POLICEPAY.NET
Yesterday, the hearing concerning four Vallejo union's objections to the City of Vallejo's bankruptcy ended. Judge Michael McManus said that he would render his decision on Tuesday September 2, 2008. If the decision is in favor of the city, the city will be able to void the collective bargaining agreements of the four unions. If the unions prevail, the contracts stand and the city will have to go to plan "B" - re-negotiating the contracts. Of course, there could be a bevy of appeals and counter-appeals.
Roger Mialo
cq & Harvey M. Rose
The case evolved along these lines - the city filed for bankruptcy and immediately ask to have the collective bargaining agreements voided and the union filed an objection. To make it's case for the objection, the unions hired the firm of Harvey M. Rose Associates of San Francisco (The Rose Firm). Mr. Roger Mialocq of the Rose Firm was given the lead position on the Vallejo project and created a report that gave his findings (The Rose Report). The Rose Report said that the city did not qualify for bankruptcy and identified areas of additional funds and expenditure reductions that would make the bankruptcy unnecessary.
The Rose Report was publicly released and immediately came under attack from many places. There were some ministerial mistakes in the report, which were subsequently corrected. The four unions put up a website that purported to be informational, but it was more of an advocacy organ that made personal attacks on Vallejo city manager, Joe Tanner. The city did put out information, but overall kept a rather low profile. The local paper, The Vallejo Times-Herald presented a relatively balance coverage of the events. Staff reporter, Jessica York, did a very good job covering story by avoiding the hyperbole being put out.
Although the city did not get down in the mud like the unions, it got its mud slung by proxy. An internet "newspaper/blog" Vallejo Independent Bulletin and two hard nosed bloggers on the Times-Herald website (FF-COPS-WELFARE QUEENS and VALLEJO VISTOR) vehemently went after the unions, primarily the police and fire. This pursuit has been relentless. The two bloggers have to be either retired or unemployed, because they go day and night.
Eventually, the dispute made its way to the venue that mattered - The United States Bankruptcy Court for Eastern California. The hearing began the third week of July and ended yesterday. Testimony began with the city explaining why it was insolvent while making incidental attacks on the Rose Firm and the Rose Report. City officials, primarily the finance people, droned on for days and weeks, finally coming to an end last week. Next, it was the unions opportunity to plead its case. As always, the responding party (the union) ask for a summary judgment in their favor, knowing that there was no way that it would be granted. The judge's reponse provided some insight to what he was thinking. First, he chastised the attorneys for the union for taking the argument for summary judgment over the top. That's bad news for the unions, because it is the judge telling the unions that he is not taking their attorneys very seriously. Next, he told the union attorneys what he would need to hear to rule for the unions and that he had not heard anything like that yet. This translates into "Your are behind in the score and the count is two strikes and no balls."
The unions only had one witness - Roger Mialocq, the author of the centerpiece of the unions case, the Rose Report. The city immediately objected to Mr. Mialocq as an expert witness because of some of the statements he made at his deposition. When discussing the implications of the Vallejo bankruptcy, he referred to other governmental entities that he had previously worked for. As a fallback, the city said he violated a "gag order" by making public comments about his report. As might be expected, the judge was having no part of either of those objections and rejected both. Mr. Mialocq eventually made it to the witness stand and was lead through a presentation by the union lawyers that tried to prove that the city was not insolvent. He supported this claim by giving anecdotes of where the city could either raise or save money, mostly by second guessing the decisions of the Vallejo city council.
On cross examination, the city's lawyers used a three pronged attacked. First, they jumped on all known errors in the Rose Report, including those that were insignificant Based on the reports I have seen, Mr. Mialocq did not field these issues very well. The second prong cast doubts on how knowledgable Mr. Mialocq was about the finances of the City of Vallejo. The third attack was the old "ad hominem". The union's lawyers did little to rehabilitate his testimony.
Based on my review of the financial statements of the City of Vallejo, I do not believe it qualifies for bankruptcy. Based on the audited financial statements, the city is neither insolvent nor illiquid. However, if I had to make a guess today, I would predict that the judge will rule in favor of the city. Being legally right is not always enough.
As much as it is probably not in my best interest, I feel compelled to speak up in defense of the Rose Firm and Roger Mialocq. I do not know Mr. Mialocg, but I have known of the Harvey Rose firm for many years. I have never worked with them. In fact, I see them as competition. There are three primary entities in the United States that provide this type of service to police unions:
Harvey M. Rose Associates - San Francisco, CA
Amy McCarthy - Washington, DC
POLICEPAY.NET - Norman, OK
I have read other reports prepared by the Rose Firm and found then to be both comprehensive and on-point. I have read the report at issue in Vallejo, the Rose Report and found it credible. I certainly did not have time to investigate and verify every number and claim in it, but I found it to consistent with my findings for the overall financial condition of the city. As for the mistakes in the report, all large reports have mistakes. They will continue to have mistakes as long as human beings prepare them. I was once asked on the witness stand by an opposing attorney "are there any mistakes in your report?" My answer was "yes there are". He then asked "would you point them out?" I responded "if I knew where they are, I would have already fixed them."
Another point in defense of the Rose Firm is that it primarily works for the management side. I understand why people call me a shill for police (trust me, I am not). I work mostly for police unions, but the Rose Firm does not. I wish that the Rose Firm only worked for management, leaving the police and fire unions in California to me, but even with that selfish envy, I can assure you that the Rose Firm is not a bunch of hacks.
The ramifications for police and unions will not be good if the City of Vallejo prevails. Essentially, a victory for the city will be a significant lowering of the threshold for municipal bankruptcy. In my opinion, we then will see more cities using bankruptcy to get out of contracts that they no longer like. One thing that will happen, that deter other cities, is the interest rate that the City of Vallejo will have to pay to borrow money. The city will not get out of this without sustaining injury.
Below are links to selected documents that relate to this case:
June 30, 2007 Comprehensive Annual Financial Report (CAFR) - "The Audit"
The unions objection
The City's Response
Roger Mialocq Declaration
Mialocq Exhibits A-B (includes the Rose Report)
Mialocq Exhibits C-H
City Motion To Block Mialocq Testimony
List of Additional Motions and Documents
Unions Website For Information
Vallejo Independent Bulletin
Harvey M. Rose Associates
