Bell, California, the Poster Child for Bad Government: Exorbitant Salaries, Lavish Pension Benefits, a Looming Default on $35 Million in City Bonds, and Illegal Property Taxes

Lessons from the Bell, California Fiasco

High government salaries means soaring pension costs that taxpayers cannot afford.

August 24, 2010

Reason Foundation - The City of Bell has become the poster child for bad government. Exorbitant salaries, lavish pension benefits, a looming default on $35 million in city bonds, and illegal property taxes have all come to light recently. And as a result, taxpayers across California are focusing new scrutiny on their own local officials.

The biggest long-term threat to taxpayers and budgets is the pension crisis. Bell City Manager Robert Rizzo was raking in a salary of nearly $800,000, and a total compensation package of more than $1.5 million that included benefits such as 28 weeks worth of vacation and sick time. That puts taxpayers on the hook for over $600,000 a year for Rizzo’s pension—for the rest of his life—when he retires.

The Bell scandal is a microcosm of a new class struggle—in California and across the nation—between taxpayers and government employees. Government employees have become the new privileged class.

The argument of public workers has always been that they do not earn as much in salary as comparable private-sector workers, so governments must make up for this inequity through increased job security and greater pension benefits. If this was true a generation or two ago, it certainly is not today. The most recent Bureau of Labor Statistics report on employee compensation revealed that, as of March 2010, state and local government workers earn, on average, nearly 44 percent more than do private-sector workers, including 34 percent higher salaries and wages and over 66 percent greater benefits.

California taxpayers are already paying pensions of over $100,000 a year to more than 12,000 former state and local government workers, including over 9,000 state and local employees covered by the California Public Employees’ Retirement System (CalPERS) and greater than 3,000 former school administrators or teachers covered under the California State Teachers’ Retirement System (CalSTRS).

At the federal level, a recent USA Today analysis, based on Bureau of Economic Analysis data, found that government employees’ average compensation has grown to more than double that of private-sector workers. Federal workers earned average pay and benefits of more than $123,000 in 2009, compared to a little over $61,000 in total compensation for private workers. Since 2000, federal worker compensation has increased 36.9 percent after adjusting for inflation while private-sector workers saw only an 8.8 percent increase.

The silver lining of the Bell fiasco is that it has awakened taxpayers to the magnitude of the public employee compensation problem (recent studies suggest the state has $500 billion in unfunded pension liabilities), and hopefully shamed some elected officials into implementing some real transparency reforms.

The excessive pay and benefits received by many government workers will not be solved, however, by merely increasing transparency of compensation data or tinkering around the edges of the pension system by offering slightly less generous benefits for new employees or requiring them to work a couple of more years before being eligible for retirement. The entire system needs to be overhauled. New employees should be switched to a 401(k)-style defined-contribution system, with pay and benefits comparable to those in the private sector. Only by seriously addressing excessive public employee pay and benefits can state and local governments in California ever rein in their enormous and unsustainable bureaucracies and return to any semblance of fiscal responsibility.

Ex-city Manager Among 8 Arrested in Bell, California, Pay Scandal

September 21, 2010

Associated Press – The mayor and ex-city manager of the scandal-plagued Los Angeles suburb of Bell were among eight current and former city officials arrested Tuesday in a corruption investigation.

The district attorney's office said several City Council members were taken into custody along with ex-city manager Robert Rizzo and Mayor Oscar Hernandez.

"This, needless to say, is corruption on steroids," District Attorney Steve Cooley said at a news conference in Los Angeles.

The district attorney, state attorney general and others have been conducting investigations of officials in the small working-class city since it was disclosed they were paying themselves huge salaries. Rizzo was making nearly $800,000 a year.

The investigations involve allegations of corruption, misuse of public funds and voter fraud in the city where one in six of the 40,000 residents live in poverty.

A message left at Rizzo's Huntington Beach home was not immediately returned.

Cooley said one arrest required authorities to use a battering ram.

The suspects were booked into county facilities and will be kept away from other inmates for their protection, Los Angeles County sheriff's spokesman Steve Whitmore said.

The arrests were the latest twist in a scandal that emerged in July with the disclosure that Rizzo was paid almost twice the salary of President Barack Obama.

It also was revealed that former Police Chief Randy Adams was making $457,000 a year, and Assistant City Manager Angela Spaccia was paid $376,288. Four of the five City Council members paid themselves nearly $100,000 a year for their part-time service.

Rizzo, Adams and Spaccia resigned and the council members reduced their salaries to about $8,000 following the disclosures and angry public reaction. The four council members are currently the target of a recall.

Last week, Attorney General Jerry Brown sued eight current and former officials of Bell, accusing them of defrauding taxpayers by granting themselves salaries he said were far higher than warranted for the jobs they were doing.

California Sues Leaders of City Hit by Pay Scandal

September 15, 2010

AP - The California attorney general's office sued eight current and former officials of the scandal-ridden city of Bell on Wednesday, accusing them of defrauding taxpayers by granting themselves salaries so high they were illegal and a disgrace to public service.

The suit demands the officials, including former City Manager Robert Rizzo, return hundreds of thousands of dollars they were paid to run the small, working-class city where one in six people live in poverty.

It also demands the reduction of bloated pension benefits that were based on the high salaries.

The salary scandal sparked nationwide outrage and calls for cities of all sizes to publicly disclose what employees are paid.

Rizzo's salary was $787,637 a year — nearly double that of President Barack Obama. Bell police Chief Randy Adams, who later resigned, was paid $150,000 more than the chief of the Los Angeles Police Department.

"You can't just take the public's money and give it to yourself or give it to your friendly employees or members of the city council just because you want to," said Attorney General Jerry Brown, a candidate for governor. "There's a standard and that standard is that the pay must be commensurate with the duty and the work."

Brown called the Bell salaries "enormous and obscene" and not anywhere in line with those paid to officials in most cities of comparable size.

Rizzo's attorney James Spertus said his client believes he did nothing wrong.

"His contracts were presented by the City Council and countersigned by the city attorney, and he acted openly and transparently when he interacted with the city," Spertus said, adding the council kept raising Rizzo's pay to retain him.

The Bell case prompted Brown to launch a statewide investigation of public employee salaries. On Wednesday, his office issued a subpoena ordering the small, neighboring city of Vernon to produce its employee compensation records.

Those records "may pertain to possible violations of various state laws and the waste and misuse of public funds," the subpoena stated.

The Los Angeles Times has reported that the former administrator in Vernon, an industrial city with only about 90 residents, was paid more than $1 million a year.

Brown's office and the Los Angeles County district attorney opened investigations after learning Bell had some of the highest-paid officials in the nation. The city of 40,000 also faces a federal probe into whether it violated the civil rights of Hispanics by deliberately targeting their cars for towing to raise revenue.

Along with Rizzo and Adams, those named in the lawsuit were former assistant city manager Angela Spaccia; council members Oscar Hernandez, Teresa Jacobo and George Mirabal; and former council members Victor Bello and George Cole.

Phone messages left for the council members were not immediately returned, but the city of Bell issued a statement saying officials were reviewing the lawsuit.

"The city continues to work diligently to uncover information, public documents, and actions taken by the former administration and make any findings available to the public," the brief statement said.

Rizzo's salary was raised by the council 16 times since 1993, with an average increase of 14 percent a year, according to Brown. In 2005 alone, the council boosted his salary 47 percent.

Spaccia was paid $376,288 a year, and Adams was making $457,000 a year.

Four of Bell's five City Council members were paid nearly $100,000 a year before they took a recent cut. Cities of similar size pay their council members about $5,000 a year.

Bell Councilman Luis Artiga was not named in the lawsuit, even though he also was highly paid. Brown declined to say why he was not a defendant.

Artiga and the other three council members are the targets of a recall campaign. On Tuesday, Artiga announced his support for the recall and said he would resign from the council if the others did.

A leader of the recall, Ali Saleh, said his organization was pleased with Wednesday's developments but also wants to see the district attorney bring criminal charges.

"We want some of them in jail," Saleh said.

Other Cities to Pay Lavish Bell, Calif., Pensions

August 2, 2010

MSNBC — Cities across Southern California will be on the hook for the pensions paid to municipal officials in Bell, where excessive salaries led to a recent purge of city leaders, according to pension experts.

The Los Angeles Times reports that more than half of former city manager Robert Rizzo's $600,000-a-year pension will be paid by taxpayers in 140 small cities and special districts that are in the same pension liability pool. This includes Glendale, Simi Valley, Ventura, Norco, La Canada Flintridge and Goleta, as well as Rizzo's former employers, Hesperia and Rancho Cucamonga.

In the case of Bell's former police chief, Randy Adams, the city is only responsible for 3 percent of his estimated $411,300-a-year pension under CalPERS, the state's public employee retirement plan. Taxpayers in Glendale, Simi Valley and Ventura would have to pick up the rest.

Critics of the state's complex pension system are pointing to the scandal in Bell as an example of why the CalPERS should be overhauled. An estimated 90 percent of public agencies in California participate in the system.

Gov. Arnold Schwarzenegger and the two gubernatorial candidates, Meg Whitman and Atty. Gen. Jerry Brown, are urging reforms in the system.

"Even the governor's office couldn't figure these Bell pensions out," said Marcia Fritz, a certified public accountant and president of the California Foundation for Fiscal Responsibility.

Even though Rizzo and Adam's salaries were relatively modest until they were hired in Bell, other cities will be responsible for much of their pension costs. When they resigned last week, Rizzo was making nearly $800,000 a year and Adams was making $457,000.

Bell hired Adams at more than double the salary he was making in Glendale. That salary spike also doubled his eligible pension amount under CalPERS. City managers in Glendale and Simi Valley, where Adams previously worked, estimate they'll have to come up with an extra $40,000 in taxpayer dollars each year to cover the pension costs. Ventura's tab could go much higher.

"We had no control over his final year's salary," said Glendale City Manager Jim Starbird. "Yet the rest of us will be bearing the brunt of Bell's decision."

CalPERS last week said it is putting both men's pensions on hold pending multiple investigations into Bell's salaries. Glendale and Ventura have sent letters to the attorney general supporting investigations.

Outrage Remains after Bell, California, Council Votes to Cut Pay

July 27, 2010

Associated Press – The City Council of this tiny blue-collar city voted to slash its bloated salaries, but some residents suggested nothing short of a totally cleaned house would appease their anger.

Under pressure from furious Bell community members, council members on Monday voted to cut their own salaries by 90 percent and two said they would not seek re-election when their terms end.

Four of the five council members were getting paid nearly $100,000 for their part-time jobs. Other officials were getting paid far more and the city manager, who made nearly $800,000, has already resigned. Attorney General Jerry Brown on Monday revealed he had subpoenaed hundreds of city records.

Hundreds of residents packed the community center on Monday to assail council members who listened to more than five hours of public comment. After the council announced its decision to cut its salaries, dozens of people waited for hours to vent their anger. Many demanded the council resign immediately.

"I can never, ever, forgive you," an emotional Marcelino Ceja shouted at the council members, who sat grim faced through the noisy public comment. "You need to resign today."

Vice Mayor Teresa Jacobo was defiant in saying she would not resign and that she would "stand by my people."

"How dare you try to take a penny more from our pockets," responded Raquel McLafferty, an 11-year-resident of Bell. "Do the city a favor, we don't want you here and we are not your people."

Bell's city manager, police chief and assistant city manager all resigned last week after it was revealed they were making salaries totaling $1.6 million a year.

The six-figure salaries at City Hall have prompted investigations by California Attorney General Jerry Brown and the Los Angeles County district attorney.

"We ask that you leave and give us our city back," said Alfredo Ruvalcaba, a 27-year-old college student. "I am here on behalf of my parents, who couldn't make it here today because they have to work to pay your salaries."

Last week, Mayor Oscar Hernandez defended the salaries of the city manager and other staff as being in line with similar positions in other jurisdictions. He also noted the city had achieved 15 years of balanced budgets.

Brown, a candidate for governor, said he had demanded to see employment contracts within two days to determine whether to file any charges.

The grass-roots Bell Association to Stop the Abuse had threatened to recall the council members if they didn't resign or slash their own pay.

The salaries exploded into public view after a Los Angeles Times investigation, based on California Public Records Act requests, showed the city payroll was bloated with six-figure salaries:

• Chief Administrative Officer Robert Rizzo made $787,637 a year, getting a series of raises since being hired in 1993 at $72,000. President Barack Obama makes $400,000.

• Assistant City Manager Angela Spaccia made $376,288 a year.

• Police Chief Randy Adams earned $457,000 — $150,000 more than Los Angeles Police Chief Charlie Beck.

Councilman Lorenzo Velez makes about $8,000 a year, in line with the part-time pay for council members of similar-sized cities. He urged his colleagues to reduce their salaries to that level.

Bell, California, Seeks Resignations of High-paid Officials

July 22, 2010

Associated Press (BELL, Calif.) – The City Council in this small, blue-collar suburb of Los Angeles intends to ask three administrators whose salaries total more than $1.6 million to resign Thursday or face possible firing.

The officials include Chief Administrative Officer Robert Rizzo, who earns $787,637 a year — nearly twice the pay of President Barack Obama — for overseeing one of the poorest towns in Los Angeles County.

The others are Assistant City Manager Angela Spaccia, who makes $376,288 a year, and Police Chief Randy Adams, whose annual salary of $457,000 is 50 percent more than that of Los Angeles Police Chief Charlie Beck.

Councilman Luis Artiga said the panel planned to request the resignations during a closed-door, afternoon meeting that was called to consider dismissing the officials. A public hearing is scheduled for Monday.

Rizzo was hired at an annual salary of $72,000 a year in 1993, and the council rapidly increased that amount over the years. His most recent raise boosted his salary more than $84,000 a year.

"All right, somebody wasn't paying attention to that," said Artiga, who joined the council a little more than a year ago. "But we are acting on that today."

Adams was recently hired at a relatively high salary, while Spaccia was paid $102,310 when she was hired in 2003 and received hefty raises since then, Artiga said.

All three officials under question have contracts that protect them from being fired without cause. If they refuse to quit, the city might have to shell out hundreds of thousands of dollars to buy out their contracts.

Revelations about the pay in Bell has sparked anger in the city of fewer than 40,000 residents. Census figures from 2008 show 17 percent of the population lives in poverty.

Enraged residents have staged protests demanding the firings and started a recall campaign against some council members.

"Woo-hoo, the salaries. Wow. What can I say? I think that's unbelievable," Christina Caldera, a 20-year resident of the city, said as she stood in line at a food bank.

Caldera, who is struggling after recently losing her job as a drug and alcohol counselor, said she generally was satisfied with the way the city was being run but felt high-paid officials should take a pay cut.

"What are they doing with all that money?" she asked. "Maybe they could put it into more jobs for other people."

Attempts to leave messages with city representatives seeking comment from Rizzo and Spaccia failed because their voicemails were full. A message left for Adams was not immediately returned.

The council members are paid well themselves — four of the five members, including Artiga, each make about $100,000 a year for the part-time work. The county district attorney's office is investigating to determine if the council's high salaries violate any state laws.

The City Council also intends to review city salaries, including those of its own members, according to Artiga and Mayor Oscar Hernandez.

"We are going to analyze all the city payrolls and possibly will revise all the salaries of the city," Artiga said.

However, both men said they considered the City Council pay to be justified.

"We work a lot. I work with my community every day," the mayor said, as he shook hands with and embraced people leaving the food bank Thursday.

Council members are on call around the clock, and it is not uncommon for them to take calls in the middle of the night from people reporting problems with city services, Artiga said.

Though many residents are poor, Hernandez said they live in a city they can be proud of, one with a $22.7 million budget surplus, clean streets, refurbished parks and numerous programs for people of all ages. He pointed proudly down a street to a park filled with new exercise equipment.

When Rizzo arrived 13 years ago, Hernandez said, the city was $13 million in debt and on the verge of bankruptcy. Rizzo obtained government grants to aid the city, the mayor said.

Editor's Note: According to Gary Allen, The Rockefeller File, the CFR is behind the many regional government plans, which would abolish city, county, and state lines, leaving us at the mercy of federal bureaucrats. Financing of regional governments is acquired through federal revenue sharing. Revenue sharing is a mechanism whereby the state and local governments become financially dependent upon the federal government. Pressure can then be applied to any level of state government that refuses to comply with the dictates of the regional government rulers.

The Los Angeles Times reported the salaries last week, prompting a large protest Monday at City Hall in which residents shouted and demanded that Rizzo be fired.

If Rizzo leaves, he still would be entitled to a state pension of more than $650,000 a year for life, according to calculations made by the Times. That would make Rizzo, 55, the highest-paid retiree in the state pension system.

Adams could get more than $411,000.

Spaccia, 51, could be eligible for as much as $250,000 a year when she reaches 55, though the figure is less precise than for the other two officials, the Times said.

The chart shows that public (state and local) and private sector pay rose in parallel from 2001 to 2004. Then the lines diverged. Since early 2005, public sector pay for state and local government employees has risen by 5% in real terms. Meanwhile, private sector pay has been flat.