Meet the Mayor Thursday Night (updated)

The first Meet the Mayor event filled the backroom at Pitfire Artisan Pizza, with 20-30 folks enjoying the pizza and drinks provided. The important part of Meet the Mayor was the chance to ask questions, of course.  Righeimer passed out T-shirts, sweatshirts, and hats to those who asked questions. Even the confrontational questioners received gifts.

Gifts got questions flowing

The gift idea turned out to be inspired. Citizens who seemed to feel shy about speaking out were more able to speak up while the crowd was competing for a chance to ask questions. In any case, questions provoked more questions and a broad range of subjects was covered. These will be covered by the reporter who attended, I’m sure. I’ll add a link to the article when it appears. See: Pilot Article

This blog will address some observations about the meeting.

Knows his stuff

First of all, we were amazed at the breadth of knowledge – without referring to notes – displayed by the Mayor. He covered subjects like funding for projects, water drainage requirements, and code enforcement in detail and made the subjects seem easy to understand.

(Ten minutes reviewing the City’s ordinances will convince anyone that collecting and organizing information from them to reach a conclusion is a major undertaking.  Surveying the code is like studying calculus – persistence and a willingness to look at the matter from different perspectives are essential for both.)

Next, his explanations of infrastructure maintenance projects, their priorities, and the detailed requirements that had to be met were also clear. Mayor Righeimer certainly knows exactly what is going on in Costa Mesa.

A little advertising thrown in             

He pitched the 60^th Anniversary celebration kick off in June, and told the crowd what a great Council was working for them. “Five Council Members working very hard, and (we’re) working together to (get business done) and to make Costa Mesa even better.”

Mayor Pro Tem Mensinger helped hand out the gifts and extended his greetings to all. We noticed him helping an older visitor get her drink; very gentle and agile for such a large man in that confined space.

Almost on time

Some of the visitors arrived little late and asked questions that had already been answered; the Mayor handled them courteously and respectfully.

“I had to go around the block and then I had to park next door, sorry I’m late,” was met with “That’s fine, that’s fine, I’m glad you’re here.”

Few nay-sayers

We didn't notice many of the “chronically-opposed to everything” group there to have their questions (or accusations) answered “up close and personal.”  It’s too bad they weren't there. 

(The two we noticed were uncharacteristically courteous -- not polite, just uncharacteristically courteous. They were happy to get free shirts; one even sarcastically demanded, "what am I going to do with this, wash my car" to get a smaller size.)

The nay-sayers' characterization of Righeimer as rude and pushy was overwhelmed by a gracious, humble, and very well informed Mayor. Maybe they stayed home because they were afraid that they would see a different Righeimer. Or, maybe they just don’t like pizza. 

Great pizza, successful Meet and Greet 

The pizza, by the way, was outstanding.  Pitfire Artisan Pizza is definitely on our list for a dinner visit, so the “Green Eggs and Ham” pizza can be more fully explored.

Pizza, questions, and especially answers exceeded our expectations. A great beginning for what should be an informative series of meetings.

More debt than income -- and worse 

Previously we discussed the debts Costa Mesa faces from unfunded pensions. Money, mostly supplied by Costa Mesa with a much lesser amount from employee contributions is given to CalPers to invest.

The employees’ pensions are drawn from the invested funds. Pension amounts are guaranteed as a percentage of total pay during the final year of employment. This type of retirement system, pretty well limited to government pensions, is called a defined benefit plan.

For non-government employees 

Most non-government retirements are based on a defined contribution plan. These specify an amount that will be deposited for each employee. No specific payout is guaranteed.

For example, the employee may agree to deposit 10% of his pay while the employer agrees to deposit “matching” funds. Typically employers match about half of an employee’s contribution. The amount paid to the employee upon retirement depends upon how much has accumulated in his account, including gains and losses on the investments.

Expert studied our obligations

Dr. Joe Nation, an economist from Stanford, was hired to evaluate Costa Mesa’s unfunded liabilities. After Nation's presentation Tuesday night Mayor Righeimer stated “there is no way we can pay these (unfunded obligations) off in the foreseeable future.”

Compared to private sector retirement 

Nation said that an average Costa Mesa employee who earns $100k per year was getting retirement benefits similar to those earned by a private sector employee earning the same amount who put $70k per year into his own 401k. That is, one who lays aside 70% of his salary every month to save for his retirement! And CMPD and CMFD pension payouts are more remunerative than this.

Possible solutions

He mentioned that one way out for the city was bankruptcy.

 

Most of our cities are in this fix. If many cities declared bankruptcy California would face universal bankruptcy. Then all government pensions and medical benefits would stop. The payoff, at perhaps thirty cents on the dollar would be devastating to all government retirees.

Bankruptcy would force Costa Mesa into providing only minimal police and fire services and would eliminate infrastructure maintenance. Costa Mesa would soon resemble a third world village. It would be dangerous, dirty, and ugly.

Three other ways out

Nation suggested three other ways out of the mess, and a fourth arose during discussion. First, benefit reductions for current employees and retirees, which will be politically difficult. Benefit reductions require major legislative changes from the union-dominated legislature. These changes are unlikely until the state is insolvent or nearly insolvent.

Second, greater cost-sharing would help, but cost-sharing at a level that would be meaningful would require legislative action, as well.

Third, new revenues, aka increased taxes, could generate cash to pay for the pensions, but could also drive the big players to move to another state (or county, although extreme need for cash to cover unfunded pensions is rampant throughout California). And, as mentioned by a local blogger, the main sales tax generating area, South Coast Plaza, might decide to incorporate as a separate city to avoid a significant tax increase.

It will hurt

Regardless, private sector employment and business would be adversely affected – the predicted loss depends on the rate increase assumptions, and on educated guesses. The loss of revenue-generating entities would exacerbate the City’s indebtedness.

This might help 

During the post-presentation discussions Dr. Nation estimated that decreasing the Cost of Living Adjustment (COLA) incorporated in Costa Mesa pensions from 2% to 1% (arbitrary numbers) would decrease the unfunded liabilities by 20%.

Cobble together a solution

The eventual solution for prudent and responsible management will probably include some aspect of all four methods. It will be painful for all: government employees, private sector employees, business owners, and retirees.

Can Sacramento help

The chance that CalPers will be able to make the necessary changes for us is remote. Originally, their investment fund was managed conservatively to preserve wealth for the expected lifespan after retirement.

Over time the system has developed into investments in social engineering, such as green energy, regardless of the risk to funds. Furthermore, the funded benefits have increased and expected lifespans have increased. Also, funds have been withdrawn from good investments to meet current bills, making the program work like a Government-sponsored Ponzi scheme. But now there are fewer new hires to provide new revenue.

Who leads CalPers

CalPers controls more money than most third-world nations and more than many developed nations. Their current leader is a window glazier whose CalPers position makes him one of the most powerful men in the world. He’s certainly one of the most influential in the financial world.

The board that supervises CalPers investments is composed of people appointed by political officials and elected by employee unions. The folks who've been elected aren't likely to risk losing their position by favoring anything that reduces retiree benefits; in fact the opposite is true. And those appointed by officials elected with union money aren't likely to risk losing their appointments by pushing for fiscal responsibility.  CalPers is simply a political entity making financial decisions.

Whose money does CalPers invest

Most of the funds deposited in CalPers are from the employers. That means that the expenses accrue to the Costa Mesa taxpayers while the benefits accrue to the retirees. So it’s our money and our problem in Costa Mesa. It’s up to us to solve it.

Others have solved it

Nation gave an example of one of the Northeastern states that has resolved its pension problem by changing its system to a defined contribution system. From other sources we've learned that Utah has developed a hybrid defined contribution/benefit plan. And other states, such as Texas, have fully-funded pension plans. So, the problem has been solved elsewhere, and it can be solved in Costa Mesa.

We'd better solve it

We must find a way to reduce the liabilities. Financial stewardship requires it. Financial survival demands it.

Will they walk or talk 

Let’s see what the Council – and the employee associations -- have to say about resolving this issue.  Will they “walk the walk” or just “talk the talk?”

Council leadership, subtle and direct 

Last night’s City Council meeting was extended but productive. We found that a stack made from just one copy of each public document concerning the meeting measured over 1 ½ inches. So, there was lots of homework for the Council – and for citizens. Digital agenda and staff reports are available on the city’s web site. (HERE)

Mayor Righeimer is displaying aggressive (but amiable) leadership in getting the work done. New Council Member Genis appears to have done her homework. And she displayed insight and astute thinking during the meeting.

Council at work

Member Monahan doggedly sought information he believed was missing from a staff presentation, and Mayor pro Tem Mensinger displayed his usual statesmanship as he presented and defended a proposal for another City committee. Member Leece was absent. Best of all, the Council played well together.

Awards and comments

The Mayors Award was presented to a loved and respected long-term influence in Costa Mesa, Sister Mary Vianney Ennis. The presentation and acceptance is worth a look. (The video is here)

Citizens’ comments had been well-planned and orchestrated in support of changes to the City’s fireworks regulations and of partnering with Costa Mesa United to support youth sports. The folks supporting Council actions should be commended for bringing as much organization and motivation to Council meetings as the “anti-everything” folks.

Ex-parte revisited

Mayor Righeimer began a practice of asking the Council Members for reports of any “ex parte” communications about agenda items of financial import as they were discussed. (Ex parte is a Latin term meaning “from one party” used in legal circles to relate any contact with principals in the matter being discussed.)

This pretty well opens COIN-like transparency to all financially significant Council issues. (None of the members disclosed what their conversations were about, though. Perhaps that will be an issue in the future.) Now what will the City Employees’ associations and the chronic nay-sayers have left to warn us about (or divert attention to)?

All grown up

All in all, this Council is starting to look like an effective, and well-led, government body, and the citizen-speakers are sounding like productive Costa Mesa Citizens with concerns or requests. The theater of the absurd that we've seen at past council meetings has diminished since the new regime took hold, and was absent last night. Good riddance.

It’s nice to feel proud of the City Council; we’d like to enjoy that pride twice a month.

The Mayor’s Award and proceedings will be discussed in the newspapers, particularly the OC Register. We’ll focus instead on observations about the meeting.

Observations 

A developer presented information about a site; the information was clear and controversial, but one of the representatives was hard to take seriously. When a supposedly-professional person is chomping gum like a stereotypical “Valley Girl” the clash between appearance and ideas is stark. The same criticism could be applied to some of the otherwise-influential City staff members from time to time.

To improve. . .

If an executive is making a presentation she’d certainly comb her hair and wear a jacket. Why wouldn't she spit out her gum before the meeting? Perhaps these folks would benefit from observing their bovine-mimicking mannerisms on video.

And, we think that presenters should attend “how to present” training prior to appearing before the Council. The IT Chief seemed to be throwing out lots of both relevant and irrelevant data  in response to questions. Although it’s interesting to hear how he decided on a course of action, what the background for his decision was, and the current state of changing IT technology in the area . . . an answer of “no” was all that was needed.

A past presentation by the City’s Assistant CEO about the Homeless Study group activities suffered from the same surfeit of data that obscured the thinking. The City should sponsor Toastmasters training for its executives. Or the CEO, who presents quite well, should teach a class for the other presenters. The savings in Council time alone would be worth it.

Issues passed

CMPD in-car-computer upgrading slipped through as a consent item. Outstanding and well overdue. (Consent items are routine matters that aren't likely to be controversial. Some regimes, such as Bell’s City Council, reportedly slipped very controversial financial decisions through as consent items. That misbehavior makes citizen responsibility to read the staff reports more acute – even though we have an honest Council.)

One shaky issue at the meeting was creating an IT fund from money borrowed from the General Fund, and arranging to pay back the loan with General Fund money. Councilman Monahan questioned the need for the financial manipulations, and apparently wasn't satisfied with the answers. He cast a dissenting vote on the issue, although he favored financially supporting the upgrading and improvement of our IT infrastructure.

The fund seemed to us to be duplicitous. Perhaps the IT fund with its borrowed money could be spent with less Council oversight. Or it could be a way to “lock up” some of the budget surplus. Whatever its purpose, it seems sneaky.

That is not, in any way, to suggest misuse of the money – the City procedures protect very well against that and the executives involved have reputations for integrity. 

But, it might be tempting to have a fund to use as needs develop without the cumbersome process of bringing details to the City Council. Or, one might understand that IT, having suffered from non-maintenance for so long wants to lock in its support as soon as it can.

Perhaps the loan-filled fund is just an efficient way to process funds. Perhaps not.

Look for in the video 

The Mayors’ Award and the discussion of IT, and the sharp questioning about a site’s development are worth a look; you can skim through the video when it’s posted and view those parts. Be sure to watch the Mayors’ Award for a great example of professionalism by both the Mayor and the recipient.

What happens without oversight

Last weekend the OC Register Watchdog focused on school board bonds issued to avoid oversight by state legislators, and more importantly, by the citizens who will have to pay for the bonds.

The bonds are like mortgages; the principal, which is the amount borrowed, and the interest, must be repaid. Over a 30 year home loan most buyers can expect to pay about twice what they borrowed as they repay both interest and principle.

Pay back 23 times what was borrowed

Several school districts in Orange County, including Newport-Mesa, have issued bonds that require much higher payoffs than home loans. 

And, most home loans have provisions for paying the loan off early, to avoid paying so much interest. The sooner the borrower starts paying off the principle, the lower the amount that accumulates interest. The school board bonds can’t be paid off early, though.

Payment on the bonds doesn't start for a long time, so interest is compounded for many years before the payments start. (Compounding means the interest is computed on the principle plus the total of all past interest.)

Would a rational person agree to it

Well, would a home buyer agree to pay back 13-23 times what he borrowed? Of course not. But a San Bernardino county school district did. It agreed to pay 23 times what it borrowed, while other school districts, including those in Orange County, issued bonds obligating the districts to pay back 13 times what was borrowed, or more.

The Register article last weekend included a couple of noteworthy quotes:

"It's another method of pushing debt to future generations," said state Treasurer Bill Lockyer, who compares the bonds to "payday loans."

"I just don't understand how these board members got away with this," said Alexandria Coronado, a former member of the Orange County Board of Education. "These people need to be recalled."

No oversight let it happen

Why didn't anyone who pays the bills know what the bonds would cost until the Register investigated? No oversight, that’s why. Had the citizens of these school districts seen the proposals – and understood what the payback would total  . . . Surely they wouldn't have opted to lay huge debts on their children and grandchildren. 

They would have done without fieldhouses and performance venues. Or they would have financed the buildings much differently. (The bonds don’t pay for teachers.)

Would our city do that

In Costa Mesa the biggest City expense is employees; their pay, benefits and incentives total over three-fourths of the budget. Could we get saddled with heavy, even unsustainable employee expenses? Yes – but, under COIN, only if we agree to it.

Our COIN (Civic Openness in Negotiations) ordinance insures that costs of employee expense are explained and published, followed by a waiting period before a Council vote. 

(Remember that ordinances are laws, however, they can be overruled through a referendum. So, if the Council adopted a pay scheme that was outrageous, we could overrule them.)

Not everybody likes COIN

A local blogger (West) has written that the COIN process is “going to be an impediment to timely resolution of labor negotiations . . . (and) . . . dooms every negotiation to a long, long protracted activity.” If that’s true, which seems unlikely, isn't a “protracted activity” that avoids catastrophic debt justified? We think so.

And the (City) employee union spokeswoman Jennifer tried to divert attention from COIN to a need for “more rigorous transparency about the discussions that take place leading up to the bids for city contracts.” By City Contracts she means the cost of services that account for the other quarter of the City budget.

Why change the subject 

Why does she want to divert attention from big expenses to little ones that are handled through our normal procedures? The contracts for these purchases are negotiated by City employees. City Council members have nothing to do with issuing any service or supply order. In fact, they’re forbidden by law from affecting City Procurement. The City Council merely approves use of City funds for the purchases.

Our biggest expense is being negotiated in plain sight so we citizens can see what it’s going to cost. Jennifer wants us to look instead at what the Council Members hear and say about purchases they can’t affect. That seems disingenuous at best, deceptive at worst.

Not so virtuous in the past

Have past labor negotiations in Costa Mesa been suspect? Yes, but. . 

We have to honor the present contracts. How they ballooned, who did what to whom – all of that is unfixable  so there’s little point in belaboring it. (We did that a lot in the last election, anyway.) But we don’t have to make the same mistakes again.

From now on, we, as citizens of the City of the Arts will know what our Council is agreeing to pay for every employee’s salary, benefits, and special skills bonuses . . . what we’ll pay for everything. And with that oversight we insure that we know what we’ll get for our money.

Can't go back to fix 

The school bonds mentioned above are unfixable now. They were written that so that they can’t be paid off early. The citizens will enjoy a school gym for 20 years, then, as it ages, will start paying for it. They will pay 23 times what it cost to buy at the time it was built.

After the Register investigation new school district bonds will probably be examined more closely by the taxpayers. And maybe some board members who make stupid decisions will find other lines of work.

Protects us if we pay attention 

The COIN ordinance protects Costa Mesa from that kind of debacle. Now it’s up to the citizens to read the explanations. To read, think, compare – and if the deal is a bad one, to complain. And if the Council won’t listen, to start a referendum. Or, as a last resort, to recall any of our representatives who don’t represent us to our benefit.

Of course it's our business 

Costa Mesa is our City, after all.

Three ways to use money to make money – and other City pension matters 

If you have some money as a “stake” or “bankroll” you can make money by playing poker. You need skill, insight, and courage, but most of all self-discipline. You bet when the odds are in your favor and don’t when the odds are against you -- consistently.

Or gamble on stocks

You can also use your money to buy stock – shares of ownership—in businesses. If the businesses prosper, your money grows. Although you can’t figure the odds when buying stocks, like you can in poker, you can buy stocks from diversified fields. You are hoping that if the stocks you bought in a steel manufacturing company go down, the stocks in an electronics firm will go up and compensate.

You can determine how effective your stock investing is by comparing your results with an index, or sampling, of the stocks in a field.

For example, the Dow-Jones’ Industrial Fund is a representative sample of industrial stocks. If your investments “did better than the Dow-Jones” your investment decisions were better than average. If not, perhaps you need a new stock adviser.

Ponzi dollars 

Finally, an illegal and unethical way of increasing your bankroll is by running a Ponzi scheme. This is a program where the early investors are paid from investments by subsequent investors rather than from increases in the value of the investment. “Send one dollar to the name at the top of the list, scratch it out, put your name on the bottom and send copies to ten people. When your name reaches the top you’ll get $10,000.”

 

Our pension debts

Now let's move to Costa Mesa’s employees’ pensions. Employees are guaranteed a fixed amount for the rest of their lives after they retire. Actually, their retirement checks are increased with the cost of living, but not decreased during depressions or other drops in the cost of living.

How does Costa Mesa meet these pension promises? We send a periodic payment to CalPers for each employee. Some of the money is Costa Mesa’s; a lesser amount comes from employees’ pay. CalPers invests the money hoping to grow it enough to pay the retirees’ pensions.

Worked when it began

When CalPers was started the employees contributed most of the money and the investments were conservative and designed to protect and grow the funds. Presently most of the money going to CalPers comes from employers – Costa Mesa – not from the employees.

The fund’s goals have evolved from growth into a number of other fields. (See this article). The fund is now used to promote social causes, but with growth also listed as important. So, it buys stock in green energy, fair trade agriculture, and such, but avoids investing in “bad” businesses like tobacco companies or companies that don’t use unions.

Sell at a loss and Ponzi out of embarassment

CalPers sometimes had to sell stocks at a loss to get cash for its pension obligations. And, it has sold off shares that were growing rapidly in value (such as the tobacco company stocks). It has also bought stocks in companies that had little chance for success but were “politically correct” such as solar energy manufacturers that had shiny brochures but weak business plans.

And, like a Ponzi scheme, the fund sometimes relied on meeting pension obligations in the short term with fees from increasing numbers of employees. A stabilized workforce will block further CalPers Ponzi schemes, though.

We share good results but . . .

As CalPers investments grew and declined the employees shared in the gains with increased benefits and the City paid for the losses. That will continue as long as Costa Mesa remains solvent because increased cost of living increases pensions, but lowered costs don't.

(It’s likely that cities which go bankrupt will have most of their debts erased, which is stealing from the citizens and businesses to whom it owes money. However, their pension burdens will probably be shifted to the solvent cities, driving them closer to insolvency. That is, when Bell goes bust, Costa Mesa pays more into CalPers.)

How're they doing

So how well has CalPers done?

Their goals are returns of around 7.5% to 7.75% per year, which they think will allow the pensions to be paid without demanding extra fees from Costa Mesa’s government.

Other investment funds anticipate a return of 4-5% for successful investing. CalPers then must do about twice as well as other funds to reach its objectives. Clearly, it hasn't.

Our investments gained value -- this week 

CalPers recently made a “smoke and mirrors” announcement that so far this year its investments have grown 13% or 14%. That’s like a gambler bragging that he’s won the last three big pots and doubled his bankroll for the evening.

If he had been losing for a few weeks, he’d have a smaller bankroll to double. Anyway, it’s performance over time that matters for gamblers and for pension funds. During its last full fiscal year CalPers earned 0.14%; that is, it earned 1/53 of its stated goal for the period.

To compare investing success

Some investment funds, called index funds, invest in stocks tracked by an index such as the Dow-Jones. So, as a minimum, a successful fund should return about as much as a Dow-Jones Index fund.

How to value CalPers’ returns is hysterically debated, and usually at full-shriek. We won’t attempt a comparison. We’ll just suggest that a Dow-Jones Index fund be used to compare returns when evaluating CalPers investments.

We believe that CalPers hasn’t been successful in earning the needed 7.5-7.75% on their investments over a significant period (such as 10, 20, or 30 years). This is at least partially due to their strategy of investing in shaky but politically correct companies. Incompetence might also be a factor.

How do we pay for everything

Obviously we’re going to have to pay more into CalPers as time goes on. But we still need street repairs, and other infrastructure growth and improvement. Where are we going to get the money for our needs as well as for our increasing CalPers assessments?

Two possible solutions 

Maybe Costa Mesa needs a “Department of No Limit Hold ‘Em Poker” since Ponzi schemes are against the law. 

Or maybe we should consider changing the “guaranteed payments for life” public pension system.

Fairview Park Riparian Addition 

About 50 of the neighbors living on the “Lower Bird” streets were treated to a “pre-opening” tour of the Fairview Park Wetlands addition. John Manly put the "early" tour together. Great use of the "Nextdoor" neighbor alert system.

City officials including Mayor Pro Tem Steve Mensinger attended. Public Services Director Ernesto Munoz and Senior Engineer Bart Mejia guided the crowd and explained how the system is designed to operate.

Cleaner is better  

Munoz explained the layout and function of the ponds and how water flows through each pond, getting cleaner as it goes. Water from the Greenville-Banning Channel will be pumped to Pond A and flow slowly through the system. Each pond has plants that filter and clean the water, such as cattails and bulrushes. The water flows from one pond to the next due to the grade – after the pumping it’s gravity powered.

Low impact funding, too 

Funding for the project was also “low-impact” on Costa Mesa. Most of the funds were acquired through grants. The money for the grants was largely from “mitigation fees” paid by developers and entities such as Caltrans to repair and replace features changed by development.

Something to crow about

A new pump for the system would have cost Costa Mesa about $2 million, according to Munoz. However, the existing pump, owned by Orange County, was in place to move overflow water out of the channel and into the Santa Ana River. It was re-plumbed to supply water to the Riparian (near a river or near water) habitat. Kudos to the City staff for saving a couple of million dollars.

Water cleaned as it flows

Water evaporates, seeps into the ground watering the surrounding plants, and flows from pond to pond, being cleaned by the vegetation. As the water level drops the pump is signaled to start by sensors in the overflow pond. And, the constant flow of the water prevents stagnant water and the mosquitoes it would attract.

Pump operation is also controlled by salinity sensors in the channel so salt water won’t be pumped into the system. And, if there’s a hazardous waste spill into the channel the flow will be pumped through the original pipes to the river, not threatening the habitat. The ponds will hold about eight million gallons when they are at their optimum levels.

Expenses end

That volume is the reason the ponds seem so slow to fill. Munoz compared filling the eight million gallon system with filling a swimming pool. He noted that it takes about a week to fill a 20,000 gallon pool with a garden hose, so filling a much larger pond system (about 400 times larger) takes longer even though the inflow is much greater.

 

During the development period irrigation with reclaimed water helps establish stable vegetation around the ponds. This water, which costs Costa Mesa money, is also being used to initially fill the ponds. Use of bought water will be discontinued when the ponds are filled and the bushes well-established.

Plans

A series of boardwalks to take visitors over some of the wetlands has been proposed; grants to develop the walks are being investigated. Munoz estimated that maintenance cost for the project will be in the “thousands to hundred thousand (dollars)” range. This will have to come from the City’s money and will need to be budgeted in future years.

Senior Engineer Mejia led and taught half of the group to facilitate questions and discussion. 

Mid-year Budget Review

Against logic there is no armor like ignorance.
Laurence J. Peter

US educator & writer (1919 - 1988) 

This Blog entry is an overview of how the City’s finances are doing halfway through our fiscal year. (Here) The news is pretty good, but the risk of debacle is significant. However, some of the Council Members demonstrate fiscal maturity, which mitigates the risk. The Midyear Budget study last night also included a recap of the FY 2011-2012 financial report (CAFR) which we’ll discuss in a later entry.

Getting here

The City once had adequate reserves – the municipal version of a savings account -- but spent the reserves during the economic downturn. The justification for spending could be debated, but, regardless, the money was spent and Costa Mesa approached insolvency.

A change in administration led to fiscal discipline that is starting to be effective. We have inadequate reserves now, but aren't in immediate danger of bankruptcy. We had unexpected revenue that led to a $2.5 million surplus for the previous fiscal year, and appears to be leading to a surplus this year.

Fiscal maturity showing

There’s encouragement in the statements by Council Member Genis, Mayor Righeimer and Mayor Pro Tem Mensinger who favor restraint in expenditures as we build back the reserves. Genis expressed horror about our financial near-disaster in the immediate past and cautioned against “spending, spending, spending… (lest) the money burn a hole in our pockets.” Mensinger and Righeimer echoed and amplified that concern.

Pro Tem Mensinger and Member Leece favored consideration of Youth Sports for increased funding if and when it’s prudent to spend more.

And not so much

Leece, however, also suggested having the police and fire departments evaluate their need for more personnel in light of the City’s improving financial condition. That idea equates “more” with “better” and it ignores “what works” in favor of “what we wish would work.” That is, she wants more police to mean more safety, so, ignoring the multitude of applicable studies and information to the contrary, proposes adding more sworn officers.

Of course, sworn officers aren't a one-time expense – the cost to the city continues for the officers’ foreseeable lifespan due to pensions. Would the cost be effective in reducing crime? Probably only minimally. If the strength of the department were below critical levels the increase would be useful. However, adding more when the strength is (barely) adequate increases public safety incrementally, if at all.

This is something like a family who likes a couple of books being advertised. They decide to sign a fifty-year, monthly book purchase contract hoping their overall savings will justify the cost. They could consider the library, or decide to purchase the books they really want at Barnes and Noble, instead.

More cops or better systems

Similarly we can sign on for fifty years of expense in salary and pension, or we can try investing in public safety projects that have been shown to work elsewhere. These programs end, unlike wages and pensions.

Problem Oriented Policing is one approach.(Here) It focuses on analyzing the causes and foci of crimes and reducing or eliminating them. It’s a proven and effective approach to policing, but certainly not the only one. Several approaches have been shown effective. Chief Gazsi is clearly aware of approaches that work and is implementing a mix that he believes will work best in Costa Mesa.

What the neighbors do

A nearby city, Redlands, responded to decreased funding by emphasizing technology.  They rely on upgraded computer and communication technology – and even Segways! – to make their policing more effective.

Costa Mesa PD needs a computer upgrade, too. It looks like assets confiscated from drug sellers may be destined for this upgrading. There are a number of technology assists and improvements CMPD and CMFD could use very well.

Redlands’ Police Chief has also focused on upgrading his officers with schooling – think college and graduate studies – funded by Redlands. (Here) This is a one-time expense that he thinks will improve public safety by improving the scholastic levels of his sworn officers.

Let the Chief decide

There’s a danger in having Council Members decide what the PD needs. We have a competent and hard-charging Chief  in Tom Gazsi, so let’s authorize the money as it becomes available, audit the expenditures – and let him decide how he wants to spend it to upgrade and improve his department.

Don't ask that

This brings us back to the idea of asking the FD and PD how many more people they’d like to have. If the Chiefs are effective executives they’ll answer with as much manpower as they think they can get. More officers and firefighters equates to less overtime cost and greater flexibility. It’s not likely to lead to fewer fires or less crime, though.

The City Council controls the purse strings to insure Costa Mesa gets the most bang for our bucks. It has no business, in our opinion, asking leading questions like, “how many more personnel would you need to do even better work?”

Getting out of the hole, but. . . 

So the City’s financial affairs are moving toward stability, and three Council members are leery of spending money without concrete purpose. One member, Monahan was absent. One member thinks she can throw money and debt at crime and fires to increase public safety.

There’s still a gorilla in the room; we have unfunded (pension) debts we’ll have to pay someday. More about that later, though.

Good news -- scary news  

So, we heard some good news and also heard some good reasons to be wary as we monitor the Council’s activities. We elected them to govern the City for us; we don’t want them to incur multiple 50-year financial obligations just because we’re able to start funding our reserves.