Financial Solutions

Problem:  We have been running our city on debt.  Our high interest (7%) cost is increasing from $1 to $2 million, which diverts critical funding from infrastructure. Our employee pensions are not secure.   Our balance sheet [net value] has diminished from $88 million to $50 million.  We are now running cash deficits and depleting our savings. Our Capital reserves are gone.   Each of these issues has worsened in the past four years.

This is not sustainable.

Measure E will sunset in 2028 and the city polling shows residents do not support increases, yet the budget has not been reduced.

Approach:  I lend a fresh voice and viable solutions to help solve problems, collaborative with the Council. I will build trust with residents using candor, disclosure and fact-based decisions.  Expenditures should be based on resident priorities.  Problems need to be solved holistically to avoid tax stacks and retore trust.  Residents are respected as our trusted partners.

Source: page 36: https://www.pvestates.org/home/showpublisheddocument/15984/637641844126900000

Fiscal year 2024 begins 7/1/23

PROPOSED SOLUTION

  1. Build trust by re-establishing Transparency as mission and standard practice for the city. Full disclosure and candor are critical.

  2. Transition to an accrual-based budget and include all costs even if purchased using debt.

  3. Transition to an accrual-based long-term financial plan Continue to utilize our long-term financial plan for appropriate decision making to ensure the multi-year impact is considered in appropriations.  Now all the budget, long-term plan and the balance sheet will tell one story and one truth.

  4. Increase revenue with non-tax revenue:  

  • Reinstate the non-tax revenue ad-hoc committee and include residents

  • Revitalize Malaga Cove and Lunada Bay plazas to increase revenue and beautify these areas

  • Charge for parking like Del Cerro park, which will may also reduce congestion and litter on the coastline

  • Charge development fees that cover the full cost of planning/ staff/consultants, rather than have residents continue to supplement development costs

  • Offer more optional fee-based services by the city

5.   Reduce costs:

  • Conduct an operational review and implement efficiencies

  • Conduct a line-item budget review and eliminate low value spending

  • Implement financial and operational controls. s

6. Implement a real pension policy that prevents more debt by paying the full cost each year.  Then pay off existing debt so high interest costs are avoided; redirect the savings to infrastructure. 

  •  Stop pension debt growth:

Pay the full cost of pensions each year.  This is approximately 70% of salaries.  If CalPERS has a bad year, pay off any incremental new debt the following year.   

  • Pay off existing pension debt:

We are paying 7% interest on about $20 million in debt, which is growing quickly.  We need to come up with the best mixture of savings verses risk using a mixed combination of available funds, a temporary tax, and a loan at a lower rate.  The annual savings ($1-2 million) should then be redirected to fund infrastructure.

  7.   Communicate and collaborate with residents.

  • Publish clear graphs to express our current state and future trajectory (use OpenGov). 

  • Understand resident priorities and what they are willing to pay for:  police, infrastructure, parkland, fire abatement, beautification, etc. 

  • Listen and respond to what residents need, and expect to evolve in an atmosphere of respect, engagement, and continuous improvement.