Tuesday, July 31, 2007

Unblending The Retirees

Last night, the Council decided to provide one more transition year to the City’s 140 retirees who purchase medical insurance from the City. It’ll cost us $220,000 – but it will provide a softer landing for the retirees who have traditionally counted on favorable City medical insurance rates, and it will save us a lot of money in the long run.

This story is a good example of the financial pressures the City faces, and the hard decisions that we on the Council have to make as those financial pressures grow. It’s also a good story about collaboration and about innovative solutions within government.

Many city employees retire before the age of 65, meaning they are not yet eligible for Medicare. Faced with the question of what to do about medical insurance in the meantime, about 140 of these younger retirees currently buy it through the City’s program. Traditionally, the retirees and the current employees were put into the same pool and purchased insurance at the same rate – a rate that was lower for the retirees than they otherwise would pay (because their medical costs generally are higher) but higher for the employees than they would otherwise pay (because they were subsidizing the retirees). The City is not required to provide retirees with medical insurance at the same rate as current employees, but it was longstanding practice and most of our younger retirees had come to depend on it.

In the last few years, of course, the price that everyone pays has gone way up. And, more recently, the Government Accounting Standards Board (GASB) has changed its practices and will soon require that the City (and all other government agencies) calculate the cost of all retiree medical benefits as a liability on our books. A quick calculation by the city’s staff concluded that this figure would currently be $5 million. In the years ahead, as more and more people retire, it would grow to $24 million. This liability would harm the city’s overall balance sheet and could hurt our credit rating. And, of course, it would mean the rates for our current employees would just keep going up and up.

This is kind of like Social Security. The more retirees there are, the harder it for those still working to pay the bill.

So last fall, we voted to “unblend” the rate, meaning current employees paid a rate based on their own actuarial and risk factors and retirees paid a separate rate based on their factors. We did it, frankly, without a whole lot of discussion. The result was a big hit for some of our younger retirees. The typical individual saw his or her rate double, from about $500 to $1,000 per month, under Blue Shield. (Kaiser, which had just taken over Buenaventura Medical Group, had not yet unblended the rates and so their rates were still low.)

Not surprisingly, this caused a backlash. In November, Councilmembers Neal Andrews and Jim Monahan proposed reconsidering this action – and more than 100 out of the 140 retirees packed the council chamber in support. We agreed to subsidize 50% of the increased rates for one year (calendar year 2007) – a hit of about $400,000 on the General Fund. We also agreed to create a task force, including Councilmembers Andrews and Ed Summers, to work out a longer-term solution.

And we did. The proposal that came before us last night was a pretty good solution, and included a tolerable increase for most people. Kaiser has now unblended the rate and so the typical individual will now pay $500 a month, up from $300 a month last year. (It’s more than $1,000 a month for two or more people.)

But the task force also found another solution to the high Blue Shield costs. Riverside County has negotiated low rates with Blue Shield and has now offered this program – known as Exclusive Care Select – to other government agencies as well. Ventura County is likely to join, as are Orange and San Bernardino Counties. By joining this program – essentially, contracting with Riverside County to join their program – it looks like we’ll be able to soften the blow, and bring the retiree premiums to around $530 a month for an individual and $1,000 for a couple.

This is a pretty good application of a theory floating around in public administration circles these days. The theory suggests that government agencies should not try to do everything. Rather, they should specialize in what they are good at, and then contract with each other for the good stuff. For example, if the County’s better at 911 than we are, let’s contract with them. Our deal with Exclusive Care Select is a good example. Riverside County is good at this stuff. So we’re going to contract with them to help provide more affordable health insurance for our younger retirees.

And we’re giving the retirees a bit of a soft landing besides. We agreed to subsidize their transition for one more year – at half the previous level, or $220,000. That works out, on average, to about $130 per month per retiree. (We rejected another alternative, which was to phase the subsidy out over four years, at a cost of almost $1 million.)

Our subsidies are real money, of course; this is money we will have to come up with in the short run from existing sources of funds. And we weren’t contractually obligated to provide this transition period.

But our own employees clearly believed we had a moral obligation to them. We did not want to risk our long-term credit rating. And by working together with the retirees, we found an innovative solution that, we hope, will maintain affordable medical insurance premiums for them in the long run. Who says government can’t be innovative?

Wednesday, July 25, 2007

Why I Backed Off On Reconfiguring Victoria

One of the things I hate about politicians is that when they run into political resistance, they often change course and don’t admit it. They make it look as though the changed course is a perfectly logical result of a thoughtful process, not the result of political pressure. So let me make something very clear: I backed off of the idea of reconfiguring the lanes on Victoria because most everybody in town seemed to think it was a bad idea.

On Monday night, the City Council voted 6-1 to move forward with the a new development code for Victoria Avenue – which requires an environmental impact report and other process considerations – but scrapped the “streetscape” part of the Victoria plan. This was the controversial idea of reconfiguring the traffic lanes in Victoria so that only six would be through-traffic lanes, while the other two would be local traffic and turning lanes. I voted to scrap the reconfiguration.

A politician has to admit when he’s not on the same page as his constituents. I’ve never had so much negative comment on any position that I’ve taken in four years on the council. Though a few people came to our defense, most constituents who expressed an opinion did so in very strong terms – calling us idiots or morons. Frankly, I got tired of defensively explaining that I wasn’t advocating eliminating any lanes, just using them in a different way. And I was waiting to see what our traffic planners told us about how this would affect traffic flow.

But when an idea doesn’t get traction, it’s okay to move on. So we’re moving forward with what we agree on rather than dwell on what we disagree on. And what we agree on is this: Victoria should strengthen its position as an important business district, especially for professional services firms. It will continue to have important retail, restaurant, and residential components, of course – the Victoria corridor really is a truly “mixed use” area, with everything you need in one place. But given its proximity to the Ventura County Government Center, it only makes sense to try to strengthen the office base in the area. By changing the code to encourage more office uses -- without eliminating any existing retail or other businesses – we can make a long-term commitment to prosperity.

Not only have I never gotten so much negative comment on an issue, I’ve never seen an issue that had so many dimensions. They’re endless.

Jim Monahan quite rightly pointed out that part of the traffic problem is the fact that Victoria serves as the southbound connector between 126 and 101. On Monday night, I reiterated my promise to Jim that I would talk with my fellow transportation commissioners and Caltrans about moving the 126-101 connector project up the list (it’s currently last).

All of our planning efforts in East Ventura have led me to believe, even more than before, that we have to do something to move traffic north and south. Mills Road by the mall is very busy, as is Victoria at rush hour. Wells Road south of Highway 126 has gotten very crowded, especially in the morning rush. We could try to push Johnson Drive across the 126 freeway or Kimball Road down across the Santa Clara River. But both these efforts would require building a bridge and winning a SOAR vote. To do Johnson we’d have to widen the street between Ralston and Bristol, where people live in single-family houses close to the right-of-way; and to do Kimball we’d have to work with Oxnard, which may or may not be receptive.

Then there are all the large employers who rely on the Victoria corridor, especially the county, the school district (which has five schools in the vicinity of Victoria and Telegraph), and the college, whose staff and students come up Victoria and turn left on Telegraph. I still hope we can have a dialogue with all these employers and institutions to discuss whether we can alleviate rush-hour congestion by staggering everyone’s schedule.

Finally, of course, there’s Wal-Mart, which is preparing an application to build a store where the Kmart is currently located adjacent to Trader Joe’s. A lot of folks around town want us to keep Wal-Mart out, while a lot of other folks think we’re dragging our feet and foregoing lots of needed sales tax revenue by not falling all over ourselves to welcome them.

The truth is it’s very difficult to keep any individual company from doing business in our city . Constitutionally, our planning policies cannot distinguish between Wal-Mart and, say, Kmart or Target . Wal-Mart has already taken down a 20-year lease on the Kmart site and there would be nothing to prevent them from simply moving into that building (which is about 100,000 square feet).

But that’s not what it appears they are planning to do. In May, when they showed the city staff a new design (which apparently looked good in urban design and “green building” terms), they also hiked the size of the building from what they had previously discussed. It’s now apparently a 150,000-square-foot supercenter, complete with groceries. .

Some of the folks opposed to Wal-Mart have been encouraging us to pass an “anti-big-box” ordinance. But, as our Community Development Director Nelson Hernandez pointed out the other night, we already have mechanisms in place to deal with very large stores. Any retail store over 50,000 feet in the Victoria Corridor now has to go to the Planning Commission for a special permit, and under the proposed Victoria code it would be very, very difficult – if not impossible – to approve a store of more than 90,000 square feet.

All of which means that Wal-Mart might have to bag the groceries and settle for a smaller store, more the size of Kmart. But remember: Groceries are exempt from sales tax. So there wouldn’t be much hit on the city treasury.