A key planner of the Stockton bankruptcy, City Manager Bob Deis, plans to retire on Nov. 1, shortly before what could be a crucial public vote on a sales tax increase that has split the city council.
Deis battled with a police union that bought a house next to his home and subpoenaed his wife, oversaw deep staff cuts and structured an orderly bankruptcy that was a sharp contrast to San Bernardino’s emergency bankruptcy.
But the Stockton bankruptcy plan, which cuts bond payments but not pensions, has drawn well-funded opposition from bond insurers, who complain of unfair treatment because the city’s largest creditor, CalPERS, is untouched.
When Dies was hired in July 2010, the city council “knew something was amiss” but not how bad city finances had become, he said in a news release. Dies expects to have accomplished what he was asked to do by Nov. 1.
“Since my arrival, we were able to balance extremely difficult budgets without laying off a single police officer,” he said, “and we went from utter chaos to restoring order and implementing business plans.”
Bob Deis
The former mayor and several council members who hired Deis were ousted by voters in November. The new mayor, Anthony Silva, vowed during his campaign to put more police on the city’s crime-ridden streets.
With financial support from developers, Silva is backing a “Safe Streets” initiative for the November ballot, a half-cent sales tax increase intended to add at least 100 more police officers.
Deis warns that the initiative, intended to limit new sales tax revenue to police, could delay or disrupt the city’s exit from bankruptcy. The current city council opposed the initiative on a 4-to-3 vote.
As directed by the city council, Deis is working on a sales tax proposal for the November ballot that would fund the city’s “Marshall Plan” to reduce crime and perhaps pay some creditors as the city emerges from bankruptcy.
The pension issue surfaced during a debate on the two crime-fighting measures last month. A developer backing the Safe Streets initiative, Anthony Barkett, said the bankruptcy plan should address the high cost of pensions.
“I don’t think we’re having that debate and asking the right questions,” said Barkett, quoted in the Stockton Record newspaper. “This is our only chance to ever do anything about it. If we don’t, forget it.”
The city argues that pensions are needed to remain competitive in the job market, particularly for police. The bankruptcy plan eliminates the city’s retiree health care, a cut retirees tried to temporarily block in court.
Anthony Silva
U.S. Bankruptcy Judge Christopher Klein declined to block the cut while acknowledging some “tragic hardships” may result. He said the court cannot “interfere with” the property or revenue of a debtor in bankruptcy.
The city told the judge yesterday that a 13-member group appointed to represent retirees agreed to a $5.1 million lump sum payment for future retiree health care worth an estimated $300 million to $600 million and a promise not to cut pensions.
“The agreement to not impair the pension benefits is a major part of this agreement,” an attorney representing the retiree group told the judge.
The agreement will be included in the proposed “plan of adjustment” the city expects to file in September. A city news release said the retirees and other creditors will have an opportunity to vote on the plan.
Judge Klein said in April when he ruled Stockton eligible for bankruptcy that the bond insurers claim of “unfair discrimination” must be considered in the plan of adjustment proposed by the city to reduce debt before emerging from bankruptcy.
The judge made the same point yesterday as he rejected a motion by Assured Guaranty to change his finding in the eligibility ruling that the bond insurer did not negotiate in “good faith” before the city filed for bankruptcy last June.
His eligibility ruling said bond insurers “voted with their feet” and were a “stonewall” when they left mediation, prescribed by state law, after the city refused to negotiate a cut in CalPERS debt. Then the insurers failed to pay their share of mediation costs.
“The CalPERS issue may be very significant later in the case,” the judge said yesterday. “The point is it’s later in the case, not at the outset.”
The judge said in his ruling yesterday that the bond insurers have been “itching for a fight over pensions, to answer interesting questions whether the city has an executory contract with CalPERS and whether liabilities to CalPERS might be dischargeable debts.”
And, he said: “CalPERS itself has been bellowing and pawing the sidelines during the eligibility phase waiting for the main event that will come only after relief is ordered.”
The judge said an assertion by the city’s bankruptcy attorney, Marc Levinson, that the bond insurer’s obstinacy in opposing eligibility is “all about leverage” has some “resonance” with him.
“The objectors are trying to get their way by forcing the city to incur massive legal expenses that should not be necessary,” Klein said in the ruling on the Assured Guaranty motion.
“An appropriate method for achieving their goal of spreading the pain to CalPERS would be to challenge CalPERS head-on in battle over an actual plan filed after relief is ordered, in which battle the city would watch from the sidelines,” the judge said.
The tax issue is sparking a battle on several fronts. At the end of his state of the city address, an exuberantly aggressive Mayor Silva donned a helmet and waved a spiked mace while urging residents to join him in the fight to change the city.
Last week Silva was on defense after an e-mail sent to thousands said he has been accused of sexual battery. A young woman accused him of offering her drinks and improper touching, KCRA TV reported, but officials said the charge had no merit and are looking at other accusations.
A Stockton Record editorial last month said putting two competing tax measures on the ballot would likely doom both, citing a “well thought out” analysis by Jeffrey Michael, director of the University of the Pacific Business Forecasting Center.
“We would urge Silva to back away from the single-purpose tax approach and work with his fellow council members toward a flexible approach with built-in guarantees about how the money will be spent,” said the Record editorial.
The city’s bankruptcy attorney, Levinson, told the judge yesterday that Deis remains in control and continues to “direct the team” until Nov. 1. He said his direction from Deis and city staff is to “charge forward.”
Mayor Silva prepares for battle (KXTV photo)
Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at https://calpensions.com/ Posted 13 Jun 13
Calpensions 
June 13, 2013 at 9:38 pm
Deis is an example of the conflict of interest apparent in the Vallejo, San Bernadino and Stockton Chapter 9 filings. In each case the City did not request that the pension contracts with CaLPERS and the Unions should be modified.. The reason: If you don’t keep unsustainable defined benefit pension plans, you will not attract the quality personnel equal to those of us who got us in this mess in the first place. Vallejo, after Chap. 9, is clearly in worse financial condition than at any time in history. And Stockton and San Bernadino will also be worse off after bankruptcy. I live in Pacific Grove. CaLPERS costs and pension bond costs exceed 20% of our budget. We have a 45 million dollar unfunded pension deficit that grows at the rate of 7.5% per year compounding. It has a “services deficit” of over 50%. Rejecting pension contracts in a Chap. 9, is its only hope. But, in my view, this city council will file too late and wont touch pensions. It will, like the other cities, be a suicide Chap. 9..
June 14, 2013 at 12:42 am
The city’s in desperate straights need to start somewhere … with a MATERIAL reduction in pension & benefit from current levels. Once it starts, other cities will follow suit and the high-pension high-benefit cities will diminish rapidly.
And anyone who thinks cities can’t be staffed with qualified candidates for 75% of the cash pay and 50% of the pensions and benefits is likely ALREADY employed as a Public Sector worker and simply trying to protect his/her turf.
June 14, 2013 at 5:34 am
CalPERS has used their financial (taxpayer dollar) clout and political (taxpayer funded) muscle to bully cities like Vallejo into submission. Fortunately the Bond Insurers have the deep pockets to challllenge CalPERS in a court of law. I for one have never believed that CalPERS can both promote increased pension benefits, even retroactively, while also claiming pension formulas can’t be modified going forward.
That’s why I can’t stand CalPERS and their pathetic board of directors, or even their CEO – whose very Job is dependant on the approval of the Corrupt Union Controlled Board Of Directors (Administration). And these Union Elected Board Members are as Underqualified and Biased as you can get.
If the taxpayers are picking up the tab for the CalPERS Boards bad decisions, financial calamities, corruption, Pay to Play, and bloated expense accounts then they should at least be able to seat the Board with responsible financial experts.
June 14, 2013 at 2:33 pm
Cal pers is standing up for its members. I salute them!
June 14, 2013 at 3:22 pm
Bjorne, Why, other than that you (or a family member) are now (or will in the future) benefit from the Grossly excessive Public Sector Pensions than CalPERS sponsors?
I guess that makes you one of the “takers”.
June 15, 2013 at 8:40 pm
Six of the thirteen Directors are elected by active and retired CalPERS members, Captain. There is no member of the Board that is elected by any union. The actuaries are the ones whose expertise is needed–all the Board members have educational and occupational resumes that would tell you that they are all experts. Certainly not like those “experts” that brought financial collapse on the world in 2008.
June 16, 2013 at 1:32 am
SeeSaw, I see that you’re still delusional.
June 16, 2013 at 4:34 am
And, TL is still a jerk. So, what else is new.
June 16, 2013 at 7:00 pm
SeeSaw, Do you see what going on in Detroit….hold on to your britches, as Crazyfornia is right on their heels. Looks like half of their excessive pensions (and all their retiree healthcare) will be vaporizing shortly. Clearly the real decisions will be in a Bankruptcy Court.
Finally,some relief for Taxpayers NOT riding this gravy train.
June 16, 2013 at 8:49 pm
I am not in Detroit, and I am very sorry for what has happened to Detroit. I care about other people. Your whole aim is to desecrate the finances of people that you think you have the sole ability to make judgement about. You are one sorry example of a human being–you should change your moniker letters from TL to PH–“Pure Hatrid”.
June 17, 2013 at 12:46 am
No SeeSaw, my goal is to remove the unnecessary and unjust EXCESS that PUBLIC Sector workers are now promised (from elected officials whose favorable votes on these pensions were bought with campaign contributions and election support) in the form over absurdly generous (and hence VERY costly) pensions and benefits, multiples greater in value than what PRIVATE Sector works get, while those PRIVATE Sector workers are called upon to pay for all but the 10-20% of total PUBLIC Sector Plan costs that the workers’ own contributions (INCLUDING investment earnings thereon) pay for.
It’s called rightfully remedying an injustice.
June 17, 2013 at 7:47 am
TL, it is easier to ignore the self serving comments from the appropriately named seesaw.
I hope you’ve read this article which demonstrates our Ca Democrats committment to transparency: “California public records law ‘eviscerated’ in budget bill, critics charge”
Here is the excerpt:
“Legislation tucked into the state budget bill would “eviscerate” the public’s ability to track tax dollars and hold local officials accountable, open government advocates charged Friday.
“This is the worst assault on the public’s right to know I have seen in my 18 years of doing this,” said Jim Ewert, general counsel of the California Newspaper Publisher’s Association, said Friday as the bill appeared headed for passage.
Language inserted into a budget bill on Wednesday would allow local governments to turn down requests for records without citing a legal reason. It would no longer require government officials to respond to to records requests within 10 days or force them to help the public by describing what records exist.”
Democrats in Ca seem to be enjoying their new found power that includes ANTI-TRANSPARENCY language into the budget bill that they have complete controll of.
When will non-public employee union democratsf(in California) figure out that they aren’t important to the public employee unions – except when it comes to election time? And how do these elected democrats (listed in the article) look in themselves in the mirror while voting to hide basic goverment data from the very same taxpayers that pay their wages and help elect them to office based on their hollow promises.
The link to the article: http://www.contracostatimes.com/breaking-news/ci_23464836/california-public-records-law-eviscerated-budget-bill-critics
June 17, 2013 at 4:42 pm
There, there, Captain. Hope that off-topic rant eased your blood pressure a little.
June 17, 2013 at 5:21 pm
Captain, No, I had not rad that article, but it doesn’t surprise me. A precursor was the recent laws to stifle City Bankruptcies.
In the end-game, most of this gets down to money, HUGE sums to pay for the self-serving wastage, and the over-the-top pensions and benefits.
The money will ultimately run out and the grim reaper awaits his turn.
June 17, 2013 at 11:59 pm
Like a good German circa 1938, strange love needs to paint me with a gov/union/pension brush to defeat my cogent comments!
Dull.
June 18, 2013 at 12:46 am
Grim Reaper! LMAO
Doomers unite! You have nothing to lose but your chains!
June 18, 2013 at 4:05 am
Bjorne, You haven’t denied it.. So speak up … do you (or a family member) now (or in the past) work for any gov’t and now do (or will) get a gov’t pension ?