Jeff Pelline's Sierra Foothills Report

Here’s an article being shared on the internal employees network of the county. Let’s hope the county is more successful in its labor negotiations with the employees’ union than it was the last time around. For all the crowing about our fiscal conservatism, the county and the supervisors could have held a harder line with the unions the last time around, as I’ve written before. The unincorporated county faces many problems in upcoming years, I would argue: declining revenue, a moribund real estate market and increasing costs, such as how to deal with disposing of sewage. Here we go (again):

This past Tuesday we presented a fiscal report to the Board of Supervisors outlining the results of the 2009/10 fiscal year, an update on the 2010/11 fiscal year budget and early estimates for the upcoming 2011/12 fiscal year. I want to share this report with all of you as it is important for you to understand the financial pressures the County team faces as we try and deliver sustained services to our citizens.

Our last fiscal year results once again reflects positive operating results and improved the beginning General Fund fund balances by $788,000. Our budget last year for the General Fund was $63 million so we had a positive operating result of approximately 1.25%. Thank you for your efforts to helping to live within our means.

As you will see when you review the report the County’s property taxes are estimated to decline by 7.5% this current fiscal year. This is significantly more than the 4% decline we assumed when the 2010/11 budget was adopted. The additional 3.5% decline represents a loss of $1,175,000 in General Fund revenue. Thankfully we have experienced some known positive offsets that will keep the budget balanced for 2010/11.

Unfortunately, our property taxes and frankly virtually all revenues throughout the County services have been declining and there is no clear cut signal of economic recovery. This sets up a twofold problem.

First, the decline in revenues will force us to reduce expenditures once again in 2011/12 and second there is no new revenues to pay for cost increases, the largest of which is salary and benefits, which will cause us to reduce expenditures even further in 2011/12. You will see in the report that in the General Fund alone we are now estimating a $5.5 million budget gap for 2011/12.

I have recommended a combination of three tools to address this gap: continued staffing reductions, labor discussions which have already begun with your labor unions, and use of fund balance reserves.

Decisions for the past three years have been difficult. I know we have and will continue to impact individual employee’s lives and incomes.

This upcoming budget year, and the next several, will also be very difficult given the economic environment. Thankfully Nevada County has made some prudent preparations, but the fact is that we did not anticipate the length or breadth of this economic recession.

Once again, thank you for your continued vigilance in keeping the Nevada County government fiscally sound. Together we will weather these times.

Richard A. Haffey
County Executive Officer

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Watch as a 1,200 pound pumpkin is dropped on a Pontiac. Only in America.

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The local media is touting a quarterly profit at Citizens Bank, demonstrating the kind of boosterism any serious investor or “citizen” has come to expect from the local reporting.

But when you dig deeper into the earnings report you find:

•The bank’s leverage capital ratio was 5.7 percent in September — just as it was in June. It is supposed to be at 9 percent, according to the agreement it had with bank regulators. More background is here.

•The bank hopes to raise capital through a stock offering at $3 per share, but it is trading at $2.20

•Non-performing assets are still increasing year-to-year, now standing at $42.2 million, a sign of the ongoing real estate slump. The allowance for credit losses was 5.15 percent of total loans as of September, increased from 4.78 a year earlier.

•The company still is deferring TARP dividend payments and in July 2010 began deferring interest payments on trust preferred securities as well.

I wish Citizens the best in overcoming its obstacles. In the worst case scenario, I’d speculate (without any inside information) that it would be sold to a larger regional bank.

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A new anti-Prop. 23 ad plays off the California v. Texas World Series, the S.F. Chronicle reports. “Beat Texas,” it reads. Details are here.

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The same GOP lawmakers who opposed the bailout that saved GM were on hand to cheer when the automaker said it would rehire 483 laid-off workers at the Spring Hill, Tenn., plant, the daily auto website Jalopnik reports.

The article is here.

“The irony of the Republican lawmakers’ presence wasn’t lost on the workers who attended the ceremony; they booed Tennessee Republican Bob Corker, and one UAW official made clear from the stage that the union still remembered which politicians had voted to rescue Wall Street but opposed an auto industry bailout.”

U.S. Sen. Bob Corker —
Then: “This administration has decided they know better than our courts and our free market process how to deal with these companies….This is a major power grab.” – March 30, 2009.
Now: “At the end of the day we all have to feel good about what we did,” said Corker, who did attempt to negotiate the failed 2008 aid package. “I contributed to strengthening the auto industry in this country.”

U.S. Sen. Lamar Alexander —
Then:”This is not the right direction: taxpayer money down the drain, and Washington politicians trying to run auto companies. The sooner the politicians get out of the way, the sooner auto jobs and taxpayer dollars will be secure.” – March 30, 2009.
Now: “The center of the auto industry is still moving to Tennessee and the mid-South,” Alexander told WSMV-TV.

Speaking of taxpayer dollars being secure, GM’s value has gone from zero to more than $60 billion in just over a year.

“That may just be fast enough for U.S. taxpayers to start recouping their investment,” as CNN reports.

A growing number of analysts are speculating that taxpayers could break even with the GM investment with a drastically improved cost structure, just four brands instead of eight and a better quality product.

Would the GOP have bailed out GM? Of course. They just would have called it something different.

For many GOP lawmakers, it’s more about ousting Obama in 2012 that working together for the American public. Expect “gridlock” for the next two years, as I’ve written before.

The results of the GM bailout are worth monitoring. GM will kick off a road show for its IPO after the November elections.

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