Wednesday, May 25, 2011

Revenues & Probolsky's Poll

Unlike in past years, this session was held in council chambers to accommodate the growing number of residents and others actually interested in these proceedings. Last night slightly more than 50 people attended the meeting, of which about half were residents. That's a good sign. The remainder were staffers, journalists, union observers and security personnel. Also, the change in format which permitted public comments after each segment made for a much more useful and informative agenda. The comments made by residents were, for the most part, respectful and thoughtful. The responses from the council and staff were generally helpful and informative.

One person who DID NOT show up was part-time, part-time council member Eric Bever, who was absent again from the second consecutive meeting. Once again, nobody missed him except, perhaps, stand-in City Attorney Harold Potter, who was left dangling out there on the end of the dais by himself all night.

I was impressed when Mayor Gary Monahan rebuffed councilman Steve Mensinger's overture to move the presentation by pollster Adam Probolsky forward on the agenda. (Apparently Mensinger invited Probolsky to make the presentation) Monahan, appropriately, stiff-armed that suggestion, much to Mensinger's chagrin. Monahan left at 6:15 p.m., so Mensinger apologized to Probolsky when he finally had a chance to make his presentation just after 7:00 p.m.. One could only assume that he thought he could convince Monahan that Probolsky's time was more important than that of those actual residents who came to hear the budget discussions. He couldn't, because it's not. Sometimes Monahan actually does the right thing.


Long-time bu
dget watchdog and community activist Judi Berry - as some of us anticipated - had gone over the entire preliminary budget document with a fine-tooth comb and popped up to ask about an error in the document. To his credit, Budget and Research Officer Bobby Young acknowledged the error and had corrected pages ready and waiting.

As in y
ears past, the presentation by Lloyd deLlamas of The HdL Companies, Sales Tax consultants who have supported Costa Mesa and many other entities over the years, was fascinating. His mixture of facts and opinion based on decades of experience provided a clear understanding to the audience of the Sales Tax issue in general and Costa Mesa's situation specifically. Our city, apparently, is an aberration to the norm, since our funding is heavily tilted toward Sales Tax and those dollars are primarily generated by what he referred to as consumer goods and "luxury purchases" - high-end items that tend to rebound more quickly from an economic downturn like we've been experiencing for the past couple years. You can view their PowerPoint presentation HERE.


Young's presentation last night dealt with the Revenue side of the budget - the Expenditure side will be covered next Tuesday - and provided excellent information to the council and audience. His charts and graphs showed us clearly where we stand today, the trends in our revenue streams and comparisons to surrounding cities to provide perspective. He told us, for example, that 91% of all revenues comes to the City through the General Fund; that 78% of all General Fund revenue comes from taxes and franchise fees and that, unlike other cities, Costa Mesa is more heavily weighted to Sales Tax revenue - 44% of all General Fund revenue.

We learned that, while Sales Tax dollars represent 44% of the General Fund in Co
sta Mesa, that funding source represented only 34% in Irvine; 16% in Santa Ana; 17% in Newport Beach and 11% in Huntington Beach.

We also leaned that Sales and Use Taxes dropped from a high of $46 million in FY06-07 to a low of $34.5 million in FY 09-10 and is on the rebound with $41.7 million projected for FY 11-12.

We learned that the less-volatile Property Tax revenue has remained fairly level, from a high of $21.3 million in FY 0
9-10, down to $20.1 in FY 10-11 and back up to a projected $20.9 in FY 11-12.


Property Tax revenue re
presents 22% of the General Fund in Costa Mesa, 48% in Newport Beach; 38% in Huntington Beach; 31% in Irvine and 14% in Santa Ana.

The Transient
Occupancy Tax (TOT), which represents 8% of our General Fund, has benefited from the 2% increase approved by the voters last November. It has rebounded from a low of $4 million in adopted FY 10-11 budget back up to a projected $5.9 million projected for FY 11-12 thanks to a recovering economy and that voter-approved increase. It makes one consider the stubbornness of Monahan last fall, when he rejected the staff-recommended 3% increase and the additional million dollars it would have brought to our coffers.

The lack of a reason
able Business License Fee structure was discussed, including our inability to do anything about it until the 2012 elections. Had a modest adjustment to our Business License Fee structure been proposed and approved by the voters last November we would have begun to see an increase in that revenue stream already - it has been stable at around $850,000 each year since the current structure was adopted in 1985! That's right - we've had NO change to our current Business License Fee structure for the past 26 years!

While Costa Mesa generates only $850,000 each year on Business Licenses, Santa Ana has $10 million, Huntington Beach $2.2 million and Newport Beach generates $3.9 million. When you consider that we have arguably the most successful retail center in the country - South Coast Plaza - it makes you realize what a short-sighted lost opportunity we have had. If an increase in this fee were to be approved by the voters in 2012 we won't receive any impact of it until 2013.

When we finally got around to the presentation by Probolsky we learned a few new
things thanks to the excellent questions by some in attendance. We learned, for example, that "nobody" paid for this poll - it was done "pro bono" by Probolsky Research for the Association of California Cities - Orange County (ACC-OC) as an "in kind" contribution to their operations. Unfortunately, nobody asked the second part of that question - "Who asked for the survey to be done?" Since Probolsky is joined at the hip with many of the Orange County Republican movers and shakers - including Mayor Pro Tem Jim Righeimer - one might speculate that one or more of those folks put the bug in his ear. I can almost hear Scott Baugh whispering in his ear.

Several speakers took exception to the validity of a poll with such a small sample - 325 respondents in a pool of 3.2 million residents does seem a wee bit thin. Probolsky defended it, saying it was perfectly valid to measure the tendencies of Orange County residents, including all demographics. He did say the survey was conducted in English, though, so that certainly cut out a significant segment of the county population. In Costa Mesa it would have eliminated more than a third of the residents, for example.

Both Righeimer and Mensinger seemed extremely sensitive to the characterization by some (me) of this poll as a "push poll", so they asked Probolsky to address that issue. He, of cou
rse, denied that it was a "push poll", since it wasn't designed to influence public opinion during the process of conducting it. He cited, and Righeimer emphasized, that the small sample kept it from being a "push poll" - that thousands of individuals would have had to been polled. Of course, the way the questions were framed DID influence those taking the poll and the summary of the results touted that fact. I guess these guys really DO think the public is stupid - that we don't actually see through the facade and understand the intent of this poll.


I encourage
you to read the poll results yourself, HERE, concentrating on the actual questions as asked by the pollsters. Bring a magnifying glass because the type used for the questions at the bottom of each page on the report is teeny. Judge for yourself whether those questions were geared to influence the answers. I know what I think...

Righeimer, during his council member comments segment, told us that "pensions were not part of the budget discussion tonight", and yet there stood Adam Probolsky - invited to be at the podium of a study session dedicated to the discussion of our municipal budget - with his poll that was clearly aimed at influencing public opinion toward major pension reform. Righeimer acknowledged that, because our association contracts last for the next 3 or 4
years, nothing can be done about Costa Mesa pensions now. As I've said before, his only choice then, is to dump the employees who would get the pensions. To my knowledge no representative of city management has asked the bargaining units to sit down and discuss concessions that might save jobs - yet. Instead, the draconian and mis-applied outsourcing stampede continues.


During his comments Righeimer said we need to decide wh
at pensions are supposed to be. He made a clever statement to the effect that we don't want to "kick them onto the streets" but do we "want to kick them to the beach?" - alluding to his opinion that the current pensions are much too rich and take effect too early. After this mini-rant, are we REALLY supposed to believe that "pensions are not part of the budget discussions tonight"? Clearly, that issue is in the forefront of his considerations as he hears and contemplates our current budget dilemma. Again, he apparently REALLY DOES think the residents of this city are stupid.

I was amused when, at the end of the meeting, Righeimer suggested that if people REALLY wanted to discuss issues they should call him and make an appointment to have a cup of coffee and discuss them instead of griping at the podium of public meetings. I chuckled out loud because that is SO typical of him and his pals - "let's discuss public issues in private"! Well, I can tell you from personal experience, "having coffee" with Righeimer doesn't resolve issues - unless you agree with him. So, good luck with that, folks. You'll end up with a half-caf decaf frappachino with an order of baloney on the side.


Next Tuesday, the day following the Memorial Day holiday, the considerations of the Preliminary Budget will continue with the presentation of the "expenditure" side of the equation. This
meeting - again at 4:30 in the council chambers - promises to be even more interesting because it will dig into just what parts of our budget will have to be cut to find that elusive $3.3 million necessary to balance it. Since much discussion took place about "rebuilding our reserves", don't be surprised that simply balancing the budget is enough for these guys. I expect that there will be strong support for building the reserves by ousting more staff members. See you there...

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Blogger Gericault said...

I could get a bunch of people together in a room, and I'll even make the coffee..........I wonder if Riggy would come.......Hmmmmm.
I have a few unanswered questions I'd like to ask.

5/25/2011 07:34:00 AM  
Anonymous Wyatt Earp said...

This information illustrates issues some of us have brought up since this fiasco that is these four councilpersons began. CM does not pay their employees any better than the middle or upper middle for the cities and the OC. Obviously, this has worked over the years but has run into some issues recently. The city has been warned time and again about evaluating the need to increase the TOT and business license fees from time to time to better reflect the cost of city services, specifically police and fire. 26 years with no increase is insane. No one is suggesting or has suggested making either of these two revenue streams cost prohibitive as CM needs to stay competitive, a touch of reality is sorely needed unless barebones services are acceptable. Unfortunately, it will likely be too late when the citizens realize barebones services don't always cut it. Righeimer will be laughing his tail off in Sacramento with Mansoor when that happens. The rest of us will be left holding the bag.

5/25/2011 09:08:00 AM  
Anonymous "Mrs. Olson" said...

"Hmmm......That's funny... he never has a second cup of my coffee!".... That's because it's not spiked with "HEY KOOL-AID!!!"

5/25/2011 09:09:00 AM  
Anonymous mike m said...

How about Millard's commentary this morning in the Pilot - loved his reference to 'Every STABLE resident I've spoken to says...' Would love to know the definition of that, and it's safe to assume he doesn't believe any of us would qualify...

5/25/2011 09:57:00 AM  
Blogger The Pot Stirrer said...

Yeah, mike m, I saw it last night and posted a 2-part comment on it asking the same question.:-)

5/25/2011 09:59:00 AM  
Anonymous unionquiltersforleece said...

with all the name calling from Gericault, what would entice anyone to talk with him? Our Wendy is willing to quilt and talk with anyone , anytime. It is good that Righeimer offers this also. Why is it wrong to offer to meet? As for our City paying what other cities do, that is the problem. Each city compares itself to a basket of other cities. When one raises the ante, the others follow. This ratcheting up has now reached the point of no return and the direction needs to reverse and reverse fast. The one city that pays more may get a long list of applicants but surely cannot hire everyone. We will be able to get qualified employees by being at the bottom of pay scale. Before you jump all over us for that statement remember there are many great people in the private sector out of work. Many wannabe firefighters, blocks long, come out when a job is open. Gericault is a joke and we hear many people who basically are on his side of the issues wish he would disappear due to diminishing their credibility.

5/25/2011 11:55:00 AM  
Anonymous OCLonghair said...

Hey Geoff,

Why don't we add the "Business License Increase" proposal to the emergency ballot... the one which we are going to use to remove and replace the Fab4.

5/25/2011 01:05:00 PM  
Anonymous Amazing said...

The presentation and comparison to surrounding cities underscores the council's focus on infrastructure and capital improvements. We rely far too much on sales tax, and need to dramatically increase our proerty tax base. That means real investment and prioritizing infrastructure and capital improvements. For you to focus on the miniscule business license fees and completely miss the implications of the property tax disparity is absolutely amazing.

5/25/2011 01:16:00 PM  
Anonymous lumpy lemming said...

Every one needs to get on the bandwagon and support our Council, just like Mr. Moorlach said this morning in the Register.

Brave lemmings us all we must follow the "smartest man in the world".

Kool aid anyone?

5/25/2011 01:21:00 PM  
Anonymous Re Stable Residents said...

Mike M,

Unfortunately, most (but not all) of the comments left on blogsites would appear to be written by unstable individuals. I think those must be the people Martin Millard is referencing.

Multiple times I've heard people refer to BC as a "nut magnet". I'm just the messenger so don't get mad at me. I may be one of the nuts!

By process of elimination, stable residents would therefore be those residents who do not leave insane remarks on blogsites.

5/25/2011 02:04:00 PM  
Anonymous Pentagon Hexagram said...

Thanks for the update.

Sales tax proved to be the least stable revenue source during the great recession, and it was the foundation of Costa Mesa's finances.

Other cities have additional revenue sources - higher business license fees and utility taxes are used frequently.

Newer South County cities also have other hidden taxes - homeowner association fees that pay for parks, local streets, local lighting, and private security guards.

Other cities also have water and sewage districts that help cover some of the overhead of administration and facilities like maintenance yards.

Amazing doesn't make much sense. There's no amount of potential new development that would boost Costa Mesa's revenue substantially. One of Costa Mesa's problems is that 50% of the housing units are properties that don't change hands and get reappraised at a new basis. Don't forget that Prop 13 was funded by the apartment owners, and they continue to be the primary beneficiaries.

5/25/2011 02:58:00 PM  
Anonymous Barb said...

Bloggers on the BC. Newsflash! The tide has turned. People are starting to get this stuff. People are seeing our budget mess, people are seeing other cities outsourcing left and right, people are seeing other cities re-negotiate their horrible public safety contracts to benefit the residents. Add onto this the disastrous impact that the OCEA and its loons have had on your "cause" and the popularity rating of our Council has never been higher. Things have changed markedly in the last month. People are getting on-board now that they understand what the problem is. Spend all day venting on this blog but you're in the minority on this. Your cause is slowly fading away.

5/25/2011 04:03:00 PM  
Anonymous factor in inflation said...

I wonder if any of these actuaries have done a simple excel sheet that has expressed the business license fee in 1986 dollars. Because of inflation, the money we are actually getting from this fee has decreased dramatically because the dollar is worth less (for those of you who are clueless to what that means). I sure would like to see it!

And slashing your police force and outsourcing the fire department is not the way to increase property values since like it or not, time and time again people say safety (perceived or not) is the number one factor effecting where they choose to live, followed by schools. Infrastructure is simply not that high of a factor despite what rig yaks about.

And Barb, your propaganda doesn't fool anyone on this page. Get off the computer and go back into your apocalypse bunker in Mesa Verde. I hear you can still get Fox News through those thick cement walls- so you can continue to be told what to think. Higher brain power is sooo exhausting anyway.

5/25/2011 07:50:00 PM  
Anonymous mike m said...

I can definitely think of more than a few on there, 'Stable' - but on both sides of the fence. I get the sense more people are catching on to the bigger picture and educating themselves, but I don't know that they are in the majority yet as far as backing the council. I'm hearing plenty of anger from my more conservative friends and family members, but hard to get a read...good to see anyone snapping to attention, though.

5/25/2011 08:03:00 PM  
Anonymous Tom Egan said...

I appreciate your in-depth reporting and analysis, P.S. Surely you have staff to help you now; otherwise, how could anyone but Superman sit through the long meetings, analyze not only the intended information but the unintentional revelations, then summarize it in a very accessible way, spiced with your mordant wit? Next time I see Mrs. Pot Stirrer I'll have to verify that you are Superman around the house, too!

I need to respond to unionquilter.etc.etc. because he needs to see the irony of his argument that we get sc...ed when cities base their employees' pay on what comparable cities pay.

From his remarks, I assume he likes the idea of running a city like a business. Now we all know the little dance that corporate boards go through to justify zillion dollar payments -- including hiring bonuses -- to CEOs. They "have to pay, or else we won't be able to attract the best."

So I have to ask, if it's OK for businesses to pay competitive wages/salaries/benefits, why isn't it OK for cities to do the same? After all, it all comes out of your pocket ... either higher cost for the widgets you buy from the businesses, or higher taxes for the services you get from your city.

5/25/2011 09:04:00 PM  
Blogger The Pot Stirrer said...

Tom Egan,
Thanks, but I can't yet see through walls - although I'd love to be able to! :-)

I agree with your question. I do have a little experience in the "attracting the best" business and almost every time it does require a compensation package at least a little better than "competitive". It's curious that the "businessmen" on the council fail to recognize that reality, since they were likely the beneficiaries of such a philosophy during their careers.

5/25/2011 09:09:00 PM  
Anonymous unionquiltersforleece said...

Mr. Egan, what the cities pay in benefits is way out of line of what is paid in the private sector where comparable jobs exist and except for public safety comparable jobs do in fact exist. It IS idiodic to allow this ratcheting up of pay/benefits by this basket of cities we compare ourselves to, don't you think? Yeah it is a sweet gig and nice of you to want to bestow such generosity on city employees but it has gotten out of hand. We are not talking about CEO's, of course they are worth a lot, we are talking about non management jobs. If the rank and file employees pay is in line they I doubt they will be outsourced. Yes, running the city like a business that has to have a balanced budget would be alright with us. And maybe a little money left for something other than wages and pensions would be cool too. You know, new chairs now and then, some new paint here and there, a reserve fund, some investment in capital improvements. That's the ticket, eh?

5/25/2011 11:13:00 PM  
Anonymous Amazing said...


Successful cities have solid property tax bases, we don't. Encourage more residential developmnt, and that changes.

The presentation was clear, fees are a small revenue source for successful cities.

5/26/2011 11:39:00 AM  
Anonymous class idiot said...

Ah the quilter has shown his ignorance yet again. It is a well known fact that employees at higher ranks are paid less in the public sector than in the private sector. And yes lower level employees in the public sector make more compared to their private sector counterparts. Of course that wage is called a living wage- you know the amount of money it actually takes to live in southern California. But according to quilter everyone should make minimum wage (actually that is too much) and work 60 hour weeks with no medical benefits.

5/26/2011 01:24:00 PM  
Anonymous Math E. Matics said...

"factor in inflation",

Please check out (inflation calculator).

FYI: $200 in 1986 = $401.06 in 2010 dollars. The annual inflation over this period of time is 2.82%

The business license fee schedule is worth about half the original fee set way back in 1985. So the time has come to finally increase this fee to a nominal % of gross sales if this CC wants to implement it's infrastructure & capital improvement wish-list!

Also, the city is about 39% homeowners, and 60% rental properties. So I'm curious if the City is collecting this fee from all the "landlords" operating their lucrative "businesses" throughout CM.

If not, why not? We sure aren't collecting very much property-tax revenue from these long-time Prop 13 "rental" owners (that also indirectly caused the City to upgrade our sewer system a few years ago due to overcrowding conditions on the Westside!)

5/26/2011 09:50:00 PM  

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