I am writing you today out of a deep concern for the future of our city.
Last week, during a 30-minute stretch in our council meeting, we came within one vote of creating lasting fiscal damage to our community.
First, while considering a routine measure to validate reductions in the business license tax enacted by the prior council, Councilman Peotter, out of the blue, moved to slash our current tax structure and implement the same tax used in Irvine. No analysis, no budget consideration, not even any real knowledge about how much money was involved.
This would have created a $3 million to $4 million hole in the budget during the middle of the fiscal year. It failed on a tie 3-3 vote with Peotter, Muldoon and Duffield in support. This amount is enough to fund approximately 20 police officer positions.
Second, Councilman Peotter advanced the centerpiece of the Team Newport platform: his “debt reduction fund.”
The initial idea was to refund our outstanding Civic Center debt. In an independent analysis prepared by the city’s financial advisors, to do so would incur a net additional cost of $21.6 million.
Mr. Peotter has also criticized the fact that the city used Build America Bonds (BABs) to finance the civic center stating he would not have used them.
Our financial advisors determined that BABs saved $719,000 annually in debt service or $7,190,000 until the first bond call date. Money that would have been lost to the taxpayers if Mr. Peotter had his way.
This was so contrary to the public interest, that had our paid advisors recommended this to us, they would be subject to fine, sanction and potential disbarment by the Securities and Exchange Commission for violation of the fiduciary standards requirements of Dodd-Frank.
I encourage you to watch the March 24 council debate online on Item 22 on the city website.
Mr. Peotter and Team Newport were well aware of these financial consequences, yet they continued to campaign on this theme and advanced this idea on Tuesday.
Mr. Peotter did recognize at the meeting that a refunding was not cost effective and proposed putting city funds aside to “buy the bonds at par.”
This would assume that bond holders would sell their assets at a 30 percent discount to their value. This is a completely naive and ill-informed assumption. Once again as noted in writing by our advisors, there is no practical way this fund would ever be used, yet, based on recent financial performance, he would put $5 million to $12 million annually into it, taking away funds for important city services and capital projects.
Even more strange was his proposal to terminate the “fresh start” amortization of our PERs liability approved by the council last year.
Our current plan increased our contributions to our pension obligations by $6.6 million in order to reduce our pension amortization from 30 to 19 years, saving $47.1 million.
He would instead hold these funds for purposes to be determined. His debt reduction plan actually would increase our long term obligations!
In spite of independent, written financial analysis showing these plans to be poorly conceived and costly to the taxpayers, Council members Duffield and Muldoon dutifully voted in lock step with Peotter.
Fortunately, Mayor Selich, and Mayor Pro-tem Diane Dixon also opposed this foolishness and the proposal was defeated 3-3 (Council member Petros, who would also have opposed this, was absent).
I am tempted to say that this was the biggest financial disaster to confront the city since the Orange County bankruptcy. But that is not true, in the bankruptcy we only had $16.9 million in the investment pool and our losses were only $3.5 million. The Peotter initiatives are worse than the impact of the Orange County bankruptcy on our city.
In all of my years in and around government, I have never seen anything that compares to the financial illiteracy and the political recklessness on display at city hall.
Follow the money. Every week since Team Newport has taken their seats on the dais, we have had an agenda item in open or closed session that financially benefits some of their major donors; Woody’s Wharf, Lido Partners, Dock Owners, Mooring holders, Friends of the Fire Rings (read their court filings, they are seeking thousands from the taxpayers).
It is one thing to give $125,000 to benefit a few large dock holders, but we have moved beyond the usual political payback to threaten the financial condition of our city and the ability to provide high quality services.
I know that all of you love and care deeply about our city and its future. My friends, consider this a warning bell, our city is under assault.
If you share my concerns, we need you, your city needs you. Please let your views be heard at the council, in e mails, and in letters to the editor and online posts. Tell your friends and pay attention to what is going on.
Working together, we can lower the cost of government, preserve our high quality services, protect our community and leave this a better community for our children and grandchildren.
Thanks for listening.
Councilman Keith Curry