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IN TODAY'S NOONER:
The Nooner for Tuesday, December 24, 2019, presented by SYASL Partners
You would think that I would have nothing to write about in politics and policy on Christmas Eve, but the gift of this genre keeps on giving. I wish I could say that I pre-wrote this, but fortunately my mom sleeps in so I had enough time to start with a blank page today.
Before we get to business, these two tweets caught my eye during Nooner edit time:
Agree or disagree with Lorena (I do both on issues), you have to admit that she's got game--even on Christmas Eve.
PG&E: While PG&E's reorganization proposal and deal with the wildfire claimants (mostly survivors and insurance companies) seemed like a done deal, the late concerns expressed by Governor Gavin Newsom appears to re-opened the door to the group of hedge funds that hold billions in bonds in the investor-owned utility struggling to emerge from Chapter 11 bankruptcy. Dale Kasler reports for the Bee:
The utility’s bondholders told Newsom late Friday they’ll meet his demands for overhauling the troubled utility — demands that PG&E itself, struggling to exit bankruptcy, haven’t met so far. In a 17-page letter to Newsom, the bondholders promised to create a “resilient, reliable and reimagined PG&E.”
They vowed to consult with Newsom on appointing a new board of directors for the utility and said they’d give the state the right to buy the company if PG&E engages in “willful misconduct” that triggers another big wildfire — two promises that align with Newsom’s demands for greater control over PG&E’s operations. They added that their plan will put PG&E in better financial shape than the company’s own plan, which is backed by a different pack of hedge funds.
The courtship of California’s governor by Wall Street interests illustrates how critical the next few months will be for PG&E — and how crucial a role Newsom will play in deciding the troubled utility’s fate.
Every week, it seems like we have a solution and then we're back to square one.
WILDFIRE INSURANCE: GOV'T MUST ACT: There is another huge issue I have been following and I know several Nooner readers are deeply affected by. The homeowners insurance market has absolutely gone haywire in "wildfire prone areas," a definitional debate in and of itself.
We have insurers dropping comprehensive coverage in such areas and the bundling of the industry-backed "insurer of last resort" for wildfire coverage ("California FAIR Plan") and the remainder of liability insurance is simply unaffordable for people to remain in their homes. One example shared with me was comprehensive insurance in 2017 of $1,534 per year. Now, no insurer will provide comprehensive including wildfires.
That same homeowner at $1,534 in 2017 best offer for 2020? A combined $10,300 for the traditional coverage minus wildfires and the backstop California FAIR Plan for wildfires. And this is in an area that is "wildfire prone" in the foothills east of Sacramento but with no wildfires nearby in recent history. They are in an area of PG&E public safety power shutoffs (PSPS), but that doesn't factor into the actuarial calculations because, as we saw with the Kincade Fire that started on October 23 near Geyserville in Sonoma County, even when there is a PSPS of distribution lines, there can be overhead transmission lines that ignite fires. Also, while I personally believe PG&E has executed distribution PSPSs well, let's just say that the trust level in the company by the insurance industry is not high.
I do believe it is a reasonable question about new construction in many places in the state as well as places in hurricane-prone areas on the opposite side of the country. That said, we're not going to abandon the Gold Country completely where California's "modern" history began. Beyond tourism, it's a thriving agricultural zone, as many of you know who went to Apple Hill this fall or have a zinfandel from there on your holiday table. For me, my farmers market goat cheese comes from Jollity Farm in Garden Valley (El Dorado County), my poultry comes from PT Ranch in Ione (Amador County), and much of my other produce comes from similar "wildfire prone" areas, such as the Capay Valley in northwestern Yolo County.
While I'm talking today about the foothills because of a reader's example, this same situation is playing out across the state.
Like several of the communities above Malibu that burned in the Woolsey Fire in 2018, these areas are not full of folks with incomes overfilling their stockings. They include the wealthy and farmworkers and service employees, owners and renters, and large homes and mobile homes. All are affected by this insurance crisis.
Before you jump to the conclusion that I'm criticizing the insurance industry, I am not. A couple of weeks after the Kincade Fire broke out, Capitol Weekly had a great forum on wildfires (video) and I had the pleasure of moderating a panel of various perspectives, including Rex Frazier, the president of the Personal Insurance Federation of California.
Insurers base rates on actuarial calculations with a reasonable rate of return on investment, not unlike utilities. Both are regulated by the state. The problem for insurers and wildfires (and earthquakes and floods) is unpredictability. Actuarial projections of the probability of a policyholder having a house fire or flooded house from a broken water pipe is relatively easy to calculate based on past experience.
We know that we have a changing climate and I'll let you debate the cause among your family members with different political perspectives around your holiday table. Actuaries read data and scientists provide data. The problem is that 10 of the state's 20 historically destructive wildfires have occurred in the last five years. While some of this is because of the cost of wildfire destruction because of development into more wildland areas, 4 of the state's 20 largest have been in the last five years. While maintenance of forest lands, largely federal, is certainly issue, much of the destruction had nothing to do with raking forests. The Kincade Fire in October was not forestland nor was Tubbs Fire that burned 5,636 and killed 22 people in Napa and Sonoma in 2017.
I've heard some rumblings but no confirmation that something might be included in the governor's budget proposal (due January 10) or at least a call to the Legislature in the State of the State Address. The governor's address annual speech to the Legislature has not been announced, but it will be the week of January 6.
I'm not an advocate for unnecessary government intervention and look for private sector solutions whenever possible. At this point, because of the uncertainty of how long it will take to develop an electrical system that is more inured to the climactic events we're experiencing, a solely private model will not keep people in their homes and maintain critical areas of California's economy. The Legislature and Governor Newsom understood this in the passage of AB 1054 discussed yesterday, but needs to step up immediately to provide a solution that the private sector simply cannot.
Insurance Commissioner Ricardo Lara simply can't solve this administratively, and that's no dis on him. The problem is far bigger than the authority of his office (which I've written before shouldn't be elected), and arguably administrative directives complicate the challenges we face. There's already a lawsuit by the insurance companies over his most recent prescriptions expanding the California FAIR Plan.
What does it look like? I don't know. The state is flush with cash with a strong credit rating. People smarter than me can figure out how government can backstop a private insurance market that is simply not working, not because of government policy as sometimes the case, but rather uncertainty.
Insurance is based on actuarial certainty, and we won't have that for several years. However, it's time for the state to act now.
This is as much about keeping Californians in their homes as any other issue the Legislature discussed this year and should be front and center when they return on January 6 and in the Governor's State of the State.
Several more items, Cakeday, Farewell, and NEW Classifieds after the jump...
HEY, IT'S OMAR! Rep. Duncan D. Hunter (R-Alpine) may not be a candidate for Congress this year as he awaits an April sentencing following his guilty plea earlier this month to one count of the sixty-six charges related to extensive campaign finance abuses and continues to collect a congressional salary over the holidays, but the fortunes are far different for 2020 CA43 candidate Omar Navarro (R). He's still in the pokey and I'm guessing San Francisco County lock-up is nothing like the white-collar federal club Hunter is destined for.
On the occasion of his December 7 arrest, I wrote December 9 about Omar's elaborate grifter campaign (his third!) against Rep. Maxine Waters (D-Inglewood) and the massive small-dollar fundraising scheme that pays for Omar's lifestyle and keeps many consultants well paid and need not repeat it today. That was just a sampling of the most recent quarter.
Anyway, he was arrested for disobeying a restraining order obtained by his ex-girlfriend, DeAnna Lorraine, a fellow candidate running for Congress against Nancy Pelosi in the Speaker's San Francisco district. It's too early to see how lucrative her anti-Pelosi campaign is, but she one-upped her ex- by finding an even bigger target for small dollar direct mail and email solicitations. Pelosi won re-election with 86.8% of the vote in 2018 over a GOP candidate, and it probably would have been higher if some on the far left didn't cast a ballot because Pelosi is "too moderate" for them. It IS Baghdad by the Bay after all.
Omar was arrested on December 7 and posted a $75,000 bond. However, when he appeared in court on arraignment December 12, the judge revoked bail and remanded to custody after the DA filed eleven charges on disobeying a court order, stalking, and witness intimidation. He thus was returned to jail pending a court pre-trial hearing yesterday. Following the hearing, he was returned to his cell in county jail and the next court date is January 29.
His last tweet was on December 12, where he wrote "A public execution of my character by my ex without due process goes against what our country is about. Two sides to every story not just one."
WITCH HUNT! (at the hands of a fellow MAGA-capitalizing ex)
He likely drew in new donations after the tweet before he was remanded into custody, but we won't know until January 31, when the year-end reports are due. It will also of course be interesting to look at expenditures for this month to see if there are some clearly fraudulent ones like the third quarter of an even $2,000 that I wrote about on December 9.
To see the charges and status of Navarro's case, visit the San Francisco County Sheriff's inmate locator system and enter Last Name: Navarro and First Name: Omar in the search fields (I can't directly link to his info).
ICE ICE BABY: In the LAT, Andrea Castillo reports that the federal Immigration and Customs Enforcement (ICE) agency has signed nearly $6.5 billion in contracts with private immigration detention facilities in California ahead of a January 1 law meant to prohibit such actions. Castillo writes:
Under the new contracts, which took effect Friday, detention space in California is set to double to nearly 7,200 beds.
In October, California became the first state to kick out privately run immigrant detention centers. A new law prohibits new contracts or changes to existing ones after Jan. 1 and phases out existing detention facilities entirely by 2028. The law also bans private prisons.
But within days of Gov. Gavin Newsom signing Assembly Bill 32 into law, U.S. Immigration and Customs Enforcement officials posted a solicitation — a request for offers — to a federal website seeking at least four detention facilities around the state. Details for the request, including location and bed space, appeared to closely match existing facilities. ICE specified that facilities needed to be “turnkey ready” by the start of the contract. Interested companies had two weeks to respond.
CANNABIS: In the LAT, Patrick McGreevy reports that some in the legal cannabis industry frustrated with the implementation of regulations and taxation of the industry under Proposition is hampering the legal industry to the benefit of the illicit market, although the idea has some Prop. 64 backers divided about whether it's time for a new ballot measure.
The article does not seek reaction to the two measures (19-0010 | 19-0011) that are currently in circulation for the November 2020 ballot to do what some advocates in the industry want to see but also may be seen as going too far, such as setting new limits on local government regulation of retail cannabis stores. That was a major selling point to get Prop. 64 through and would likely trigger more funded opposition to a measure. The proponents are longstanding advocates for marijuana legalization but are not involved in the industry to my knowledge.
CAKEDAY: Happy birthday to Michell Nguyen and Julie Sandino!
FAREWELL: Former Sacramento City Councilmember Lynn Robie (1935-2019)