The Burlingame Voice

Municipal Charity is Limited

The City-funded support for local businesses, residents and charities is coming into focus as the DJ reports today

The Burlingame City Council agreed to build a $500,000 grant program for local businesses, while setting aside $250,000 to purchase gift cards for struggling families and donating another $250,000 to service providers.  The program is to be administered by the San Mateo County Economic Development Association, or SAMCEDA, which is also operating a similar program through the county.

Noting the city’s contribution capacity is limited, Councilman Michael Brownrigg said the Burlingame Back in Business program would likely serve about 50 companies fitting a limited criteria with grants capped at about $10,000.

Officials also agreed to purchase about 1,000 gift cards from Visa or Mastercard worth $250 which would be distributed to families in Burlingame, with hopes the cards would be redeemed at local businesses.  Councilmembers had first discussed attempting to restrict spending to a specific zip code, but ultimately determined allowing flexibility for families who need assistance would be more valuable.  Those eligible for the program will be contacted by the city’s utility provider, which maintains a list of those who qualify for financial aid.

We are in the fourth quarter of the city's fiscal year which ends on June 30th.  Using last year's financial report as a rosy baseline,  page 34 shows the $84.5M of revenue had major components of property taxes (25.7%), sales and use taxes (21.1%) and the biggie that is also the most at risk, hotel tax (34.8%).  When Michael Brownrigg says that the city's contribution capacity is "limited", he ain't kidding.  We could easily see the hotel tax get cut in half for the year--which would be a $15M hit to the budget.

Even at the end of June when the next report arrives, we won't really see the complete picture since the pain arrived at the end of the third quarter.  Another DJ piece on the San Mateo budget shortfall lays out the timing issue

“There’s a challenge we have on sales tax in that the data we get is essentially six months in arrears. The most recent sales tax data we have is for the third quarter of 2019,” said Finance Director Richard Lee. “We won’t see the true impact of COVID-19 for another six months. … It’s a similar concept for [hotel] tax.”

San Mateo's predicting a $7M "structural imbalance" next year which seems small to me.  It's total projected budget is $251M but only 14.3% in sales and hotel tax, so we shall see.

Friends with Benefits: Calpers Hedged or....Not?

Four months ago, we looked at the new Calpers chief investment officer Ben Meng's early moves to shore up the municipal and state workers' pension fund here.  We watch this because the City sends a sizeable chunk of pension money to Calpers to invest on its behalf.  We already know the coming year or two is going to be ugly for city finances.  The hotel tax ("TOT") has evaporated and it's certain the various sources of sales tax are going to be down substantially.  So sending cash off to Calpers in Sacramento has to be funded from somewhere and how Calpers manages it is important to all of us.  A piece in today's Wall Street Journal highlights Meng's call to exit several "tail risk" funds--meaning they hedge against rare events (the "long tail" in a probability distribution).

The California Public Employees’ Retirement System was well prepared to cash in on a stock market selloff. Until a few months ago.  After suffering big losses during the financial crisis, the $371 billion pension fund hedged against another dramatic downturn by investing in three funds designed to produce big payoffs when markets fall steeply. But the pension, also known as Calpers, decided to sell out of these hedges last year, giving up what could have been a payday of more than $1 billion.

Some members of the Calpers board were caught by surprise.  “He took away a risk strategy that the board had approved without telling the board,” Ms. Brown said in an interview.  Calpers began investing in both funds in August 2017 and developed a third internally managed fund with a similar strategy.  Calpers decided to unwind the positions in October, and by March it only had a residual stake left in one fund-- LongTail Alpha LLC , according to documents and people familiar with the changes.

Mr. Meng, who took over as the pension’s chief investment officer in January 2019, said he has no regrets about exiting Universa and the other funds. “Knowing what we know, we would make the exact same decision,” he said in an interview.

We shall see how the board and Meng address this.  Meng may have put in a viable substitute strategy--it's a story that is just starting, but one that highlights how expensive this lockdown will be for everyone regardless of whether they are working now or not and regardless of whether they are stock market investors or not.  Personally, I'm glad I live in a fairly well-run (financially speaking) city and that over the years we have chosen to limit our interdependence on other cities.

Covid-19 Tracking and Planning

It's time to start a new thread on our tracking of the coronavirus.  You can see the prior post from March 24th and the path of the virus' growth in the County here.  Today's County report at SMChealth.org shows 16 new cases in the County for a total of 767.  67 cases are currently in hospital and 7,295 total tests have been done with a 10% positive ratio.  Recall there are about 769,000 people in the County so the testing rate is still minuscule.

There was a great human interest story in the Daily Journal yesterday about Officer Steve Vega.  I've chatted with the officer on the street before (the last time was in front of the Apple store during the on-going patrol there) and I'm thrilled to hear he is better.  He may be down at Stanford right now donating

After recovering from COVID-19, Burlingame police Officer Steve Vega is hoping the antibodies in his blood can be used to treat others infected with the disease.  Vega, 55, is among the first participants in a new effort by Stanford Blood Center to treat COVID-19 patients while the world waits for a vaccine to be developed.

The 22-year Burlingame officer is set to donate his plasma, the liquid in blood, at Stanford this Thursday and however many times is needed after that.

Also in the news is some data on how the work-at-home trend for self-isolating plays out across the economy.  Having worked full-time from home for more than a decade one article about the trials the newbies are discovering was gratifying to read.  On the data side, the Wall Street Journal has a piece titled "The Lucky Stay-at-home 37%"

A newly released study called “How Many Jobs Can Be Done at Home?” reckons that 37% of all U.S. jobs can plausibly be done at home, meaning that nearly two-thirds cannot. The study’s authors, from the University of Chicago’s Becker-Friedman Institute, add that their 37% estimate is at the “upper bound of what might be feasible.”  Along with other studies, this one also finds that those in jobs that can be done from home “typically earn more.” By their calculations, for example, 37% of jobs that can be done at home account for 46% of all wages.

Those who have stressed the need to get our economy up and running again are sometimes criticized for favoring profits over people. But the Becker-Friedman paper underscores that those lower down on the socio-economic scale are most in need of a re-opening for their livelihoods.

That's an important point that can be missed during the high-anxiety zeitgeist we are in.  Here is the Avenew showing that zeitgeist.

 

Electric Parking: Low Usage at Lot Y Spaces

Some of the comments on the original post about taking 10 regular parking spaces in Lot Y just south of B'way and creating 8 electric vehicle-only charging spaces noted low occupancy (often no occupancy) of these new spaces.  I've noticed the occasional EV getting juice there, but not too often--and only once have I seen three EVs at the same time.  That motivated me to get the early usage figures from the City and the vendor, EVgo, so we can establish some sort of baseline.  I fully understand that some innovations take time to get to widespread use--the question is how long, if ever?  So here are the January 2020 figures (i.e. 31 days):

312 Charging Sessions

5.2 Megawatt Hours of charging delivered

Equates to ~1,350 miles of electric driving

Doing the math:  10 charges per day for 8 spaces is our baseline…1.25 charges per space per day.  Again, these things can take time, but I sure hope things improve otherwise we should turn at least a couple spots into EV-optional access until usage ramps up.

School Bonds...And Then There Were 3

For the first time in more than 20+ years, I've been contemplating whether or not to support a B'game school bond measure (Measure O) and the SMUSHD Measure L.  Over the last 20+ years it's been a no-brainer to vote "yes" and to further support the schools with donations and charity auction donations and bids.  Parcel taxes and bonds for the local schools are the most local taxation we have and local is good.  In reading the full text of Measure O, my concern was the last bullet point on the Project List 

Workforce housing to increase accessibility for District employees to quality, affordable housing

I decided to check in with Superintendent Maggie MacIsaac about any housing plans and she brought Board member Davina Drabkin into the conversation.  Davina and I had a good conversation about the pressures the district is feeling to retain staff including credentialed staff in key areas like math.  Here are a couple things that came out of that discussion

• There is no pre-allocated portion of the $97 million for housing.
• There are a number of models being tried elsewhere (subsidies, partners, build to suit, etc)
• The Board included the language in order to be able to spend money on studying the issue
• Unlike some Districts, B'game doesn't have land available for any sort of build project and is unlikely to be able to buy it

As a former analyst, I also want to look at the metrics that might point to the severity of the problem, so Maggie was kind enough to provide the teacher turnover (not counting retirements which don't fit the problem) over the last 12 years which are

• Year        % Certified Staff Turnover
• 2007/2008             8.7%
• 08/09                    4.4
• 09/10                    10.6
• 10/11                    9.8
• 11/12                    7.6
• 12/13                    14.4
• 13/14                    12.2
• 14/15                    15.1
• 15/16                    13.8
• 16/17                    16.6
• 17/18                    12.25
• 18/19                    13.3   

There are a lot of factors that go into teacher turnover, but you can say there is a slight upward trend to the data.  There are also a number of non-District-driven projects that might address the housing issue-- the city project on Lots F&N, the stunning amount of building going on it town with affordable unit components, and the possibilities of additional teacher compensation that might not involve millions of dollars of debt.  Of course, the stunning amount of building will only exacerbate the school budget problem. The real challenge for Measure O and L is that a state Proposition, crazily listed as 13 that I'll just call the New Prop. 13, is also on the ballot for $15 billion.  As the Chronicle reported today

The largest school bond in state history, at $15 billion, is going to voters in March as supporters try to put a dent in a $100 billion backlog of failing boiler rooms, leaky roofs and new construction projects needed at K-12 schools and universities.

Proposition 13 — unrelated to the same-numbered 1978 tax measure — was placed on the ballot by the Legislature with bipartisan support.

Supporters, which include the education establishment as well as the construction industry, would allocate $9 billion to K-12 schools, $4 billion for California’s public universities and $2 billion for community colleges.

The prospect of voter fatigue is very real-- I am hearing it all over town.  So I'm still contemplating how I will vote, but I feel a little better having some information that I didn't have before.  Hopefully you are too.          

Crime Update - 5 Year Trends

I had a chance to sit down with Chief Mike Matteucci and Lt. Jay Kiely for an update on police affairs.  I would say that I was meeting with the "new" chief after Chief Wollman, but Chief Matteucci's been in the position for a year already.  Time flies but the Chief move up through the ranks here in town and it appeared to be an easy transition .  Voice readers will recall a three-part series I did five years ago on various department initiatives including the Quality of Life team, the actions to reduce property crimes and technology initiatives.  During our discussion, it was clear that many of the initiatives have come to successful conclusion or are continuing to progress.  The most notable shift in the crime figures came in Vehicle Burglaries (i.e. of locked vehicles) which jumped near the end of the year especially downtown.  BPD has some on-going tactics to fight this trend that I won't go into here.  Here are the monthly averages:

Monthly Average                    2015    2016    2017    2018    2019

Residential Burglaries                5        5        2            3        3

Vehicle Burglaries                    22       23    25        21       39

Commercial Burglaries                8        9        4            5        4

Other Thefts                              56        60      51        56      61

Robberies                                   1        1        1            1        2

Stolen Vehicles                          10        9        6          4         6

Vandalism                                  14       13    13          11       12

 

"Other Thefts" include porch pirate package thefts, shoplifting and stealing items out of unlocked cars.  B'game averaged 127 crimes per month in these seven categories last year.  Having now subscribed to the daily email crime summary for several months, I can also say there are a semi-regular occurrences of other, more serious crimes like assault and sexual assault.  Fraud, scams and DUIs are also represented on a monthly basis.

As the city's population grows with all of the building taking place we should expect to grow the police department budget as well.  It may not have to grow linearly with population, but it will have to grow.                                                           

Santa, I Want a Swimming Pool

Another long-running B'game saga is coming to a conclusion in the next two weeks as the BHS pool is ready for swimsuits.  Here is your personal invite to the Grand Opening courtesy of the Trustees:

Be among the first to dive in when the San Mateo Union High School District and City of Burlingame celebrate the Grand Re-opening of the Burlingame High School Aquatic Center: 

Wednesday, January 8 at 5 p.m.

Burlingame High School 

 With strong financial support and through a partnership with the City of Burlingame, the San Mateo Union High School District has just completed renovation of the Burlingame High Pool including a new shell, deck and substantial sustainability upgrades.

It's likely to be chilly at 5pm in two weeks, but go for it anyway.  You can click through to here for what it looked like in January and this is what $6.4 million can do

Friends With Benefits: New CalPERS Guy Gets Tough

We haven't addressed much in our "Friends With Benefits" category since this post in August of 2017 that noted an 11.2% return that year and a 68% funded ratio for benefits.  During the council rotation Monday night, Mike Brownrigg commented that some of the unheralded accomplishments of the council this year was additional funding for pension benefits.  Compared to many cities we are in good shape--emphasis on compared to many other California cities.  This matters because the added funds come out of the funds available for everything else in town.  Last week, the WSJ had a piece on the new investment head at CalPERS that was revealing and encouraging

It didn’t take Yu Ben Meng long to find problems at the nation’s largest pension fund.  Six months after starting as investment chief of the California Public Employees’ Retirement System, he told board members at a Santa Rosa, Calif., gathering in July that some older investments might be valued too richly, said people familiar with the matter. By fall, the fund had shaved the value of a real-estate investment trust and was looking more closely at a five-plus-year-old bet on a solar developer, other people said.

Now as his first year comes to a close, Calpers has cut ties with a longstanding manager on a hometown project, jettisoned under-performing stock pickers, and slowed work on a multi-billion-dollar private-equity experiment.  Calpers’ has struggled to consistently meet its 7% yearly target at a time of high retirement costs and ultra-low interest rates. The pension fund has on hand only about 70% of the assets it will need to fund future retirement checks.  He told board members in January that the world today has many bigger, more nimble asset managers not based in Sacramento.

The fund also jettisoned four of five firms in a program that sought to attract women and minority managers that his predecessor helped grow.  Cuts to such a program “could be a hot potato and have political ramifications,“ said Co-Chairman Howard Marks of Oaktree Capital Management. ”But if your job is to achieve investment performance, you can’t be confused about what’s No. 1.”

Staffers are looking more closely at a developer of solar energy assets that some staffers at the fund believe is worth half or less of what it is valued at, a person familiar with the matter said.

So he won't overtake Judge George Miriam as person-of-the-year, but I'm thinking he makes an excellent runner-up.  Now if Yu can just keep the Legislature and Newsom from burning through the $21.5 billion budget surplus on pet projects and be as disciplined as B'game has been, we might get somewhere.

Death...Oops... Trains and Taxes

Since affordability is such a hot topic these days we should examine each and every effort to degrade our affordability.  Gas taxes.  Highway 101 fees.  Natural gas bans in new buildings--or at least so far only new buildings--so we can spend oodles on electricity.  School bonds and parcel taxes.  More bonds for affordable housing.  A sliver for the Rec Center.  I'll bet some of the regular Voice commenters can remember some that I am missing.  So here are the latest two-- a slice for the train and a big bite on commercial property which is to say a big bite on brick and mortar retail.  Amazon must be thrilled.

Bond Disclosures and Sea Level Rise

As I was reading yesterday's WSJ article about coastal cities decrying the impending sea level rise on one hand and essentially ignoring the risk in their municipal bond disclosures, I flashed on the B'game bayfront and the bonds we are about to issue for the Rec Center rebuild.  The Journal article notes

The Government Accountability Institute undertook a yearlong study of 40 major cities to find out if mayors’ apocalyptic projections about climate risks are factored into the interest rates on the municipal bonds their cities issue. The results revealed a gulf between the words municipal leaders speak and the disclosures cities make. There was no statistically significant difference in the interest rates for bonds issued by cities in high-risk locations for climate-change devastation versus those issued by low-risk cities.

The study also found scant mention of climate change in bond disclosure documents. The disclosure statements of the 20 at-risk cities totaled 4,361 pages. Phrases like “climate change” and “sea-level rise” appeared fewer than 100 times across all 20 at-risk cities in the context of the issues addressed in this study. Further, 12 out of the 20 disclosures for at-risk cities did not mention climate language in the same context.

When they got to discussing Oakland, it felt very close to home indeed since our sea level is their sea level

Worse, “by 2050, a ‘100-year flood’ in the Oakland vicinity is expected to occur on average once every 2.3 years and by 2100 to occur 44 times per year or almost once per week.” The lawsuit added that “Oakland is projected to have up to 66 inches of sea level rise by 2100.” The city alleged this would “imminently threaten Oakland’s sewer system” and harm property with a “total replacement cost of between $22 and $38 billion.”

Contrast that detailed, dramatic language with Oakland’s bland, measured 2017 bond risk disclosure to investors: “The City is unable to predict when seismic events, fires or other natural events, such as sea rise or other impacts of climate change or flooding from a major storm, could occur, when they may occur, and, if any such events occur, whether they will have a material adverse effect on the business operations or financial condition of the City or the local economy.”

That looks like an "oopsy" to me.  Which is it?  Is Oakland 30 years from disaster on a semi-annual basis which for a major port city would be a financial Titanic or are they unable to predict any of this?  We will have to have our local bond expert(s) weigh in on the B'game disclosures of same.