Courtney Ruby’s Oakland Pension Audit Report Political Grandstanding

Oakland City Auditor Courtney Ruby has done it again: produced yet another report that’s more political grandstanding than problem-solving. This time, her focus is Oakland’s generation-long pension obligation issue, and it just happens to come at the time when she’s running for Mayor of Oakland against Jean Quan and 15 other candidates (as of this writing).

The City of Oakland has faced a pension obligation problem that extends beyond the term of Oakland Mayor Jean Quan, and was started all the way back when then-California Governor Jerry Brown allowed Howard Jarvis and Paul Gann to ram the idea of a state-wide one-percent property tax down the collective throats of Californians in an initiative called Proposition 13.

The bottom line, folks, is this: prior to the passage of Proposition 13, Oakland and other California cities were able to largely set the property tax to a point that was in accordance with the demand for services like police, fire, schools, and infrastructure – civic basics. Oakland’s property tax rate in some areas of the city (in what are called “flood control districts”) was as high as 16 percent.

Then came the passage of Prop 13 in 1978, and those rates were literally Hulk-smash-crushed to the level of one percent. Panicked city managers – Oakland’s then-City Manager, now City Administrator Henry Gardner, and his predecessor David Self, among them – scrambled to find a solution to the problem of the sudden, literally overnight, drop in revenues.

(I vividly recall having an argument with a middle-aged woman about Prop 13 as I was waiting for the AC Transit bus that took me to Skyline High School from 40th and Broadway each morning, and that was in 1978; I’m a graduate of Skyline High, Class of 1980. I told her that if Prop 13 passed, I may not be able to even ride this bus to school, and because service would be cut. Her response: “I don’t care; my property taxes will be lower.”)

The State of California took the official position that as long as we had a $3 billion surplus, we were just fine. But a little known report released in 1988 (and not placed online but available at the MTC / ABAG Library) predicted that by 1997, California and its cities and counties would start to feel the impact of Proposition 13.

The report was right on, as education budgets and city services began to be cut back, or privatized, or eliminated altogether. Some cities, like Oakland, and to a more dramatic extent, Santa Ana (which tried to make nearly its entire city a redevelopment project area) looked to capture as much property tax revenue as possible under the legal guise of California Redevelopment Law, and a little-known section of the portion of the California Health And Safety Code that concerned Redevelopment (Sections 33000 to 33999), that specifically allowed the use of tax-increment financing revenues for the provision of city services, which translates into the payment of salaries – Section 33678, Subdivision B.

How do I know this? Because in 1996, when I served as Economic Advisor to Oakland Mayor Elihu Harris, I made a presentation to the Oakland City Council presenting an innovative way to form our redevelopment property tax zones, such that our overall bonding capacity was increased to $5 billion. That, if the City Council elected to take the bold, but logical approach to adopt it, would have given Oakland more than enough money to then solve it’s burgeoning pension problem via indirect means of payment of salaries, and then establishment of fund balances – all the better to stay within the law of what redevelopment money could be used for, and yet solve our problems.

Daniel Levine, then of the San Francisco Business Times, took time to write this account of my proposal that is still online today. Dan wrote:

Facing a redevelopment budget deficit this and every other year through 2000, the City of Oakland will consider an innovative and controversial plan its proponents say will raise between $1 billion and $5 billion.

A complicated plan submitted to the City Council proposes combining currently separate redevelopment districts to create a larger, unified zone. That could extend the life of Oakland’s redevelopment program for 45 years, keeping a long-term stream of revenue flowing to the redevelopment agency. The council is expected to consider launching a one-year study of the idea.

“If no action is taken,” said Zenophon Abraham, an economic adviser to Mayor Elihu Harris and author of the plan, “the Oakland Redevelopment Agency will lose the ability to apply the powers of redevelopment to those areas that need it the most.”

The plan got its first public airing before the City Council’s Economic Development and Community Development Committee July 23, but it came late in an agenda-crammed session that spent most of its time with politically charged issues rather than broad economic ones.

As a result, the rushed presentation of the complex plan received little discussion other than a request that additional information be prepared for a report prior to the city council meeting.

Some people, including the redevelopment agency’s legal counsel Donnell Choy, have raised questions about the legality of the plan noting that it is illegal to postpone the collection of tax increment revenue. Abraham insists that is not what the plan is doing, since tax revenue is collected under the structure of the original district and then phased in to the new multi-zone within the language of current law.

City Councilman Dick Spees, though, said his concerns were not legal, but financial, and indicated the debate ahead for the plan will be on whether or not the city wants to give its redevelopment agency the ability to take on as much new debt as the plan seems to allow it to take on.

What Donnell Choy admitted, and after outside bond council looked at my proposal, was that there was no – zero – case history on my idea. It broke new ground, and there was a powerfully good chance Oakland would have withstood a legal challenge against it. The only problem was that the Oakland City Council didn’t want to try it.

If we did, it would have solved our pension, and many other, problems.

But not only did the City of Oakland not adopt the idea, but when Mayor Quan was initially elected along with Oakland City Auditor Courtney Ruby, the city failed to challenge the State of California, and now, and again, Governor Jerry Brown’s attempt to kill California Redevelopment Law, and with it any chance of saving Oakland’s property tax revenue.

Where was Oakland City Auditor Courtney Ruby on this giant problem? Silent. For all of her pretense of leadership, when the political / fiscal going got really rough, and it was time to take on the efforts of Governor Brown to save Oakland’s bacon, where was Courtney? Where was one of her vaunted reports?

Nowhere. Courtney Ruby sat pat, and said nothing.

So now, Coutney Ruby gives us this Oakland Pension Fund Audit that just happens to be timed with her run for Mayor of Oakland, and unlike my approach way back in 1996, gives no, zero, concrete solution to the problem.

Instead, what we get is a bunch of total crap about how the private sector handles its problems, and before that a reminder of the legal limitations established by the State Of California’s public retirement laws.

We don’t get a solution. All we get is political grandstanding. What set me off about City Auditor Ruby’s report is that it failed to provide a clear answer to the problem. We all know what it is.

I’ll give you one solution – well, two: we need to increase our sales tax rate, and to the tune of over double the nine percent rate that currently stands. Then, we must open a new challenge to the State of California, and reclaim, via home rule law, our right to collect and use our property tax revenue as we see fit.

Look, the initial round of legal challenges to Jerry Brown’s move to destroy redevelopment was such that Oakland basically left it to the California Redevelopment Association to wage the legal fight against the state, and the CRA lost that one. Oakland should have fought its own battle, and that’s where Quan and Ruby, and the Oakland City Council as a whole are to blame. They allowed it to happen, and even gave up money to the State of California!

It’s time for Oakland to stand-up and set a path for other California cities, and get our millions back. After all, Governor Brown sold us a bill of goods in saying that we needed to clobber California Redevelopment Agencies to balance the State’s budget.

As it turned out, the cutting of redevelopment agencies saved only $1.7 billion; the state’s shortfall was $15.7 billion, and out of that, California realized a $1 billion reserve. In other words, all things being equal, California could have balanced the budget without that reserve, or cut a little more to create one, without killing redevelopment.

Now, Governor Brown realized he killed the State of California’s best job-generating machine in redevelopment by mistake, and is now, this year, trying to make up for it by proposing the use of infrastructure finance districts.

That’s just the attack opening we Oaklanders need to take back control of the use of our property tax revenue and to start to solve our budget and pension obligation problems, as we were able to do in the past, along with other California cities.

Once again, Oakland City Auditor Courtney Ruby has done the City of Oakland a major disservice by pointing her pension problem finger at Oakland Mayor Jean Quan, when she might as well point it at herself, too. She was into her second term as City Auditor when Mayor Quan was elected, and yet did nothing to work to move the city to solve this problem – until she decided to run for Mayor against Quan this year.

And that was after Ruby issued a report that blasted two black Oakland city councilmembers for a city charter violation that all city councilmembers past and present have made in giving direction to city staff, then pulling the report, then saying she was going to run for Mayor of Oakland, then reintroducing the report, then saying she wasn’t going to run for mayor after she literally racially tore the City Council apart, and now is vigorously running for Mayor.

Got that?

Please. City Auditor Ruby. Stop the political games. Oakland needs real leadership and fearless direction, and right now, we’re not getting it from you.

Stay tuned.