Felix Bachofner, candidate for Mayor - Seaside, CA panorama banner image

Fiscal Responsibility

We hear frightening things about Government finances every day.  The situation in Seaside is no different — in fact it is worse.  The City is once again spending more money for less service.

Where’s our money?

During 2010-2012, as Mayor I successfully led the City Council to adopt and enforce two structurally balanced budgets.  This means the City did not spend any reserves (savings) to balance the budget.  In other words, the City spent less than it took in in tax and fee revenue.

Unfortunately, a single council vote less than 1 hour after I stepped down as Mayor threw the City’s budget back into imbalance.  All employees were given a 3% raise.  About year later, a second 3% raise was given. This year another ~4% to most bargaining groups.

The total, “fully burdened” cost of the first two raises is about 3.5 million dollars per year.  The current year’s raise was split into many agenda items and the cumulative impact has not been disclosed yet (although I have publicly asked for it).

It merits mention that all employees are deserving of fair incomes.  However, by every reasonable metric, Seaside employees were already very well compensated.  Now, the average City employee makes 4 times what the average Seaside household earns. [And to be completely fair, a small group of Seaside employees — predominantly parks and public works employees — are still proportionately underpaid relative to their peers.  The Council does not seem to understand employment equity and is enriching select classes of employees at significant public expense.]

Because of these salary hikes, a structurally balanced budget was not achievable in the past two years.  Worse, where the City operated leanly with an average of 145 employees while I served as Mayor, the City can now only afford an average of 125 employees.  This means we are down significantly on police, public works, parks and recreation and other categories of City workers.

This reduction in service is in spite of revenue growth and increasing budgets over the past 4 years!  We are getting less, but spending more!  Future years look to be even worse if the City is to address all its deferred maintenance and current federal and state mandates.  There is no current plan to address these future imbalances although the Council has directed staff to investigate

Chart showing tremendous revenue and spending imbalance in the City of Seaside

 

Seaside’s Financial Pendulum: a brief History Lesson

 

The Recent Past — Fiscal Irresponsibility: 2003-2010

Until late 2010, even though the City claimed to have a balanced budget, it pulled heavily from reserve accounts — $13.8 million in just 7 years.  Because of this hemorrhage of public funds, the first Rubio administration and City manager Ray Corpuz needed to heavily promote Measure R (a 1% increase in the sales tax) in spring of 2008, indicating services would be reduced if the measure were not passed.

The increased tax measure was passed, but services were reduced anyway.  Potholes remained unfixed, the fire and police departments had shrunk (even though Measure R proponents told us we needed MORE staffing, the City later commissioned a new study to justify reductions!) and City parks remained almost completely unimproved (vs pre-Measure R).  It turns out that while the analysts suggested this incremental tax would add approximately $3 million in annual revenues, it added only about $1 million annually.

Even more frustrating, mathematically, this extra tax measure would have been unnecessary had it not been for the expensive “reorganization” of the City undertaken in (approximately) 2006.  Virtually every “client” of City Hall noticed (and many complained publicly) that the “reorganization” did nothing to improve customer service.

Did increased taxation have other costs?

Vacancy rates on Broadway and in other commercial areas skyrocketed after Measure R passed.  Indeed, in the newest commercial complex (the City Center at Broadway and Fremont) the vacancy rate was about 50% for the first few years after it was built!  [City Center only approached 100% occupancy after my administration passed two structurally balanced budgets.  These actions gave the business community some confidence the City was on the right path and local investments once again made sense.]

With this kind of tax environment is it any wonder that businesses might prefer Monterey, Sand City or Marina where sales taxes are up to one full percent lower?  If it isn’t out of the way (and Monterey, Sand City and Marina are not), shoppers will generally flock to stores with the lowest total costs, taxes being one element.

Giveaways

What’s worse, under previous administrations the City was implicated in massive government giveaway of multimillion dollar proportions.  For example, during initial review of the Seaside Highlands housing development during the late 1990s, the developer initially was expected to provide for various public amenities  such as a police substation and possibly a fire house when asked by planning commissioners.  In the end, the City only got a small office for police officers to do some paperwork during shifts.  The City of Seaside had owned the land and sold it for far too little money — the developer, meanwhile, is understood to have made over $100 million in profits. 

Now the City must renew its effort to provide a police substation to provide adequate coverage for patrols in the Northern areas of the City.  While this is once again promised as part of a forthcoming proposal, it is critical we make it actual.  We need a Mayor and Council members who do not follow the poor examples provided in the past, but rather insist on the best deal for the City’s residents.

On another note, the City Council frequently doesn’t ask enough finance related questions of its staff.  See the video page for information on how a $5 million “City Checks” request went through without any call for explanation except from me.  Even if or when the council already knows the answers to these questions, it is a “public good” to clarify how large amounts of money are spent.

 

Return to structurally balanced budgets: 2010-2012

Shortly after being elected Mayor at the end of 2010, I led the council to immediately adopt structurally balanced budgets (in other words, budgets where revenues exceed expenses and allow for a moderate amount of savings).  We started with the mid-year budget review Dec./Jan 2010-2011 and put the same principles into place for the next two budget years.

One way we achieved structurally balanced budgets is that we demonstrated the City had too many employees for the workload of many departments.  For example, why maintain 5 or more planners and multiple building officials when the City had virtually no development occurring?  The proper solution is to ramp employment up and down, as private industry does — according to current need.  We reduced average employment from about 175 employees to about 145.

Even so, the City of Seaside increased the levels of service while spending less money.  That was a good thing!

Here were some highlights:

  • The police and fire departments were fully funded and fully staffed since shortly after my administration took office.
  • City Hall was once again opened 5 days per week (under the previous administration it was closed on Fridays).
  • Public facing counters were opened and accessible too, as soon as we hired a non-controversial, cooperative City Manager.
  • Rather than relying on expensive consultants, Seaside began providing a host of services to other cities to help maintain employment levels when workloads were low.

All of these increased benefits were achieved even though we spent about 4 million fewer taxpayer dollars per year!

 

The Pendulum swings back into the red: 2012-2016

Unfortunately, after I left office, the City has been operating back in the red. This is most easily seen from the City's own data, synthesized (in part) into the chart on this page made public on October 2, 2014.

Simply put, the City once again spends more money than it takes in.  Even worse, the level of service is lower in almost every metric.

  • Fewer police officers (by any metric, but in particular as measured by officers actively patrolling our streets!)
  • Fewer parks and recreation workers
  • Fewer maintenance and janitorial workers
  • Fewer recreation programs
  • Less maintenance of parks and other public infrastructure (although the partial repaving of Broadway is single bright spot)

Meanwhile, more of our taxpayer dollars are being spent for this lower level of service.  The general fund now expends over $24 million.  From 2010 to 2012 we achieved better levels of service while spending millions of dollars less.  Our plan was to invest in infrastructure, more public safety officers and other programs or needed City services.

Our leadership team is so inefficient, those opportunities were squandered!

 

“Balance” vs Structural Balance

Certain City policy makers have a very loose understanding of generally accepted financial principles and terms.  The current Mayor, my opponent, repeatedly claimed from 2012 to 2015 the City had a “balanced budget” a “surplus” and even claimed the budget was “structurally balanced.”

Not only did local newsmedia, the Seaside Taxpayers Association and the City’s Chief Financial Officer (see graph) all disagree, it flies in the face of logic.  Most would call such claims a lie.  How often it is repeated does not make it true.  In fact, there are only enough reserves to “balance” the City’s budget perhaps one more time.  After that, the reserve will be gone.  The City can not legally borrow money to balance the budget.  The only available next action will be to radically cut employees and services to residents and businesses.

This is why we must achieve a structurally balanced budget immediately.  It can be done using the same, evenhanded and fair policies enacted in 2010-2012.

In fairness to the City and my opponent, for the 2016, the budget finally is structurally balanced.  Unfortunately, it has been achieved quite cynically.  In the 2016-2017 budget virtually all promises for paying for maintenance or capital improvements from the general fund have been rescinded!

The next opportunity to significantly fix the City’s ongoing budget problems is at budget mid-year (Dec./Jan. 2016-2017), shortly after the new council is seated.  We did the same thing in 2010-2011 to great, positive effect.

The Government Finance Officers Association of the United States and Canada has an excellent discussion of these issues at http://www.gfoa.org/achieving-structurally-balanced-budget.

 

Proposed Solutions

All Council members must be vigilant (especially about finances) every moment of their service to the City.

A fair compensation structure must be enacted for all City employees.

When elected, I will continue to ask the toughest of questions and not allow public funds to be allocated poorly.  Developers will need to pay their fair share of improvements and the business environment will be stimulated with an appropriate tax policy to the degree that the Council can determine taxation within the City.

With attractively planned businesses, higher occupancies and a commerce friendly sales tax rate that does not put Seaside at a competitive disadvantage, it is entirely likely that the City will reap much greater revenues.  Indeed, some of the policies we put in place in 2011/2012 have already led to the greater revenues the City has been collecting for a couple years.

It is important to not squander those financial resources on enriching special interests.  All stakeholders must fairly benefit from the money Seaside takes in and spends!

Page Last Edited: Tuesday, October 18, 2016

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