"Don't be afraid to see what you see."
— President Ronald Reagan
It is my hope — and more importantly, the community's hope — that our employee associations help restore Costa Mesa's fiscal health and return it to being a model of balanced government.
First, we have to stop the bleeding. Our city has been hemorrhaging money for the past four fiscal years, draining $33.6 million from its reserves, despite eliminating more than 120 employee positions, delaying infrastructure repairs and cutting into many services.
The sales tax revenue declines from the economic downturn and sharply rising pension costs have fundamentally changed the financial structure of Costa Mesa, and the city has yet to fully adjust. Our state and federal governments certainly don't seem to have a solution that would create a marked change in our city's fiscal health for many years to come.
The preliminary 2011-12 budget still shows a multi-million-dollar deficit, despite sales tax revenue projections that are higher than those predicted by the city's own consultant.
This council is committed to adopting a sustainable budget that is balanced, doesn't use one-time financial gimmicks, and begins to re-establish priorities important to residents such as infrastructure repairs, quality sports fields and adequate emergency reserves.
Unfunded liabilities, which are commitments we've made to our employees, must also be addressed as soon as possible.
The cuts needed to balance next year's budget will be painful — which is why past councils opted to tap into reserves instead of balancing the city's books. (Credit to Councilman Eric Bever, who warned us many times that the city was headed down a dangerous financial path.) We've let our reserves get so low that our credit rating has been downgraded, and we're now in danger of running out of cash in December before our coffers are replenished with property tax revenues.
It's critical that we begin to spend less than we take in to keep the city's finances out of intensive care. And once Costa Mesa is stabilized, we need to practice preventative medicine to insure the city's budget remains healthy for years to come.
The prescription for Costa Mesa's long-term financial health is based on a healthy dose of common sense.
First, we need to maximize revenues. We should study the city's business license fees, for instance, which haven't been revised in more than 25 years (any change will need to be approved by voters, likely in June 2012). And we need to hire an economic development consultant who can help Costa Mesa attract revenue-generating businesses and help craft policies that will engage the business community in a productive partnership.
Second, we need to lock into our budget adequate spending on infrastructure. For example, Huntington Beach residents voted to spend 15% of the city's general funds on infrastructure improvements, repairs and maintenance. Costa Mesa would be wise to do something similar, along with regulations on minimum levels of cash reserves.
Third, we need to deal with our long-term, unfunded liabilities we've accumulated in our city employee pension and retirement health care packages. We can't leave the next generation with the bills we've run up. Nor can we ignore our promises to the retirees. Ironically, this council not only understands that previous elected officials made promises, we will work hard to make sure the city has the money to keep them.
Fourth, we need to initiate pension reform in Costa Mesa. This fiscal year, we will spend three times as much on pension costs than we do on infrastructure. Within the next several years, pension costs are projected to be 25% of the city's total budget.
This is not sustainable and a warping of the city's duties to its citizens. Costa Mesa's primary mission has gone from providing services to its residents and businesses to funding pensions for city employees.
By the way, I don't blame the employees for this is predicament. The majority in past councils, then flush with money, agreed to the contracts — pensions and all. But it is time for the employees associations to sit down with us and work together on this needed reform. With the city locked into multi-year contracts with its five employee associations, it's up to union leaders to re-open negotiations.
Some have tried to label Costa Mesa's budget crisis as a figment of the Republican Party's imagination. I'm a card-carrying member of the GOP and have received no financial, strategic or volunteer support from the Republican Party.
If you want more evidence that the need for pension reform cuts across party lines, look at the scores of local governments throughout California that are struggling to balance budgets because of rising pension costs: Los Angeles, San Francisco, San Jose, Santa Cruz, Vista, San Diego, Sacramento and Yuba City, to name a few.
This isn't an ideologically driven issue. It's driven by dollars and cents.
Most of us can agree on the basics of pension reform. City employees need to pay more into their own retirement accounts, and a second-tier system needs to be started for new employees who will receive benefits in line with private industry (including age of retirement). Some cities have already started to enact these reforms.
If this seems like radical medicine, it's only because for years politicians ignored the financial health of the very governments they were supposed to shepherd. In Costa Mesa, you now have a council willing to do what's right.
It's time we take our medicine and get Costa Mesa healthy again. It's time we work together with the employees associations to provide to Costa Mesa taxpayers a sustainable city government. Our community deserves it.
STEVE MENSINGER is a member of the Costa Mesa City Council.