City Talks Finances

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City Council spent some time during Tuesday’s study session to review the city’s financial standing, including a presentation from staff and a discussion among council members.

Mayor Rush Hill requested an overview of the city’s debt and pension obligations at the last city council meeting.

City Manager Dave Kiff and Finance Director Dan Matusiewicz gave the presentation.

Several council members asked or commented about revenue, city fees, pension liability, equities market crash, civic center and park project costs and more.

Many of the council members’ questions were just “Isn’t that correct?” or similar and simply confirmed what they had just stated.

As the only public speaker, city watchdog Jim Mosher questioned whether the urgency of the presentation had something to do with the upcoming election. Hill is facing an opponent (Marshall “Duffy” Duffield) who questions whether the city’s debt is as fiscally sound and as responsibly managed as what was presented.

There is a whole slate of candidates running on that theme, he added.

“I do not necessarily endorse the slate of opposition candidates, but I do think having this glowing review hastily prepared at this exact moment smacks of a campaign stunt,” he said. “I would question whether a campaign stunt to benefit one of the candidates over his opponents is a proper use of public funds.”

The discussion did involve several council members bringing up the election or ideas or statements made by some candidates.

Less than 10 minutes in, Councilman Keith Curry was the first to mention it when staff spoke about city debt.

“Several candidates, for example, in this election have suggested that the thing for us to do is to sell city assets, city property, city real estate, and use those proceeds to pay down our debt,” Curry said.

His comment was referring to the old city hall property, recently leased to R.D. Olson Development to build a hotel, as he specifically mentioned later.

There have been questions regarding immediately paying off the debt from the civic center and park project, Matusiewicz said.

Retiring the civic center debt now would trigger a $44 million early redemption premium, cause the city to lose the Build America Bond subsidy, reduce savings and rainy day funds, and would limit flexibility to build several projects, he explained.

“But what I think this is telling us, is that for every dollar of debt that we pay off under the strategy put forward by some of these candidates would cost $1.44 to pay it off,” Curry lead into his question, “is that correct?”

If the city didn’t issue some debt, certain projects – like Marina Park and replacing fire and the police stations and more – would not be possible, Matusiewicz explained.

“When we look at the list (of projects) today, it would be a pretty tough dilemma,” he said.

A reasonable amount of debt is prudent and a part of the city’s history, allowing projects like the harbor, library and civic center, to be built or improved, Matusiewicz said.

Regarding the pension debate, “thy sky isn’t falling, but nor are we completely out of the woods,” Kiff said.

Employee contributions are paying $7.4 million of the $27.4 million paid to PERS this year, Kiff explained. That’s 27 percent, up from zero percent in 2004, he added.

“I venture this percentage is more than nearly any other cities’ employees pay in our region,” Kiff said. “It was done through difficult negotiations.”

Kiff noted a few more things that can be done: Another “Fresh Start,” thoughtful outsourcing, continued partnership with employees and reform at the state level.

The ideas of getting out of PERS entirely or moving everyone to a 401K plan aren’t practical, or in some cases, aren’t legal, he added.

Councilman Mike Henn said the city’s finances are well managed and people who say otherwise may be influenced by the pressures of the political season.

“They say that election time is ‘Silly Season,’ and I think that comes about because in the process of campaigning people tend to make elliptical statements and over-exaggerate things and try to twist a set of facts to suit a purpose,” Henn said.

Henn noted that he has been CFO of publicly held companies for 30 years and chairman of the city’s finance committee for several years. He has been “at close range” or “at the controls” with city staff of managing the city’s financial standing.

The city’s financial standing is “top flight,” he said, which allows the city to build projects like parks while other cities are struggling to meet the payroll.

“Any person who says that the spending of Newport Beach is out of control is just plain wrong,” Henn said. “It is a silly statement.”

It’s fair to ask if the city should have spent as much on the civic center as they did, he admitted, but he questioned where the people who are making those statements now were when the city was making those financial decisions.

“When we heard practically not a word of opposition to these plans despite dozens of public meetings and exposure about all of this,” he said.

Questioning whether the city should spend money on other projects is fair, he added.

“What is not at question here is that this city is in very sound financial condition and is very carefully managed every day to keep it that way,” Henn said.

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1 COMMENT

  1. So easy to spend money one has not earned…. kind of fun …. City Clerk! Bunnies, Floating docks , 1000 dollar office chairs perks and failed REIT’s s for all my friends.

    (Cornerstone real estate / health reit – now SH – look it up – the Feds did)