bauder

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SurfPuppy619 Feb. 20, 2010 @ 8:42 p.m.

I will be interested to see what he says about the possibility of massively subsidizing (say, $700 million) billionaire Alex Spanos's pro football team when the city is technically insolvent.

I will support NO ONE who advocates for corporate welfare in the form of a stadium. Anyone that even thinks about that out loud is someone to RUN from.

I myself have only heard Sanders make claims of trying to support a stadium (and library and convention center and city hall).

I am pretty sure the public has had just about as much as they can tolerate with Sanders and his pie in the sky claims. Sanders has not even come close to delivering on his promises.

No one I know has any confidence in Sanders, or the (non) job he has done so far.

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johnsd Feb. 20, 2010 @ 10:31 p.m.

Comparing San Diego to Vallejo is like saying apples and oranges are fruits. They both are but both have completely different favors. San Diego is not insolvent and many people question if Vallejo was too.


It is true that San Diego and Vallejo are different cities in terms of size, demographics and affluence. However, like many, if not most cities, counties and the state itself, both San Diego and Vallejo agreed to total compensation levels that could not be sustained in the long term. The current recession and stock market losses have simply accelerated the day of reckoning. As an example, Vallejo, which is primarily a lower-middle class city, was paying its policemen about 20% more than the Solano county sheriffs were being paid. When you include the costs of all the benefits, which do not exist in the private sector that pays for government, the total cost for a government employee increases by more than 50% and is simply unsustainable. It used to be that public employees were paid less but had job security and good benefits. Today, the average direct salary of public employees is significantly more than the average private sector salary before the cost of the platinum benefits are even included.

Other than the public employee union members and their consultants, could you please refer to other sources who did not believe that Vallejo was insolvent.

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johnsd Feb. 20, 2010 @ 10:36 p.m.

In a recent column in the San Francisco Chronicle, Willie Brown, who was one of the smartest and most effective politicians, said:

"If we as a state want to make a New Year's resolution, I suggest taking a good look at the California we have created. From our out-of-sync tax system to our out-of-control civil service, it's time for politicians to begin an honest dialogue about what we've become.

Take the civil service.

The system was set up so politicians like me couldn't come in and fire the people (relatives) hired by the guy they beat and replace them with their own friends and relatives.

Over the years, however, the civil service system has changed from one that protects jobs to one that runs the show.

The deal used to be that civil servants were paid less than private sector workers in exchange for an understanding that they had job security for life.

But we politicians, pushed by our friends in labor, gradually expanded pay and benefits to private-sector levels while keeping the job protections and layering on incredibly generous retirement packages that pay ex-workers almost as much as current workers.

Talking about this is politically unpopular and potentially even career suicide for most officeholders. But at some point, someone is going to have to get honest about the fact that 80 percent of the state, county and city budget deficits are due to employee costs.

Either we do something about it at the ballot box, or a judge will do something about in Bankruptcy Court. And if you think I'm kidding, just look at Vallejo."

Here is the article link: http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2010/01/03/BA2V1BBGHH.DTL

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johnsd Feb. 20, 2010 @ 10:40 p.m.

The city of San Diego may or may not be insolvent, but it is in critical financial shape. You have to wonder about the "competence" of the clowns running the city when they want to spend money they don't have for dubious projects.

Then again, look at the clowns in Sacramento and the bigger clowns, or God knows what, in Washington D.C.

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Burwell Feb. 20, 2010 @ 10:48 p.m.

Funny... I thought Mr. Goldsmith said he was unable to find any case, in the nation, where a federal bankruptcy judge had altered the vested pension benefits. I don't believe he said they couldn't be changed, just that he found no case where they had been changed.

======== In a bankruptcy scenario the pension plan would likely be terminated outright and dissolved. Current and retired city workers would receive checks for their share of plan assets which they could rollover into an IRA and nothing more. The existing defined benefit plan would disappear and be replaced with a government version of the 401(k) and social security. Once the city exited bankruptcy the taxpayer would have no further liability to retirees or current employees for unfunded pension benefits. City workers like JW would be well advised to obtain the 40 quarters needed to qualify for social security benefits before it's too late.

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johnsd Feb. 20, 2010 @ 10:51 p.m.

I should have used the word "knaves" instead of "clowns" in my previous post. It more accurately reflects the nature of the political class.

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Don Bauder Feb. 21, 2010 @ 6:51 a.m.

Response to post #17: I wish I were as confident as you that the public is aware that the City of San Diego is broke, and will not support insane ideas such as the football stadium, convention center proposal, and new city hall complex. The U-T has a story today that San Diego may lose Comic-Con. It looks like a plant by downtown boosters to hype the convention center expansion. I think the city could well lose Comic-Con. I also think it is the height of folly for a financially-ailing city to expand a convention center to keep one event which has the power to go elsewhere. Best, Don Bauder

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Don Bauder Feb. 21, 2010 @ 6:55 a.m.

Response to post #18: The claim that Vallejo was not really insolvent is outrageous. Public employee unions in Vallejo and elsewhere are desperately trying to hold on to their excessive salaries AND excessive benefits. They will continue to claim that cities are not really hurting. It is not true. Best, Don Bauder

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Don Bauder Feb. 21, 2010 @ 6:58 a.m.

Response to post #19: That article by Willie has stirred up much commentary -- overwhelmingly positive. He's right. Best, Don Bauder

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Don Bauder Feb. 21, 2010 @ 7 a.m.

Response to post #20: In a sense, San Diego is a microcosm of the nation. Best, Don Bauder

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Don Bauder Feb. 21, 2010 @ 7:02 a.m.

Response to post #21: That would be one way to do it. Best, Don Bauder

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Don Bauder Feb. 21, 2010 @ 7:04 a.m.

Response to post #22: In San Diego County, "knaves" would seem to reflect verisimilitude more than "clowns." Best, Don Bauder

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SurfPuppy619 Feb. 21, 2010 @ 6:48 p.m.

The claim that Vallejo was not really insolvent is outrageous. Public employee unions in Vallejo and elsewhere are desperately trying to hold on to their excessive salaries AND excessive benefits. They will continue to claim that cities are not really hurting. It is not true. Best, Don Bauder

The latest poll shows that basically everyone in CA knows about the public pensions and the absolute chaos it has created, this includes both demorcrats and republicans. Today a MAJORITY of voters see that the $100K@50 pensions need to go.

I think that the tide is/has finally turned.

But don't take my word for it JW, read the facts for yourself-Page 22, 76% of the adults (78% of likely voters) in this state think public pensions are a problem, compared to only 14% (gov employees??) who think public pensions are not a problem;

http://www.ppic.org/content/pubs/survey/S_110MBS.pdf

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Don Bauder Feb. 21, 2010 @ 7:42 p.m.

Response to post #29: I certainly hope there is a public commitment to do something about this problem draining cities as well as the state. Best, Don Bauder

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SurfPuppy619 Feb. 21, 2010 @ 7:47 p.m.

Other than the public employee union members and their consultants, could you please refer to other sources who did not believe that Vallejo was insolvent.

By johnsd

As you can see from the link above, only 14% of the adults in CA think these gravy train pensions are NOT a problem, and if you excluded gov employees that number would probably drop by 90% or more.

We will see if JW repsonds, but I think he his tucked tail and ran away.

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johnsd Feb. 22, 2010 @ 12:23 a.m.

76% of the adults (78% of likely voters) in this state think public pensions are a problem, compared to only 14% (gov employees??) who think public pensions are not a problem.


These numbers do not surprise me. However, lets hope they do not change when the massive propaganda effort funded by the public employee unions starts. Had the four propositions that Arnold supported in the special election a few years ago passed, we would not be in such bad shape. Ultimately, it is the voters fault that we let the propaganda from special interests influence how we vote. It is a very difficult task for the voters to understand what is going on because the political class does its best to obfuscate the information about the total cost of public employees. Even basic things like the difference between baseline and zero-based budgeting are very poorly understood and certainly not explained my most media sources.

There is no need for government unions other than to protect firemen, policemen and others in difficult jobs from false accusations or other unfair attacks on their performance. When voters start reacting negatively to any political ad sponsored or paid by a government union, I will believe that this cancer can be eradicated.

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Don Bauder Feb. 22, 2010 @ 5:58 a.m.

Response to post #31: I agree the situation is serious. But once again, I must throw in another variable: REALLY outrageous pay of corporate top management. When government employees see the average CEO bringing home $14 million a year, and Wall Street CEOs bringing home $50 million to $100 million, and then money being stashed in overseas tax havens, there is a rebellion. The public sector workers demand more. When economies were good, politicians boosted those salaries and fringes. Now we realize that governments don't have the resources to meet those past commitments. So, rightfully, the public is outraged. But the public should be equally outraged at two private sector abuses: 1. Excessive compensation at the top; 2. Inadequate compensation in the middle and at the bottom. Best, Don Bauder

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Don Bauder Feb. 22, 2010 @ 6:05 a.m.

Response to post #32: And remember, a different kind of propaganda from special interests is one reason that the governments cannot pay pensions promised workers. I'm referring to entrepreneurs who spend money to convince the public that they deserve massive subsidies. Those constructing hotels, retail outlets, shopping centers, pro sports teams all expect subsidies from government. And they have the funds to keep a propaganda barrage going. Those handouts are one factor putting governments in binds. Best, Don Bauder

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Ponzi Feb. 24, 2010 @ 7:47 a.m.

JustWondering.... here's some news for you...

Bankrupt Vallejo eyes CalPERS By Ed Mendel

The city of Vallejo’s groundbreaking attempt to use bankruptcy to overturn expensive labor contracts may include pension and retiree health contracts with CalPERS.

The list of creditors holding the “20 largest unsecured claims” issued by Vallejo when it declared bankruptcy last May was topped by the California Public Employees Retirement System — $135 million for retiree health care and $84 million for pensions.

The city has not formally proposed a change in retiree benefits. But Vallejo officials have said publicly that they want to negotiate a “long-term solution” with the public employee unions.

An attorney for the city’s retirees, James Paul, said in a filing with the U.S. Banruptcy Court last month that the city “has indicated its intent” to modify retiree health benefits in talks with unions and the retirees committee.

The rest of the story: http://calpensions.com/2009/01/15/bankrupt-vallejo-eyes-calpers/

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Don Bauder Feb. 24, 2010 @ 3:04 p.m.

Response to post #35: This is encouraging news. Best, Don Bauder

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johnsd Feb. 25, 2010 @ 11:53 p.m.

And remember, a different kind of propaganda from special interests ... entrepreneurs who spend money to convince the public that they deserve massive subsidies. Those constructing hotels, retail outlets, shopping centers, pro sports teams all expect subsidies from government.

Thanks for reminder. Sports teams are some of the biggest corporate welfare recipients, where most of the beneficiaries are either millionaires or billionaires. It is one thing to expedite a cumbersome approval process and remove needless red tape, but it is totally different to subsidize private development. There is no such thing as too much transparency with government decisions. To a great extent, the political class are like roaches, when the light is turned on, they scurry and hide.

In defense of decision makers, there can be honest differences of opinion and opinions can change the more facts are known.

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Don Bauder Feb. 26, 2010 @ 8:03 a.m.

Response to post #37: Probably a majority of the pro sports team owners are billionaires. Those that aren't have hundreds of millions. They are much better off financially to finance a sports facility than the cities and states from whom they suck taxpayer blood. Best, Don Bauder

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SurfPuppy619 Feb. 27, 2010 @ 12:32 a.m.

JW is too busy posting hundreds of times per day on the Orange County Register's site to come back I guess.

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Don Bauder Feb. 27, 2010 @ 1:40 p.m.

Response to post #39: I had no idea JW had left us for Orange County. Remember, he kept saying that people in his occupation would leave SD to go where the jobs and fringes were better. Do you suppose he did? Best, Don Bauder

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