Community Voices: Confirmed: $347,000,000.00 is Coronado’s Financial Deficit

How did this happen? It happened as a result of decades of Coronado city councils unanimously approving unbalanced budgets and decades of city councils unanimously spending more tax dollars than we receive as revenue, fees and so forth. It’s basic math and it’s easy to understand once you have all the facts.

Why haven’t you heard of it before now? News sources on television, online and in print haven’t been reporting on it, even though I’ve been speaking about it publicly for approximately 3 years now during numerous council meetings and elsewhere. It’s disappointing but not surprising that, in order to further their partisan agendas, biased news sources keep true facts hidden from the public.

One of the purposes of www.dailycoronado.com is transparency, which means keeping Coronado residents informed with true facts and non-partisan commentary on government in Southern California. The website will inform you of the facts you need to know in order to keep on top of what your city government is doing. I strongly encourage Coronado residents to stay informed and to oversee your local government.

On June 18, council officially approved a city budget for fiscal year 2013-2014 that breaks the bank. The vote was 3-2 with myself dissenting. Councilman Al Ovrom joined me in dissent, although his reason for dissent was far narrower than mine.

While we both agreed that annually spending hundreds of thousands of more dollars by hiring more city staff was unwise, I went further and described the big picture of our city finances includingour $ 347,000,000.00 financial deficit as another reason why I couldn’t approve the FY 2013-2014 budget. Instead of being a part of the financial deficit problem in Coronado, I prefer to be a part of the solution.

Also during our June 18 council meeting I described the fact that, by spending Toll Revenue public funds on the Pomona Roundabout project, as well as a Street Drainage fix on 3rd & 4th Streets, council is irresponsibly exposing our taxpayers to legal liability by setting our city up to lose in a court of law by a lawsuit that Coronado residents may bring to stop our city from illegally spending the Toll Revenue public funds. The reason is that the Settlement Agreementof June 2000 legally binds the city to use Toll Revenue funds only on positive things that mitigate (or lessen) the negative effects of the toll removal upon our residents living “in the Corridor.” The Corridor is defined specifically in the Settlement Agreement as State Routes 75 & 282.

These allowed uses of the Toll Revenue funds include, but aren’t limited to, helping Corridor residents purchase double pane windows, shrubbery and fences for both noise reduction and to protect their homes from collision by vehicles, as has occurred in the past. The reason is that increased noise and increased risk of collision are two of the negative effects of toll removal upon our Corridor residents. Double pane windows, shrubbery and fences will mitigate (lessen) the noise and risk of collision. In contrast, the historically poor driving and vehicular speeding on Pomona are not effects of the removal of the toll, which was inbound on 3rd Street, not outbound on 4th Street. Pomona doesn’t connect to 3rd Street and wasn’t intended to be included in the Settlement Agreement.

The flimsy opinion by our city attorney, un-researched yet given verbally at a prior council meeting, will fail in court and expose our city taxpayers to liability for breach of the June 2000 Settlement Agreement signed by and agreed to by prior city officials. Even though I wasn’t a part of the council in 2000, I recognize the reality that I’m duty bound to adhere to the promises our city officials made to our Corridor residents on behalf of our city. The city attorney stated on the dais in her un-researched opinion that Pomona is an “arterial” street that goes into the Corridor so it’s “ok” to spend Toll Revenue funds on a Pomona project. That’s just wrong because it’s wholly unsupported by the plain language of the June 2000 Settlement Agreement.

The city attorney’s bogus “arterial” argument also means that any street that eventually leads into the Corridor is an “arterial” where we could spend the Toll Revenue funds. There are so many streets that lead to the Corridor . . . Glorietta . . . A, B, C, Orange, D, E, F . . . all the way to Alameda which means that we could spend the Toll Revenue public funds for projects on all of those streets. This is illogical given the plain language of the Settlement Agreement which recognizes the purpose of the agreement to mitigate the negative effects of toll removal “in the Corridor” only . . . not on any other street.

We’d certainly lose in court before a judge if we made that bogus argument as stated by the city attorney as the excuse to spend Toll Revenue money on the Pomona project because:

• There is no language or concern for “arterial” streets at all in the Settlement Agreement. “Arterials” are irrelevant to the Settlement Agreement.
• The only purpose of the Toll Revenue fund, as stated in the Settlement Agreement, is to reduce the negative impacts of toll removal “in the Corridor.”
• The Corridor is specifically defined in plain language as Routes 75 & 282, not any other street.
• Drainage problems and a roundabout project outside of the Corridor are clearly unrelated to toll removal.
• There was never an outbound toll on or near Pomona and 4th Street so logically there is no toll removal connected to Pomona at all.
• There was never an outbound toll and Pomona only leads outbound from our island so Pomona isn’t involved in the toll removal at all.

While I support the Pomona Roundabout project and the Drainage fix project, I don’t support paying for them out of the Toll Revenue fund because it’s illegal to do so. We should use other public funds for those two projects in FY 2013-2014.

The built-in deficit in this current budget is $ 15,000,000.00. You can see the facts of how it’s calculated here in the June 19 post entitled Confirmed: Coronado Passed Another Unbalanced Budget.

In brief, the city staff report for our June 18 council meeting agenda item # 11 b clearly states in the “Attachment A Exhibit 1? table on page 149 that the expected city revenues are $ 42,000,000.00. The staff report clearly states in the “fiscal impact” portion on page 141 that expenses are $ 57,000,000.00. Thus the budget deficit is available for all tocalculate from the numbers written in black and white in the city staff report. There’s no mystery about it.

Here’s how we calculate the FY 2013-2014 budget deficit. Revenues of $ 42 million minus expenses of $ 57 million equals negative $ 15 million, which is a a deficit (or loss) of $ 15 million. By definition, a budget with a deficit is unbalanced.

There is no surplus at all for FY 2013-2014. By definition, an unbalanced budget cannot have a surplus. Naturally, deficits and surpluses are mutually exclusive.

When you add in our total redevelopment debt of $ 232,000,000.00 as approved by city council and self-reported by city staff to the state Department of Finance for the period of 1 July 2013 to 31 December 2013 plus our unfunded pension liability for city employees of approximately $ 100,000,000.00, it’s easy to see that Coronado’scurrent total financial deficit amounts to $ 347,000,000.00. This $ 347 million deficit is unacceptable.

Have I voted to approve budgets in the past? Yes.

Have I voted against budgets in the past? Yes. And I’ve always stated the specific reasons why I voted against them.

In general, the more you learn about our city finances, the more you understand exactly how out-of-control our city spending is in reality.

Coronado’s current giant financial deficit of $ 347 million is easily hidden from the public because we only report the bare minimum of financial information on our annual budget statements and fudge the numbers so that it might look like there’s a “surplus” to residents who don’t have all the facts because they don’t know where to look for them. In reality Coronado city has an enormous deficit that’s growing larger and larger over time because we keep spending more than we have and living above our means.

It’s imperative that our municipal (city) financial reporting requirements be reformed for the good of the public and for the financial health of our city. Unless and until the state, or a group of taxpayers or accounting professionals, pushes for reform of our municipal reporting requirements, taxpayers will remain in the dark about the true state of Coronado city finances.

The problem that makes reform necessary is that Coronado residents never see a complete and accurate picture of our city finances because:

• our city has never reported our giant $ 100,000,000.00 unfunded pension liability to the public, and

• our city separately reported our giant $ 232,000,000.00 redevelopment debt to the state Department of Finance on documents unconnected to the usual annual budget documents that we present to the public at budget time.

When residents are in the dark about our city finances, they are easily fooled into thinking there is a “need” to raise taxes, when in fact the only need is to live within our means by stopping the wasteful spending of our tax dollars on things we can’t afford. If we live within our means, then there is no need to raise taxes.

Is it possible to run our city during FY 2013-2014 on the $ 42 million of revenues we expect to receive during the fiscal year? Of course it is, if we make smart choices and live within our means.

Thankfully, a new municipal accounting rule says that by 2015 we’ll have to report our unfunded pension liability to the public. In two years, we won’t be able to hide it any longer.

So, I’ve been continuously lobbying our city manager since last year to report our true unfunded pension liability immediately — as staff in other cities are doing — for the good of our city employees and for the health of our city finances. Also, earlier this year I made the motion to pay down a portion of our unfunded pension liability by $5,000,000.00. That motion was seconded and passed unanimously.

It’s important for you to know that by the 2015 deadline, our unfunded pension liability will be far greater than $ 100,000,000.00. The reason is that effects of the gimmick called “smoothing” that CalPERS currently uses to fudge their true losses will wear off by then. Once that “smoothing” gimmick has run its course, our city employee pension liability will be much, much larger. Experts agree that Coronado taxpayers are in for a gigantic shock over our true unfunded pension liability by 2015.

It’s wrong to continue to neglect our city employees by failing to fund our city employee pension program, as Coronado has done for decades. It’s also unfair to our taxpayers for our city to hide this enormous unfunded pension liability from them.

It’s clear from the facts that our city government is living above its means. In good conscience, I can’t approve of wasteful budgets that intentionally spend more of our tax dollars than we take in. In addition to being bad financial management, it puts future generations on the hook for paying for bad choices being made now, especially since those future generations have no voice in the bad choices we’re currently making to overspend and put their financial future at greater and greater risk.

Remember that if any city official tells you that we have a budget “surplus” and our city is “well run,” then:

1. They don’t understand our basic city finances so they shouldn’t be making any decisions that affect our finances. They simply don’t know what they’re doing. Or,
2. They know what they’re doing. They understand that they’re making bad choices with your tax dollars and piling up city debt which risks your city’s financial future. Yet they’re intentionally being untruthful to you so they can continue to wreak havoc on our city finances for various reasons.

Either way we lose because city officials are continuing to ruin our city finances by wasting our tax dollars and burdening future generations with digging our city out of this enormous debt.

Simply put, if you ran your personal finances like Coronado city runs, then you’d have to file for bankruptcy.

Genuine questions and comments are welcome. Trolls aren’t welcome, whether you’re hiding behind fake names or out in the open with real names.

– Councilwoman Barbara Denny