For years the city of Richmond has been working hard to create taxes, fees and permits that make it difficult for Chevron, the largest employer in the city, to stay. The city has made it clear that want Chevron to leave. A few years ago Chevron wanted to expand by spending billions to create a larger facility and provide lots of new, well paying jobs. The people of Richmond said no, they would rather put the fortune in a fortune cookie than have a profession and a higher paying job.
“In concert with Butt’s questionable sense of reality, City Manager Lindsay held back the release of a report in 2014 that showed the bleak financial outlook the city faces today and in the future. It is likely this oversight helped the city to convince voters to pass a .50 percent sales tax increase that was intended for road repair and infrastructure needs.
As might be expected, the first year’s revenue was used to make debt payments rather than fixing pot holes as promised.
Meanwhile it has been business as usual for local government in Richmond to operate in the red and fall behind each month, as it fails to set aside payments for its retiree benefit obligations.
Another Progressive city, another city crumbling with bad regulations, high taxes and a hatred of jobs that pay well. How much will it cost the people of California to bail out this leftist Democrat city.
Arrogance and ignorance reigns as Richmond nears bankruptcy
by Richard Eber, Contra Costa Bee, 11/15/15
In June 2015, we last reported the financial disaster that is the city government of Richmond California after Moody’s downgraded its debt to near junk. Almost six months later, the question is not if the city of Richmond will file for bankruptcy protection, but when. Years of expanding government services, lack of fiscal restraint, poor administration, and just plain incompetence on the part of its City Council has led to this sad state of affairs as Richmond nears bankruptcy.
Other local governments in Contra Costa County since the 2009 recession have had to use the old journalistic “A.I.” approach which means “adjust and improvise,” as they fiddle with budgets and services to maintain essential tasks such as police and fire protection while balancing the budget. Many cities also passed local sales tax increases to make things work and avoid Draconian cuts.
An opposite approach has been taken by the City of Richmond in juggling its financial predicament outlined by Dan Bornstein’s recent column in the Contra Costa Times. A.I. in this case means “arrogance” and “ignorance” as Richmond’s hyper progressive leadership leads its citizenry off the fiscal cliff to certain bankruptcy.
Richmond Mayor Tom Butt and the Progressive Alliance that has controlled the political reins for too many years just don’t get it. They continue to ignore the city’s structural deficit of approximately 19 million dollars a year. The city is also oblivious to its pension and medical benefits deficit for city workers owed CalPERS that is more than 450 million dollars and growing each month.
Earlier articles have shown how abuses in overtime for (mostly) the police and fire departments have lead to ridiculous pay packages for Richmond employees (see table nearby). At the same time this has been going on, these individuals’ pension and medical benefits have gone up exponentially.
As an example in 2014, Richmond’s Fire Chief Michael Banks pulled in a gross income of $561,278, which included $287,034 in overtime and $75,993 in benefits. This package was $52,835 more than the compensation received the previous year by Fire Captain Angel Bubo, who at the time had the highest income of any public employee in Contra Costa County.
City of Richmond, California Employee Compensation
It is well documented that if every man, women, child, and decline to state resident of Richmond were to send CalPERS a check for $4,100 they would still be in the red for pensions and medical coverage for retirees.
None of this matters to City Manager Bill Lindsay who acts like the Publisher’s Clearing House is going to bail Richmond out of its current economic mess any month now. Richmond’s criticism of Moody’s Investment Services and Standard & Poor’s downgrade of its bond rating to “junk bond” is tantamount to shooting the messenger.
Mayor Butt’s stated “They want us to cut our budget to the bone, they want us to lay off people, to curtail programs, to spend less money, put more money in reserves, pay off our pension obligations and that sort of thing.” It never occurred to him that the bond rating companies do risk management and have no stake in its findings.
In his campaign for mayor campaign Butt stated, “The City of Richmond is more fiscally sound than it has been in decades” Perhaps this perspective helps explain why he thinks Moody’s and Standard & Poor’s do not know what they are talking about.
In concert with Butt’s questionable sense of reality, City Manager Lindsay held back the release of a report in 2014 that showed the bleak financial outlook the city faces today and in the future. It is likely this oversight helped the city to convince voters to pass a .50 percent sales tax increase that was intended for road repair and infrastructure needs.
As might be expected, the first year’s revenue was used to make debt payments rather than fixing pot holes as promised.
Meanwhile it has been business as usual for local government in Richmond to operate in the red and fall behind each month, as it fails to set aside payments for its retiree benefit obligations.
It is only a matter of time until Richmond joins Vallejo, Stockton, and San Bernardino in having to declare bankruptcy. As Richmond nears bankruptcy, Bill Lindsay will likely not care as he is expected to step down as city manager in early 2016 when his lucrative contract ends that pays him more than any other City Manager in Contra Costa County.
Tom Butt and the self-righteous progressives who rule Richmond will likely blame Chevron, Republicans, Wall Street, landlords, Corporate America, and anyone else standing nearby for causing its financial woes. It is doubtful that a lack of concern for the city’s bottom line could somehow be responsible for the mess Richmond is in.
As Richmond nears bankruptcy and the Chapter 9 flag is run up the flag pole, a judge would supervise the city’s operations. Existing labor contracts, retiree’s medical benefits, and debt obligations will need to be restructured. City contracts with vendors could be changed as well.
Cost cutting will need to occur whether the City Council likes it or not. Even then, bankruptcy is not the cure for everything as existing state law prohibits most pension obligations sacrosanct.
We can see how bankruptcy played out in Vallejo. While that city emerged from bankruptcy four years ago, it is still on shaky ground according Moody’s. Despite prudent cost cutting efforts by City Manager Dan Keen, Vallejo must still keep its budget under control. Even today Vallejo’s police department is understaffed by around 20% because of financial considerations.
Unfortunately, it will likely take years for Richmond to right the ship of government as it carries far more debt per person than most other locales in California that have declared chapter 9. There are no overnight fixes for the years of fiscal mismanagement.
It will be interesting to see what will happen with Richmond’s City Council races in 2016. If Richmond becomes a ward of the state will voters continue to elect the same wild-eyed Progressive activists who have literally destroyed the local government?
How will Chevron, operator of the Richmond Refinery react to Richmond bankruptcy. In the past the large oil company has fought ongoing skirmishes with a local government that hates Big Oil but wants every dollar it can get through guilt trips and litigation.
Instead of opposing Progressives in Richmond, Chevron might consider doing the opposite and not contest the outcome of upcoming City Council elections. Knowing that bankruptcy will limit the power of local government to hassle it, Chevron can sit on the sidelines and let Richmond suffer the results years of its own fiscal mismanagement.
Recent history in Richmond should be a wake-up call for local, state, and federal governments as well. Recklessly spending money and wasting valuable resources eventually lead to disaster. Richmond is certainly begging, even if they do not know it, for an adult to step forward and tell it “no” for a change.
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