The Mayor relies on the government's chief cheerleader for setting budgetary assumptions. Well...
There are many who think the structural problem with our economy is just consumer psychology.
Qatar is the worlds most optimistic country and that is why they are super rich!
Ben Bernanke's job description includes using jedi mind tricks aimed at getting consumers to use their credit cards as much as possible. I was totally wrong. I didn't think anyone actually fell for it.
Here is the Mayor talking about the most delicate part of the budget process.
I've not had time to write this up, but I should leave some tracks behind for others to follow.
1. If they had fully vetted (as a serious effort) the assumptions, that stuff, and the stuff the Mayor says they are relying on should be documented. At least it should be referenced. If its there, well I suck. I didn't see it this year and I have exhaustfully searched in previous years.
2. The city projected a relatively snappy sales tax increase for this year. How was that conservative?
3. The city has not always got the projections right (At least our CFO Gaspar should have known that).
4. Just before the peak of housing, the city's assumptions were based on the stated position that home prices would not fall, even though it was a raging bubble, but listening to cheerleaders is easier than doing asset valuation analysis.
5. SANDAG modeling should not be swallowed whole. As a member of ITOC it was within our mandate to review some of their models. I did. SANDAG relied heavily on autoregressive forecast models that were seriously overfit (R2>95%). Those familiar with developing forecast models will not be surprised that the predictions didn't work as well as expected, especially in a time of mechanistic flux.
The city should rely on good mechanistic forecasts, not on the unquestioned authority of others.
6. The city does not use the best guess. They should be. When they do, they should not be basing their budgets on what is expected, but rather what can be counted on with high certainty. The difference is huge. They should also do sensitivity analysis with horizons out to as far as they are carrying current liabilities.
7. The most important projection has ALWAYS been the elephant in the room. It is not sales tax. It is not property tax. It is rate of return that the highly mismanaged CALPERS is providing the city on its pension fund. Get that wrong and it WILL results in layoffs and park closures IN THE FUTURE. It is not something that will be fixable.
I mentioned this and the general response is, well we don't calculate that number. Uhm, but we are the ones on the hook for that liability. It is not a conservative estimate. You can't find an annuity for anything close to CALPERS' "conservative" estimate. It now turns out that even CALPERS thinks their assumptions are too optimistic, but they don't want to change it because of political reasons.
8. As for the roads report. Nobody got in contact with me. Deferred maintenance of streets ends up costing future taxpayers more to repair. The city is underfunding roads maintenance and have done all they can to push that issue off as long as possible. It is not an issue of "perfection" of our streets. It is an issue of the ethical treatment of future residents. If the roads get bumpy... it is already too late.
It was insane that Bond and Maggie would spin the fact of the accumulation of deferred maintenance.