Newport Beach City Council met over the weekend to discuss current and upcoming projects and review the financial status of the city.
Overall, the city is in good shape, City Manager Dave Kiff concluded at the annual planning session on Saturday.
“We ended the year on a good note,” added Finance Director Dan Matusiewicz.
Revenue from property, sales and TOT tax is up, and the city ended with about $10.9 million surplus, Matusiewicz explained. The revenue flows “ebb and flow” each year, he added.
“Our revenue and our reserves are not the problem,” Matusiewicz said. Although, “we do have our budget challenges.”
The biggest of those challenges is “getting on sound footing” regarding the unfunded pensions. It is the “Achilles heel” of the city, Matusiewicz said.
In December, the California Public Employees’ Retirement System board of administration voted to lower the discount rate from 7.5 percent to 7 percent over the next three years.
The unfunded liability in 2015 was about $275 million, Kiff explained. The recent change in the discount rate “balloons” that figure by about $51 million.
“This is obviously a big concern,” Kiff said. “These are promise made, arguably contracts that can’t be undone, with employees, many of whom are long retired.”
There are a few alternatives, Kiff said.
“I do think it’s important for us to think outside the box,” regarding pensions, Kiff said.
The annual minimum payment is $24 million, which covers it, but doesn’t really address it, Kiff said. The city could pay about $41 million annually and “catch up” in about 15 to 18 years, he noted.
The employees pay about $9 million – and growing -, which is up from zero about nine years ago, Kiff explained.
For a city the size of Newport Beach, they are paying quite a bit toward it, said Councilwoman Diane Dixon, it‘s a heft challenge to overcome. But, there’s no need to panic, she added.
“We’re not on a cliff,” Dixon said. “We’re not yelling ‘Fire’ in a crowded building.”
Another financial challenge is setting money aside a project to repair, replace and increase the sea walls, particularly around Balboa Island.
A number of residents commented on the sea wall issue, many of them urging the city to move forward with the project as soon as possible.
“We’re trying to look ahead, obviously, on this,” said Mayor Kevin Muldoon. “That’s why we’re being more aggressive.”
The city is making progress on it, Kiff noted. The next step major step would be planning for a $20 to $30 million allocation in the next 15 to 20 years for a future, more significant sea wall project, Kiff said. It needs to be studied further for more details.
City staff suggested a plan to put portion of the surplus funds aside each year for the future significant sea wall project.
Balboa Island resident Lee Pearl suggested looking for state or federal funds for the sea walls.
Former councilwoman and mayor Nancy Gardner noted that there is a lot of real estate facing the ocean that needs to be considered in the future.
“If we wait to think about plans then we are going to be very limited in our options if sea levels meet certain projections,” Gardner said. “I’m hoping we won’t put off the thought of it until it’s too late.”
She suggested the city put together a long-term plan for sea level rise so they can be flexible and strategic.
Addressing the sea walls is just part of the bigger picture for the city’s renewed focus on the harbor.
“Just making sure we are not neglecting the harbor as, arguably, we have done in years past,” Kiff said.
Getting the harbor “where it needs to be” is part of the long-term master plan and an expense they need to anticipate, Kiff said.
“That’s pretty much, as you all know, why I’m here,” said Mayor Pro Tem Marshall “Duffy” Duffield about the city’s focus on the harbor.
The immediate problem facing the harbor are the sea walls, that’s why it is at the top of the list, Kiff explained. The city also needs to set aside money for routine dredging, he added.
There also some talk about the need for a general plan update and the cost and time that it would take. It will be a multi-year project, explained Public Works Director Dave Webb. Probably about $1 million each year into the CIP, he added.
“This is going to be a big event,” Webb said.
Muldoon also previously suggested reviewing planned projects for essential versus non-essential and taking a “hard look” at the Facilities Financial Plan, Kiff explained.
Kiff explained that the overall theme is to protect the quality of life, make strong progress on the city’s obligations, and preserve as much budget flexibility as possible.
City staff also gave updates on current and upcoming projects, including Grand Canal dredging, streetlight LED retrofitting, rehabilitating public piers, pickleball courts at Bonita Canyon Sports Park, Lower Sunset View Park, reducing and capturing trash in the bay and harbor, Lower Castaways Park, extending the boardwalk, Mariners’ Mile Master Plan, and many more.
Councilman Jeff Herdman provided a reality check and warned the public that while revenue is good, there is also considerable debt. The presentations on Saturday showed a lot of projects currently in the works or for the future, and, in reality, a lot of them won’t be done, Herdman said.
“They’re simply not [all] going to [get done] because of the financial liability that this city faces,” Herdman said.
For more information, visit newportbeachca.gov.