Press release from the Humboldt County Sheriff’s Office:

On March 29, 2022, at about 2:37 a.m., a Humboldt County Sheriff’s deputy on patrol in the Blue Lake area conducted a routine traffic stop for a vehicle code violation.

The deputy contacted four occupants inside the vehicle and observed drug paraphernalia in plain view. Additionally, one passenger of the vehicle, who later was identified as 26-year-old Maxwell Thomas Elliott after providing deputies with a false name, was found to have a warrant for his arrest. Elliot and a passenger of the vehicle were both found to be on probation with a search clause.

Due to the presence of drug paraphernalia and the probation terms, a search of the vehicle was initiated. During a search of the vehicle, deputies located approximately 79 grams of methamphetamine and various drug paraphernalia belonging to Elliot. While conducting their investigation, deputies were informed that a passenger of the vehicle, 20-year-old Lynzee Aurora Strange, had contacted the Sheriff’s Emergency Communications Center in an attempt to divert deputies from the traffic stop. Strange was detained and searched incident to arrest. During a search of Strange, deputies located over 5 grams of suspected Fentanyl and drug paraphernalia.

Strange was arrested and booked into the Humboldt County Correctional Facility on charges of possession of a narcotic controlled substance (HS 11350(a)), possession of a controlled substance paraphernalia (HS 11364(a)), obstruction of justice (PC 148(a)(1)) and misuse of 911 (PC 653x(a)).

Elliot was arrested and booked into the Humboldt County Correctional Facility on charges of transportation/sale of a controlled substance (HS 11379(a)), possession of a controlled substance for sales (HS 11378), false identification to a peace officer (PC 148.9(a)) and violation of probation (PC 1203.2(a)(2)), in addition to a warrant for Post Release Community Supervision revocation (PC 3455(A)).

The driver of the vehicle, 40-year-old Keara Leighanne Loudon, was cited and released on charges of driving an unregistered vehicle (VC 4000(a)) and failure to maintain lighting equipment (VC 24252(a)).

The fourth passenger of the vehicle was released at the scene.

Anyone with information about this case or related criminal activity is encouraged to call the Humboldt County Sheriff’s Office at (707) 445-7251 or the Sheriff’s Office Crime Tip line at (707) 268-2539.

As California experiences a housing shortage amid soaring market rates, the need for affordable housing in Humboldt County is greater than ever. In an effort to create more housing across the state, California lawmakers are trying to get rid of a classist and antiquated law that has stymied the creation of low-income housing in California for decades.

Article 34, which was passed by voters as Proposition 10 in November 1950, is a provision of the California Constitution that prohibits the development of any low-income housing project with federal, state or local financing without voter approval. No other type of housing is subject to such a requirement in California.

Before we delve into ongoing efforts to repeal Article 34, let’s take a look into its sordid past, which, interestingly enough, stemmed from a low-income housing development dispute that occurred in Eureka in the late 1940s.

Eureka rises up against federal funds

In accordance with the Housing Act of 1937, which was amended in 1949, housing authorities across the nation entered into agreements with the federal government to receive federal funds to build “low rent” housing. Housing eligibility would be determined by whether the applicant’s family income “was too small for them to afford decent housing,” according to coverage of a Eureka City Council meeting in the Oct. 3, 1949, edition of the Humboldt Times. World War I and II veterans would have priority.

“The city’s only obligation under the proposed housing program would be to provide services which are provided for ordinary property owners,” the article stated. “The low-rent housing would be tax free, but in lieu of the tax exemption the housing authority would be permitted to make a payment of ten per cent of the shelter rent to the city.”

Eurekans came out in droves, reportedly filling the council’s chambers and staying past midnight to call for a public vote and to speak against the low-income housing project at the council’s next meeting, according to the Humboldt Times. Despite public outcry, the council passed the resolution, approving the Eureka Housing Authority’s application for a preliminary loan of $150,000 to build 500 low-income housing units at its Nov. 1, 1949, meeting. 

Led by local attorney Ernest Mitchell, disgruntled residents then circulated a petition to force the repeal of the resolution. By February 1950, the petition had garnered 1,822 signatures and was sent to the City Clerk, who refused to accept the petition. 

“Two actions have been taken before the superior court [in Humboldt County],” a Feb. 3, 1950, article in the Humboldt Times read. “One to cause the City Clerk to show cause why she should not accept the petitions and the other to enjoin the housing authority from proceeding with the program. … The writ of prohibition just issued by the state supreme court prohibited hearing on both actions.”

In the June 1950 judgment, Housing Authority of City of Eureka v. Superior Court In and for Humboldt County, the California Supreme Court sided with the City and stated that the actions of local governments under statewide housing laws are “administrative only for the purpose of giving statewide effect to the declared legislative policy. …” 

“Because the housing authority law is of statewide concern, it is not subject to referendum,” the judgment stated. “That may well be one factor in determining whether an act is administrative or legislative. If the law is of a statewide nature, then even a charter city has no word in policy questions which are involved in legislation of this character.”

The court case piqued the interest of the California Real Estate Association, the predecessor of today’s California Association of Realtors, which came up with a ballot initiative to combat the Humboldt County Superior Court’s ruling. Proposition 10 proposed to amend the California constitution in such a way as to require voter approval to authorize publicly funded low-income housing projects.

Proponents of the measure said voters should have a say in whether or not low-income housing is built in their communities. Opponents argued that the proposition was merely an attempt to discourage the construction of affordable housing by erecting unnecessary and cumbersome procedural barriers.

California voters narrowly passed Proposition 10 in November 1950 with a 50.78 percent majority – less than a 50,000-vote margin – adding Article 34 to the constitution.

When looking back at the momentum behind 34, it’s important to remember that at the time, discrimination in housing “was the norm,” Sanjay Wagle, senior vice president of government affairs with the California Association of Realtors, wrote in an email to the Outpost.

“One [argument] was playing on fears that public housing could result in projects with low-income, nonwhite residents being placed in white areas resulting in the integration of neighborhoods … ,” Wagle explained. “Related to that, proponents played on fears that low-income projects would hurt the property values of a community generally but, in particular, if such projects contained nonwhite residents. The other argument was generally against the government spending taxpayer dollars on what were called ‘socialist’ programs, in general, and especially without voter approval.”

Wagle added that, despite the organization’s support for Article 34 at the time of its inception, today the California Association of Realtors “strongly support[s] fair housing legislation, removing discriminatory housing laws and the repeal of Article 34.”

Undoing the damage

Attempts to repeal the constitutional amendment have been unsuccessful thus far. The amendment survived an equal protection challenge at the U.S. Supreme Court in 1971 (James v. Valtierra). In 1980 and 1993 California voters rejected ballot measures to repeal or amend Article 34.

State Senators Ben Allen (D-Santa Monica) and Scott Wiener (D- San Francisco) introduced legislation to repeal Article 34 in December 2018 but the measure failed to gain the necessary two-thirds vote from the California State Assembly for referral. 

“Article 34 is a scar on the California Constitution – designed to keep people of color and poor people out of certain neighborhoods – and it needs to be repealed,” Wiener said in a prepared statement. “Publicly owned affordable housing for low-income people is critical to reduc[ing] homelessness and ensuring that housing is available to people of all income levels. This important source of housing shouldn’t be singled out for voter approval when other types of housing aren’t.”

Undeterred, the two senators tried again with Senate Constitutional Amendment 2 in December 2020. The initiative cleared the State Senate in a unanimous 37-0 vote, with three senators absent, this January. The bill was sent to the state Assembly, where it has been “held at desk” for the last two months.

Cathy Mudge, a spokesperson for Assemblymember Jim Wood (D-Santa Rosa), told the Outpost that the bill must be assigned to a committee before moving forward. Mudge could not say when the assembly would review and vote on the initiative but underscored Wood’s support for legislation that will make room for more affordable housing in California.

“Assemblymember Wood supports efforts that could bring necessary and much needed affordable housing to all communities and also would want to eliminate barriers to that happening,” she wrote via email. “Housing affordability is a challenge everywhere in the state.”

State Senator Mike McGuire (D-Healdsburg) called Article 34 “blatantly racist” and urged its immediate repeal.

“Even in an era of extreme division in American politics, Democrats and Republicans in the California Legislature agree that this racist amendment must go,” McGuire told the Outpost. “This law has been on the books for well over a half-century now and it’s blatantly racist. California is the only state in the union with a law like this on books. We got to get rid of it now.”

It should be noted that Article 34 is much less of a barrier than it used to be. Many counties and municipalities across the state have passed local laws to counteract its impacts and make way for the construction of affordable housing.

Humboldt County voters passed Measure I in November 2020, authorizing the development of affordable housing for low-income families, seniors and folks with disabilities in up to 2.5 percent of housing units in unincorporated areas of the county. Arcata and Eureka passed measures to mitigate Article 34 as well.

Arcata voters passed Measure L in 1992. The measure authorized the development and construction of 250 low-income housing units, or up to five percent of the total number of housing units in Arcata, whichever is greater.

Eureka’s Measure O was approved by voters in 2016. The measure increased the number of low-income housing units in the city to three percent — or 368 of 12,286 existing housing units — in the city.

Before such measures were enacted locally, Humboldt County “didn’t produce low-income housing for decades,” said Nezzie Wade, president of Affordable Homeless Housing Alternatives (AHHA).

“We hadn’t allowed for any other types of housing other than single-family dwellings, which would obviously be supportive of the middle and upper classes but not much for the working class,” she told the Outpost. “…There has been a lot of effort to try and get rid of Article 34 because it’s kept people from getting into much-needed housing.

Workarounds

The push to create more housing – specifically low-income housing – has been met with significant pushback. The EaRTH Center, the City of Eureka’s latest housing endeavor, will contain an intermodal transit center and at least 31 dwelling units, with 27 of them designated for low-, very-low- and moderate-income tenants, including students. 

While the majority of the community’s concern seems to focus on how the project will impact parking in downtown and Old Town Eureka, many others have raised concerns about the potential increase in crime allegedly associated with a low-income development.

“The perception of affordable housing has proven to not necessarily be a barrier, but definitely a divisive component of affordable housing,” Eureka City Manager Miles Slattery told the Outpost. “Some of those that oppose the proposed developments have a perception of affordable housing akin to Section 8 housing, transitional housing or permanent supportive housing. Along with this misperception comes the idea that these developments will result in increased crime, drug use and loitering. This is definitely not the case, not only for Section 8, transitional and permanent supportive housing but also for affordable housing.”

Slattery added that the non-student tenants of the proposed EaRTH Center development “will be gainfully employed.” To qualify for a low-income unit, single tenants will make, at most, $40,000 per year while those qualifying for very-low-income units can make up to $25,000 per year. 

“These people are your relatives, current neighbors and people that take care of you and your family … ,” he said. “The tenants will be the servers at your local restaurant, the cashier at your local bakery, the administrative assistant that receives calls from clients, the maintenance worker that paves your streets, the teller at all of our local banks and even the nurse that cares for your family. Employees of all of these professions are finding it increasingly difficult to find housing that their wages can support.” 

There is a profound need for housing of all kinds in California. Anything that stands between the creation of new housing is not considering the state’s best interest given the housing crisis, Wagle added.

Even with overwhelming support in the state legislature, the challenge to repealing Article 34 is finding adequate funding to get the word out to voters. 

“We’re ready to put it on the ballot, but it’s going to require a significant statewide campaign, and those don’t come cheap,” Sen. Wiener wrote in an email to the Outpost. “I’m hopeful we can get this off the ground soon.”

Likewise, McGuire said he is confident that the legislature will pass the amendment this year, but he echoed Wiener’s concern about funding a statewide campaign.

“The education of the general public about this amendment and having the resources to advance those efforts will be the challenge ahead,” McGuire said. “…It’s beyond time that California mobilizes to abolish this blatantly racist law. I firmly believe what makes California so strong is our diversity and we need to have housing diversity in our communities.”

George Gredassoff (1941-2022) was born in Sarajevo, Yugoslavia and came to the United States at the age of 5. He was a student at Campbell High School, and graduated from San Jose State University with BS degrees in social studies and Russian. He continued his studies and earned a General Secondary Education Credential.

George taught Russian, history, geography, economics and government in the Fremont Union High School District in Sunnyvale from 1966 until his retirement in 2001. Known for his innovative and creative teaching style that made learning interesting and motivating, he touched the lives of over 4,000 students in the classroom.

In the latter part of his career, George served as President of The Fremont Education Association, leading teams to negotiate teachers’ contracts that, for the most part, are still in effect to this day. After retirement, he served 13 years on the Hydesville Elementary School Board.

He met his wife Elaine at SJSU and they were married in 1964. They lived in San Jose until they both retired in 2001 and relocated to Humboldt County. He enjoyed fishing, hunting, camping, and the great out-of-doors. He was a woodworker, enjoyed gardening and was a fantastic ‘scratch’ cook, but most of all…he loved teaching people.

George is survived by his wife of nearly 58 years, Elaine, sons Mark, and Eric (Giovanna}, granddaughter Caitlynn (Sam), two great-granddaughters Kensleigh & Madison, brother-in-law Bill (Betsy), nieces Michele & Nancy and many friends and neighbors. He was a humble man with a heart of gold. To say he will be missed is an understatement. We loved him dearly and he loved us dearly. A celebration of life is planned for May.

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The obituary above was submitted on behalf of George Gressadoff’s loved ones. The Lost Coast Outpost runs obituaries of Humboldt County residents at no charge. See guidelines here.

Nick Mercado was born on February 21, 1930 and passed away on March 25, 2022. He left gently surrounded by loved ones at his home.

Nick moved to Humboldt County as a young man from Southern California. He held many jobs including working for the County Hospital, Simpson’s Timber Company, and Blue Lake Forest Products. Nick was a model employee: hard worker, easy to get along with, always punctual, and seldom missed work.

He loved riding his motorcycles and took many trips on his bike staying in rest areas for the night. One highlight of his life was when he finally acquired a 1967 Avanti. He liked challenging his mind with crossword puzzles. He wrote everything down and kept track of life’s events and activities. He was organized and took immaculate care of all of his belongings. He enjoyed watching action and horror films, westerns, tennis and the Sci-Fi channel. He was extremely talented and could craft almost anything and could repair just about everything. After being exposed to our local Native American culture, he made his wife and daughter miniature traditional houses for display. Nick was also a talented artist, once making a beautiful instrument that won first place in a competition. His beautiful hand carvings of faces and people are displayed throughout his home. Crafting was not his only talent. He enjoyed drawing and sketching, and he surprised us one evening by bringing out his guitar and playing it and even singing a little.

He met his wife, Delores Mercado in 1976 through a mutual friend, Pennie Evenson. She thought they would be good together and she was right. They married in 1980. Together they enjoyed traveling by motorcycle, special trips to Reno, and spending time with family and friends. When he married Delores, Nick gained a wife and a family. Delores’ family became his family and he attended their traditional ceremonies, weddings, birthdays, funerals, sports games and other family events. Nick had a special relationship with his daughters, and they knew he was always there for them whenever they needed anything. His grandchildren and great-grandchildren closest to him, called him Tata. Their eyes always shone when they saw him and gave him a great big hug!

Nick was preceded in death by his wife, Delores Mercado; his parents, Anthony and Margaret Mercado; his siblings, Tony Mercado, Russell Mercado, John Mercado, Betty Mercado-Alvarez; and his son by marriage, Deverous Frank.

Survivors include his children by marriage, Myra Fiore, Marlene Jarnaghan, Elizabeth Lara-O’Rourke and husband Greg, and Robbie Lara; his siblings, Sandra Mercado-O’Dell, Margarita “Babe” Mercado; his grandchildren, Michelle Bayer, Rachel Stamison, Kristina Fiore-Shinohara, Joanna Colegrove, Darin Jarnaghan, Joey Jarnaghan, Mini Robbins, Deverous Ray Frank, Lucinda Ottum, Lau-lei Lawrence, Michael Lawrence, Ernie Albers, Chu-cheesh O’Rourke, and Charlene Juan and 35 great grandchildren.

Graveside services will be held at the Trinidad Community Cemetery on Thursday, March 31 at 11 a.m.

Pallbearers will be: Greg O’Rourke, Walt Lara III, Ernie Albers Jr., Michael Lawrence, Everett “Bronc” Colegrove, Ernie Albers Sr.

Honorary pallbearers will be: Walter Lara Sr., Clyde Moon, George Moon, Richard Moon, Mike Orcutt, Kevin Orcutt, Darin Jarnaghan, Joey Jarnaghan, Deverous Ray Frank, Troy Super Sr., Darren Shinohara, Teh-sa’a:n-xwe Cooper

Services are being handled through Paul’s Chapel, Arcata.

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The obituary above was submitted on behalf of Nick Mercado’s loved ones. The Lost Coast Outpost runs obituaries of Humboldt County residents at no charge. See guidelines here.

Press release from the Humboldt County Sheriff’s Office:

On March 28, 2022, at about 11:45 a.m., Humboldt County Sheriff’s deputies were dispatched to a residence on the 7100 block of Humboldt Hill Road near Eureka for the report of a possible residential burglary.

Deputies arrived at the residence and learned that multiple unknown suspects were reportedly observed accessing the home without the owner’s permission. The suspects reportedly stole numerous items of value, including a vehicle which had been parked at the home.

Later that evening, at approximately 5:58 p.m., a sheriff’s deputy on patrol in the Eureka area observed the stolen vehicle traveling on Broadway Street. Deputies conducted a traffic stop on the vehicle and detained two occupants, 33-year-old Anthony David Maillelle and an adult female. During a search of the vehicle, deputies located multiple items that had been reported stolen from the Humboldt Hill residence.

Maillelle was arrested and booked into the Humboldt County Correctional Facility on charges of vehicle theft (VC 10851(a)), possession of a stolen vehicle (PC 496d(A)), driving with a suspended/revoked license (VC 14601.1(a)) and violation of probation (PC 1203.2(A)(2)).

The female was determined to be uninvolved and was released at the scene pending further investigation.

This case is still under investigation. Anyone with information about this case or additional involved suspects should contact the Humboldt County Sheriff’s Office at (707) 445-7251 or the Sheriff’s Office Crime Tip line at (707) 268-2539.

Press release from the Humboldt County Sheriff’s Office:

On March 25 and 26, 2022, Humboldt County Sheriff’s Office investigators and representatives from CDCR Parole and the Humboldt County District Attorney’s Office conducted a sex offender registration compliance sweep throughout the County of Humboldt.

During this sweep, law enforcement attempted to contact approximately 100 registered sex offenders to ensure each offender was in compliance with state requirements. Pursuant to California Penal Code 290, sex offender registrants are required to register in person with the law enforcement agency that has jurisdiction where they reside. The registrants must also comply with several registration requirements, such as updating their registration annually and informing law enforcement when any changes have been made to their address or registration information. Failure by a sex registrant to keep law enforcement notified of an address change or registration information is a crime and can be punished as a felony or misdemeanor.

During the compliance sweep, 11 registrants were found to be out of compliance. Two registrants were arrested, and one registrant was cited as a result of this operation. Additionally, four registrants were determined to have absconded, and warrants will be requested for their arrest.

Detectives are completing follow up investigations into the remaining individuals found to be out of compliance and anticipate cases to be submitted to the District Attorney’s Office for review.

This month’s operation is part of an ongoing effort to do smaller, more frequent 290 sweeps to reduce violent sexual offenses in the county through proactive surveillance and arrest of habitual sexual offenders, and strict enforcement of state registration requirements. The Humboldt County Sheriff’s Office involvement in this enforcement effort is funded through the Sexual Assault Felony Enforcement (SAFE) grant.

The Humboldt County Sheriff's Office would like to thank participating agencies for their assistance in this operation.

Additional Resources:

• https://meganslaw.ca.gov/faq.aspx
• https://humboldtgov.org/DocumentCenter/View/69388/Sex-Offender-Registration-Requirements

Receive HCSO news straight to your phone or email. Subscribe to news alerts at: humboldtsheriff.org/subscribe.

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Late last month, shortly after receiving a final demand letter from the California Attorney General’s Office for a long-overdue fiscal report, the county’s auditor-controller, Karen Paz Dominguez, issued a message to taxpayers. She alleged, among other things, that by decentralizing financial operations, the county had paved the way for decades of financial mismanagement, leading to “confirmed cases of error and fraud.”

A few days later, at the March 1 Board of Supervisors meeting, she elaborated in an oral report, leveling a series of allegations — or “findings” — against several county departments. 

The Outpost is investigating some of those allegations, and today we’re looking into arguably the most serious charge — namely, that the County Administrative Office (CAO) forged a report and submitted it to the State Controller’s Office.

Like many of Paz Dominguez’s recent accusations, this one involves some jargon and acronyms that won’t be familiar to most folks. We’ll explain the relevant terms below, but for now, let’s revisit what she said at the March 1 meeting.

About 11 minutes into her report, Paz Dominguez told the board that when representatives from the State Controller’s Office were in town auditing the county’s cost allocation plan, they had some questions about the county’s PARS account. She said the agency later required the county to submit an actuarial report to justify charges it had been levying on individual departments.

If you’re not a government accountant, that’s likely a confusing glut of information. You may not have heard of cost allocation plans, PARS accounts or actuarial reports.

A cost allocation plan, in this context, is a report that calculates indirect costs to the various county departments for services from other departments. Specifically, here, county departments were being charged for contributions to a type of pension account known as a PARS fund.

PARS, or Public Agency Retirement Services, is an organization that serves a variety of California government agencies, such as school districts, community colleges, cities, counties and other special districts. As a financial service firm, it offers a variety of retirement-related services, including a Pension Rate Stabilization Program, which the county has participated in since 2015. The idea is to reduce the county’s ballooning unfunded pension liability.

Each county department was chipping in state and federal grant dollars, contributing two percent of its payroll costs every two weeks. The money went into something called a Section 115 Trust, a federally authorized type of account that allows governments to set aside funds to be invested. Such accounts typically yield higher returns than the money that sits in the county treasury.

The incidents Paz Dominguez was describing to the board occurred in late 2019. In September of that year, the State Controller’s Office requested an actuarial report to justify those PARS charges — an actuarial report being an analysis of the fund’s assets and liabilities, prepared by a licensed actuary.

“The CAO’s Office confirmed to the State Controller’s Office that there was an actuarial report,” Paz Dominguez said at the March 1 meeting. “The State Controller’s Office requested a copy of that report.”

After a dramatic pause she added, “There was no actuarial report. And the CAO’s Office purchased the software and forged one and submitted it to the State Controller’s Office.”

At that point, Supervisor Virginia Bass interjected. “Excuse me,” she said. “I’m hearing threats in there, so do you have proof that there was [a] forged [report]?” 

Paz Dominguez assured Bass that she did indeed have proof. However, two subsequent opportunities for Paz Dominguez to present her evidence at a public meeting were canceled after she failed to meet the county’s agenda-scheduling deadlines.

Instead, during her March 15 re-election campaign announcement, Paz Dominguez encouraged the public to search for the evidence in a large trove of documents (mostly internal county email communications) that a supporter had posted online. And in a speech from the courthouse steps, she elaborated on her accusations.

“Retirement is not as secure as it should be,” she told the group who’d gathered. “You’ve heard our county has an unfunded pension liability nearing $500 million. What you might not have known is that in 2015, per the County Administrative Office’s recommendations, the board authorized the creation of an external investment account referred to as PARS that, according to the County Administrative Office, would be used to offset the county’s unfunded pension liability.” 

She glanced up at the audience and continued. “Well,” she said, “I’m sorry to be the one to tell you that that is not what is happening. That external investment account was set up outside the county’s treasury and outside of the county’s books. Departments were charged, and that money was wired to an external bank account where it is being used to purchase and sell investments.”

None of the more than $6 million that’s accumulated in the county’s PARS account has been used to pay down the unfunded pension liability, she said, and she repeated her accusation about the “forged” actuarial report, saying that in the absence of a real one, “the County Administrative Office made one up and sent it.”

Paz Dominguez makes this same allegation in some of the emails from the online document dump early this month. In an Oct. 3, 2019, email to all five county supervisors, for example, she said she believed the county was in danger of losing significant federal and state funding due to its investments with PARS. She objected to the county’s use of this firm in part because it’s a corporation, not an agency of the state. She also argued in emails that taxpayers’ money is safer when placed directly with the California Public Employees’ Retirement System (CalPERS) because the latter backed by the state.

This is the document she alleges is a forgery. It’s a pension analysis report produced with proprietary software from a company called GovInvest. In her Oct. 3 email Paz Dominguez characterized it as “obviously a last-minute attempt to forge a report using a purchased software program.”

‘Political stunt’

County Administrative Officer Elishia Hayes disputed this interpretation of events and suggested that Paz Dominguez’s recent accusations were designed to distract from her failure to submit the overdue Financial Transactions Report. (That report was finally turned in late on March 16, just ahead of the Attorney General’s deadline to avoid legal repercussions and a $5,000 fine.)

“Dropping headline-grabbing accusations without proof and without action is an obvious political stunt and our employees do not deserve to be put in the middle of that,” Hayes said in an emailed statement.

She offered a different account of what occurred back in 2019: Paz Dominguez, she said, had given the CAO’s Office very short notice about the state’s request for an actuarial report. “[E]ven back then,” Hayes said, “[Paz Dominguez] was either unavailable or would not communicate with the CAO’s Office.”

The consequences for missing the state’s deadline were “characterized in terms that made failure seem unacceptable,” Hayes continued.

So she and her staff rushed to produce the above-linked report using GovInvest, a company that was working with 48 of the state’s 58 counties at the time. “That report was itself not a certified actuarial report,” Hayes acknowledged, “but it was reviewed by a certified actuary on their staff, and it stated so.”

Hayes emailed the GovInvest report to the State Controller’s Office on Sept. 18, 2019. On Dec. 2, a supervisor from the State Controller’s Office wrote back, informing county staff that they would need to produce a full actuarial report to show that the county’s PARS contribution methods complied with the Actuarial Standards of Practice.

A lot was at stake here. If the state and feds concluded that the county’s PARS charges were not supported by accepted actuarial standards, it would mean returning all those payments — nearly $2.5 million — to the individual county departments that contributed them.

‘A positive step’

Hayes, unlike Paz Dominguez, believes that the county’s contributions to a PARS-managed Section 115 Trust were a wise fiscal investment, one with advantages the county wouldn’t realize by making direct contributions to CalPERS or by leaving that money in the county coffers.

“Long-term is the key here,” she said. “These funds are intended to grow over not just years but decades.”

Investing in a PARS-managed Section 115 Trust “basically allows us to invest our money in more aggressive money market accounts so that we put those dollars to better use than if they were in our own treasury,” Hayes said. By law, the money placed into 115 trusts can only be used to pay down pension liability, but because they remain in the trust for years or decades, it allows the investments to grow and be used on a rainy day.

“We stick that money aside so that when our [pension] costs hit a mark where we’re like, ‘Whoa, we can’t afford these increases anymore,’ then we have those dollars that we can pull over [to] help to stabilize our pension accounts,” Hayes said.

As Paz Dominguez said at her campaign event, the Board of Supervisors decided to invest with PARS back in 2015 based on a recommendation from then-County Administrative Officer Phillip Smith-Hanes.

About a year later, the Humboldt County Civil Grand Jury [HCCGJ] set out to investigate the county’s unfunded pension liability, which was then estimated to be about $232 million. The Grand Jury’s ensuing report, titled “Will Unfunded Pension Liability Un-fund Our Future?” commended the county on its decision.

“The HCCGJ supports the [board’s] September 2015 decision to create the PARS Trust fund,” the report says. “We see this as a positive step to provide more local control of our pension liability. The true value of the PARS Trust lies in securing funding today in order to offset future variations in the County’s contribution to CalPERS during times of poor market performance.”

Hayes said the investment has indeed paid dividends well above what they’d have earned in the county treasury. 

“As of March 2022, we have contributed $5.4M to this fund, and earnings on that investment total more than $1.4M … ,” she said. “This represents a rate of return of 5.8 percent.” The county treasury, by comparison, averages a return rate of 0.89 percent, according to Treasurer-Tax Collector John Bartholomew.

Substantiated

When the CAO’s Office staff learned in December 2019 that the state was still requiring a full actuarial report, they went back to the most recent one they’d commissioned, a 2016 report prepared by Bartel Associates, LLC, a firm that specializes in providing actuarial services to public agencies. 

They submitted that report, along with a letter signed by a certified actuary, to the state and waited to hear back. On Jan. 7, an analyst with State Controller’s Office emailed Paz Dominguez, cc’ing other county personnel, with the verdict. 

“Based on our analysis, the previous charges for the PARS Section 115 Trust are substantiated,” the email said. “The County was able to provide a letter signed by a certified actuary that the report was prepared using generally accepted actuarial principles and practices.” 

Amy Nilsen, the county administrative officer at the time, was ecstatic. In an email to office colleagues she said, “The SCO has substantiated our PARS charges. … Today is a great day!!!!!”

The Outpost recently contacted the State Controller’s Office to ask about this situation. We asked whether the agency considered the GovInvest report to be a forgery, as Paz Dominguez alleges.

Jennifer Hanson, press secretary for the State Controller’s Office, replied via email, saying her agency’s staff and their federal counterparts reviewed the GovInvest document and together determined that it did not meet federal requirements to substantiate the county’s PARS Section 115 Trust charges.

“Subsequently,” she continued, “the county CAO provided an actuarial report prepared by Bartel Associates and an actuarial certification that the report was prepared in accordance with the appropriate standards. SCO [the State Controller’s Office] and our federal counterparts determined this report was sufficient to substantiate the charges.”

We wrote back. Given the gravity of the accusation, we asked for clarification: Did the the State Controller’s Office consider the GovInvest report a forgery?

Hanson declined to elaborate. “The first response provided accurately reflects SCO’s position on the report submitted,” she wrote.

The Outpost emailed Paz Dominguez on March 17 to request any further evidence she may have to support the forgery allegation, and in a follow-up email we asked whether she believes a crime was committed. She has yet to respond.

The county’s unfunded pension liability remains a serious concern. It had grown to $331 million as of the the county’s latest budget brief, this past June. Deputy County Administrative Officer Sean Quincey said that when Paz Dominguez began questioning the validity of the county’s PARS contributions, those contributions were paused to allow time for investigation and reconsideration.

Since then, the State Controller’s Office informed the county that it would need to submit yet another actuarial valuation before resuming those charges. The county has now done that, according to Hayes.

Last April, the Board of Supervisors adopted an updated pension funding policy. Hayes said the county plans to resume its PARS contributions in the 2022-23 fiscal year. 

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PREVIOUSLY:

• Attorney General’s Office Threatens Legal Action Against Auditor-Controller Karen Paz Dominguez Over Failure to Submit Financial Transactions Report
• Paz Dominguez on the Offensive: Auditor-Controller Riles Supervisors, Staff With Allegations of Fiscal Shenanigans
• Auditor-Controller Karen Paz Dominguez Blasts Humboldt County Board of Supervisors During Reelection Announcement
• Auditor-Controller Submitted Overdue Report to the State After 10 Last Night; Special Meeting to Present Proof Behind Her Recent Allegations Canceled
• Sheriff’s Office Responds to Allegations from Auditor-Controller Karen Paz Dominguez