<html><head><style type='text/css'>p { margin: 0; }</style></head><body><div style='font-family: Arial; font-size: 12pt; color: #000000'><font face="Arial" size="3">Hello friends and neighbors.</font><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">To begin this update on today's Board of Supervisors (BOS) meeting, County Treasurer Shari Schapmire presented a report about the Treasury Pool to the BOS this morning. That wasn't her plan. Or the plan of whomever in the County CEO's Office puts together the BOS agenda, I guess. </font><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">Who knows who buried the County Treasurer's Treasury Pool report? Does it matter?</font><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;">What matters is that Supervisor -- and BOS Chair -- Dan Hamburg, pulled County Treasurer Schapmire's report from the Consent Calendar of today's BOS agenda. The report would have otherwise been accepted by the BOS without discussion as part of the BOS's Consent Calendar. </div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div><font face="Arial" size="3">Thank you, Supervisor </font><font face="Arial">Hamburg</font><font face="Arial" size="3">! </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Supervisor Hamburg then asked a few questions of Ms. Schapmire. His questions and comments were all on point. Her answers were forthcoming, accurate, and polite.<br></font><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;">Then, I followed up the BOS discussion on the Treasury Pool report during Public Comment for the item. </div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div><font face="Arial" size="3">I reminded County Treasurer Schapmire that she agreed to be a guest on my </font><font face="Arial">radio</font><font face="Arial" size="3"> show. We're looking at May 17 as the date of our show. We look forward to an informative show. The public is largely in the dark about much of county finances.</font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">During Public Comment, I also reminded the the BOS that the people of Mendocino County want more transparency and accountability in three areas of county finance, in particular: socially responsible investing, public banking, and robo foreclosures.</font></div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;">I also reminded the BOS that the Treasury Pool is pretty much a "backwater" of county finance, and that this is not a good thing...not a good thing, at all!</div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;">If the county's $130 million Unfunded Pension Liability teaches us anything, it's that no area of county finance should be a backwater...much less the $203 million Treasury Pool.</div><div style="color: rgb(0, 0, 0); font-family: Arial; font-size: 12pt;"><br></div><div><font face="Arial" size="3">Actually, the county's Unfunded Pension Liability could be calculated to be much bigger than $130 million with the new GASB regulations that are coming down the pike...maybe even twice $130 million. </font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">Double that $130 million figure, and you're in the ball park.</font></div><div><br></div><div><font face="Arial" size="3">The Unfunded Pension Liability got so big, in part, because past BOSs didn't </font><font face="Arial">exercise</font><font face="Arial" size="3"> much oversight over the county's finances, in general, and over the retirement system, in particular. </font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">As a Board, they were lazy (my opinion) and took things on faith. No oversight. </font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">Meanwhile, the County Treasurer and County Auditor at that time failed to disclose key facts. Things were "hidden". Outta sight, outta mind, as the saying goes. This was especially true of our Unfunded Pension Liability. It was also our Teeter debt. (Read past Grand Jury reports about the Teeter debt. Read'em and weep. The good news? The current BOS took responsibility for the hitherto fore unrecognized Teeter debt and is now amortizing the Teeter debt.)</font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">Regarding the Unfunded Pension Liability?</font></div><div><font face="Arial" size="3"><br></font></div><div><font face="Arial" size="3">First, there was $9.6 million in diversions of county contributions. This occurred sometime in 2007-2009. MCERA, the county's retirement system, is now negotiating with the IRS on how to make the system whole. I don't think I have to tell anyone out there in Mendo Land that attracting the attention of the IRS is not a good thing.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Second, regarding the Unfunded Pension Liability, in addition to the $89.6 million in diversions, there was another $30 million or so in abuses to the "excess earnings" policy that also contributed to our big unfunded liability. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">The whole subject of excess earnings is a complicated one. Suffice it to say that the concept of excess earnings is an accounting fiction. Excess earnings don't really exist. Yet, this money was spent as if it actually existed.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Sounds crazy, right? You bet!</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Lesson learned for the BOS? Stay on top of things. Exercise oversight. Hire the best outside accoutants and auditors that we can afford. Open the books to the public. Finally, one more thing. The most important thing. "Transparency" and "accountability" aren't just two empty words to be dusted off and used at election time. They are the principles we live and die by.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Lesson learned for We the People? Make sure the BOS do all the above. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">It's pretty simple, really.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">As a post script to this memo, below is a short description of new GASB regulations. We the People should know is that county pension costs will continue to escalate by millions of dollars every year for the foreseeable future. The can was kicked down the road for years and years and years. Now, we can't kick the can anymore. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">For that reason, the BOS needs to be fiscal hawks. We need to balance our budget. We need to build reserves. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">And, no doubt, this fiscal conservatism is painful. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">It goes without saying that this is not a happy time for county employees. They have taken a 10 per cent pay cut, and they have seen county payroll cut by hundreds of positions. The productivity of county employees is off the charts. And so are their stress levels. But is what it is.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Nor is this a happy time for the citizens. We have seen services cut. But again, it is what it is. The county needs to protect its solvency, credit ratings, its future.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Here we go with GASB. Thanks for listening! And stay on top of the Treasury Pool. Stay on top of socially responsible investing, public banking, and robo foreclosures. </font></div><div><font face="Arial"><br></font></div><div><font face="Arial">Remember: We are We the People! All power comes from We the People.</font></div><div><font face="Arial"><br></font></div><div><font face="Arial"><br></font></div><div><div style="font-family: Arial;">GASB 67 and 68</div><div style="font-family: Arial;"><br></div><div style="font-family: Arial;">On June 25, 2012, the Governmental Accounting Standards Board (GASB) approved final standards related to pension accounting and financial reporting for state and local governments. GASB Statement 67, Financial Reporting for Pension Plans, establishes new standards for state and local governmental pension plans. GASB Statement 68, Accounting and Financial Reporting for Pensions, establishes new standards for governmental employers (and other entities) that contribute to state and local pension </div><div style="font-family: Arial;">plans.</div><div style="font-family: Arial;"><br></div><div style="font-family: Arial;">The final Statements 67 and 68 significantly change current pension accounting and reporting standards for state and local governments by adopting the following measures: </div><div style="font-family: Arial;"><br></div><div style="font-family: Arial;">• Disconnecting state and local governmental pension accounting measures from the funding measures used to determine pension </div><div style="font-family: Arial;"> contributions;</div><div style="font-family: Arial;">• Requiring employers to recognize an unfunded pension obligation (i.e., the “net pension liability”) as a balance sheet liability in </div><div style="font-family: Arial;"> their government-wide basic financial statements. Moreover, the unfunded liability is based on the market value of assets rather </div><div style="font-family: Arial;"> than a smoothed value;</div><div style="font-family: Arial;">• Requiring employers to recognize a new measure of the pension expense that may have little relation to the actuarially determined </div><div style="font-family: Arial;"> contribution; and</div><div style="font-family: Arial;">• Replacing most of the current financial note disclosures and required supplementary information with information based on the new measures</div><div><br></div></div><div><font size="4">Feel free to forward or post this email.</font></div></div></div></div><div><br></div></div></body></html>