Scoopy Plays the Race Card

I didn't think it possible for the Sacramento Bee to come up with a less persuasive case for Kevin Johnson's strong-mayor push than the one I took apart in the last post. But then this editorial got dropped on my porch this morning.

The Bee repeats its plaintive cry: "Sacramento must separate Measure L from the mayor." As I previously noted, this is impossible. Kevin Johnson and the strong-mayor push are like conjoined twins who share one heart. They are inseparable. One can't live without the other. Even Kevin Johnson thinks so. Look at Measure L's own campaign materials.

It's all about Boss Johnson, and always has been. When the Bee tries to suggest otherwise, it's pissing into the wind.

From there the editorial goes downhill.

When we subscribe to a newspaper, one of the things we expect for our money is journalism that provides some context and depth to make sense of the flood of events, information, and spin that come at us every day. The Bee can no longer seem to do that.

It attributes the opposition to Measure L to "some in the old guard," people who never fully accepted Kevin Johnson and who "would prefer to keep a political system that worked when the city was smaller." Leave aside for a moment the obvious fact that the council-city manager system continues to work pretty well in big cities that are doing much better than Sacramento, a fact that an intellectually honest editorial would have to acknowledge. The big lie here is that somehow it's the "old guard" behind the opposition to Measure L.

That's nonsense. There's nobody more "old guard" than the people supporting the Measure L push: Angelo Tsakopoulos, the Friedman family, the Chamber of Commerce, the cops and firefighters. On the other hand, the opposition campaign is headed by rookie Councilmember Steve Hansen, who, at age 34, is hardly a member of the old guard. The fact of the matter is that there are young and old, both people who voted for Johnson and people who voted against, on both sides of the strong-mayor debate. When you don't have any evidence to support your position but aren't honest enough to say so, tarring your opponents becomes a temptation.

And that's when the editorial spirals down into the muck: "It does make you wonder whether some of these personal attacks on Johnson, Sacramento’s first black mayor, have something to do with race."

That's an astonishing thing to read in what purports to be a professionally edited metropolitan newspaper. Not because there aren't people who will vote against Measure L because the mayor is African-American; this is, after all, the United States. But because it maligns a wide swath of the community with no evidence to support the claim. A leading foe of the strong-mayor measure was the late Grantland Johnson, the city's most prominent black politician for three decades as council member and county supervisor, who signed the opposition ballot argument before he died earlier this year. It's also signed by Bonnie Pannell, another long-time African-American member of the council. Does the Bee believe their opposition has "something to do with race?" Does it believe that they would have associated themselves with the opposition if it did have "something to do with race?"

It's an axiom of Internet debate that the first person to invoke Nazism loses the argument. There's an even older newspaper corollary: An editorial page that "wonders" in print, without supporting evidence, whether a large and active part of its city and its readership is racist has not only lost the argument; it has lost its moral compass.

Strong Mayor? Why? Part 4

The expensive push by out-of-town oligarchs to crown Kevin Johnson as “strong mayor” of Sacramento has spawned a lot of dubious arguments. But the most wrong-headed is the one being retailed by the mayor’s cheerleaders at the Sacramento Bee. Measure L is about Sacramento’s future, they tell us, “this decision should not be about Mayor Johnson.”

In fact, the strong mayor push has always been about Johnson. He and his allies started agitating to give him more power from the moment he was elected in 2008. When their first effort was ruled unconstitutional by the courts, they kept at it, until a city council majority finally agreed last year to put it on the ballot.

In other cities that have voted on strong-mayor measures, it’s been typical to have voters first decide whether they want a strong-mayor system, then separately elect a mayor fit to fill the newly expanded role. Not in Sacramento. Passage of Measure L would immediately give more power to Johnson.

And perhaps only to him. The strong-mayor powers in Measure L go away at the end of 2020 unless voters approve them a second time. Is there anybody who believes that the coalition backing Measure L—billionaire fat cats, developers, sports owners, cops, firefighters—will be ponying up another $1 million in campaign cash to extend the strong mayor if the likely mayor after 2020 were to be a liberal environmentalist, a pension reformer like San Jose’s Mayor Chuck Reed, or a fiscal conservative opposed to welfare for sports owners and other corporate rent-seekers?

No, forget the Bee’s silly argument. Measure L is about Johnson, and nothing else. The voters’ decision about the strong-mayor system is inseparable from the question of whether Kevin Johnson is qualified for promotion to chief executive officer of the city.

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What do we know about Johnson’s executive skills? His only prior management experience was running St. HOPE, a small Sacramento non-profit organization. A federal investigation by the inspector general for the Corporation for National and Community Service found that Johnson, in that management role, diverted federal grant money to personal use; illegally forced AmeriCorps members to live in and pay rent on apartments owned by Johnson’s own development company; and illegally required AmeriCorps members to campaign for his favored candidates in a local election.

On one occasion he entered the apartment of an AmeriCorps member he supervised, climbed uninvited into her bed, and put his hand under her shirt. When the young woman reported the sexual harassment to St. HOPE personnel, Johnson sent his personal lawyer to ask her to change her story and later offered her $1,000 a month to keep quiet. In the midst of the federal investigation, a St. HOPE board member was sent to delete Kevin Johnson’s e-mails from the St. HOPE computers, e-mails then under federal subpoena. The superintendent of St. HOPE’s charter schools resigned in protest of these incidents and of other mismanagement and misappropriation of funds by Johnson, as did two widely respected members of the St. HOPE school board, Bernard Bowler, a businessman, and Robert Trigg, former superintendent of Elk Grove schools.

Johnson’s record of managing his current mayoral duties follows the same pattern. A top aide stole more the $19,000 from taxpayers by charging personal items to a city credit card. The state’s Fair Political Practices Commission has fined him twice for failing to report dozens of gifts from businesses and corporate foundations to his political machine’s front groups. In 2012, as the lead city council opponent of the Measure U tax increase to balance the city budget, he was designated to write the opposing ballot argument. He forgot to submit it. “As a result, no argument against Measure U was included on the ballot,” the Sacramento County Grand Jury found.

Over the course of my career, I’ve often been involved in hiring decisions. I think it’s fair to say that on none of those occasions, in either the private or the public sector, would a candidate with Kevin Johnson’s record have been considered an appropriate choice for even a minor supervisory position, let alone chief executive officer of a $900 million-a-year enterprise with more than 4,000 employees, the position he is seeking with Measure L. In fact, hiring a manager with that record would likely be seen in court as recklessly negligent, putting at risk both the property of shareholders and the safety of employees.

And it’s also fair to say, I think, that the same standards would apply to hiring at the companies of the oligarchs funding the Measure L campaign. Theft of public funds, political corruption, sexual harassment of employees, coverup, neglect of oversight and rules—that’s not the résumé you want to send when you apply for a management job at Apple, Disney, Bloomberg, or even the Sacramento Bee.

So here’s the question that hangs in the air, unasked by the media and unanswered by the oligarchs behind Measure L: If you would never hire someone with Kevin Johnson’s sleazy record to manage your own businesses, why do you insist he’s good enough to manage our city?

Strong Mayor? Why? Part 3

Like every reform, the push in Sacramento to crown Kevin Johnson a “strong mayor” is an effort to change the rules of a political game. And like all such reforms, it comes wrapped in rhetoric about good government. But as we’ve seen in the last two posts, reality doesn’t confirm the rhetoric. Council-manager or strong-mayor system: the choice doesn’t matter to how well a city is run or responds to its residents.

So voters are left to judge Measure L, a change in the rules of the game, by how it will affect who wins. When the clerics in Iran fiddle with the election rules or Vladimir Putin and his oligarch buddies change the constitution in Russia, we understand immediately: Reform is about making it easier for one team to win. It’s no less true when it happens closer to home. If you want to understand the push by Sacramento’s wealthy and powerful for Measure L, think of it as Putin envy.

The backers of the push for “strong mayor”—developers, downtown property owners, public safety unions, the consultants and fixers who hang around city hall—have been power players in city politics for decades. Often they’ve won policy fights and elections. But not always.

 Vladimir Putin

Vladimir Putin

There have been checks on their power: independent politicians like Mayors Anne Rudin and Heather Fargo, who had support from women’s, neighborhood, and environmental groups; strong liberals like Joe Serna and Grantland Johnson, whose background in civil rights and labor struggles gave them a commitment to broad sharing of public resources; active and resourceful neighborhood groups; scrutiny by the Sacramento Bee operating in the McClatchy family Progressive tradition of distrust of concentrated private power in business or labor.

But in the Kevin Johnson era the balance has tipped toward the powerful. Ambitious, pliable, and lacking a reliable ethical compass, Johnson has been a perfect front for the dominant coalition: a celebrity African American basketball star with proven ability to attract attention and cash from the corporate foundations and donors that drive so much of the policy agenda of this new Gilded Age. Over the last six years Sacramento has seen the rise of a shadow city government, dubbed K.J. Inc. by the city’s leading political reporter, Cosmo Garvin, who has chronicled it so diligently in the Sacramento News & Review.

The coalition is a new kind of urban political machine, fueled by “behest” gifts from corporate, foundation, and wealthy individual donors and employing a crew of operatives it shares with special-interest groups. Directly and through independent expenditure committees, it has poured hundreds of thousands of dollars into campaigns to reelect its favored candidates. When challenged by independent voices in community and nonprofit groups, it has bought them off or tried to bully them into silence with threats to cut off charitable donations.

It even managed to engineer the dismissal, at least temporarily, of the executive secretary of the central labor council. When a business-dominated coalition can control the voice of labor, you know Sacramento is seeing an unprecedented change in its politics.

Measure L is best understood, I think, as the coalition’s attempt to create what UC Merced Prof. Jessica Trounstine calls a “political monopoly.” By passing a strong-mayor measure, it aims to tilt the game to hobble its foes and assure reelection. If a governing coalition can do that, it “gains the freedom to be responsive to a narrow segment of the electorate at the expense of the broader community,” she writes.

Kevin Johnson whines when foes of his strong-mayor push call it a “power grab,” and he’s halfway right. Unlike Putin, KJ can’t grab, he must ask. Measure L is more like a “power reach.” But he can’t deny that it’s all—and only—about handing him and the dominant coalition more power. (If you doubt that, ask yourself whether the oligarchs would be pushing this measure if Heather Fargo were still mayor.) And the power they seek would go far toward sealing their political monopoly.

 Kevin Johnson

Kevin Johnson

The mayor would gain control over jobs in city departments, letting him reward political allies. He would gain control over the budget, writing the first draft and having veto power over the council’s final choices. That would give him a way to reward or punish community groups and nonprofits that receive city money. Concentrating so much power in a single office elected expensively in a citywide campaign would amplify the influence of the wealthy people and organizations who can supply the election cash.

Perhaps most important, the mayor would gain control over information that citizens and the city council need to assess the performance of the city.

Former San Diego Mayor Jerry Sanders showed how it’s done. After that city adopted a strong-mayor system a decade ago, he “moved to consolidate his control over the city bureaucracy by concentrating information in the mayor’s office,” University of California political scientists Steven P. Erie, Vladimir Kogan, and Scott A. MacKenzie write in Paradise Plundered: Fiscal Crisis and Governance Failures in San Diego. “Sanders forbade city employees from speaking to the press, allowing department heads to conduct interviews only when a member of the mayor’s public relations staff was also present.”

K.J. Inc. already excels in spin and restricting press access. It took a lawsuit to reveal that the purported city analysis of the benefits of the Kings arena giveaway was a cut-and-paste job from the deal’s backers. Combine increased mayoral control with the Bee’s declining capacity to cover the city and you can count on city hall’s becoming an information black hole.

Sacramento has already gone far down the road toward what Erie calls, in its San Diego form, the “politics of extraction,” through which “civic elites succeed in channeling the powers of government to benefit narrow, private interests at the expense of the broader city interest.”

While police and fire unions win and protect pay and pensions unimaginable elsewhere in the country, Sacramento residents get stuck with the unenviable combination of high crime rates and among the lowest levels of policing of any major city.

Billionaire sports owners get handed $300 million in subsidies, Sacramento taxpayers get handed taxes higher and more regressive than any other in the region, which provide levels of services for things like libraries and recreation that are far below the standard in comparable cities outside California.

When Erie describes San Diego as “an American Potemkin village—an impressive privatized facade with a dark public-sector underbelly—featuring a gleaming new downtown and bevy of tourist attractions but saddled with billion-dollar pension liabilities and deficient public services,” you pause and ask yourself whether he wasn’t talking about Sacramento instead.

So forget about all the rhetoric and Measure L as some abstract proposition. Think about it concretely. Do we want to risk handing a political monopoly to this mayor and this coalition of self-serving interests who have rung up this record of bringing Sacramento this low?

Strong Mayor? Why? Part 2

In the last post, I disposed of the claim that switching Sacramento to a strong-mayor system would make city government more efficient. Let’s look now at the oligarchs’ second argument: that strong-mayor cities are more responsive and accountable to voters.

Unlike the first, this second argument is at least plausible. The wealthy businessmen who promoted the city-manager system a century ago were no friends of the urban masses. They argued that “good government,” as they defined it, was more important than self-government. City managers were to be freed to run cities according to dictates of science and efficiency and to operate outside of “politics,” the realm where responsiveness and accountability reside. The possibility that city-manager governments can ignore the wishes of their voters is encoded in that system’s DNA.

In practice, though, scholars haven’t found any evidence that one form of city government is more responsive or accountable to voters than another.

The most recent and sophisticated of these studies, by political scientists Chris Tausanovitch of UCLA and Christopher Warshaw of MIT, compares the ideological leanings of residents of 51 large cities with the policies adopted by their local leaders. They find liberal cities get more liberal policies and conservative cities get more conservative policies, regardless of the form of city government.

responsive

“In contrast to the expectations of reformers, we find that no institution seems to consistently improve responsiveness…,” they report. “City manager systems, designed to be more professional and less political, appear to be just as responsive to public opinion as their mayoral counterparts. Given the same set of public policy preferences, a city with a mayor looks almost exactly the same as a city with a city manager for most policy outcomes.”

Jessica Trounstine, the UC Merced political scientist, provides a similar perspective in her fine recent book, which looks at occasions when powerful and unresponsive coalitions were able to establish political monopolies in city governments. These unaccountable monopolies arose, she finds, in both strong-mayor and city-manager governments, differing only in the tactics they used.

The verdict? Judged as to whether a strong-mayor system provides more responsive and accountable city government than Sacramento’s current city manager system, the oligarchs’ case once again fails.

So why do the wealthy and powerful pouring so much money into the strong-mayor campaign continue to argue that the reform will make the city more efficient and responsive even when decades of scholarly research and experience show that it won’t?

Because what alternative do they have? Words like “efficient” and “accountable” are talismans in any debate over city government organization. If the oligarchs and Kevin Johnson didn’t claim those magic words and try to own them, their opponents would. It was for the same reason that the wealthy civic reformers of a century ago so often invoked their devotion to “the people” even as they busily went about suppressing voter participation and shifting city power away from voters and toward unelected professional administrators.

Having taken the would-be reformers’ rhetoric seriously enough to assess it and find it empty of substance, I’ll offer, in the next post, a hypothesis about the real meaning of the push for strong-mayor system.

Strong Mayor? Why?

The Sacramento Bee ran a nice graphic the other day detailing the big dollars that out-of-town oligarchs and special interest groups are pouring into Measure L, Sacramento Mayor Kevin Johnson’s November campaign to make him a “strong mayor.” Since it’s safe to assume, as Johnson himself once complained to me about his donors, that “they all want something,” the obvious question for voters to ask is: What?

Their official line is that ditching the current council-city manager setup will help get things done, make the city more efficient, and make its leaders more accountable and responsive to voters. It's hard to take that line seriously, because neither logic nor experience supports it.

The Brains.png

Start with the formal name of Measure L itself: the Checks and Balances Act of 2014. The phrase “checks and balances” is meant to give voters a warm glow, evoking dimly remembered school civics lessons about wise men in powdered wigs writing the U.S. Constitution.

But if you paid full attention in class, or follow the news, you understand that the checks-and-balances systems in federal and state constitutions notoriously put up obstacles to “getting things done.” And with good reason: The framers of the Constitution were more concerned about restraining power than enabling action.

The system they created frequently results in divided government. A president of one party vetoes the agenda of the party that controls Congress, while the party that controls Congress tries to undermine the agenda and legitimacy of a president of the opposite party. Sometimes, even when a president and Congress get something done, a Supreme Court controlled by their adversaries barrels into the fray and strikes it down. Our history tells of long periods when federal and state governments sat paralyzed in the face of big problems, and of moments when even day-to-day activities like budgeting become occasions for crisis—think federal government shutdowns, state-issued IOUs, and the collision between President Obama and the Republican House that brought the nation to the edge of default.

Measure L invites the same gridlock in city government. Under Sacramento’s current charter, a mayor and four members of the city council can pass ordinances and a budget. It takes five members of the council, a majority, to block what a mayor wants or set a different course. Under Measure L’s “checks and balances,” a mayor would have to win over five of eight members of the council to get anything done, and it will take six of eight members of the council, a three-fourths supermajority, to pass a measure the mayor opposes.

No wonder the oligarchs talk abstractly of “checks and balances.” Telling voters that they want to make Sacramento city government more like Washington probably isn’t a winning argument.

There’s a big irony in hearing today’s rich and powerful tout a strong-mayor/council government as more efficient than the council/manager model. Because a century ago, it was the very same social group, the rich and powerful, the corporate barons of America’s first Gilded Age, in partnership with newly organized chambers of commerce and a growing class of college-educated professionals, who drove the creation and spread of the city-manager form of government that the rich and powerful now want to dump.

They sought, and often won, changes in city charters to take power away from mayors and councilmen, transfering it to unelected professional city managers. The elected city officials of that day were too parochial for the oligarchs’ taste. Typically drawn from the ranks of local leaders like shopkeepers, artisans, and contractors, they won election by steering services and jobs to their voters and protecting their constituents, many of them immigrants, from the assaults on their religions and pleasures being launched by nativists and prohibitionists. They were focused on neighborhood, not the broader city-wide investments corporations wanted.

“Reformers loudly proclaimed a new structure of municipal government as more moral, more rational, and more efficient and, because it was so, self-evidently more desirable,” the historian Samuel P. Hays writes. Trained city managers, freed from patronage and politics, would deliver more honest and efficient services and attend to city-wide interests instead of neighborhoods and working-class needs. Sacramento adopted that system in 1921.

And now the heirs and successors of those oligarchs say their ancestors got it all wrong. A strong mayor will bring more efficient government.

The political scientists and economists who’ve compared the two systems disagree. They’ve found that whether a city has a strong mayor or council/manager government does not change how much it spends and taxes, how it spends its money, or how efficiently it delivers police, fire, and sewer services. As one study summarized the research, “There is no apparent difference in the efficiency levels of the two municipal government structures.”

The verdict? Judged as a spur to efficiency, the case for “strong mayor” is weak and unproven.

Next: Does having a strong mayor make a city more responsive and accountable?

The Scent of the City

A year ago, when Sacramento's city staff presented the council with an analysis of the proposed giveaway to the new owners of the Kings, I wondered why it paled, in economic sophistication and concern for the public interest, beside a similar analysis performed for the Maloof family. We now know the answer: Corruption.

In a deposition given in the lawsuit that citizens have filed against the giveaway, James Rinehart, the city's economic development director, testified that the city's staff has made no effort to analyze the economic effect of the subsidy or weigh it against the potential benefits of alternative uses of the money. In fact, Rinehart admitted he had never seen the giveaway term sheet and was unaware of any effort by the city to place a value on the non-cash assets—land, parking spaces, digital signage rights—it proposes to throw into the deal.

 Hiram Johnson

Hiram Johnson

So how did the city staff report come to conclude that the giveaway "would have multiple benefits to the City"? Documents discovered in the lawsuit show that those claims of benefits were invented by the subsidy seekers themselves, e-mailed to the city, and, by the magic of cut and paste, placed into the staff report, where the city's elected leaders and the public were defrauded into believing they were reading the considered judgment of the professionals of government. When the city staff spoke, the welfare seekers' lips moved.

If you think this kind of thing is par for the course in government, you're wrong. As a deputy treasurer for the state of California, sitting on boards and financing authorities and overseeing staff work on behalf of the treasurer, I watched professional public servants test the claims of organizations seeking state financing and tax credits and analyze the potential risks and benefits to the public. Their scrutiny was applied routinely and across the board, even to projects and financings three or four orders of magnitude smaller than the proposed Kings giveaway, which at over $300 million, is roughly equivalent to an entire year's worth of pay and benefits for Sacramento's city workforce. For the past three decades I've often seen Sacramento's city council bend to the wishes of the developers, downtown property owners, and unions whose dollars dominate city politics. But until now, the city staff, under honest professionals like former city manager Bill Edgar, usually played things straight.

But the evidence collected thus far in the lawsuit shows that the city management's sins go beyond playing ventriloquist dummy to those looking to boost $300 million out of taxpayer pockets. Staff is also actively obstructing the public's right to know. Councilmember Kevin McCarty testified that he repeatedly asked staff for a valuation of the "sweeteners" the city was throwing at the Kings' superrich owners but was consistently rebuffed. "You're not going to vote for it anyway," McCarty said the staff told him.

This, too, is misconduct. In my time at the State Treasurer's Office, many of California's financing authority boards comprised three officials running for governor: Phil Angelides, Steve Westly, Arnold Schwarzenegger. But in their frequent jockeying and disputes, I can't remember a single instance of the professional staff's withholding requested information from an elected official, even when doing so might result in a different policy result than they or their boss sought. When such things happen in state government, as when parks officials failed to report all their revenue to the governor's finance department, it was rightly considered a scandal.

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A century ago Progressives successfully pushed many American cities to adopt the city-manager form of government as an antidote to corruption. The idea was that professional civil servants, disinterested and armed with the social science and economic knowledge coming out of the newly burgeoning universities, would be a source of honest, efficient government. Cities would be freed from the handouts and special deals for politically connected businesses that bribed politicians and financed their campaigns and political organizations. Reform would protect the many against the few.

But Progressives did not imagine what is unfolding in Sacramento: professional managers marching in lockstep with wealthy boodle seekers; ignoring principles of sound public finance; rejecting expert knowledge showing the economic infectiveness of sports subsidies; putting special-interest spin into official reports to masquerade as professional analysis; depriving the public and elected officials of a full accounting of their sweetheart deals; even going so far as to try to frustrate Sacramento citizens' use of the very tools of direct democracy that the Progressive created as the bulwark against special interest giveaways and corrupt government.

The state of the city is fragile: Public services and budgets not recovered five years after the end of the recession. High levels of debt and unfunded liabilities, of violent crime and poverty. Low levels of job growth and the college-educated workers vital to future growth.

But the scent of the city? Ripe with a stench that Hiram Johnson, the reformer, and Lincoln Steffens, the muckraking journalist, would have smelled in their youth in Sacramento—so ripe that maybe the people paid to report on and police these things might even begin to notice again.

The No-Growth Giveaway

Cosmo Garvin and the Sacramento News and Review have written the kind of deep analysis of the arena issue the city needs but hasn't received. He finds what anyone who has followed the sports extortion game would expect: Spending huge amounts of taxpayer dollars in giveaways to basketball arenas has little or no benefit to local economies. The outrageous claims of boosters "aren't real."

But the real news is that Kevin Johnson's team of hired liars have now essentially conceded that Garvin and the economic doubters are right.

They have released a new "study" making the usual bogus claims of the kind Garvin debunks. They say the arena will increase economic output in the region by $11.5 billion over 35 years.

Since this is the holiday season, let's be charitable and assume they are right. How big is $11.5 billion over 35 years?

The Sacramento metropolitan area had an output of $97.6 billion in 2012. If you assume economic growth at a nominal rate of 4 percent a year, the region will produce $8.2 trillion in total output over the next 35 years. Divide the claimed arena boost by total output and you find the claimed "incredible multiplier effect" from the arena would amount to only 0.0014 of the region's output over that 35 years.

How "incredible" is that? It is so tiny you need a microscope to see it. It is the economic equivalent of 11 hours in a year, or the length of two football fields on a drive from the State Capitol to Union Square in San Francisco. In other words, it is exactly what Cosmos Garvin's fine report shows: Arena subsidies bring little or no growth.

And now Kevin Johnson and his cronies have admitted it.

An Arena? Let the Grandkids Pay

After looking over Sacramento’s plan to go deep into debt to fund a giveaway to National Basketball Association, the editors of the Sacramento Bee proclaim it “doable.” The city, they assure their readers, has “the numbers to back it up.”

This conclusion can only mean those editors didn’t read or understand the numbers, because the numbers themselves shout, “Don’t do this!” The numbers describe a city that, despite imposing the highest and most regressive taxes in its region, still suffers from depleted reserves, large unfunded liabilities, and reduced levels of public services.

So how, in the face of that fiscal mess, does Sacramento buy an arena it can’t afford? The numbers say city leaders and the Bee want to make the grandkids pay.

Because city officials aren’t interested in helping citizens understand what they are up to and what the numbers mean, I’ve turned them into this picture:

Click to enlarge

The city wants to sell bonds to fund $212.5 million of its subsidy to a new arena for the Sacramento Kings. That’s the red-shaded arena on the graph. It plans to repay the debt with future revenues from parking in the central city.

But there’s a big problem here. The parking revenues are already spoken for. They are used to pay for parking operations and the mortgages on the city’s garages, with the balance going to the general fund for police and other services. There aren’t enough of those dollars to pay for all those things and the arena debt too.

To solve the problem of having more wants than wallet, the city takes the low road: borrow a lot more and delay the obligation to repay far into the future. It plans to take out an extra $91.5 million in debt (the yellow-shaded area in the picture) and use some of that extra borrowed money to pay the interest on the bonds for the first four years. A $212.5 million subsidy to the arena thus becomes $304 million in debt to be paid off over 36 years.

Is this “doable?” Yes. There’s a whole industry of investment banks, financial advisors, and consultants who, for a price, will show how to put together and sell, at very high prices, “doable” debt for cities that want to live beyond their means. (There’s also an industry of people who, for a price, will tell you how sexy you are.)

But it’s doable in the same way that you could take out a home equity loan to add an extra room on your house, then pay the interest on the equity loan by stopping your contributions to your retirement account and pulling a cash advance out of the Visa card until you’ve paid off the car loan and have a few extra dollars. What’s “doable” is often the way to end up poor and bankrupt.

The black line on the graph shows the remaining debt from the deal over time. The city won’t begin making principal payments on that debt until 2022, and full principal payments won’t begin until 2034. The whole debt won’t be repaid until 2050. And repayment of the $212.5 million portion of the debt taken out to subsidize the Kings (the red-shaded area) won’t start until 2038, 22 years after the arena is supposed to open. The grandkids will pay all of it.

If that debt were buying something likely to make Sacramento a better place for them in 2040 or 2050—flood control, schools, bridges, parks, housing—pushing the repayment obligation deep into the future would be one thing. But arenas are more like cars than houses. They begin losing value the day they open. Team owners drive them for 10 or 15 years, then declare them “obsolete.” They demand taxpayers buy them a new one, or at least a complete and expensive overhaul. And cities rarely have the courage to refuse them.

So let’s be clear about what the numbers mean. The city and the Bee want the largest burden of paying for an arena in the present to fall on people in the future who will likely never buy a ticket there because it’s already gone or “obsolete.” (And if you doubt that, go count the number of today’s arenas that were around 30 years ago and never substantially overhauled. It’s zero.)

Instead of being able to use their own resources to pay for the public services and projects they need in their own time, our grandchildren will be paying for a subsidy a previous generation cheered but then put on the credit card—to go along with the unfunded liabilities for pensions and retiree health benefits of city workers.

Isn't that the kind of government irresponsibility we pay newspapers to warn us against? Apparently Bee bigwigs Cheryl Dell, Joyce Terhaar, and Dan Morain are so busy waving pompoms for the owners of the Kings they don't have time to watch out for the future of their community.

Remembering the SF Ballpark Five

Most sports memorabilia recall a favorite game or player. The autographed baseball sitting on my desk is different.

The autographs belong to the group that dubbed itself the SF Ballpark Five — Gregg Lukenbill, then owner and managing partner of the Kings; Maurice Read, his spokesman; and political consultants David Townsend, Jack Davis, and Richard Schlackman. Amid all the huffing and puffing in Sacramento about who or who's not giving money in the fight over the proposed subsidy to the Kings and their wealthy owners, their signatures recall a day when the Kings ownership itself was the shadowy "outside" force siding with taxpayers against sports extortion.

It was 1989 and the extortionist in question was Bob Lurie, owner of the San Francisco Giants. He was threatening to move the team to Tampa or some other eager town if the taxpayers of San Francisco would not build him a new stadium to replace the wind tunnel known as Candlestick Park. Mayor Art Agnos led the charge with a measure to do just that for the November ballot.

Unfortunately for the extortionists, the San Andreas Fault choose the wrong moment to slip. On October 17 the Loma Prieta earthquake knocked down a portion of the Bay Bridge, damaged San Francisco's Embarcadero Freeway, and destroyed blocks of houses in the Marina District.

Agnos briefly put the ballpark subsidy push on hold but then resumed campaigning. Opponents of the deal replied on the final weekend with a mass mailing suggesting that, what with the earthquake and all, the city might just have more pressing uses of tax dollars than lining Lurie's pockets.

And here's where Agnos dropped the bomb he had been holding in reserve: The opponents' mailer, he charged, was financed by Gregg Lukenbill of Sacramento, who was trying to steal the Giants. "We haven't had any looting after the earthquake until now," Agnos proclaimed. In a front-page editorial the San Francisco Chronicle piled on: "A contemptible, inflammatory and highly inaccurate hit piece... stands exposed as a scheme by Sacramento promoters." (How much importance do newspapers attach to subsidizing the home team? In all my years of reading the Chronicle — through the threat of Cold War nuclear holocaust, the turmoil over the Vietnam War and civil rights, the crimes and impeachment of Richard Nixon, the assassinations of Mayor George Moscone and Supervisor Harvey Milk — that is the only front-page editorial I can recall.)

Lukenbill denied any involvement. And despite Agnos's charges and the Chronicle's ranting, San Francisco voters turned down the subsidy plan.

But Lukenbill was lying.

Maurice Read, his spokesman, and David Townsend, the Sacramento political consultant, had met Davis and Schlackman, managers of the campaign against the subsidy, for lunch in San Francisco on September 29. They learned that the campaign was winnable but needed money for opposition mailers. They relayed the news to Lukenbill, who was deeply committed to building a privately financed stadium to bring the then-LA Raiders and baseball to Sacramento. Lukenbill knew that if the Giants stayed in San Francisco the team could block any competitor from locating in Sacramento, within its monopoly 100-mile territory. To improve Sacramento's chances, he called business associates and asked them to donate to opponents' campaign. One of them, a Woodland steel manufacturer, made a $12,500 contribution reported the day before the election.

"I made a few phone calls to protect Sacramento's interest in potentially getting a baseball team here," Lukenbill admitted months later. "I'm not ashamed of that. I'm proud of it. I want baseball in Sacramento and I'm proud of it and I'm not going to back off of it."

What Lukenbill didn't know was that Agnos and the Giants, their campaign failing in the wake of the earthquake, had been tipped off to his possible involvement within days of the first contact with the opponents, and had been itching to use the "outsider" threat in a last-minute push. Nor did he know that Agnos was a bad loser. The mayor urged San Francisco District Attorney Arlo Smith to prosecute his opponents; Smith, hoping to goose his campaign for state attorney general, complied. He got the grand jury to indict Lukenbill and the rest of the Ballpark Five on the incredible theory that their efforts to help the anti-subsidy campaign constituted a conspiracy to create a campaign committee that had failed to report its existence.

But this is the rare story with many happy endings:

  • Having failed four times in five years, first in San Francisco and later in San Jose, to get voters to buy them a new stadium, the Giants, under new ownership, gave up their extortion bid and built their own privately financed ballpark. The team has gone on to win two World Series.
  • Having protected their public resources for investments more potent than subsidizing sports owners, San Francisco and San Jose are now among the most economically buoyant big cities in the world.
  • When the Ballpark Five reached court, the judge dismissed the case, saying there was no evidence any laws were broken and no grounds for the grand jury's indictment or the district attorney's pursuit of the case.
  • Dogged by the judge's conclusion that he had been engaged in a political prosecution and hurt by revelations that he had sought to speed up the case to help his campaign, Arlo Smith was defeated in his campaign for attorney general.

The baseball on my desk freshly reminds that, in politics as in sport, the game is hardball, and though everybody mouths the bromide about "it's how you play the game," the spitball your side throws never seems as wet as the one loaded up by guy in the other dugout.

Sacramento Bee Misleads on Arena as Tax

On his City Beat blog, Ryan Lillis, city hall reporter for the Sacramento Bee writes that opponents of a subsidy for the NBA Kings arena in the city are misleading voters when they say that it means higher taxes. In fact, the opponents are more right than Lillis.

It is a fundamental principle of public finance that any spending by a government that does not have its own currency must ultimately be paid for by individuals and firms — through taxes, fees, or exactions. As conservative economist Milton Friedman liked to say (in a phrase that liberal economists frequently quote), to spend is to tax.

So, too, with the proposed arena subsidy in Sacramento. The city's$346 million contribution to building the arena is a government commitment of public resources that must be repaid by the city's taxpayers. It's a tax of roughly $700 on every resident of the city.

How exactly that money will be collected is still an open question. Sacramento remains mired in the process that the New York bond analyst who writes online under the pseudonym Bond Girl describes thusly:

Officials then work with their friends in the banking community to craft some borderline-insane financing scheme that involves the city, or some puppet nonprofit established by the city, issuing a combination of tax-exempt and taxable bonds to pay for the new facility. Debt service will be paid from a combination of grossly exaggerated facility revenues and whatever other miscellaneous revenues the city manages to scrape together. (“Hey, how about parking revenues? Our parking garages will be packed once the city’s economy is rejuvenated by the presence of a professional sports team. The facility is practically paying for itself this way.”) Officials will then probably hire some economic (prostitute) consultant to reverse-engineer revenue projections that make the project seem feasible. Maybe the city decides to back the bonds directly.

Whatever "borderline-insane financing scheme" ultimately emerges, one fact will remain: any public resources devoted to the arena could otherwise be used to pay for other city services like police, fire, parks, culture, and libraries, or to reduce taxes. To spend is to tax.

What Lillis neglects to tell us is that the signature gatherer he ignorantly brands as "misleading" is doing no more than paraphrasing what the Bee's own columnist, Dan Walters, has suggested: that the higher Measure U sales tax enacted in 2012 and due to expire in 2019 will be used and extended to pick up the arena bill.

Supporters of the arena subsidy understandably don't like to talk about it as a tax. Mayor Kevin Johnson is demanding that his city, home to the poorest residents in the region, carry the entire burden for a facility that caters predominately to higher-income people. (This may explain why the strongest supporters of the subsidy live outside the city; it's easier to love a tax you don't have to pay.)

Poor City

And it's even harder to talk about the arena as a tax when your city already has the highest taxes in the region. Only Galt has a sales tax as high as that in Sacramento (8.5%). The city's utility user tax rates (7.0% and 7.5%) are triple those in other parts of the region. These taxes are both highly regressive, hitting the essentials of life—heating, cooling, clothing—that make up a high percentage of the budgets of the poor. The city that's home to many of the region's poor hammers them hardest.

Vigilant and useful journalists would be explaining this to the region. Instead, as in so much of the Bee's cheerleading coverage of the arena subsidy, Lillis brands as "misleading" the very citizens who are raising the right questions about who benefits from the giveaway and what it might mean for the future of a financially and economically troubled city. He owes them an apology, and the Bee owes its customers and city better reporting and analysis.

Prop 13 as Original Sin

Give credit to David Crane. Unlike the pundits and would-be tax reformers who moan about California state government's boom-and-bust revenues, Crane, who was economic advisor to former Gov. Schwarzenegger, is brave enough to state the obvious: Prop 13 is the original sin.

Why are state revenues volatile? Because over the last 35 years California voters and policymakers cut the taxes that vary least with economic conditions, leaving governments increasingly dependent on the ones that vary the most.

The first and biggest whack, as Crane notes, was the 1978 Jarvis-Gann Prop 13, which cut and capped the property tax, a revenue source that declines only in the most dire economic moments, such as the Great Depression and the bursting of the housing bubble in the Great Recession. It was followed by the 1982 initiative eliminating state gift and inheritance tax and Schwarzenegger's 2003 cut in the vehicle license fee (which, perhaps not surprisingly, Crane fails to mention). Even more than the property tax, these were stable revenue sources, death and driving being inevitable features of the California scene.

But when they cut taxes, Californians didn't mean they wanted fewer public services. They have filled the void, partly by raising sales tax rates (since Prop 13 the combined uniform state-local rate has gone from 6% to 7.5% plus locally approved add-on levies for transportation or general city services); and partly from the rising yield of the personal income tax, which delivered more and more dollars because of the enormous shift of income to the wealthy that has taken place over the past several decades. Now, with the higher rates on the rich enacted last year in Prop 30, the yield will be even greater.

But it will also be episodic. Income tax collections swing with capital gains in the markets, and taxable sales swing with the economy (they fell 18 percent from 2007 to 2010).

As Crane argues, the right cure for this volatility would also be good for the state's economy. I think he exaggerates the risk that California's current taxes will cause the rich to flee, but he's right that our current tax balance—high taxes on work and investment, low or no taxes on property and oil—is "crazy." From an economic perspective, property taxes are, in the words of conservative economist Milton Friedman, "the least bad tax there is." If you tax land, you don't have to worry that you will cause people to produce less of it. If California imposes an oil severance tax, as every other oil-producing jurisdiction in the world does, you don't have to worry about the oil disappearing or oil prices rising, because oil prices are set by a global market, in which California tax policy is but a blip. Shifting taxes toward land, oil, and carbon and reducing them on work and investment would strengthen the economy while providing a more stable base for public services.

Crane cautions that, before changing Prop 13, "governments would first need to reduce pension and health-care liabilities." But here he has it backward. As we show in California Crackup, it was Prop 13 and the governing system it created that made the out-sized pay and pensions of local government workers possible and perhaps inevitable. Getting rid of them is the necessary condition for creating a local taxpayer counterweight to public employee power in city and county politics.

Will the NBA love Sacramento if it doesn’t put out?

I’m reminded, as I watch the saga of the Sacramento Kings, of one of those movies about the plain girl in high school—the girl who’s smart and sensitive but aches to have the cool kids like her and a boy tell her she’s pretty.

Right now, with the National Basketball Association’s relocation committee having recommended against moving the Kings to Seattle, we’ve reached the scene when the heroine, her inferiority complex in full bloom, sees her wildest dream come true. She’s been invited to the prom! And not just by another nerd. No, she’s been asked to share the big night with the star of the basketball team, the most handsome and suave of the in-crowd!

Doubt—does he really like me?—gives way to giddy excitement. She trades her normal drab uniform (baggy brown sweater over black tights) for a shimmering sheath, sweeps up her hair in a stylish do, and performs magic with the makeup tray. Bliss is just a limo ride away.

Of course, the audience knows what she doesn’t, something she may suspect but won’t let herself believe. The basketball hero, a bully and predator, has asked her to the prom only because he’s bet his crew he can have his way with her before the night is out. The homely ones are the easiest to nail, he brags. They’re so desperate they always put out.

Sacramento has so far played the heroine to perfection. If they awarded Oscars for desperation, it would sweep the field. Driven to madness at the prospect of losing the Kings, the city’s elected officials broached the idea of offering more than $300 million, roughly $600 per city resident, in subsidy to the NBA.

But now the plot turns. With the move to Seattle vetoed, the argument that Sacramento taxpayers must throw a wad of cash at the NBA because keeping the Kings was somehow economically vital—a weightless argument always—is moot. Here they stay.

Moreover, the city’s latest budget, released the same day the NBA decision was revealed, makes clear that an arena subsidy is money the city doesn’t have and, even if it did have it, needs more vitally elsewhere. The budget shows deficits and more cuts in already savaged city services as far as the eye can see—and then comes the “cliff”: the expiration of the temporary city sales tax that went into effect April 1.

So this is where the plain girl thanks her date for a lovely evening, expresses her hope that they will stay friends, and closes the door. There is no reasonable case for putting out.

The End.

Roll the credits.

Wait, wait, wait, I hear cheerleaders for an arena subsidy shout, that’s not how the movies go. The basketball dude doesn’t take “no” for an answer. If Sacramento doesn’t put out, the NBA will change its mind and move the team.

Really? Do those cheerleaders understand what they are telling us?

That all the nice words the NBA has spoken about Sacramento’s long and loyal customer support of the Kings are just sweet nothings, lies whispered in our ears to distract us from its true agenda.

That the crew of superrich would-be owners of the Kings and self-proclaimed believers in Sacramento and its future, men whose wealth surpasses all understanding by mere mortals, men like Vivek Ranadivé, who modestly bills himself on his blog as “entrepreneur, technology visionary, author, philanthropist, angel investor,“ are so bereft of capital and imagination they to cannot do what Gregg Lukenbill—the local developer, a guy in flannel shirts, jeans, and steel-toed boots, who brought the Kings to Sacramento in 1985—managed to do: build an arena without having to apply for AFGB (Aid to Families of Grasping Billionaires).

That should Sacramento balk at his advances, Ranadivé will lean into the face of the heroine and say, "Don’t you get it, you ugly bitch? I’m only here because I bet I could get into your pants."

Now that’s a movie I’d pay to see.

Eye on Sacramento Eyes the Deal

Eye on Sacramento, a local citizen watchdog group, has done what the Sacramento city staff and the Sacramento Bee have failed to do: write a comprehensive analysis of the terms and risks of the proposed city giveaway to the NBA Kings.

Read it and be sure not to miss my favorite part: where Stanford economist Roger Noll, a leading expert on sports economics, notes that the free luxury suite that the City Council and Mayor have negotiated for themselves will cost Sacramento taxpayers $8 million.

Now we know who are the real Kings in Sacramento.

Sacramento's Pig in a Poke

Here's a little quiz. Below are extracts from two separate documents assessing the proposal that Sacramento taxpayers hand over a quarter of a billion dollars to subsidize a new arena for the Kings pro basketball team. Read them and then answer a question.

  1. The development of the Entertainment and Sports Center [ESC] will not only transform Downtown Plaza into a thriving center of entertainment and activity, it will also provide Sacramento with a first-class venue for sports, entertainment and cultural events.... The project will serve as a catalyst for economic development in downtown and throughout the region.

  2. The proposed new arena... poses a variety of challenges for the City of Sacramento’s fiscal health. The city’s fiscal position is already tenuous—the Great Recession hit Sacramento particularly hard.... Spending money on an ESC will affect the local quality of life to the extent that these resources could be used to backfill some underfunded local assistance programs, education, or infrastructure projects. In addition to the already tenuous fiscal situation, the projections of the increase to local economic activity underlying the projected economic impact of the ESC are likely overstated.... The city is gambling with this investment. If it fails, it will put enormous stress on the city’s finances in the near and distant future.

One of these passages was written by an advisor employed by a team owner seeking the subsidy from the taxpayers. The other was written by a city employee charged with providing sound advice to elected officials and protecting the public interest. Which is which?

It will surprise no one that the first passage comes from the city staff report laying out the terms of the newest version of the arena giveaway. Such puffery has been the norm from the city in the arena discussion.

No, the surprise is that passage that tries to make realistic judgments about Sacramento’s economic strength and fiscal capacity to do an arena deal comes not from those paid to protect the public but from the analysis of the 2012 arena proposal (the current plan Is largely the same) that was written for the Maloof family, owners of the Kings, by Christopher Thornberg of Beacon Economics.

You won’t find anything in the city staff report that approaches Thornberg’s informed concern for the public interest and the future of the Sacramento. I won’t repeat what Neil deMause has written at Field of Schemes in his dissection of the arena term sheet and what he calls the “perpetual parking revenue machine.” The report is full of double-counting and lacks the detail needed for the public or council to make an informed judgment on its workability. I’ll only note that it’s an insult to the intelligence of elected officials and voters to offer up a half-baked analysis on a decision of such magnitude.

But even more troubling than the parking mystery black box is the city staff’s continued use of arena revenue projections that Thornberg has shown, through careful analysis of the Kings own books and Sacramento’s economy, “to be based on, charitably, best-case scenarios or, not so charitably, a wing and a prayer. Rather than hoping for the best but planning for the worst, this arena proposal plans on the best while ignoring the worst.”

Relying on wishful thinking would put both the city and team at risk, Thornberg pointed out. “When the expected revenues fail to materialize, both will end up severely financially distressed. Given the current budget difficulties faced by the city, such potential outcomes cannot be ignored—as the lessons of Stockton, California, and Harrisburg, Pennsylvania, demonstrate.”

Thornberg’s analysis and message, which I highly recommend you read, became even more relevant with the vote last week at the California Public Employees Retirement System to raise pension contribution rates by 50 percent over five years, which will deliver a hit to city finances roughly double the size of the proposed arena subsidy. It’s not often a consultant of Thornberg’s caliber—and he is widely seen as one of the most sane and reliable economists in the state—writes so bluntly. But it’s the kind of bluntness that good staff provide when big decisions with big stakes are at hand.

And, sadly, it is exactly what Sacramento’s own lavishly paid city manager and treasurer have failed to deliver. They totally ignore Thornberg’s work and fall back on the wing and the prayer. Why? Is it arrogance? Incompetence? A careerist desire to tell the elected bosses what they want to hear, the public good be damned? I can't say.

All I know is this: In my years covering Sacramento city finances as a journalist and serving as deputy state treasurer, I have seldom seen such shoddy analysis and so little concern for the public good from public servants. If this is all Mayor Kevin Johnson and the City Council expect, Sacramento is in deeper trouble than any of us ever imagined.

NBA Handout? Let Voters Decide

It now looks like there’s a chance that the decision about whether to pay extortion to the billionaires of the National Basketball Association could be made by the people of Sacramento themselves. Two lawyers representing opponents of the subsidy to the Kings franchise have sent a letter to the city’s leaders asking for a public vote on the question and suggesting that a referendum is likely if the city council does not itself seek voter approval.

A public vote is a good idea. As we pointed out in California Crackup, the referendum is the underused tool in the kit of California direct democracy. Unlike the state’s inflexible initiative, which is used for getting around elected lawmakers and tying their hands, the referendum is about holding a conversation: Our representatives make decisions and through the referendum we voters tell them whether they got it right, or should go back and try again.

The people’s right to pass judgment on legislative action through the referendum is guaranteed in the California constitution and Sacramento’s city charter. “The powers of the initiative, referendum and the recall of elected municipal officers are hereby reserved to the electors of the city,” the charter states, echoing the language of the state constitution. “All ordinances which may be passed by the city council shall be subject to referendum, whenever the use of the initiative or referendum is permitted by state law applicable to cities,” the charter provides. Qualifying a referendum against the issuance of revenue bonds for the arena would require signatures of 10 percent of the number of people voting for governor at the 2010 general election, or about 12,000 people.

If the past is truly prologue, though, expect Sacramento Mayor Kevin Johnson and his allies on the council to do everything they can to avoid making voters part of the conversation.

As the lawyers’ letter notes, “Last year, the City Council expressly voted not to allow the residents of Sacramento an opportunity to vote on the prior version of the proposed subsidy,” and put off taking any legislative act that might have triggered a referendum vote. It is the standard tactic of these sports extortion games to use a combination of delay and made-up deadlines to turn subsidy decisions into moments of crisis, where drama reigns and emotion defeats evidence and logic.

Expect Johnson and the friends of the billionaires to tell citizens that there can’t be a public vote because the deadline is too near—even though the deadline is too near because they wanted it that way. Expect them to follow the same path as the city of Santa Clara, which blocked a voter referendum on the subsidy for the new 49er stadium. Sacramento City Attorney Jim Sanchez has already claimed to reporters that the council’s upcoming March 28 vote on a “term sheet” for an arena handout isn’t subject to voter review because it isn’t a “final” act.

But California courts have found that the referendum right applies broadly to all legislative acts by city councils, and state law explicitly recognizes the referendum can be used, for example, to test voter approval of issuing revenue bonds, which would likely be used in any arena subsidy scheme. A time will come, perhaps many of them, when the council will have take a legislative action to make an arena subsidy real, and thereby trigger a referendum opportunity.

As divisive as the sports corporate welfare issue is, any attempt by Sacramento’s leaders to deny the city’s citizens their final say in such a critical decision would be more explosive still. Wouldn’t it be better to have the civic conversation upfront, before voices get raised and lawsuits filed?

Will Sacramento Be a Sucker For the Kings?

Your city is plagued with high unemployment, rising crime, declining public services, and unfunded liabilities that now amount to $2 billion, or about $5,000 per resident. What do you do?

Well, if you are the Sacramento City Council, you vote, 7-2, to signal your willingness to spend hundreds of millions of dollars you don’t have to subsidize a billionaire by building a basketball arena. “Every great city has a coliseum,” said Steve Hansen, a council member.

But the question for Sacramento is not what great cities have but what measures a failing city should take to make itself great. Paying corporate welfare to the rich doesn’t even make the list (something that Hansen, a corporate lobbyist himself, may be professionally forbidden to recognize.) At Zócalo Public Square today I explain how the dark side of sports loyalty blinds those whom the gods wish to destroy.

Pension Reform Trap II

It’s been an item of faith among would-be pension reformers that switching public employees from defined benefit pension plans to defined contribution plans like 401(k)s would save taxpayers money. When I’ve suggested here that the savings may never materialize, the faithful have scoffed.

So here’s one, early data point: In its new budget, San Diego is projecting a $40 million increase in pension costs for the coming year, much of it due to the switch from defined benefit plans approved by voters in June 2012 in the Prop. B reform plan.

This is not a surprise. It was predicted by San Diego’s Independent Budget Analyst.

A switch to defined contribution pensions doesn’t, by itself, save money. Because of higher fees charged by financial institutions and the lower returns realized by individual workers in self-directed retirement accounts, it takes higher levels of contributions to achieve a given level of retirement savings in 401(k) plans. For the switch to save taxpayer dollars, government employers must either reduce their workers’ retirement saving or cut their wages. In San Diego, Prop B will yield lower costs for taxpayers only by holding total city worker pay—wages plus benefits plus contributions for retirement plans—below the levels anticipated before passage of the measure. In particular, this will require learning to say no to police and firefighters.

Good luck with that.

Faulty Sacramento Fault-Finding

My old newspaper, the Sacramento Bee, has once again gone into full panic mode over the rumors that a Seattle group may be trying to buy and relocate area’s National Basketball Association franchise, the Sacramento Kings. Dare I suggest that what the Bee’s readers need at the moment is less panic and more insight?

Marcus Breton assures readers that “whether the Kings ultimately move or stay, it's time that Sacramento embraces an undeniable truth: None of the turmoil surrounding the team is the fault of this community.” It’s all the fault, the ham-fisted local columnist tells us, of the team’s owners, the equally ham-fisted Maloof family. If that is so, why did the Kings fail to prosper, either on the court or as a business, during the tenure of the prior two owners?

Should the Kings leave, Phillip Reese reports, Sacramento would be the second largest metropolitan area in the nation without a major-league sports franchise, after only the Inland Empire area of San Bernardino and Riverside.

That’s a nice factoid but it raises the obvious question: Why? Pro sports teams are businesses. Leagues locate their franchises in the places where they are likely to yield the greatest revenue and profits. Is there something about Sacramento that explains why it has such a hard time supporting the Kings?

The Bee used to know and report the answer. NBA franchises draw a large share of their arena revenue from corporate sales. But Sacramento, its economy dominated by state government, is the weakest market when measured by the number of local firms able or willing to shell out for season tickets and luxury boxes. The area’s median household income is far below that of metropolitan areas on the coast, home to California’s other pro sports teams, or of Seattle, and its growth is hampered by its mediocre level of educational attainment. Those weaknesses, which have plagued the franchise since it moved to Sacramento in 1985, have been compounded by the effects of the Great Recession. The popping of the housing bubble and cuts in state government dealt a double blow to the region, which lags far behind most of the country in recovering lost jobs.

The uncomfortable truth that Breton and others at the Bee evade is that the Kings story is part of the larger story of Sacramento’s economic shortcomings and leadership failures. The area is a lousy market for delivering revenue to an NBA team, and its governments are in deep fiscal trouble and in no position to subsidize the franchise. A newspaper devoted to tough journalism would be telling that story, not whining and pointing fingers.

Expensive Cops = More Crime

The New York Times has a new story linking rising crime in Sacramento to cuts in the local police force. I doubt any reader finds this particularly surprising. Most people assume that putting police on the streets helps deter some crime and results in the arrest of criminals who aren’t deterred, thereby preventing them from offending again.

What the Times doesn’t explain is why Sacramento’s leaders would choose to inflict such a policy on their community. Are they just nuts?

You have probably guessed at least part of the answer. Like the rest of the nation, Sacramento was hit hard by the recession. It was one of the cities at the epicenter of the bursting of the housing bubble. The combination of the two economic blows depressed the city’s property and sales tax revenues, forcing budget cuts.

But another part of the answer is the extravagant level of pay and benefits for police and fire employees.

According to the California State Controller’s database, 168 police employees in Sacramento received in excess of $100,000 in reportable wages in 2010. Most of these also received more than $20,000 in city contributions to health insurance premiums and employer’s assumption of the employee’s share of pension contributions. In addition, 225 of the 446 fire department employees were paid more than $100,000 in wages.

The “why” here is clear. It is difficult for any community to provide adequate levels of police and fire protection when it pays cops and firefighters twice the average wage of full-time workers in the community.

The puzzled readers of the nation’s paper of record would have been well served by this added context.

Prop 31 Crashes and Burns

The California Budget Project, long the gold standard for intellectual honesty and rigor in California policy analysis, has published its overview of Proposition 31 on the November ballot.

The analysis is long and detailed. (How could it be otherwise for a ponderous jumbo-jet of a ballot measure, which weighs in at over 8,000 words, longer than the original U.S. Constitution plus its subsequent 225 years of amendments?) But it’s worth the time. The CPB doesn’t take positions on measures, but as you read, you will feel the damning details add up, like ice glazing the wings, until the plane stalls under the accumulated weight, falls out of the sky, crashes, and burns.

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