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Parasitic Architecture is Not What it Seems

The concept is attractive. Taking advantage of an existing superstructure and utility conduits, developers can simply add new units on the sides and top of a residential building. In theory, this can save money, preserve the original building and create new housing in areas where housing tends to be in short supply and high demand.

In practice, parasitic architecture often ends up being a controversial aesthetic experiment, wherein buildings of historic value have their exterior facades debased – or enhanced, depending on who you ask – with odd protuberances. Or it finds expression in “adaptive reuse” projects that rely on public subsidies to create overly expensive additional housing units.

A classic example of parasitic architecture blazing a path into the aesthetic frontier of urban design is the Museum of Military History in Dresden, Germany. In this case, a 135-year-old stone building had grafted onto its square, classical façade a massive steel and glass triangle that juts skyward like the prow of a ship. It’s not everyone’s cup of tea. A Wall Street Journal architecture critic compared the new section to “a piece of shrapnel freshly fallen from the sky.”

Enthusiasts proclaim the beauty is in the incongruity, but the practice has many detractors. During the 1980s, architects saved the facades of many historic Washington, D.C. downtown offices and built superstructures behind them – spurring critics to refer to them as “facade-omies.”

There are plentiful examples of historic public buildings expanded with ultra-modern structures. The Pablo Serrano Museum was […] Read More

Pension Costs Are Still Eating Government Budgets

About 20 years ago, I read an ad in a local Sacramento newspaper that said “Get a government job and become an instant millionaire.” The ad went on to describe how public bureaucrats in California enjoyed benefits private sector employees can only dream of, including a guaranteed retirement pension worth the equivalent of millions of dollars in a private 401K plan. I’d had no idea. Most people still don’t.

Pension finance, and how pension obligations affect government budgets, remains one of the most consequential elements of public policy that nobody has ever heard of. Until someone is elected to a city council, or a county board of supervisors, and sees first-hand how pension payments crowd out other budget items, the typical response to pension policy debates is one of befuddlement or indifference.

But as they say, even if you are indifferent to pensions, pensions are not indifferent to you. Also about 20 years ago, a series of pension benefit enhancements enacted by gullible elected officials, egged on by aggressive pension system managers and public employee unions, led to pension payments moving from a negligible portion of civic budgets to ravenous monsters that threatened to drive into insolvency every government agency in the state. The result has been higher taxes and fewer services, and everyone feels that.

To begin to cope with out of control pension costs, in 2013 the California State Legislature enacted PEPRA, the Public Employee Pension Reform Act, which reduced the pension benefit formulas for new government […] Read More

Are Government Pensions Funds in Crisis Again?

If ever there were a case of Chicken Little, it’s the endless squawking over the imminent implosion of public employee pension funds. In California, ever since pension benefits were enhanced, retroactively, starting in 1999, critics have been claiming a pension apocalypse was imminent. But no matter what happens, pension funds muddle through.

The modern era of pensions began in the 1984, when pension system guidelines were revised to permit them to purchase equities without limit. By 1999, on the strength of a nearly 15 year run of unbroken equities growth, California’s pension systems were fully funded with surpluses. With their confidence undiminished after the internet bubble popped and stocks tanked, pension system managers blithely continued to advocate pension benefit enhancements. By 2005 those benefit enhancements had rolled through every agency in California, and by then the markets were recovering as well. Then came the crash in the fall of 2008. To cope, the pension systems began to use creative accounting. Collectively these gimmicks obscured growing problems.

For example, asset “smoothing” made it possible to hide recent drops in the value of invested assets by reporting the average value of those assets over previous years. As the funded status – the difference between total invested assets and the amount the fund actually needs to pay current and future pensions – worsened, pension systems began to require so-called “unfunded contributions,” which were catch up payments necessary to reduce the growing amount of underfunding. But by negotiating repayment terms […] Read More

Inflation adjusted per capita state spending doubles in one decade – for what?

The California State Legislature has just released the “Floor Report of the 2022-2023 Budget,” and it’s a doozy. Representing an agreement between the budget committees of the Assembly and the Senate, and building on Governor Newsom’s proposal, this $300 billion monstrosity has moved one step closer to becoming final.

To fully appreciate how out of control California’s state government spending has become, compare the general fund spending growth over just the past ten years. The following chart, relying on official state budget reports going back to 2012-13, shows California’s General Fund spending by year. Back then, the general fund was $92.9 billion. Adjusting for inflation and expressing this amount in 2022 dollars, the 2012-13 general fund was $118.4 billion, barely half the swollen $235.5 billion that is projected for the upcoming budget year.

When you take into account the fact that California’s population has only increased by 3.1 percent in the past decade (it’s actually declined for the past two years), this budget profligacy becomes even more inexplicable. The inflation adjusted (i.e., in 2022 dollars) per capita general fund spending ten years ago was $3,124. It has now exploded to $6,023 per person. What has the average Californian gotten for all that extra money, apart from taxes that are higher than ever, and set to go even higher?

By almost every objective measure, Californians are worse off today than ten years ago. Back in June 2012, the average cost of a home in California […] Read More

California State and Local Liabilities Total $1.6 Trillion

California’s total state and local government debt now stands at almost $1.6 trillion, or about half the state’s GDP.

That isn’t an alarming ratio when compared to the national debt, which has now soared to 128 percent of U.S. GDP with no end in sight. But Californians carry this $1.6 trillion state and local debt ($40,000 per capita) in addition to their share of the national debt (about $90,000 per capita).

Consolidated data on state and local debt is maddeningly difficult to compile. Getting the most recent data for California’s state and local bond debt requires downloading and analyzing the publicly released annual financial reports for 58 counties, 481 cities, 1,037 school districts, and 3,400 special districts. And even if data miners were to apply sweat and algorithms to this chore, at this moment in early 2022 the complete dataset can be obtained only for the fiscal year through June 30, 2020.

Rather than engage in a from-the-ground-up exercise in data gathering, we have turned to the U.S. Census Bureau’s 2019 “State & Local Government Finance Historical Datasets and Tables,” which is the Bureau’s most recent compilation. According to the Census Bureau, California’s total state long-term debt was $145 billion at the end of 2019, and California’s total local debt was $361 billion. This total, $506 billion, passes the sanity check when compared to the 2017 state/local debt estimate we compiled a few years ago, $482 billion. The slight upward trend comports well […] Read More

Newsom’s Latest Binge

“It is our hope that all schools will be able to physically open for five days per week in the fall but local conditions will determine whether that is possible.” – Cecily Myart-Cruz, President, United Teachers of Los Angeles (UTLA Update 5/14/2021)

It’s impossible to know what “local conditions” are going to look like when kids go back to school this Fall, but two things are certain: Whatever the United Teachers of Los Angeles want, the United Teachers of Los Angeles are going to get, and to the extent “local conditions” involves money, there’s going to be plenty of it.

California’s budget bonanza, just announced last week, capitalizes on conditions unique to California that in retrospect are obvious. The COVID lockdown may have decimated California’s working families and small businesses, but the explosion in online activity delivered stupendous windfalls to California’s high tech industry. In California’s top heavy income tax model, the more money California’s super rich make, the more money pours into the state treasury. And pour it did. Quoting from the May Revision of California’s 2021-22 state budget:

“Compared to a projected budget deficit of $54 billion a year ago, the state now has a projected $75.7 billion surplus. Combined with over $25 billion in federal relief, this supports a $100 billion California Comeback Plan—a once-in-a-lifetime opportunity.”

This hundred billion dollar binge is a welcome distraction for the embattled Governor Newsom, who faces a recall election later this year. And of course, spreading an extra $100 […] Read More

Placentia’s Independent Fire Dept Saves Millions and Improves Service

On July 1, 2020, the City of Placentia formally terminated its contract with the Orange County Fire Authority, where the average operations employee in 2018 collected pay and benefits in excess of $241,000. Seeking to create a new model that reduced these unaffordable levels of pay and benefits, as well as made more efficient use of personnel, and despite bitter opposition from the firefighters union, the City Council spent the year prior to July 2020 designing and building an independent fire department.

With over three months of operations now behind them, it is possible to review early results of Placentia’s experiment. According to the city’s “final quarterly update” on Placentia’s Fire and EMS Services, released on October 20th, in their first three months of operation, the new independent fire department serviced 40 percent more daily calls than the prior year with OCFA, reduced local response times by over 3 minutes when compared to OCFA, and reduced the need for mutual aid from neighboring cities by 85 percent.

One of the ways Placentia accomplished this was by using ambulances and paramedic squad units to respond to medical emergencies instead of 55,000 pound fire trucks. To further reduce response times, the city also invested in emergency vehicle traffic signal preemption devices through major intersections. To reduce costs, in addition to relying on ambulances for strictly medical calls, the city contracted with part-time firefighters and fully trained reserve volunteers instead of paying overtime to fill absences and vacancies. The city also […] Read More

How Much do California’s State Workers Make?

Californians pay the highest overall taxes in the United States, with more to come. The Democratic supermajority in the state legislature is considering AB 1253 that would raise the top income tax rate to 16.8 percent, and AB 2088 that would impose an annual 0.4 percent tax on any California resident’s net worth in excess of $30 million.

On the ballot, voters are being asked to approve Prop. 15, which will reassess commercial properties at current market values to calculate their property taxes, and Prop. 19, which will trigger reassessments of inherited homes unless the heirs intend to live in them.

Also on the ballot in cities and counties throughout the state, are nearly 300 proposals for new taxes and bonds which, if approved, will add billions in new local taxes and tens of billions in new local borrowing.

The reasons that California’s politicians have an insatiable need to raise taxes are many and complex. But principal among them is the fact that California’s state and local government employees enjoy rates of pay and benefits significantly greater than that of the citizens they serve. With the long-term economic impact of the pandemic lockdown likely to put additional strain on public sector budgets, cutting pay and benefits must be an option along with cutting services and raising taxes.

How Much Do California’s State Workers Make?

In two earlier reports, using data provided by the California State Controller, the average annual pay and benefits for full-time […] Read More

BART Faces Financial Reckoning

Of all the public agencies facing financial challenges as a result of the COVID-19 pandemic, public transit has taken the biggest initial hit. The reasons for this are obvious: when there’s a lockdown and businesses are closed, commuters stay home. And of those still fortunate enough to have places to go, few want to board busses and trains where they risk heightened exposure to contagions.

Northern California’s biggest transit system is the Bay Area Rapid Transit District, commonly referred to as BART, with operating expenses of nearly $1.0 billion per year. In good years, operating revenues – primarily fares and parking fees – never covered more than around 75 percent of operating costs. But that was back in 2016, when ridership peaked, at around 435,000 per weekday, whereas pre-COVID ridership in early 2020 was running around 405,000 per day. Weekend ridership had been dropping at a higher pace than weekday commuting because of board policies that tolerate homelessness, open use of hard drugs, panhandling and petty theft on the trains.

In addition, over the past four years, the BART board of directors has been giving away an increasing array of discounts at the same time as operating costs have steadily increased. There has also been increasing tolerance on the part of the board for fare evasion which lowers revenues by, depending on which expert you ask, between $25 and $50 million per year.

In April 2020, at the height of the pandemic shutdown, BART ridership fell to 6 percent of […] Read More

“Public Information” to Promote New Taxes, Paid for by Taxpayers

Did you know your taxes are being used to advocate for more taxes? Well, not exactly. It’s against the law for public agencies to engage in “advocacy.” The people running these agencies who want to raise your taxes may only spend public funds in order to “communicate” with you about their proposals. And so they “communicate” good and hard. And then you vote.

An example of this, and there are many, is the City of Fullerton.

To cope with a projected $7.9 million deficit, the Fullerton City Council has approved a 1.25 cent sales tax increase, which voters will either approve or reject this November. The city expects to raise $25 million per year through this tax. At first glance that appears to be overkill, but first glances can be deceptive.

For starters, nobody knows how far revenue will drop. The pandemic shutdown is entering its eighth month with no end in sight. And while tax revenue falls across the state, pension costs continue to rise. For Fullerton, this is documented in the CalPERS actuarial reports for the city’s miscellaneous and safety employees. These reports, the most recent available, were released in July 2019, well before COVID-19 burst the global investment bubble.

The reports show that Fullerton was already pouring $25 million into CalPERS in the current fiscal year, an amount projected to rise to over $33 million by 2025. And with 70 percent of that going into public safety pensions that were only 64 […] Read More