Sources: 2009 Encinitas Annual Financial Report, or AFR, and the October 2009 CalPERs Actuarial Pension Study for Encinitas, or CAP.
Encinitas Mayor Dan Dalager has recently assured voters that our city is in excellent financial shape. If so, then why are the roads and beach access such a mess?
Now if you trust the state of California, or CalPERs, pension system, the Standard and Poor’s, or S&P, rating agency, the opinions of future pension recipients (i.e., city management), off balance sheet accounting that ignores all retiree debts and road maintenance deficits (AFR p. 5), and also believe that real estate values and retail sales are presently skyrocketing; then and only then is there a chance that our city is not broke.
All of our city’s scary liabilities are tucked deep in the AFR by the city and rubber stamped by the fraudulent S&P rating agency in order to keep the massive Ponzi scheme going. These S&P AA+ credit ratings enable our city to borrow more money so that certain developers can get pet projects and city employees can continue accruing taxpayer guaranteed multi-million dollar pensions.
The current value of the promised pension benefits is $64,973,397 — what we owe (CAP p.11). But the current assets that the city has at CalPERs to pay those benefits are only $35,862,082 — this is what we have saved (CAP p.11). Thus the true unfunded pension liability is $29 million — this is our pension “debt” today. However, CalPERs lost a lot of our tax money and uses accounting fraud to avoid recognizing the pension losses so that cities can further underfund the pensions to save cash (CAP p. 6 to 8). Thus their “Actuarial Asset Valuation” of $35 million for our city is artificially inflated — just like a 2007 home appraisal.
To make things much worse, the accrued pension liability doubled between 2004 and 2008 (CAP p. 15). In addition to pensions, the city has a nonpension or Other Post Employment Benefits (“OPEB”) retiree debt of $10 million (AFR p. 68 to 69).
These retiree obligations are very problematic because taxpayers are obligated, by law, to pay these exploding city retiree debts before the city can fund any services, including police. Therefore they are much more toxic than bank loans or bonds and all $39 million ($29 million + $10 million) of this is excluded from the city’s analysis — just like AIG and Enron did before their “surprise” demise.
In fiscal 2009 our city took in about $55,773,570 (AFR p.72) in tax revenues but had a net loss of $3,591,849 (AFR p. 73). In addition, they spent only $484,530 (AFR p. 73) on street maintenance, which is less than they spent on the Parks and Recreation’s administration (AFR p.73). Due to this chronic neglect of our streets the city has accrued a deferred road maintenance debt of $17 million (http://www.encinitastaxpayers.org/issues.html). This very material liability is also not included in the city’s analysis — this is like not telling a home appraiser that your roof caved in.
Thus Dan Dalager and City Hall have obligated the taxpayers of Encinitas to at least $56 million ($39 million retiree debt + $17 million street debt) in current unfunded off balance sheet liabilities or “hidden debts.” This giant “credit card balance” is being withheld from the public while the city only has a contingency reserve fund of around $9,601,583 (AFR p. 62). In addition to all this mess our total long-term debts are $172,467,502 (AFR p.115).
Dan’s only hope is that he and Kristin Gaspar get elected so that they can launch a second “lease-revenue bond” scam to fund the popular Hall Property Sports Park. However, as with the initial $22,645,000 raised (AFR p.56), City Hall will likely devise methods to divert those funds to pay their annual pension liabilities and cover operating expenses while they continue to accrue multimillion dollar pension payouts for themselves.
By bilking new revenue sources (taxes and bonds) to make minimum payments on massive “off balance sheet” liabilities they will be able to grow the pension beast larger while giving taxpayers the illusion that our city is fine — classic Bernie Maddoff.
Taxpayer, homeowner and father of four
Filed Under: Community Commentary