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Columnist Joe Mysak of Bloomberg.com has a column today (June 16) based on the San Diego County Grand Jury's recent study on City financing -- focusing particularly on the possibility of bankruptcy to test whether promises to workers allegedly set in concrete can be broken by a federal court. The actual grand jury study said, "A Chapter 9 filing would result in a federal determination of which fringe benefits and collective bargaining agreements could be restructured." Mysak's column quotes Natalie Cohen of National Municipal Research: "It will be difficult to make the case that the city is insolvent," says Cohen. "It seems the grand jury report is looking to bust open the discussion about the irrevocable nature of pension obligations -- which will continue to eat up the city's budget."

Mysak comments, "Did you ever have a feeling that there's a vindictive element to some of the cuts governments do manage to make?" Does government "try to punish the public? It's almost as if those in charge say, 'Fine, we'll cut back, but you'll never have clean streets again.'"

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Comments

SurfPuppy619 June 16, 2010 @ 5:59 p.m.

"It seems the grand jury report is looking to bust open the discussion about the irrevocable nature of pension obligations -- which will continue to eat up the city's budget."

"...irrevocable nature of pension obligations..." .....Really...........!!

I guess Natalie Cohen of National Municipal Research never heard of Prichard Alabama (BTW-this is what our San Diego "retirees" will be saying in about 5 years);

http://www.clipsyndicate.com/video/play/1470765/5_20_prichard_pension_plan

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Don Bauder June 16, 2010 @ 6:13 p.m.

Response to post #1: You have to feel sorry for those Prichard public retirees. But it's the old story: the city does not have the money to meet its prior obligations. I don't know if the legal precedent set in the Prichard case will ultimately affect California cities. There is a general belief in California that the pension promises are set in concrete. However, the California cities that go BK will ultimately have to take their cases to the U.S. Supreme Court. Best, Don Bauder

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Ponzi June 16, 2010 @ 7:26 p.m.

Does government "try to punish the public? It's almost as if those in charge say, 'Fine, we'll cut back, but you'll never have clean streets again.'"

Well yes they do. They threaten to cut public safety services; fire and police. They also do unpopular things like remove fire pits and suggest increasing parking meter revenue downtown (which will just drive more business away.. During a recession). They want to collect a trash fee after not having to do so for almost a century.

Instead of cutting the fat, the redundant bureaucrats and non-essential services. I don’t know if Steve Francis could have done a better job, but with his business experience, I doubt his leadership would have been a pathetic as Jerry Sanders.

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Don Bauder June 16, 2010 @ 8:16 p.m.

Response to post #3: Like Sanders, the L.A. mayor is denying that bankruptcy is the answer. However, the L.A. mayor IS cutting some fat -- unlike Sanders. Best, Don Bauder

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SurfPuppy619 June 16, 2010 @ 9:21 p.m.

You have to feel sorry for those Prichard public retirees..... I don't know if the legal precedent set in the Prichard case will ultimately affect California cities. There is a general belief in California that the pension promises are set in concrete.

What is happening to those Prichard, AL retirees is pretty bad-$200/month is ridiculous.

It is actually very sad, and for the life of my I don't know how the retirees were NOT able to get the BK court to pay out a reasonable pension. But this case puts to rest the question of whether a BK court can cut vested pensions-they can. The bottom line is Prichard County doesn't have any $$$. This county has filed BK twice within the last 10 years.

As for CA, this is a federal case, using federal law. Law that will apply across the country (even though the 13 different federal circuits do not have to follow each other, they do 99.9% of the time).

This would most certainly apply to CA.

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Visduh June 16, 2010 @ 9:59 p.m.

For those who have long memories, this notion of punishing the public should be familiar. It is just what happened after the passage of Prop. 13, the Jarvis-Gann amendment, in 1978. Oh, while Reagan was in office there was a similar proposal, actually a milder version, that failed at the ballot box. But the courts held up putting Jarvis on the ballot for two or three years--explaining why the rollbacks went back to 1975--and the state surplus continued to accumulate. (Now that's quaint: a state surplus. Can you imagine the legislature allowing a surplus to accumulate now? That's what happened. There was party infighting about how to deal with the surplus, with no agreement.) Voting for Prop. 13 took care of that. The counties and cities found themselves on short rations, and the state came through with some aid to help bridge the gap that drew down on its surplus funds. But even with all that, they had less money to spend. The city of San Diego made Draconian cuts to the library. They didn't make any really significant cuts to fire or police staffing, but were less likely to pass on big pay raises. (For many years the cops complained about how underpaid they were. Underpaid compared to whom? Oh, LA and San Francisco.) I digress.

Street sweeping was one area that was cut, and almost eliminated. Finally it was retained, but only to the extent in residential areas of twice a year. The first-in-the-nation noise abatement program, which I remember being a county program, was almost eliminated. Infrastructural repairs got short shrift then, and still get short shrift. Yes, that has been going on for at least thirty years. So the pols DO punish the public by cutting out things that people really desire. For many years in SD you could not get an animal control officer out without help from your city councilman. At city hall, most departments stopped answering the phone. If you did get through by some near-miracle, they would make a record of your complaint or concern, or so they said, and then nothing would happen. Gradually, over time, the typical San Diego resident came to expect little or nothing from city government in the way of normal municipal services, and was seldom surprised pleasantly. And when you expect little from government, that is what you will get.

But how much more can San Diego cut? It has been doing so little in many of those areas of city services that there's not much more to cut before they are eliminated altogether. The scare tactics about reducing fire coverage and police coverage may backfire. I hope they do, but I don't bet on it.

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SurfPuppy619 June 16, 2010 @ 10:44 p.m.

When I was growing up the sales tax was 6%, CA colleges were free (CC). CSU was $150/semester. We had a balanced budget every year with NO deficits.

Today the sales tax is over 10% in many counties, CSU is $5K per year and we have not had an on-time, balanced budget without a deficit in 15 years.

What changed? Gov employees were not comped over $100K per year-on average- back then.

Cops and ff's were not comped anything near the $200K per year they are comped today. All the tax increases have gone directly into the pockets f the gov employees-no better service though, in fact it has left the public with LESS service because of staff cuts. So when you hear about requests for raising taxes-understand exactly where it will go-right into a gov employees pocket-out of your and into theirs. That’s why gov employees have gold plated Cadillac compensation.

BTW-out state budget was due yesterday-June 15, it is delinquent July 1.

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Don Bauder June 17, 2010 @ 8:38 a.m.

Response to post #5: Ultimately, federal law should trump state law in California cases, I would think. Best, Don Bauder

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Don Bauder June 17, 2010 @ 8:41 a.m.

Response to post #6: Yet San Diego gets away with claiming it is cutting employment, when it is not doing so significantly. Best, Don Bauder

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Don Bauder June 17, 2010 @ 8:43 a.m.

Response to post #7: That is a good example of what we are discussing here. Best, Don Bauder

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Ponzi June 17, 2010 @ 4:04 p.m.

Proposition 13 cannot be blamed for budget shortfalls. Well it can, but not the average household that benefits from Proposition 13.

Most people move every 4 to 7 years. There is a very small percentage of people who are still in the same home they purchased in the 1970’s. Even increasing all of those tax bases on residences would not make a significant impact on tax revenues,.

It is business and commercial property that has benefited most handsomely from Proposition 13 and it was business who backed it. Corporations and industries that own the largest tracts of land do not sell like residential property owners. They may hold on to land for 30, 40, 50 years or indefinitely. Actually, indefinitely is more like it because the corporation don’t sell the land. They use clever legal tactics to transfer or share ownership in property so that it is never reassessed.

The problem here is that the beneficiaries of Proposition 13 are both the average homeowner and the industrial giant. Although stripping the commercial loophole would have a tremendous windfall of tax revenue, the taxpayers do not want to tinker with Proposition 13 for fear of losing it.

Until people are educated and have a full understanding of the “real problem” with Proposition 13, there can be no intelligent dialog on how to attack it and make the businesses, who by far benefit the most. Start paying for their fair share and end the shenanigans that keep commercial and industrial property from ever having a reassessment.

On the other hand, if you study the property tax revenues of the State of California, they have gone up several hundred percent (ins spite of Prop 13) and yet the state continues to outpace this in spending. So even if the state had the additional revenues, could be trust them to spend it wisely? Would it really mean better anything? They have squandered it and mismanaged what we are giving them now so where is the compelling evidence that things would improve given more tax revenue?

I don’t have an answer. (I don’t think Meg Whitman does either.) I’m just pointing out that although Proposition 13 is a convenient scapegoat, it is not the cause of our current crises.

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SurfPuppy619 June 17, 2010 @ 5:34 p.m.

The problem here is that the beneficiaries of Proposition 13 are both the average homeowner and the industrial giant. Although stripping the commercial loophole would have a tremendous windfall of tax revenue, the taxpayers do not want to tinker with Proposition 13 for fear of losing it.

Until people are educated and have a full understanding of the “real problem” with Proposition 13, there can be no intelligent dialog on how to attack it and make the businesses, who by far benefit the most. Start paying for their fair share and end the shenanigans that keep commercial and industrial property from ever having a reassessment.

I agree, the problem is once the busienss loop hole is closed, the public employee unions will want to "adjust" the rate for residential owners as well-down the road, in the name of "fairness", or for an "emergency" like education/fire/police/[insert tax hike buzz phrases here] which is just code for raising taxes so the public employees can get more comp.

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SurfPuppy619 June 17, 2010 @ 5:34 p.m.

Has Proposition 13 left government with too little money to run itself? Hardly. From the date Proposition 13 took effect in 1978 until now, property tax revenue has increased 580 percent. You read that correctly: 580 percent. During that same time, California’s population went from about 24 million to 38 million, an increase of only 58 percent. In other words, government revenue under Proposition 13 has grown 10 times the rate of population growth.

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Visduh June 17, 2010 @ 7:13 p.m.

I cannot disagree with the comments of Ponzi or SurfPuppy in regard to Prop. 13, which was flawed at the inception. Those of us who voted for it needed something, anything, to rally round and pass. There was a certain temporary flavor to the whole thing in 1978. But it did cap the taxes at 1% of market value, plus bonded debt. Many jurisdictions around the US are levying taxes at twice, thrice and . . . of that level.

The abuse of the law, if there is one, is that corporate and business entities can keep reinventing themselves and can exist forever. Thus, the property never "changes hands", and is thus never reassessed. That was not the intention of Jarvis, Gann, or any of the other early proponents.

I'm in the same home we bought over twenty years ago. We gave up a "grandfathered" home to move to this one, and traded a $400 per year tax bill for a $1400 tax bill. Sorry we moved? No, but there was a price to be paid.

I have a neighbor, actually the widow, who moved to their home in 1975. I doubt her annual tax bill for a nice three-bedroom home on a half acre is much more than $1200 a year. He died a couple years ago, and she lives in the place alone. Could she sell? For sure. But when will she sell? Possibly tomorrow, or maybe in twenty years. There is plenty of economic incentive to stay put.

But here's the point: we have little protection from a legislature that can, at will, raise sales taxes and raise the state income tax. So, since they can, the legislators have done both rather freely over the years. Yet, they cannot catch up with the demands of the spenders. The only real protection that Californians have from highest-in-the-nation taxation is Prop. 13. We already rank among the highest, or are maybe the highest, in sales tax, and again among the highest, if not the highest in state income tax.

No, they'll take my gun (Prop. 13) from me when they pry it from my cold, dead fingers. Ha, ha!

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Ponzi June 18, 2010 @ 8:35 a.m.

Still, why should NASSCO, Disneyland, and other large corporate land holders be exempt from property tax reassessments? These entities will never sell the land, so the rest of us pay for their shortfalls by way of increased sales and income taxes.

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SurfPuppy619 June 18, 2010 @ 9:21 a.m.

I agree with Ponzi, but as I stated, many people are worried that if you give an inch, even a fully justifiable inch, then that inch could turn into a mile.

I would love to make commercial properties subject to new tax reassessments every couple of years. But here is my beef and what I am VERY AFRAID of-two things;

1) That tax reassessment will eventually try to be pushed onto regular homeowners-somewhere down the road- that Prop 13 was meant to protect. And that push will come from the gov employees under the guise of an "emergency", or "one time tax increase", or my favorite, a "temporary tax increase"; and

2) I am even more worried that the tax revenue that would come from reassessments of commercial properties would NOT go to more or better gov services-it would just go where all new tax increases have gone the last 15 years, right into the gov employee’s pocket-in bigger and better pensions, bigger and better salaries, bigger and better everything. That would NOT improve society, but have the opposite effect.

I would RATHER have a Disneyland, NASSCO and other corporate employers use that tax windfall to build their business, hire new employees, and expand their markets. Having that tax windfall in their hands to grow the economy is a much better use-in my eyes.

You just cannot trust the gov today to use taxpayer money wisely, they will squander it, while I KNOW a Disneyland or NASSCO will use it wisely-if they didn’t they would have been out of business long agao.

It is a pretty sad day when you cannot trust the gov to do the right thing.

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Visduh June 18, 2010 @ 9:54 a.m.

SurfPup, it IS a sad day when you cannot trust the government to do the right thing. Just remember that we have had a long-running sad day, as far as many are concerned, for decades. One reason that I oppose further government intrusion into our lives, and oppose more government involvement, is that it has an abysmal track record of inefficiency, poor quality of delivery, and now gross overcompensation of its employees.

If you doubt that, ask yourself if airport security is really better than it was, pre-9/11. Does the VA run an exemplary health care system (the closest thing to socialized medicine in the US)? Is the FBI the best and most effective law enforcement agency in the US? Did the California parole system take John Gardner off the streets when he repeatedly violated his parole terms?

I fully agree with you that we spend more now on government services and get less than ever before. Paying these employees more hasn't made their performance better. It is now worse in most agencies than ever.

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Ponzi June 18, 2010 @ 11:11 a.m.

I am seeing a distinct pattern with regards to governments and unions vs. private sector unions. Government entities that are in a stranglehold by unions just carry more debt, cut more services and add higher fees and taxes where they can. In the process diminishing the returns and quality of service to the people. While the private sector unions basically just drive their employer into non-competitive situations and (should) make them fail. However out government has also stepped in to bail out private unions (via their employers) when the market would have been better served if they had been left alone to fail. Same with the banks, I’m sorry to say. They didn’t change their behavior because they did not have to.

We have quite a mess on our hands and the root is in the greed of unions. Things do not seem to be getting better and the plans that are being proposed don’t pencil out. Tins will not magically “fix themselves” with tax relief and the status quo. Some big, painful, abrupt changes are going to have to come down.

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Don Bauder June 18, 2010 @ 11:57 a.m.

Response to post #11: I had strongly backed Prop. 13, but even as we paid ridiculously low property taxes, I began to see the error of my ways as I watched California go to hell. Best, Don Bauder

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Don Bauder June 18, 2010 @ 11:59 a.m.

Response to post #12: Something has to be adjusted. Quickly. Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:01 p.m.

Response to post #13: Are you sure you aren't comparing apples and oranges? Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:22 p.m.

Response to post #14: Yes, but there are real imbalances: pre-Prop. 13 homes vs. post Prop. 13 homes. Pre-Prop. 13 commercial property. Those injustices must be dealt with. Regressive sales taxes can't keep carrying so much of the load. Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:24 p.m.

Response to post #15: Well said. The sales tax can't carry the burden while companies skate. Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:25 p.m.

Response to post #16: I think your arguments are weak. Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:28 p.m.

Response to post #17: We have a dilemma. The private sector has proved conclusively that it cannot behave. But regulation is not good, either. Best, Don Bauder

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Don Bauder June 18, 2010 @ 12:30 p.m.

Response to post #18: You are assuming that private sector unions have far more puissance than they have. Public sector unions DO have such power. But the old private sector unions of old are impotent. Best, Don Bauder

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Ponzi June 18, 2010 @ 2:35 p.m.

I guess I didn’t say it clearly. The private unions can only push so far before the golden goose dies, but the public unions seem to have an indefinite well to dip into… the taxpayers. They will just keep taking money until everyone is broke.

It is the “tragedy of the commons.”

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SurfPuppy619 June 18, 2010 @ 2:53 p.m.

However out government has also stepped in to bail out private unions (via their employers) when the market would have been better served if they had been left alone to fail. Same with the banks, I’m sorry to say. They didn’t change their behavior because they did not have to.

By Ponzi

You, me and 94% of America felt the same way-there should be have been any bailouts- for anyone.

But the 94% of Americans against TARP did not stop the Congress from passing TARP.

(BTW-I have not seen 94% of America agree on anything-ever! that was a first)

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Don Bauder June 18, 2010 @ 7:45 p.m.

Response to post #27: Yes, the well appears to be infinite. It won't continue to be, though. Best, Don Bauder

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Don Bauder June 18, 2010 @ 7:48 p.m.

Response to post #28: But the federal government did NOT bail out AIG, Fannie, Freddie, Chrysler, the big Wall Street firms as a favor to labor unions. That is simply not the case. It was done to bail out investors and managements. Best, Don Bauder

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SurfPuppy619 June 18, 2010 @ 9 p.m.

But the federal government did NOT bail out AIG, Fannie, Freddie, Chrysler, the big Wall Street firms as a favor to labor unions. That is simply not the case.

I never meant to imply gov bailed these leeches out as a favor to labor unions (although GM and Chrysler were certainly bailed out for that reason).

I was just pointing out NO ONE wanted these bailouts, or almost no one-94% of America were against it-and that tide is the same today-we just cannot run $1.4 trillion deficits bailing every special interest group out......and getting nothing in return but long term debt.

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Don Bauder June 19, 2010 @ 7:29 a.m.

Response to post #31: Bailouts are horrible because of the moral hazard question -- among other problems. No argument there. Best, Don Bauder

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nan shartel June 23, 2010 @ 12:46 p.m.

tough isn't it...to let the chips fall where they may when any problem come's begging..i'm beginning to understand the particulars of the economy and both federal..state and local politics since reading u Don...thx

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SurfPuppy619 June 23, 2010 @ 1:44 p.m.

tough isn't it...to let the chips fall where they may .... Don...thx

By nan

Nice shooting nan, you understand this is baloney.

The country is not going to fade away b/c a few companies go BK. But forcing us/taxpayers/poor to bail out these yahoos to the tune of trillions is absurd.

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Don Bauder June 23, 2010 @ 3:25 p.m.

Response to post #33: I'm glad you understand the economy because nobody else does. Best, Don Bauder

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Don Bauder June 23, 2010 @ 3:29 p.m.

Response to post #34: Those whom your tax money bails out laud "free enterprise," "free markets," "rugged individualism," "social Darwinism," ad nauseam. Best, Don Bauder

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