OPINION: Measure A Bond is Fatally Flawed
The following letter was provided to PCA:
Mayor Chiang:
Please allow me to raise a couple of points regarding your letter last week (January 24th) published in the Montclarion regarding the Pension Bond proposal.
Whether or not bonds will actually save the City money remains an open question. Of the several municipalities (public entities) who have taken this venture, most, for a variety of reasons, have not done well.
What you suggest regarding the vote count (requiring a two thirds voter approval) is problematic. Although it (2/3) complies with the Constitutional debt limit, altering the measure at this late time (long after the Election Code statutory time limit provisions) is prohibited. The Code clearly does not allow for any type of alteration or modification to the measure, especially a substantive and material change as you suggest. Clearly, the bond measure is fatally flawed.
Neither is judicial “validation” (CCP secs. 860 et seq.) an option. The City was correct in the first instance (Ordinance No. 711 N.S.) that the City’s charter provision (Section 4.14) requiring an affirmative vote of the electorate precludes an action under the validation statutes. Further, even without the prohibitive charter language, considering the recent court rulings, it cannot be shown that the obligation is one, “required by law” thereby eliminating the validation process.
D. E. Mix
Editors’ Note: The opinions expressed are those of the author and not necessarily those of the Piedmont Civic Association.
Mr. Mix,
This note is in response to your opinion that Measure A is fatally flawed. Even though you are not a registered voter in Piedmont, I do not share that opinion. You may be a registered voter in Oakland and are upset with what Oakland did a number of years ago, but it’s not a reason to compare it to Piedmont’s which is totally different and not the same. Unlike other cities, we’re not speculating on interest rates or assuming we can borrow money and invest it for a higher return. We’re taking a fiscally responsible action and not gambling as you are asserting.
The bonds will save the City money (assuming interest rates and the costs of issuance do not rise dramatically to make it financially unsound). The obligation will be fixed with a payoff amount from CalPERS. We are simply refinancing an existing obligation by paying it off with proceeds from new bonds or other indebtedness at a lower interest rate (currently estimated to be 4.25% versus the existing 7.50%), and we are not trying to do an interest rate arbitrage. There are many examples in the marketplace with successful CalPERS side fund refinancing. The City is using a very experienced financial advisor for this refinancing transaction who has done many of these transactions. As for your comment that we need agreement from the unions to accomplish this, all of our negotiations have been with this potential refinancing of the CalPERS side fund in mind, and all recent contracts have provisions that enable us to move forward without any problem.
I am not trying to change the language of the ballot measure as you are suggesting. We know the rules. The ballot measure is only dealing with the City Charter requirements. As to the validation action and requirements, the City relies upon the professional expertise of bond counsel and of our City Attorney.
Mayor John Chiang