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Standard & Poor’s vs. Mendocino County

Four hours after the Mendocino Board of Supervisors whacked County workers' pay by 12.5%, CEO Carmel Angelo told the Supervisors that Standard & Poor’s had given Mendocino County a BBB-minus credit rating.

“This is a result of our efforts to re-fund our certificates of participation (aka, bank loans) and we received a rating of ‘BBB-minus with outlook stable.’ It is the same rating that we had prior to this analysis. While this out-come was not entirely surprising, we had really hoped that we would improve our long-term credit rating. Unfortunately, that did not happen. Two areas were problems for us with Standard & Poor’s; one was Teeter [borrowing against projected property taxes], and the second was the SEIU wage concessions.” Translation: To please the people who brought us the mega-swindle of the Bank Bailout we had to grab 12.5% from our employees, many of whom are barely paid a livable wage. As for our borrowing against estimated income from property taxes, well, we've ignored that problem for years and we're so far in debt on that one that it threatens to sink the Good Ship Mendo.

After some discussion of how the massive $16 million Teeter debt might be repaid, Supervisor John McCowen noted, “You just mentioned the wage concession issue and I think it's worth highlighting that that's part of what we have to be focused on and that's part of what the auditor, or the credit rating agency, is concerned about.” Angelo replied, “The second area that stood out to the credit rating agency is our wage concessions. We began working with Standard & Poor’s; we were in the process of… This was a few months ago, the thinking was that we were going to achieve those wage concessions soon. So, in this last go around with them, it stood out that the $1.5 million that we thought we were going to get in wage concessions hadn't come through yet. So that was also another factor in our credit rating. So those were the two factors that really drove S&P to keep us at the BBB-minus grading along with the fact that we do not have a robust local economic base here and so… But those two areas were key to us keeping the same rating.” Translation Two: If Mendo didn’t do what S&P wanted in wage concessions, Standard & Poor’s would have lowered our credit rating even further, thus driving up the interest rates on future borrowing by the County, assuming the County could find money to borrow any-where in the present economic context.

The wage concession savings — estimated last week at $1.2 million, not the full $1.5 million mentioned by CEO Angelo — would go into the County's depleted general fund reserve, not to pay anyone else or pay down ay debt, according to county Executive Office analyst Kyle Knopp.

In the morning before these revealing afternoon credit rating discussions took place, the Board faced an angry crowd of employees as they voted 5-0 to appease Standard & Poor's while cutting employee pay for the lowest paid workers by 12.5%.

Before the employees took to the podium during public expression, Board Chair Kendall “Miss Manners” Smith declared: “I want to begin by saying that this is going to be a mutually respectful process. This is not to have any personal attacks either coming from those who are here to address the board or from Board, from Board members. So again, a respectful process, it is not to be a personal discussion. And I would like everyone to be mindful of that. If it can't continue in an orderly fashion then the Board will take a recess. So I'm expecting that in fact it will.” Several employees proceeded to describe their dire financial situations which would now become even worse with the big pay cut. Others said the “impasse” between the County and the union over the issue of the cut was patently bogus.

After each of the first two speakers made statements about the hardship the pay cut would impose on them, the crowded chamber erupted in chants of “Shame on you! Shame on you! Shame on you!” During the chanting Supervisor McCowen turned to Chair Kendall Smith and said, “Gavel!” After the chanting died down, outspoken County employee Andrea Longoria — the woman who last month had famously asked the Supervisors, “You’re even fucking with my bereavement?” — this time declared, “This is a very very sad day for all people who live in Mendocino County. Shame on you for being fiscally irresponsible and hiding your agenda from the community. We offered to take mandatory time off a year ago and you rejected the offer. The County could have earned $28,000 a week while in contract negotiations if you had accepted. Employees are offering to make great sacrifices while you play politics. Your objective is not to reach an agreement that produces savings for the County. Your objective is to undermine the collective bargaining process and to do things your way no matter how unreasonable. Shame on you.” Which just about sums up how the County got where it is.

The chanting resumed: “Shame on you! Shame on you! Shame on you!” Smith: “Okay, the board is going to take a recess.” The room erupted in laughter and derisive hoots as the Board and CEO exited out the back door. Employees milled around talking and laughing, and shouting, “Shame on you” over and over again, waving their signs with the same message. Everyone in the room remained standing as Sheriff's Captain Kurt Smallcomb, the sole cop in attendance, strolled down the aisle and out the back door.

The board stayed in recess for over half an hour as Smallcomb patrolled the front dais and chatted amiably with one of the union reps.

When the Board came back in, Smith announced, “We are reconvening. We have word from the fire marshal that you must keep the aisleway open. We are at maximum capacity now. We need to keep the doorways open so there is access to the hallway.”

Leif Farr, a long-time county information services staffer was up next: “Shame on you for setting the stage for economic instability in Mendocino County. Your only plan is and has been the one you are prepared to take action on today: imposition of an across-the-board salary reduction. Imposition will effectively remove $7 million from the pockets of your employees. Imposition will effectively remove $7 million from the local economy — shame on you — to put $734,000 into your reserves. This plan is flawed and failed in so many ways. Shame on you for causing and planning for economic instability in the cities of Fort Bragg, Ukiah and Willits instead of really trying to problem-solve. Shame on you.” Social Services Department staffer Helen Michael: “Shame on you. Shame on you for your anti-union agenda. Your agenda is clear. And we are not shocked that as of last week you hired an expensive well-known union-busting law firm, Meyers-Nave [of San Francisco] to help you accomplish your goals. The right to collectively bargain is recognized through international human rights conventions and it is a fundamental human right. … The fact that at least three of you are united and behind an attempt to take away our fundamental rights to collectively bargain is shameful. Shame on you for hiring a union busting law firm at our expense. Shame on you. Shame on you.” Audience members didn't chant, but rattled their “shame on you” signs and held them up even higher.

Raylene Schaeffer: “I work at the District Attorney's office and we do not support the way we have been handled in these negotiations. But you have an opportunity to do the right thing right now. We encourage you to do what is right: vote no on the imposition. It is what is best for the County, the employees and the community you serve. Vote no.” More sign rattling.

Jennifer Sutly, Child Protective Services. “It has come to the point now where I don't want to come to work. I am now marking off the calendar day by day for the next three and a half years until I turn 65 and can get Medicare. I mark off the days one at a time. It feels like you all have stolen that time from me. You take away buying power from people and other stuff — what's left? I am one paycheck away from losing my housing situation. I have co-workers who are $30 away from being able to qualify for welfare and food stamps. Your own employees! What does that say about our County? Shame on all of you.” More applause and placard rattling.

Sue Blankenship, Social Services: “I've been working for the County for over 15 years. I worked my way up and in the last few years I've been knocked back down. As others have been laid off, I have retained my job and now I'm one of the lower level employees. If you take this 12.5% I will have gone down 29% in 2.5 years. 29%! And you gave yourself a 40% pay raise a few years ago? I'm sorry. That really does put shame on you. We are in a difficult position. Every single person here is going to suffer and so is the County. And so is the community. What is this? A political agenda? We are getting scared. Aren't you?” Shame on you's having finally ceased, Supervisor Pinches made the fateful motion: “Madam Chair, this is a difficult day for everybody in Mendocino County. I think that the financial conditions, not only the present financial conditions, but the future financial conditions, are going to get worse. The numbers are clearly coming in indicating at all levels, whether it's building and planning revenues for tax assessments, it's not a good situation and so at this time although I would like to take a different direction, I will move for the recommended action.” Audible groans from the employees.

Smith, a self-certified liberal of the type quick to resort to force, screeched, “Quiet! If there is not quiet we are going to clear the Boardroom and continue our business. This is not the time for public expression. You need to be quiet. This is a proceeding and we need to have quiet. I hope you understand that. If there's any more outbursts of any type we are going to have to clear the room. That's the procedure and we have to follow it. Thank you. So we have a motion by Supervisor Pinches. Is there a second to the motion?” McCowen: “Thank you Madam chair. I will second the motion. The fact is that a little over a year ago people stood before this Board at budget time and said, You need to declare bankruptcy. And looking at the books for the County — it wasn't hard to see why people would make those statements to us. And the County is still in a position where we are very seriously at risk financially and so the ability of the County to function is uppermost in all of our minds. That really is why we are where we are today as much as this isn't where we want to be. No one takes any satisfaction in this action, but it's necessary for the County in order to maintain its financial solvency, which is still in question going forward. There are many challenges still ahead financially for the County in the coming year or two. We don't know how long this is going to go on.” The motion passed unanimously to a chorus of groans from the employees.

Smith: “Thank you. We will be taking a 10 minute recess.” “Recall! Recall! Recall! Recall! Recall! Recall!” the crowd shouted as they filed out. As the shouts of “Recall!” died down, the last legible shout was, “Shame on you, Dan Hamburg!”

* * *

The other main contributing factor to the County’s dismal credit rating is the “Teeter debt” which, it turned out, was unanimously blamed on the incompetence of previous boards and senior staff, a true enough statement but one that doesn't take into account the blithe assumptions of eternal prosperity most Americans have made since the Great Depression. With a Second Great Depression picking up momentum the economic pain is just beginning.

As Supervisor McCowen explained, “Teeter [borrowing against projected income] was flying below the radar. I can't really identify exactly why that was. Part of it was that the people who were supposed to be responsible for protecting the financial condition of the County [a sorry collection of economic illiterates who simply told the Supes what the Supes preferred to hear] were not doing their job. Whether they were unaware or they were looking away, they absolutely were not doing their job in tracking Teeter and making sure that the receivables were being used to offset the debt.” Pinches blamed the credit rating problem on declining revenues: “I think if you read our report, basically, we're doing really well on the expenditure side, of cutting expenditures, but the real problem here is as the state shows is that our revenues are flat or decreasing. Not only that, our state revenue and federal revenues are looking on the downside, so that's I don't see any county our size getting an uptick in their credit rating because of the uncertainties of the economic conditions in the state and the federal monies coming in. The projections for them in the next two or three years is very bleak.” Supervisor Smith, predictably, went on auto-babble: “With the previous auditor, we had discussions about Teeter and there was direction given to the CEO and the previous auditor and I really don't know what happened because it was discussed before 2009 and, um, we had to first, kind of, extract it out of the miscellaneous budget, that was one kind of hurdle, and then I believe with changes in the executive office from year to year, it, whatever attention it may have got at the budgetary process wasn't continued, there wasn't any continuity through quarterly reviews like we have now, getting that budget into one budget unit and sticking to, um, I believe, direction that this body gave, um, on a number of occasions, so I think it's, it's continued to slip through the cracks, um, until, I think, 2009, but I, it wasn't without discussion, or it really didn't fall, but I think at this point it involves two auditors and, and, and, um, I do believe that changes at the executive level didn't allow things that did come to the surface to be rectified and again stuck to.” McCowen tried to spread the blame around: “I was talking about the outside auditor. But I think it was kind of a team play, and the fact is that either people didn't understand or they ignored that they had to pay for the current year delinquency in full every year or the debt would escalate. In '07 and '08 I think the debt shot up another $2 million each year because someone failed to understand that the full amount of the current year delinquency had to be paid plus an additional amount or the debt was just going to keep ratcheting up.”

Pinches added, “What happened was every year at budget time, and I was included in a lot of them, and before me, the auditor would come and say the final closeout number is, Oh, you got $2 million you can actually spend. So during the final budget deliberations the Board allocated so much money here and there, but it gave the option to the Board without knowing the full ramifications of that, the million, $2 million a year to allocate out to do different things that we normally would have said that we didn't have the money to do.” McCowen: “So again, the people who should have been safeguarding financial responsibility, the financial staff of the County either didn't know, or even worse knew, and were misrepresenting—

Pinches: “We were spending money we didn't have.” And here we are.

* * *

CEO Angelo reported that the Fort Bragg move of County services to the County-owned Avila Center from the $28,000 a month Affinito building originally scheduled for October — “at the latest” — has now been delayed until January of 2012 because of Fort Bragg's remodeling requirements which also have to go out to bid and City of Fort Bragg permit requirements. Ms. Angelo insisted that the January completion date was “firm.” McCowen: “With the bids coming to the Board on December 13 … it's hard to see that the construction would actually be completed by January. You are saying that the January deadline is firm, so what is your plan for ensuring that that happens given that construction is likely to still be under way?” Angelo: “There is remodeling that absolutely has to happen and there is remodeling that should happen and there is nice to have remodeling. So the absolute must-have remodeling will occur.” Meanwhile, the County is paying Affinito $28,000 a month while the move drags out.

* * *

Supervisor Hamburg, having maintained an anguished-looking, I Feel Your Pain, silence during most of the day’s proceedings, suddenly came alive to ask about — You guessed it — “I hate to bring this up,” said Hamburg, “but I just can't help it. The CSAC medical marijuana working group had ‘a productive discussion’? Could I just have a little description of what that productive discussion was? And what are other counties doing in response to the federal government crackdown?” A pointless discussion heavy on legalisms ensued which was finally neatly wrapped up by Supervisor McCowen: “The federal crackdown and responses to it, as County Counsel said, really was not a focus of the discussion and really got very little discussion. But also, for the reasons surrounding the Pack decision that County Counsel has mentioned…” (The state’s 2nd District Court of Appeals recently ruled in a decision called “Pack v. City of Long Beach” that the City of Long Beach can’t issue permits for marijuana dispensaries because federal law prohibits doing so. But some people think that the ruling means local jurisdictions can “regulate” pot dispensaries. (?))

McCowen concluded, “[County Counsel Nadel] and I had a very brief discussion and we agree that, given that there's so much uncertainty, and of course Pack centered directly on regulating versus permitting for dispensaries, so until some of those issues are clarified, either it goes up on appeal, or it's depublished, that, for the interim, it makes sense to not move forward with the development of a dispensary regulation because how Pack is ultimately decided will have a lot to do with what the ordinance might ultimately look like. So that process, I think we agree, is on hold at least for right now.”

Yes, Ms. Nadel agreed.

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