Malibu Forced to Admit Risk of Bankruptcy

If you’re a resident of Malibu, skip over the word below.

Bankruptcy.

To most Malibu officials, the B-word is one best avoided in public discussion. But increasingly, the likelihood of this 6-year-old city being unable to pay its bills, retrenching its services and even going bankrupt is harder to ignore.

“If you look at the history of Malibu, it’s about fires, mudslides and floods,” said city Planning Commissioner Tom Hasse. “I’ve lived here for 12 years, during which we have had four fires, three mudslides and an active landslide on Kanan Dume Road. The only thing we haven’t had has been a destructive wave.”

In earlier years, the disasters were mitigated by relief checks from Washington and Sacramento. But at a time of government belt-tightening, officials are reluctant to count on that.

If Malibu were a car, it would be driving almost on empty. Its budget reserves hover near or below 5% of its $13-million annual budget, making it one of California’s most problematic municipalities.

Reserves for typical cities--most of which have a far lower chance of disasters--range from 5% to 50% of the annual budget, according to the League of California Cities.

Last spring, Hasse urged the City Council to appropriate $8,000 for a committee to devise a financial rescue plan. It may take a while. The council approved the committee, but only with the proviso that local businesses voluntarily raise $16,000 in matching funds, something they have yet to do.

Folks like Hasse worry that time is running out.

Added Mary Lou Blackwood, the Malibu Chamber of Commerce’s executive vice president: “In Economics 101, you learn about providing goods and services for the residents, and a source of revenue to pay for them. We don’t have the revenue.”

Even small proposals, like the idea of turning the largely voluntary position of City Hall receptionist into a fully paid post, have drawn heat.

“The whole country is looking for volunteers. I don’t know why we would want to go backwards,” said Councilwoman Carolyn Van Horn. Fiscal restraint won that argument. It was, however, just one battle in a larger fiscal war.

The basic problem is that the city is still officially counting on about $2 million in promised federal and state disaster relief funds. Many of those checks, for disasters up to four years ago, probably will never get written, Hasse said.

Some worry that Malibu’s string of disasters may intensify through this fire season, which may well be followed by higher-than-average rains brought on by predicted El Nino conditions. With reserves running low, and the cost of weathering a single disaster estimated at half a million dollars, “over the long haul, the city may not have the tax base needed to sustain itself,” said City Manager Harry Peacock.

Malibu could broaden its tax base by encouraging development, but the city is not interested.

A five-star hotel proposed across Pacific Coast Highway from Pepperdine University would have brought the city an additional $1.5 million a year in visitor occupancy taxes, said Craig Smith, a member of the Malibu Business Roundtable, a 2-year-old coalition of business and civic leaders formed to help steer Malibu from the financial reefs.

But the proposal was voted down, leaving Malibu with only about 150 revenue-generating hotel rooms, fewer than a tenth the number in Beverly Hills.

Planning Commissioner Hasse said Malibu has made plenty of land available for development, much of it in the easily accessible Civic Center area. But developers note that the area, just off Pacific Coast Highway, is a flood plain where dozens of streams, gulches and canyons empty out.

The city’s ongoing economic uncertainty has begun to sap its vitality, worrying residents and merchants alike.

Take Kanan Dume Road, much of which has been shut down for nearly a year after a landslide destroyed a portion of the road. It would take $1.7 million to reopen Kanan Dume Road from Mulholland Highway to PCH, said Hasse--money the city doesn’t have.

Because of its unique geography, “the cost of fixing roads and drains and bridges is higher in Malibu than elsewhere, and we have disasters which are unique to Malibu,” said City Manager Peacock.

“We’re all looking at what nature will do to us,” said Van Horn. “And it’s busy everywhere.”