7-24-09

 
7-24-09
Badlands Journal
Frago and the law...Badlands Journal editorial board
7-22-09
Merced Sun-Star
http://www.mercedsunstar.com/177/story/963037.html
Letter: Patience is needed
Editor: Gary Frago made a mistake. He has admitted it and has apologized for it. Like others, I was surprised and disappointed. From serious eye-opening experiences like this, humble people can learn and grow from them.
Give Gary Frago a chance to address the issue from all angles, spiritual included. Elections are the time to select our City Council persons.
FATHER TOM TIMMINGS
The Merced Sun-Star used a secular tool, the California Public Records Act Request, and a little legal wrangling, to squeeze a few racist emails out of Atwater City Hall, channeled to and from a racist cult by Councilman Gary Frago. Having had to use the statute to get information from local governments for many years, we understand how difficult it is to get public records from public officials. 
Today, the Catholic Church got involved with the letter above, and lied. Frago was finally forced to perform a public apology. His original retort was not apologetic:
In all, the Sun-Star obtained seven e-mails that Frago sent from October 2008 to February 2009 from an anonymous source.
Some compared Obama to O.J. Simpson while others suggested that "nigger rigs" should now be called "presidential solutions."
Perhaps the most overboard e-mail was sent on Jan. 15. It read: "Breaking News Playboy just offered Sarah Palin $1 million to pose nude in the January issue. Michelle Obama got the same offer from National Geographic."
Frago admitted sending the e-mails, but showed no regret. "If they're from me, then I sent them," he said. "I have no disrespect for the president or anybody, they weren't meant in any bad way or harm…– Merced Sun-Star, July 17, 2009
Five days later, Frago issued his “apology” for getting caught by the newspaper:
"I made a mistake," he said of the seven e-mails, circulated from October to February. "It was a mistake I shouldn't have made and I apologize for it. I wasn't being racist, I was just passing on e-mails…"I didn't think it would go nationwide, to tell you the truth. If it would have stayed local, we would have been able to handle it a lot easier," he (Frago)said.   – Merced Sun-Star, July 21, 2009.
You’d have thought from this “apology” that Frago had missed a putt that cost him and his partners some money.
Perhaps Frago was stirred by another nearby prelate, Father Illo of Modesto, who vented shortly after the presidential election:
The Rev. Joseph Illo, pastor of St. Joseph's Catholic Church in Modesto, has told parishioners in a homily and in a follow-up letter that if they voted for Barack Obama, they should consider going to confession because of the president-elect's abortion-rights position.
"If you are one of the 54 percent of Catholics who voted for a pro-abortion candidate, you were clear on his position and you knew the gravity of the question, I urge you to go to confession before receiving communion. Don't risk losing your state of grace by receiving sacrilegiously," Illo wrote in a letter dated Nov. 21.
The letter was sent to more than 15,000 members of the St. Joseph's parish. It is one of 34 parishes in the Stockton Diocese, which has more than 200,000 members in Stanislaus, San Joaquin and four other counties in California. – Santa Rosa Press Democrat, Nov. 30, 2008.
The Bishop of the Stockton Diocese responded quickly:
The Most Rev. Stephen Blaire, bishop of the Stockton Diocese, disagrees with Illo. He said Catholics should not feel compelled to disclose how they voted to their priest.
Blaire said Catholics who carefully weighed many issues and settled on a candidate who supports abortion rights were not in need of confession. He said confession would be necessary only if a parishioner based the decision to vote for a candidate on his or her support for abortion rights.
"Our position on pro-life is very important, but there are other issues," Blaire said. "No one candidate reflects everything that we stand for. I'm sure that most Catholics who voted were voting on economic issues.
"There were probably many priests, and I suspect many bishops, who voted for Obama."
The article, by Sue Nowicki of McClatchy News Service, ends with a quote from the Vatican:
Cardinal Frank Stafford, formerly archbishop of Denver and now assigned to the Vatican, called Obama's election "apocalyptic" during a speech Nov. 14 at Catholic University in Washington, D.C.
"On Nov. 4, 2008," he said, "America suffered a cultural earthquake."
Atwater City Manager Greg Wellman expressed the view that the Frago affair might produce positive cultural change in city government rather than a socially destructive earthquake of racism.
City Manager Greg Wellman, who received several e-mails from Frago, said that he hopes that Frago's apology will be the start of a new culture within city government. "Personally, I have been involved in reading material from all over the United States for the past two days," he said. "I would like to think that the apologies offered are a starting point in changing a culture." – Merced Sun-Star, July 21, 2009.
Atwater actually has something more solid to work with to change the culture of its local government than Frago’s apology or Father Timmings’ homily on civic patience. California Government Code Section 53235 deals with ethics training for members of local legislative bodies. It is enforced by both the state Attorney General and the state Fair Political Practices Commission. The city might request that Attorney General Jerry Brown, once a Jesuit seminarian, design a special, remedial ethics course for Frago, more thorough than the legally established minimum.
53235. (a) If a local agency provides any type of compensation, salary, or stipend to a member of a legislative body, or provides reimbursement for actual and necessary expenses incurred by a member of a legislative body in the performance of official duties, then all local agency officials shall receive training in ethics pursuant to this article.
   (b) Each local agency official shall receive at least two hours of training in general ethics principles and ethics laws relevant to his or her public service every two years.
   (c) If any entity develops curricula to satisfy the requirements of this section, then the Fair Political Practices Commission and the Attorney General shall be consulted regarding the sufficiency and accuracy of any proposed course content. When reviewing any proposed course content the Fair Political Practices Commission and the Attorney General shall not preclude an entity from also including local ethics policies in the curricula.
   (d) A local agency or an association of local agencies may offer one or more training courses, or sets of self-study materials with tests, to meet the requirements of this section. These courses may be taken at home, in-person, or online.
   (e) All providers of training courses to meet the requirements of this article shall provide participants with proof of participation to meet the requirements of Section 53235.2.
   (f) A local agency shall provide information on training available to meet the requirements of this article to its local officials at least once annually.
53235.1. (a) Each local agency official in local agency service as of January 1, 2006, except for officials whose term of office ends before January 9, 2007, shall receive the training required by subdivision (a) of Section 53235 before January 1, 2007. Thereafter, each local agency official shall receive the training required by subdivision (a) of Section 53235 at least once every two years.
   (b) Each local agency official who commences service with a local agency on or after January 1, 2006, shall receive the training required by subdivision (a) of
Section 53235 no later than one year from the first day of service with the local agency. Thereafter, each local agency official shall receive the training required by subdivision (a) of Section 53235 at least once every two years.
   (c) A local agency official who serves more than one local agency shall satisfy the requirements of this article once every two years without regard to the number of local agencies with which he or she serves.
53235.2. (a) A local agency that requires its local agency officials to complete the ethical training prescribed by this article shall maintain records indicating both of the following:
   (1) The dates that local officials satisfied the requirements of this article.
   (2) The entity that provided the training.
   (b) Notwithstanding any other provision of law, a local agency shall maintain these records for at least five years after local officials receive the training. These records are public records subject to disclosure under the California Public Records Act
(Chapter 3.5 (commencing with Section 6250) of Division 7 of Title 1).
Father Timmings’ public, pastoral compassion for a member of his parish notwithstanding, Atwater is not a church.
There are reasons to be critical of President Obama. He bailed out the banks, not the citizens. He appears to be selling “health-care reform” to the health-care insurance agencies. He is a warmonger. The color of his skin is not a reason to be critical of him.
Merced Sun-Star
Riverside Motorsports Park CEO says plan for track is dead
The only thing left is the land and it's in the bank's possession...CORINNE REILLY
http://www.mercedsunstar.com/167/v-print/story/967136.html
The CEO of Riverside Motorsports Park finally has admitted that his failed company no longer plans to build a massive racetrack complex in Merced County.
In a July 15 letter to RMP’s investors, CEO John Condren said the company has “ceased operations.”
The letter, obtained by the Sun-Star this week, confirms that RMP is broke. It states that the 1,200-acre property where RMP planned to build is the company’s sole asset.
That land is now in foreclosure and RMP owes more money on the property than it’s worth, the letter says.
RMP still has not paid roughly $400,000 in outstanding debts to Merced County. The company has owed the money — most of it for legal and planning fees related to RMP’s development application — for nearly a year.
Though county officials said this week that they have not given up their efforts to collect the money, it appears evermore likely that taxpayers will end up footing some of RMP’s bills. “We are pursuing all legal means available to ensure that everything owed to Merced County taxpayers is repaid,” county spokeswoman Katie Albertson said.
Condren, who is 57 and lives in Morgan Hill, first proposed plans in 2003 for what he billed as the world’s largest motorsports facility. The project’s original blueprints called for a quarter-billion-dollar, eight-racetrack motorsports park, to be built on a 1,200-acre patch of farmland near Atwater. Condren’s plan set off an emotional debate about the county’s future. He claimed it would remake Merced’s struggling economy, and many agreed with him.
Others, including local farmers and environmentalists, pleaded with the Board of Supervisors during all-night public hearings to turn down Condren’s proposal.
Supervisors ultimately approved the project in 2006. Though it never broke ground, Condren has collected millions of investor dollars in the past eight years or so.
No publicly available documents reveal how much of that money Condren and his wife, who served as RMP’s public relations officer, have taken in salaries over those years. Condren has declined to answer such questions.
He did not return phone calls seeking comment for this story.
In the July 15 letter he blamed the economic downturn as the sole circumstance responsible for RMP’s demise. “Our efforts, in general, were successful,” Condren told his investors. “However, our timing for complete success was off by six to 12 months.”
Over the past two-and-a-half years the Sun-Star has published several stories calling into question Condren’s credibility and raising doubts about RMP’s claims that its project was on a sure path to fruition. Many of Condren’s partners in RMP split with him years ago on bad terms.
The company began defaulting in 2007 on debts owed to the county and to a law firm that once represented RMP.
The county and the law firm, Sacramento-based Somach, Simmons & Dunn, each hold court judgments against RMP that entitle them to what’s owed. Aside from a few hundred dollars the law firm seized from one of RMP’s checking accounts, neither creditor has been paid. That appears unlikely to change in light of the fact that RMP owes more on its land than it’s worth.
First Bank in Missouri holds RMP’s defaulted mortgage. The property fell into foreclosure in January.
Even after that — and even as his company’s creditors launched legal battles to determine who among them would be first in line to collect any of RMP’s remaining assets — Condren continued to solicit investors for his project. RMP does have one source of potential income left: almonds. About half of the RMP property remains a productive almond orchard, said Steve Nasser, a San Francisco-based investment banker and shareholder in RMP who helped the company search for backers.
A Chowchilla-based company called Riverview Ranches farms the land, Nasser said. Nasser said Riverview and RMP have a written agreement to share profits from this year’s harvest, which probably will pay out late this year.
RMP’s creditors will have first rights to the company’s portion, Nasser said.
He acknowledged that RMP’s investors stand little to no chance of seeing any return on their money.
“We could go forward as a farming operation” if a deal can be made with First Bank that would allow RMP to retain the land, Nasser said. “At this point I think an ag use is our only viable option. The investors are all aware of the situation.”
Nasser said he couldn’t provide an estimate of how much investor money RMP has collected since its inception.
Jack Skibo, who invested $25,000 in RMP in 2001, said he believes the project was doomed well before the recent economic crisis.
“I think we had a good chance way back in the beginning, but it all fell apart a long time ago,” Skibo said. “It still hurts. I think anybody who invests in something like this — we did it because we wanted to be a part of something exciting. We wanted to build something. But I’ve let go of that idea. I let it go a long time ago.”
For Condren’s part, he appears to have moved on to at least two new projects: a revived high-tech marketing company called HarperCondren Marketing, which he runs with his wife, according to the company’s Web site, harpercondren.com; and a soon-to-be launched car racing series for amateur drivers, called the ChumpCar World Series.
RMP’s Web site was taken down this month.
Loose Lips: Extra! Extra!
http://www.mercedsunstar.com/167/v-print/story/967144.html
Speaking of progressive politics, Merced Alliance for Responsible Growth was pamphleteering at the Merced County Fair to drum up opposition for the Wal-Mart distribution center. Copies of the Merced Citizen Voice, a 12-page newspaper all about the project, were on the union table. The newsprint looks a tad yellow. "Wal-Mart Jobs Threaten Lives," reads the top story. Inside there's a report about how Golden Valley High School students may become prostitutes or johns given the proximity to the proposed center. The back page has an ad calling it an "unnatural disaster," encouraging readers to contact the City Council.
One government rep remarked that the anti-distribution center folks were far more organized and active than the business groups supporting the project.
They, of course, have Wal-Mart, the world's largest retailer, leading the charge. If you have Goliath on your side, why worry?
A missed opportunity on pensions
Governor was right to try to reform the system but backed off too easily...Our View
http://www.mercedsunstar.com/181/v-print/story/967154.html
The bipartisan budget agreement reached this week in the Capitol does not include reforms of California's public employee pension system. But the problem will not go away.
Gov. Arnold Schwarzenegger tried to roll back retirement benefits for new state hires to levels that existed before 1999, when the Legislature and former Gov. Gray Davis began a round of increases that have significantly added to the cost of state and local pensions.
But Democrats pushed back, and Schwarzenegger agreed to set the issue aside.
Schwarzenegger's pursuit of this issue has been wrongly labeled as anti-worker by the public employee unions. In fact, lavish pensions are hurting union members the most -- particularly younger, lower-paid union members.
That's rarely been clearer than in the case of Pete Nowicki, who retired in January as the fire chief of the Moraga Orinda Fire District. Nowicki, featured in an article this week in The Wall Street Journal, earned $186,000 in his last year on the job. But by cashing out unused vacation, sick leave and holiday pay, Nowicki was able to boost his annual earnings to $241,000. That's the figure that was used to calculate his pension benefits.
Pension spiking, the practice of loading up a worker's final salary with other benefits that can be cashed out, is legal, but it's costing local jurisdictions and the state a bundle. With the stock market plunge, pension fund investment earnings have plummeted, meaning that more and more of those pension costs are coming straight out of local and state government budgets.
In part to pay Nowicki's and other retiring firefighters' lavish pensions, younger firefighters are being laid off in some communities or forced to give up promised raises.
Getting pension costs back under control will, in the long term, free up more money for current employees and for the services that government is in business to provide. Democrats shouldn't be fighting the governor on this issue. They should be leading
Modesto Bee
There's little relief in sight for country's unemployed...Christopher S. Rugaber, The Associated Press
http://www.modbee.com/business/v-print/story/792417.html
WASHINGTON — As the recession eases, companies are cutting fewer jobs. Yet they remain reluctant to hire, leaving potentially millions of people without any financial aid long after their unemployment benefits run out.
That grim picture was reinforced Thursday by the latest government report on jobless benefits. The number of first-time claims, a proxy for the pace of layoffs, remained below the peak levels of the spring. But the total number of people on unemployment aid topped 9.1 million.
"We are left with a bifurcated job market, with fewer newer claimants but a rising tide of long-term unemployed," said Cary Leahey, an economist at Decision Economics. "Some will exhaust all their benefits and be at wit's end to make ends meet."
The National Employment Law Project, an advocacy group, projects that 540,000 people will use up their unemployment benefits by the end of September. It estimates 1.5 million will have run out by year's end.
Those benefits include up to 53 weeks of emergency extended coverage, on top of the standard 26 weeks of aid typically provided by most states.
Even if the economy begins to recover this summer, as some economists expect, growth likely will be anemic and unemployment will continue to rise. Most private economists and the Federal Reserve expect the unemployment rate to top 10 percent by year-end. The rate for June hit 9.5 percent.
Statewide, unemployment tops the nation, at 11.6 percent in May and June.
In Stanislaus County, the rate jumped up in June to 16.6 percent. San Joaquin, Merced, Tuolumne, Calaveras and Mariposa counties saw rate increases as well. Merced posted the highest jobless rate, hitting 17.6 percent.
Economists say job creation will be weak even if the economy begins to recover this year. The reasons include:
• Huge slack in the labor market. Besides the 14.7 million Americans officially counted as unemployed, nearly 9 million people are working part-time but would prefer full-time work, the Labor Department says.
• The average workweek is at a record low. That means companies could squeeze more work from employees before hiring.
• Economic growth will be weak. A rebound is widely expected in the second half of this year in part because such industries as housing and cars will recover from abysmally low production levels. But consumer demand is likely to remain subdued.
• Layoffs are more likely to be permanent. Workers on temporary layoff are about 11 percent of the unemployed now, according to Labor Department date.
Fresno Bee
House blocks Nunes' push for water bill...Michael Doyle, Bee Washington Bureau
http://www.fresnobee.com/updates/v-print/story/1555692.html
WASHINGTON -- The House of Representatives on Thursday dismissed the latest public maneuver by Rep. Devin Nunes, R-Visalia, to summon attention to the San Joaquin Valley's water shortage.
By a nearly perfect party-line vote of 249-179, the House blocked Nunes from bringing to the floor a bill removing restrictions from Sacramento-San Joaquin Delta pumping plants. The restrictions have been put in place to protect vulnerable species and habitat.
Nunes introduced his "Turn on the Pumps Act" bill (HR 3105) last month. It was co-sponsored by the other Valley congressmen -- Democrats Jim Costa of Fresno and Dennis Cardoza of Merced and Republicans George Radanovich of Mariposa and Kevin McCarthy of Bakersfield.
It was sent to the House Natural Resources Committee.
Sacramento Bee
Home Front: Values hold up in cities that limited growth...Jim Wasserman
http://www.sacbee.com/736/v-print/story/2051931.html
In the aftermath of the Sacramento region's housing boom it's abundantly clear now that keeping a lid on housing growth can pay off for cities and their inhabitants' home values over the long run.
Yolo County property tax assessments announced Thursday show that Davis, long resistant to growth, is having none of the declining values associated with fast-growth suburbs throughout the capital area.
Neither is farmland that county activists work to save from residential development. Agricultural values for tax purposes climbed 3.5 percent over last year, records show.
In Davis, home to 66,000 residents, property values for tax purposes are up 2.8 percent for the fiscal year that began July 1. While that may have happened for a variety of reasons, one stands out in particular. It's the "slow growth of housing, especially during the boom years," said county Assessor Joel Butler. "There were no large tracts built there," he said.
After the housing boom began in 2002, Davis kept the brakes on growth, making room for only about 2,500 new residents, according to the state Department of Finance.
By comparison, West Sacramento opened its doors wide, permitting thousands of new homes and adding 10,000 people to once-open spaces. Foreclosures have since struck those new suburban neighborhoods and the collective property value for taxes in the city of 47,782 has fallen 4 percent for the fiscal year, Butler said.
There are other factors to consider about growth beyond property taxes. It's driven up sales taxes and stimulated other development that pays. Butler noted the housing-driven presence of new big box retailers such as Ikea and Wal-Mart.
Nonetheless, West Sacramento, Woodland and Winters, which encouraged housing during the boom, have seen the biggest declines. Said Butler, "It seems like you have the biggest suffering and declines in the big-tract subdivisions generated from 2003 to 2006."
Woodland opened a swath of its south side to new housing and added 4,000 newcomers since 2002.
Collective property values in the city of 56,400 fell 1.9 percent this fiscal year. Winters' values for tax purposes fell 4.9 percent.
Across the river in Sacramento County, where housing growth exploded during the boom, Assessor Ken Stieger announced earlier this month he was lowering assessed values on 170,000 properties, nearly all of them residential.
That took in nearly every new house built since 2002, and in some of neighborhoods hardest hit by foreclosures, since 2000.
Not a total exodus
For all the talk about California imploding and people leaving for other states, it doesn't look like "Golden State Armageddon" in the new moving van statistics released earlier this week.
A report from United Van Lines shows almost as many new households moving into California from January through June as leaving. The St. Louis company calls California a "balanced" state so far in 2009 – same as last year.
United counted 6,026 of its moving vans driven to California from other states from January through June. A slightly higher number, 6,282, were driven out of California.
For a state that's showing real signs of an exodus, try Michigan. A stunning 70 percent of the company's moving vans servicing the state – which has a 15.2 percent unemployment rate – were outbound.
United had no immediate data on Sacramento. But U-Haul statistics for people who move their own loads showed the capital last year ranked 15th on a list of "Top 50 U.S. Destination Cities." That's down from housing boom glory days of 2004 through 2006, when wildly popular Sacramento ranked fourth or fifth on the top 50 list. But it's hardly dying.
We'd like to hear from you
Here at Home Front we're hearing anecdotally that assisted living centers and nursing homes are seeing more vacancies because prospective move-ins can't sell their houses. We're considering a story on the phenomenon if it's merited, and would like to talk with some older homeowners in that predicament.
Or maybe you're the children trying to sell a parent's home to pay for assisted living that couldn't wait.
San Francisco Chronicle
Foes step up fight against Oakley development...Peter Fimrite
http://www.sfgate.com/cgi-bin/article.cgi?f=/c/a/2009/07/24/BA9R18TELQ.DTL&type=printable
A San Francisco environmental group is stepping up its opposition to a planned 4,500-home development on Oakley farmland next to aging levees on the Sacramento-San Joaquin River Delta.
The nonprofit group Greenbelt Alliance plans to file papers in Contra Costa County Superior Court today opposing plans to build the homes on agricultural land 6 feet below sea level.
The alliance claims more than 1,600 acres of agricultural land would be lost, drinking water could be exposed to pollutants and residents would be in danger if the levees failed - this at a time when hundreds of homes in Oakley and other eastern Contra Costa communities are being vacated or are in foreclosure.
"This is an unnecessary project in a dangerous location, and it has significant impacts on farmland," said Carey Knecht, the policy director for Greenbelt Alliance. "We don't need a development on farmland that is below sea level and adjacent to the delta."
The lawsuit was originally filed in 2006 accusing Oakley city officials of failing to adequately consider the potential for levee failure or provide mitigation for possible contamination of drinking water from homes on the 2,546-acre site known as the Hotchkiss Tract.
The city prepared an environmental report after a judge ruled in favor of the Greenbelt Alliance. Oakley recently petitioned the court to reinstate its East Cypress Corridor Specific Plan, which calls for as many as 4,587 new housing units to be built.
Knecht said the Greenbelt Alliance will ask the court during an Aug. 6 hearing to block the development because the city again failed to include compensation for the loss of agricultural land, protection for surrounding farmland or mitigation for the impacts on endangered wildlife habitat, air quality and vehicle traffic.
City officials could not be reached for comment Thursday. But Rebecca Willis, Oakley's director of community development, has stated previously that the developers will be required to build modern, dry levees inside the existing levees in addition to numerous other improvements, including a second bridge linking the area with Bethel Island and artificial lakes to capture storm water.
The city, she said, is trying to responsibly manage growth in an area where the county had already approved a 1,300-home development by Shea Homes, one of four developers who are also named in the lawsuit.
Rampant development on former agricultural land has been a sore spot in eastern Contra Costa County, especially following the mortgage meltdown, which left the county with the highest number of foreclosures in the Bay Area.
A third to half of the homes for sale in eastern Contra Costa, including Oakley, have at one time or another been short sales or foreclosures.
"Poorly planned developments have already put home values underwater," said Christina Wong, field representative for Greenbelt Alliance. "Now the city of Oakley wants to build homes that could literally end up underwater."
New York Times
California Pension Fund Hopes Riskier Bets Will Restore Its Health...LESLIE WAYNE
http://www.nytimes.com/2009/07/24/business/24calpers.html?_r=1&sq=calpers&st=cse&scp=2&pagewanted=print
SACRAMENTO — Big as California’s budget woes are today, so are the problems lurking in its biggest pension fund.
The fund, known as Calpers, lost nearly $60 billion in the financial markets last year. Though it has more than enough money to make its payments to retirees for many years, it has a serious long-term shortfall. Meanwhile, local governments in the state are pleading poverty and saying they cannot make the contributions that would be needed to shore it up.
Those problems now rest largely on the slim shoulders of Joseph A. Dear, the fund’s new head of investments. He is not an investment seer by training, but he thinks he has the cure for what ails Calpers, or the California Public Employees’ Retirement System, the largest in the nation with $180 billion in assets.
Mr. Dear wants to embrace some potentially high-risk investments in hopes of higher returns. He aims to pour billions more into beaten-down private equity and hedge funds. Junk bonds and California real estate also ride high on his list. And then there are timber, commodities and infrastructure.
That’s right, he wants to load up on many of the very assets that have been responsible for the fund’s recent plunge. Calpers’s real estate portfolio has tumbled 35 percent, and its private equity holdings are down 31 percent. What is more, under Mr. Dear’s predecessor, Calpers had to sell stocks in a falling market last year to fulfill calls for cash from its private equity and real estate partnerships. That led to bigger losses in its stock portfolio.
Mr. Dear remains a believer. Private investments, he asserts, will over the long haul outperform stocks by three percentage points a year, and that is necessary to keep Calpers on track to returning its goal of 7.75 percent annual returns.
“Three percent on a portfolio as large as ours makes a material difference,” he said.
If he can inch Calpers’s investment performance up, many problems will disappear. If not, Calpers may end up in an even bigger financial squeeze than it is today.
The scope of his task elicits sympathy from one of Calpers’s harshest critics, Marcia Fritz, a Sacramento lawyer and vice president of the California Foundation for Fiscal Responsibility, which has led a loud campaign over the rich benefits received by some Calpers retirees.
“Joe Dear has got a tough job,” Ms. Fritz said. “I wouldn’t wish it on anyone. There’s so much pressure. It’s horrible.”
A somewhat unorthodox choice for the job, Mr. Dear sounds a little like Captain Kirk surveying the Starship Enterprise when he explains why he leaped at the opportunity earlier this year: “Calpers is the flagship command of the public pension fund world.”
He was hired in large part for his management skills and political savvy — honed in Washington, where headed the Occupational Safety and Health Administration in the Clinton years. He does not have an M.B.A. or any other advanced degree in finance. Harvard, Yale or Wharton is not on his résumé. Instead, his lone degree, in political economy, is from Evergreen State College in Olympia, Wash.
Most recently, Mr. Dear headed the Washington State public pension fund, which gained a reputation as a daring investor under his oversight. It risked more of its portfolio — 25 percent — on private equity than any other public fund. The bet pushed the Washington State Investment Board, which now has $67 billion in assets, into the top 1 percent of its peer group in performance during the boom years, according to Wilshire Associates. But in the fiscal year that ended last month, the fund lost 27 percent of its value, or $18 billion.
Calpers has a lot riding on Mr. Dear’s effort to achieve above-market performance. The fund just posted a loss of 23 percent, the worst in its history. That leaves it 66 percent funded, the lowest level in two decades, meaning it has only $66 on hand for every $100 in benefits promised to 1.6 million California public employees and their families.
Gov. Arnold Schwarzenegger, who is on the Calpers board, has called the fund “unsustainable.” He has specifically criticized a decision by Calpers last month to give California municipalities a break on their required contributions. Rather than stepping up contribution rates to 5 percent to cover investment losses, Calpers set a maximum increase of 1.1 percent — saving municipalities hundreds of millions of dollars.
Mr. Schwarzenegger called it a “pass the buck to our kids idea.” Calpers says municipalities, which pay 15 percent of their payroll — or about $11 billion a year — into the fund, needed the help.
Steering through the political cross currents would seem to be one of Mr. Dear’s strengths.
“My career sort of culminates in this job, where this combination of investment and political management and organization management come together because that’s what Calpers needs,” he said in his expansive corner office decorated with a photo of himself and Bono. (Bono was a general partner in an equity fund in which the Washington State fund invested.)
“The fun part is the investment part,” Mr. Dear added, speaking in fast, yet measured tones. “The necessary part is the organization, the management and the work in the political environment. The common element in my career is that I’m extremely focused on improving the performance of the organizations I work for.”
Mr. Dear, 57, is also chairman of the Council of Institutional Investors, a Washington nonprofit group that promotes shareholder activism — an effort close to the heart of the Calpers’s board and one reason he was hired.
“The board felt that we had extremely good depth on the investment staff,” said George Diehr, chairman of the board’s investment committee. “We were looking for someone to knock down silos and get various asset managers talking to each other. We felt Joe would have those skills. He’s well known in the public pension field, and he’s a strong advocate for corporate governance.”
In the end, Mr. Dear, who will get $408,000 to $612,000 in salary and can qualify for a performance bonus of up to 75 percent of that salary, will be judged by portfolio returns.
Already, Calpers has raised its target for private equity and related investments by 40 percent to about 14 percent of the total portfolio. To cover any calls by private equity firms for additional money, the fund has also raised its target for cash on hand to 2 percent of assets.
It is ratcheting back on public domestic stocks, which account for less than 25 percent of the portfolio, while another 25 percent of the portfolio is in international equities.
Critics say that Mr. Dear and Calpers — which has a staff of 200 investment professionals — are taking on too much risk.
“Calpers is significantly underfunded, and they have decided that they will roll the dice,” said Edward A. H. Siedle, president of Benchmark Financial Services, which audits pension plans. “Is that appropriate if you have just lost 25 percent of your portfolio? These are high-risk, illiquid, unregistered products where there is tremendous valuation uncertainty. I would bet you any amount that five years from now, this plan will not have outperformed the market.”
Mr. Dear says he can improve performance in other ways as well. He has pressed the private equity and hedge funds in Calpers’s portfolio to reduce their fees, provide more transparency and segregate Calpers’s money from that of other investors. While not ready to announce any agreements, Mr. Dear said he was making “good progress.”
Last week, he testified before Congress that private equity and hedge funds should register with the Securities and Exchange Commission and be subject to the agency’s oversight. On the activist front, Calpers has voted against management in a number of recent proxy battles, including management of Bank of America. And Mr. Dear or his staff meet regularly with members of Congress and the Obama administration.
Saying he spends a third of his time as investment chief, a third on board matters and a third on outside issues, Mr. Dear remains passionate that this is the moment when shareholders can prevail.
As he sees it, “You have public awareness, outrage over the consequences of a failed regulatory system and an administration and Congress prepared to respond.”