Monday, December 19, 2011

City Records Budget Surplus

GOOD BUDGET NEWS FOR A CHANGE
In a press release today the City of Costa Mesa announced that it had recorded a budget surplus for the fiscal year that ended June 30, 2011 of $3.8 million. This is good news, since members of the current City Council have been wailing about our dire financial condition, with the word bankruptcy frequently mentioned by them and their sycophants in the Costa Mesa Taxpayer's Association.


"YEAH, BUT..."
However, while this is good news, it WILL NOT be good enough for them. We can almost guarantee that some council members will give us one of those "yeah, b
ut" comments in which they spin this good news as bad news. And, of course, this excellent fiscal news was accomplished without the draconian layoffs members of the council demanded. This news makes it even more obvious that certain members of this council have only their own personal political agendas in mind, not the well-being of the city. They scream about pension reform while they cannot do a thing about it without sitting down at the negotiating table with the employee bargaining units - something they've shown no interest in doing at this point.

UNFUNDED LIABILITIES EXPLAINED
Way down at the bottom of the text of the press release you'll see a number that, if you've been paying attention to this issue for awhile, should grab you right by the throat. That number is the $255 million in unfunded liabilities. I saw that number, too, so before I published this I grabbed the telephone and contacted Bobby Young, Costa Mesa's Finance Director, to be sure I understood what it meant because it's a much bigger number than we'd been hearing for the past several months.

NUMBER IS ACTUALLY DOWN SLIGHTLY

It turns out that the $255 million is the TOTAL unfunded liability the city faces. $225
million is pension unfunded liability - down from $230 million - and the remaining $30 million is medical unfunded liability, which appears to be constant with previous projections. So, while $255 million is a HUGE number, it's down slightly, which can only be viewed as good news - unless you're a political opportunist trying to use it for personal political gain.

PRESS RELEASE TEXT

Here's the complete, unedited text of the press release issued by Interim Communication Director Bill Lobdell today:

COSTA MESA, CALIF - Costa Mesa’s General Fund finished the 2010-11 fiscal year with a $3.8 million surplus, according to the City’s recently completed annual financial audit.

Higher-than-expected sales tax revenues and budget-tightening measures erased a projected $1.4 million deficit, and the City finished in the black for the first time since fiscal year 2006-07.

The independent audit, known as Comprehensive Annual Financial Report (CAFR) and available shortly on the City’s website, shows that the surplus resulted from receiving $95.3 million in revenue and transfers in, while paying $91.5 million in expenditures and transfers out for the year that ended June 30.

The $3.8 million surplus went into the City’s reserve fund, helping raise available cash in November (when cash flow is at its lowest) from about $5 million in 2010 to about $10 million this year. The cash reserves are still short of the $14 million minimum that the City, by Council policy, is supposed to set aside for natural disasters and emergencies. The City had used more than $30 million of its reserves in the previous three fiscal years while trying to balance its budget.

Compared to the prior fiscal year, total revenues increased 4.2%, while expenditures decreased sharply by 8.6%. Revenues rose because of a slight rebound in the economy and the voter-approved increase in the hotel tax rate. Savings were attained through layoffs, positions left vacant, employees contributing more to their pensions, and reductions in service.

In addition to restoring its reserve fund, the City Council has pledged to start paying down the significant $255 million in unfunded liabilities and begin a 5-year, multi-million-dollar capital improvement plan to make infrastructure repairs and improvements that had been put off in recent times because of budget shortfalls.

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41 Comments:

Blogger Original Max said...

Yeah, it sounded like Righeimer and Mensinger were originally bent on filing for bankruptcy but then revenue shot up. Then they did the ready fire aim approach to cutting back on wages and got the city into a lawsuit. These guys are clowns. Plus, they brought all of those junk food places to this city at the expense of local mom and pops that are a million times better. They are trying to ruin SoBeCa and the Harbor Boulevard of cars. The city should not be run like a failed business!!! And as far as the over all feel of our city goes, Irvine sucks and so do Righeimer and Mensinger.

12/19/2011 08:37:00 PM  
Blogger Moon said...

It makes me appreciate Henry Segerstroms' vision and what he did with South Coast Plaza all the more. The boys on the council don't have the vision of my half blind poodle.

12/19/2011 10:29:00 PM  
Anonymous X said...

great job by council, good news, sort of, if you exclude the quarter BILLION dollars of pension problems. But then again, it is not all due and payable now, we can make payments like people do to home depot. of course that leaves less disposable income but we get to enjoy our cops and firemen by "charging it" when it comes to their pensions.

12/20/2011 06:26:00 AM  
Anonymous Thank You said...

Great job Staff and City Council.

12/20/2011 07:09:00 AM  
Blogger Joe said...

Moon:
"It makes me appreciate Henry Segerstroms' vision and what he did with South Coast Plaza all the more. The boys on the council don't have the vision of my half blind poodle."

Me:

Agree! But I can't imagine the extremists going forward with their nefarious plans without some sort of approval from the Segerstrom family.

12/20/2011 07:35:00 AM  
Anonymous Next, Riggy for King? said...

Riggy to Mensinger----
"Crud! The budget is in the black. Now what? Well, at LEAST we can "Charter" ourselves in to higher office."

By the way....If I make a $2500 house payment on a purchase price of about 500k, don't I have an UNFUNDED LIABILITY of about 1 million? (give or take a couple hundred grand)

Why does Riggy insist we have the entire amount on hand forever?

note the satire

12/20/2011 08:01:00 AM  
Anonymous Good News For Once said...

Imagine if previous Councils had raised the TOT and buisness license fee years earlier. This Council and it's PR people will somehow turn this into a negative, and show that half the workforce needs to still be fired.

12/20/2011 08:16:00 AM  
Anonymous RickandJenn said...

Great news! Thanks to our Council for fixing this. This is what we elected them to do.

How many of the non-residents whom this doesn't impact will complain and make this a bad thing. I'm waiting.

Hope to see some positive things about City on this blog now.

Great work by everyone!!!

12/20/2011 08:33:00 AM  
Anonymous Real Deal said...

X aka Little Steve said...
"great job by council, good news, sort of, if you.."

Great job Hatch and staff DESPITE council boys. Mensinger: Put your football jersey on, go play, leave government to qualified people.

12/20/2011 10:02:00 AM  
Anonymous Real Deal said...

RickandJenn said...
"Great news! Thanks to our Council for fixing this. This is what we"

Same writing style as that CM racist blogger.

12/20/2011 10:05:00 AM  
Anonymous Not Surprised said...

Great job city staff and those who shop and stay in Costa Mesa. It is really appreciated.

12/20/2011 10:13:00 AM  
Blogger Colin said...

"How many of the non-residents whom this doesn't impact will complain and make this a bad thing"

I don't think your strawman is showing up for the arguement. :)

Why would people who don't live here complain that more money in the coffers is a bad thing ?

Max - agreed, why is there now 3 burgers joints off the 405 and Harbor ? I understand a franchise's importance in bringing revenue to the city, but one thing I like about Costa Mesa is the lack of fast food places, and the amount of mom and pops and fresh produce. These guys just want a plain cookie cutter city, and if they want that, they should move to Irvine. You can't pay me enough to live in that bland boring suburb. I don't care how safe it is.

12/20/2011 10:29:00 AM  
Anonymous Chris said...

Duh, this council was not in place when fiscal year ended for FY 2010-2011! These savings were prior to them taking a council seat in Spring of 2011! Credit should not be given to the current council for this.

However, I imagine we would be in the red for the closing of the current fiscal year, with all the execs hired on the 5th floor and of course the lawsuit from failing to read or comply with their own council policy! What a Joke!

12/20/2011 10:34:00 AM  
Anonymous Mike M said...

Credit should not be given to this Council, but they will certainly take it... that's just how they roll.

12/20/2011 11:05:00 AM  
Blogger Joe said...

Mike M:
Credit should not be given to this Council, but they will certainly take it... that's just how they roll.

Me:

Nod.
In the next day or so I'll be flipping channels, temporarily hit Fox News (The Dumbass Channel) then see Das Riggmarshal's face take up all 55 inches of the screen talking about how he saved Costa Mesa. Others in the room will think Richard Simmons is the guest before I go on to something more substantive like Jersey Shore..

12/20/2011 11:46:00 AM  
Anonymous Due Credit said...

"Credit should not be given to this Council, but they will certainly take it... that's just how they roll."

Well they took credit for the Mesa Verde street improvements, of course they are going to take credit for this too. What is sad is that there are those who believe them.

12/20/2011 12:00:00 PM  
Anonymous Here's a thought! said...

Go Riggy. Go Mensinger. Go Monahan. Go Beaver.

Don't stop!

12/20/2011 01:56:00 PM  
Anonymous Ricky said...

Hey, "Here's a thought"...if you are going to shill for someone, at least spell their name correctly! It's BEVER not "Beaver". One would think that if you support the man you would know this simple fact.

Attention to detail matters. If you can't get simple things like the spelling of a name correct, how can anyone expect that you can listen to complex issues and actually understand them? It goes to credibility.

12/20/2011 02:29:00 PM  
Anonymous Facts Please said...

"Go Riggy. Go Mensinger. Go Monahan. Go Beaver.

Don't stop!"

Don't stop what? What did these men do? I am not trying to start an argument here, I just can't find any evidence that the council did anything to make this surplus happen. The report said it had to do with increased sales tax and TOT. Didn't the residents vote to increase the TOT? None of the councils proposals have actually taken place yet. Could someone please give facts here. Thank you.

12/20/2011 02:31:00 PM  
Anonymous nevernervous said...

Spelling Bever as Beaver=another shiny object. good job!

12/20/2011 04:00:00 PM  
Anonymous harriet said...

"Go Riggy. Go Mensinger. Go Monahan. Go Beaver.


I so agree, Go boys, as far as u can from our city and we will lock the door behind you. Our city deserves better.

12/20/2011 04:09:00 PM  
Anonymous Phil said...

You can't win on this blog. When the budget's a mess, it's their fault. When the budget is in the black, it's still their fault.

People on this blog hate our leadership no matter what happens.

If the City was $4 million in the hole this year you would be attacking them for something else.

Fortunately, they are the minority. The residents and voters only see the numbers. That is what matters. If they can right our ship, they deserve our support. If they can't, they don't. So far they have.

12/20/2011 04:18:00 PM  
Anonymous Chris said...

Geoff, have you seen the preliminary agenda? Item #2 of new business: Economic Development Director (report missing). Hmmm, let's guess who that is....well since Rick Francis has been hired, that leaves Naghavi out of a title, so they created a new position.

No wonder the report is missing; submit it at the very last second possible. This is the new tactic from the 5th floor to keep the employees out of the loop, or to prevent them from leaking info to the public that may tarnish their already tarnished reputation. Maybe it's for entertainment value to keep us all in suspense. Any who...not surprised yet another position has been created.

Again, another exec position with a huge salary & pension that wasn't there before. How many people does Hatch need to help him do his job?

Just wanted to share with you, Geoff.

12/20/2011 08:52:00 PM  
Anonymous Show Us Some Facts, Phil said...

Okay Phil, I'll take the bait. Everyone is happy the city has a budget surplus. What people object to is the made up gloom and doom scenario that was presented at the beginning of the year to justify the reckless decisions made by this council majority. Even Bobby Young admitted the budget figures weren't based on any facts. He essentially made them up. I just want to know, specifically, what this council has done to create this surplus. If you are really a Costa Mesa resident, you would see it is all smoke and mirrors to promote a political agenda. You can believe what ever you want. You love to come on this blog and make statements with no facts to back them up. Come on Phil, Show us some facts.

12/20/2011 09:04:00 PM  
Anonymous Fun with Funding said...

Respectfully, there aren't a lot of ways to look at this budget news as anything but a small step in the right direction. Let me explain my perspective: (1) For reasons unknown, the current unfunded pension liability is not counted as city debt (source: pg 301, CM 2011-12 budget). As it currently stands, this is a huge sum that would represent over 47% of our Legal Debt Margin (source: pg 298, CM 2011-12 budget) I would argue that it probably should be counted as debt, since the city will be at least partially responsible for funding it for the foreseeable future. (2) CM's debt guideline reads "The term of the debt should not exceed the life of the asset being financed." (source: pg 284, CM 2011-12 budget) If we're not paying the debt faster than it is growing, the term of the debt is, by definition, infinite. If the life of the asset can't be defined, we have a major problem. The contributions of current employees plus the city debt limit will reach a breaking point.

12/20/2011 09:42:00 PM  
Anonymous Wyatt Earp said...

Phil, it's no secret I despise the four person council majority, but I believe in giving credit where credit is due. The current council certainly deserves some credit for this budget surplus. However, more credit needs to go to past councils, Roeder and every city employee. Roeder worked cooperatively with employees for concessions resulting in enormous cost savings for the city. Every employee of CM has met every single concession demand made of them since at least 2008 resulting in enormous cost savings to the city. Finally, CM citizens themselves deserve credit for increasing the TOT tax by 2%, the first time it has been raised since something like 1974. Granted, CM's own internal analysis said it should be hiked by 3%, but what is done is done. I don't object to the council taking some credit, but I will not sit here and let them attempt to take all credit.

12/20/2011 09:52:00 PM  
Blogger Original Max said...

Colin, it's getting worse. There are plans for even more corporate junk food restaurants on Harbor. Riggy and Mensy are the enemy of small business and if they had it their way all the small mom and pop places would be gone and we would look like Irvine.

12/20/2011 11:54:00 PM  
Anonymous Tracker said...

Phil = MM

12/21/2011 06:26:00 AM  
Blogger Angry White Man said...

Yay ! a budget surplus..
and it only cost one human life.

Great job council and Hatch

12/21/2011 06:40:00 AM  
Anonymous X said...

to Next, riggy for king: you are correct on the house payment analogy. just remember it has interest charged to the outstanding balance. same with the pension, that quarter BILLION dollars has 7.75 per cent interest attached. with borrowing rates so low perhaps council could borrow some money at 4 per cent and pay a chunk of it off pronto.

12/21/2011 06:42:00 AM  
Anonymous unanimous said...

phil=MM=rickandjenn=X=aka stevie=joe!

12/21/2011 08:43:00 AM  
Anonymous Not Surprised said...

phil=MM=rickandjenn=X=aka stevie=unanimous!

12/21/2011 10:22:00 AM  
Anonymous Cal said...

X:

Can you please cite your source(s) that reflect a 7.75% interest rate paid on the unfunded liability?

12/21/2011 10:47:00 AM  
Blogger Joe said...

unanimous said...
"phil=MM=rickandjenn=X=aka stevie=joe!"

Me:

Uh, no. My positions are clearly anti-council except Leece. Yours on the other hand, and those of the afore-mentioned monikers, are all "council shill."

Try harder.
And have a nice day!

12/21/2011 12:03:00 PM  
Anonymous unanimous said...

Let me be the first to welcome Don Lamm back to the city staff!

12/21/2011 02:30:00 PM  
Anonymous X said...

Cal,
exacy source i cannot cite. i attend many meetings concerning calpers,either pro or against present system. since discount rate is 7.75 it has been cited multiple times(by panelists, actuaries, lawyers, etc.) that unfunded is same as loan @7.75%. that is why some govt's have issued debt to retire more expensive liabilities (debt)

12/21/2011 03:41:00 PM  
Anonymous Wyatt Earp said...

X, and anyone else interested. 7.75% is not an interest rate paid by the city to PERS. In fact, the city does not pay interest on the contributions. 7.75% is the average annual return on the investments made by PERS. In simple terms, PERS makes an investment of $100 and receives back $107.75 on average (last year was admittedly better when the return on investment was over 20%).

12/21/2011 09:26:00 PM  
Anonymous Not Surprised said...

Thank you Wyatt. Once again it proves that "X" aka Steve Mensinger, has no clue what he is talking about.

12/22/2011 07:48:00 AM  
Anonymous X said...

wyatt has his info, and i have mine. mine came from calpers experts, lawyers, and actuaries. again, unfunded liability is like a loan at 7.75%, that is why governments float cheaper debt to pay down calpers debt. why do they do it if it doesn't save them interest? thus, it DOES save interest %.

12/22/2011 10:50:00 AM  
Anonymous Wyatt Earp said...

X, I hate to say it, but you are wrong. First, state and local governments are not allowed to go into debt to pay for day to day obligations such as salaries, benefits, equipment, etc. It may only use debt, such as state government bonds, to pay for things such as the high speed rail. CM, nor any other city or county, is paying any interest to PERS for any contribution. The 7.75% you quoted is exactly the average annual return on investments PERS makes. This leaves only two options. You are either intentionally attempting to mislead folks ala Righeimer and Bobby Young during the council meeting, or you just don't understand what you are reading or hearing. Since I am a beer mug is half full of beer kinda guy, I choose to believe you are simply misreading or misunderstanding what you have been told.

Further, the idea of an "unfunded liability" is a farce at best. PERS provides these numbers at the request of cities and counties. The cities and counties have hijacked these numbers in an attempt to scare folks. The number is no different than adding up how much it will cost to repair every mile of road in CM over time. Not every inch of road needs to be repaired at once and therefore, the figure is paid over time as the need arises. PERS is the same way. Unfortunately, Rig and the gang have taken the "unfunded liability" and twisted it so much to scare folks that the truth about it becomes clouded, much like your interest rate misunderstanding. Bottom line is the alleged "unfunded liability" is paid over time with no interest.

12/22/2011 12:34:00 PM  
Anonymous Wyatt Earp said...

X, pardon me but I thought of a third possibility as I finished that 1/2 mug of beer (and refilled). The third option is that you sought your information from anyone related to Rig, Mens, Moorlach, et al. We have seen the information coming from their side is suspect at best and out right false at worst.

12/22/2011 12:41:00 PM  

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