Op-Ed: Wrong on Debt…Again

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By Keith Curry | Special to the NB Indy

Scott Peotter has again written about his “ideas” for the city’s debt.  Oh where to begin.

First of all, General Obligation debt already requires a vote of two-thirds of the people under the state constitution and our city charter because it involves an increase in property taxes to pay the debt.

I worked with Howard Jarvis and Paul Gann and I strongly supported and still support this requirement. In fact, I have sponsored a ballot measure for the November election that requires a super-majority vote of the city council before a tax can even be placed on the ballot.

Certificates of Participation do not include the power to tax. No taxes were raised to finance city hall, it was done from the city’s existing cash flow. Certificates of Participation have been widely used for nearly 40 years in California and they are “convoluted” only in the mind of Peotter.

Peotter’s proposed debt limit would already be exceeded without any new debt so all borrowing would need a vote. In addition to potentially sending financing for police cars, copy machines and office leases to the voters, the measure would have other unintended negative consequences.

Through the sound financial planning of the prior council, no borrowing was required for Marina or Sunset Ridge parks, and none is expected for any of our upcoming capital improvements.  However, as we begin to formulate a plan for the $60 million needed for sea wall replacements, debt may be part of that solution.

Residents of Balboa Island, the Peninsula, and other low lying communities should think long and hard about the ramifications of making the public improvements necessary to protect your homes and families subject to a public vote by those living miles away with no direct benefit.

Peotter’s prohibition against non-callable debt, which has been thoroughly and repeatedly debunked, will only have one outcome: higher debt service costs to Newport Beach taxpayers.  All long term municipal debt includes some components that are not callable in response to market demands.

Certain structures such as premium bonds, that reduce the total outstanding debt, and Public Private Partnerships that use taxable debt, could be prohibited altogether. These are all tools that need to be available to the city for flexibility and sound decision making.

Our independent financial advisors, in March 2015, provided us with the precise analysis of the cost of Mr. Peotter’s ideas with regard to the city hall debt.

At that time, Fieldman Rolapp determined that Peotter’s provisions would have increased debt service by $719,000 annually. That would be a minimum of $7.19 million to the first call date and if his gamble goes wrong, would have cost the taxpayers a whopping $21 million more in debt service.

It is a gamble we did not take and should not have taken.

This is only the latest in a series of irresponsible proposals from Peotter including taking funds designed to reduce our pension liability and speculating in the stock market, selling the revenue producing old city hall site, operating the sewer enterprise at a structural deficit and cutting the business license fee by an amount equal to the operational costs of approximately twenty police officers.

Many of Peotter’s misguided ideas were recently rejected by the city Finance Committee on a unanimous vote, including Peotter’s own appointee.

Now let’s look at the real reason behind this proposal. The real reason is to create a ballot measure that would allow Peotter’s three endorsed candidates in the November election to evade the campaign contribution and spending limits.

If this ballot measure is approved by the council, expect to see the shiny faces of the 2016 “Team Newer to Newport” filling your mailboxes endorsing this measure, funded by undisclosed five figure contributions, from people with business before the city council. This is nothing more than a campaign gimmick. After all, they have nothing else to run on.

Finally, Peotter again offers his cartoonish attack on the civic center. To his credit, he has been clear on what he would have done differently. He would not have expanded the library so there would be no connection between city hall and the library. He would not have built the parking structure. This would have eliminated the civic green and nearly all of the park and replaced them with an asphalt parking lot. To meet his cost targets, we would not have excavated $8 million in dirt so the city hall would be a tilt up, Costco- style building on a hill, three stories higher than the existing building and blocking water views from MacArthur and the Harbor View neighborhood.  We would have no community center and no emergency center.

This is Peotter’s vision for our city. Is it yours?

Keith Curry is a Newport Beach City Council Member.

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