With the overwhelming voter endorsement of pension reforms in San Jose and San Diego, folks here in San Francisco might be thinking, “Thank goodness we passed our own reform — Proposition C — last November.” Well, as was pointed out in this column and in public statements by Jeff Adachi and even mayoral candidate Joanna Rees, Prop. C was founded on the fanciful notion that we could continue to assume a 7.75 percent return on pension fund investments.
When New York City considered lowering its expected investment return rate, Mayor Michael Bloomberg said, “The actuary is supposedly going to lower the assumed reinvestment rate from an absolutely hysterical, laughable 8 percent to a totally indefensible 7 or 7.5 percent.” Private companies use an average of 4.8 percent return.
Earlier this year, CalPERS, the nation’s largest public-pension fund, reduced its expected return rate from 7.75 percent to 7.5 percent, although the agency’s staff had recommended lowering the rate to 7.25 percent.
In December of last year, just a month after Prop. C passed, the San Francisco Employees’ Retirement System lowered its expected investment return rate from 7.75 percent to 7.5 percent.
According to retirement board member Victor Makras, lowering the return rate to 7.5 percent results in a $25 million increase in pension obligations in fiscal year 2012-13. With Prop. C in place, employee contributions are projected to increase by $40 million, which is nothing to sneeze at. But the massive savings predicted by Prop. C’s proponents — $40 million to $50 million in 2012-13 — appears to have been undercut by the recent reality check.
The percentage of total employee payroll that The City will have to contribute to the pension fund actually went up this year (!!!) from 18.1 percent to 20.7 percent. And we’ll still be paying $405 million in pension costs and $173 million in retiree health care costs in 2012-13, for a total of about $40 million more than last year.
Before you know it, San Francisco may have to take pension reform back to the ballot box.
RCV is back but not better
Today, the Rules Committee of the Board of Supervisors will once again take up ranked-choice voting. This time, the proposal is to keep the voting method in supervisorial elections and eliminate it in citywide elections. So offices of mayor, public defender, district attorney, city attorney, assessor-recorder and treasurer would be decided with a runoff election.
The current proposal would have a nonpartisan primary in September and if no candidate gets at least 65 percent of the vote, a runoff in November. These details may change as the committee considers amendments.
Remember that after months of frustration with the army of mayoral candidates and confusion that ranked-choice voting brought to the process, Supervisor Mark Farrell introduced legislation to eliminate it altogether on Election Day 2011. In response to Farrell’s introduction of that proposal, supervisor and mayoral candidate John Avalos gave a particularly melodramatic speech in defense of the system, only to find out later that he would have been the candidate to challenge Ed Lee in a runoff.
To give themselves more time to hammer out a compromise, the supes decided to postpone the subject so it might appear on the November 2012 ballot instead of the June ballot. So we’re back to discussing a compromise plan to avoid the extraordinary fiasco of the ranked-choice voting situation we have now.
And while initial annoyance with the system may have died down in the months since the November 2011 election, just remember that in an analysis of the effects of ranked-choice voting on the November 2011 election, professors David Latterman and Corey Cook concluded that, “If there had been a runoff, whoever came in second to [now-suspended Sheriff Ross] Mirkarimi probably would have prevailed.”
Warriors puns a slam-dunk
At Tuesday’s Board of Supervisors meeting, the supes unanimously passed a resolution allowing the Office of Economic and Workforce Development to begin negotiating for a Warriors arena. The hearing was surprisingly uneventful but for the attempts by government nerds to demonstrate knowledge of professional basketball. “This is the opening tipoff,” said Ken Rich of the Office of Economic and Workforce Development, describing the fact that this is only the beginning of the process of developing the site. Later, after local public crooner Walter Paulson treated the room to a song about the Warriors, Supervisor David Chiu complimented him with, “Slam dunk singing, Walter.”
Waterfront views vs. luxury condos
Later the board considered a development of condominiums near The Embarcadero at 8 Washington St. This is the most recent of several hearings on the matter wherein people who want to protect their fabulous waterfront views and tennis courts get to rail about the proposed luxury development. (It ain’t exactly David versus Goliath.) That the developer will be giving $11 million to The City for affordable housing was not enough for supervisors like David Campos and David Chiu, who were hung up on the amount of profit that the project would yield. Apparently when determining the amount to extort from local construction projects, the question isn’t, “What do we need?” it is, “What have you got?”