By Jonathan Weber and Tim Reid
PETALUMA, Calif./ LOS ANGELES (Reuters) - The serpentine strip of asphalt known as Sonoma Mountain Road wends its way through a bucolic landscape 50 miles north of San Francisco, curving past rows of grapevines, dipping into redwood groves, rising again through rippling hills.
It's a beautiful ride. But it is also a bumpy one.
"You get pothole patch after pothole patch," groused Craig Harrison, a local resident and attorney who is part of a grass-roots campaign to fix the crumbling roads of Sonoma County. "We're going to be a test case of what a county does with a completely failed road system."
Sonoma may be known for its wine, and for a burgeoning artisanal food scene, and for its lush, rural landscapes and great weather - all of which have attracted growing numbers of retirees, long-distance commuters and international tourists. But Sonoma County is struggling with the same type of government financial crisis that has driven California cities such as Stockton and San Bernardino into bankruptcy.
Here, too, a toxic combination of inflated public employee salaries and pensions, combined with reckless financial decision-making and the 2008 housing market crash and subsequent recession have stripped that financial cupboard bare.
Driving the county's back roads, you literally feel the pain. Spending by the county to maintain some 1,400 miles of Sonoma's roads totaled $4.2 million last year, compared with $7.6 million in 2003, according to the county budget office. Spending is set to increase slightly this year, but is still a fraction of what is needed.
A March report by an independent coalition representing California counties and cities found that $1.6 billion is needed to repair Sonoma's roads and sidewalks. Sonoma's roads, according to the report, were the second-worst of all California's 58 counties. The county ranks as the 12th wealthiest in the state based on income and property values, according to U.S. Census Bureau date from 2010.
"The citizens who live here feel like we're being held hostage with no option to get the roads fixed," said Michael Troy, a co-founder of Save Our Sonoma Roads, a group founded 18 months ago that's pushing county government to fix the potholes and crumbling asphalt.
Tom Hale, who runs Backroads, a travel company that provides cycling and walking tours to tourists in Sonoma County, wrote to the county's board of supervisors in January expressing concern over bike accidents caused by terrible roads.
The situation has reached a "critical" point, Hale says - and he blames soaring salary and pension costs for the crumbling infrastructure affecting his business.
One Sonoma resident, Andrea Granahan, says that last year her car hit a pothole so big the passenger airbag deployed, causing thousands of dollars of damage to the vehicle. "I actually thought I had hit an explosive," Granahan said.
'IT'S VERY SERIOUS'
County officials say they realize how acute the road problem is. They also agree with Hale and concede it points to a much broader problem: like many cities and states across America, Sonoma County's budget is being consumed by salaries and pensions promised to workers years ago.
The figures are stark. Sonoma County's budget has remained fairly static in the past decade, between $1 billion and $1.3 billion. Since 2000, however, spending on pensions costs have grown 400 percent. In 2000, total pensions costs - money spent on retirement payments and to service debt to fund the pension payments - were $17.4 million. This year, those costs had risen to $97 million.
Total salary costs in 2000 were $271 million. This year the figure is $489 million - a reflection of big salary and pension deals awarded to the county's workers in the early 2000s. A 1999 state law that lowered the retirement age and increased benefits for state workers, sparked a round of copy cat measures by the counties and cities.
Most alarming about Sonoma's budget, critics say, is the amount of money the county has borrowed in the past decade to fund its pension costs.
The county has negotiated two big pension bond deals in the past 10 years: $233 million in 2003, and $289 million in 2010. Together with pension loans of $97 million in 1993, the county spent $46.5 million this year just servicing that $619 million of pension debt.
And despite these large bond issues, the county's unfunded pension liability - the amount of money it needs to fully fund pension payments to current and retired workers - has soared. It jumped to $353 million last year, and could reach $527 million this fiscal year, according to a county report.
"It's very serious. These are huge numbers," said David Rabbitt, chair of the Sonoma County Supervisors - one of five elected county officials.
Sonoma does not pay into Calpers, the giant California retirement system that manages pensions for most of the state's public sector workers. Instead, it is one of 20 California counties that pays into its own pension system. Of those counties, it has the highest per capita unfunded pension liability.
Rabbitt says the county has suffered across the board cuts in recent years: the sheriff's department, the district attorney's office, the public defender's office and the parks department are among those that have seen cuts.
"Each and every department has felt the impact of the economy since 2008 and on the pension side, pension contributions put a further stain on the system," Rabbitt said.
Yet the county has limited flexibility to change pension deals which allow longtime public safety workers to retire at 50 with almost full pay, while other workers can retire at 60.
"It's like a disaster in slow motion," said Ken Churchill, a Sonoma County winemaker who has been trying to highlight the looming budget crisis in Sonoma.
James Spiotto, a municipal bankruptcy specialist and a partner at Chapman & Cutler in Chicago, said: "The important thing is you can't sacrifice essential government services, whether it's roads or other basic things, because in the long term residents will leave and revenues go down. It becomes a vicious circle."
John Noble, a negotiator for Sonoma County's main police union, said he could not comment on current or future wage and pension deals, because police are presently in contract talks with the county.
County supervisor Rabbitt says reforms have been made and he predicts the fiscal situation will improve. Salary and pension deals for new hires are far less generous, Rabbitt says. For current workers, the county has also scrapped perks that allowed retirees to inflate their pensions, set a dollar cap on annual pension payments and curbed the rehiring of retired workers.
Rabbitt says the county has set a goal for pension costs to consume only 10 percent of the budget within 10 years.
(Editing by Mary Milliken and Leslie Gevirtz)