Council Meets Tonight

One side effect of Claremont's budget problems is that they've used a good chunk of the Great Recession spending their way into a hole that, absent any additional federal stimulus money, will take a few years to recover from. That means no more big budget busting municipal projects (i.e., a new police station or a water company takeover). Fiscal responsibility, like it or not, has been imposed on Claremont.

Another effect (benefit?) of Claremont's financial woes is that City Council meetings are likely to be shorter because fewer big projects mean less time taken up by staff reports and comments, public comment, legal advice from City Attorney Sonia Carvalho, and the councilmembers' questions and opinions.

We'll see if tonight's City Council regular meeting runs under two hours. The council convenes at 5:15pm for a special closed session meeting that covers ongoing negotiations with the Claremont Police Management Association and the Claremont Police Officers Association.

The regular session begins at 6:30pm in the council chambers at 225 2nd St. in downtown Claremont. You can read the agenda here. If you're a glutton for punishment, or if the Lakers are getting walloped, you can subject yourself to a live feed of the meeting here.

On the council's plate tonight are:

• A hike in recreational user fees (to be expected given the tight budget). You'll pay a couple bucks more this year for a ticket to the City's 4th of July fireworks show, and things like swim programs will cost more. See the staff report for the new fee schedule.
  
  
• The annual engineer's report for the Landscaping and Lighting District (LLD). The report recommends an increase of 1.86%, mirroring the year-over-year rise in the consumer price index for Southern California as of March, 2010.
  
  For most single-family residences, this translates to an increase of $2.72, from $147.12 to $149.84. Properties with larger lots pay more. The increase is based on the consumer price index for Southern California.
  
  Those of you who've been around for a while know the history of the LLD. It's what really one of the first things got people thinking about how City Hall manages our finances.
  
  
• An update on the restoration Sycamore Canyon Park, which was damaged in the 2003 Grand Prix Fire. The park has been closed since that time. The City has secured $180,000 in grant funding, and will proceed with restoring the trail and picnic areas. The City will also remove non-native eucalyptus trees and plant sycamores and oaks. Work is expected to commence this coming fall and finish sometime next winter.
  
  
• A report on the traffic signal at Indian Hill Blvd. and 10th St. You'll recall there were several pedestrian accidents there before the City, bowing to pressure from the neighborhood, installed the signal last month.
  
  
• An update on the City's abandoned property ordinance. The staff report by Community Development Director Tony Witt for this item says there are currently 150 Claremont properties in some stage of foreclosure. The City has levied over $120,000 in fines under the ordinance, and around $22,000 has gone uncollected.

City Council Meeting

6:30 PM
225 W. 2nd St. - City Council Chamber
Claremont

Cities at the Fiscal Brink

A year ago, facing falling revenues and saddled with overly generous employee pension obligations, the city of Vallejo declared bankruptcy. As we suggested at the time, other California towns are being dragged down by the same set of problems.

Vallejo (and potentially other local governments) sought bankruptcy to restructure its employee contracts, which included pension obligations the city can no longer afford. The state Assembly, however, responded to the possible coming wave of municipal bankruptcies by proposing legislation pushed by public employee unions that would require local governments to obtain the state's approval for bankruptcy filings.

The municipal bankruptcy bill (AB 155) is sponsored by Tony Mendoza (D-Artesia). Local governments and their representatives have lined up against the bill, according to a Sacramento Bee article published today.

The Bee article observes that the recession has pushed more local governments to the brink of bankruptcy, and some of those same agencies have apparently been using the fiscal crises as bargaining chips with their employees' labor representatives. The article says:

The fiscal crisis "raised alarm bells," said Carroll Wills, spokesman for the California Professional Firefighters.

"Municipalities up and down the state have either spoken publicly about bankruptcy or have contacted the bankruptcy attorney representative for Vallejo," Wills said.

But the issue goes well beyond Vallejo, he said.

"There's a central issue of the sanctity of the negotiated (labor) contract at stake," he said.

"Some of our local affiliates have been given this back-channel nudge (from management): 'If you guys don't respond (and make contract concessions), we're going to pull a Vallejo,' " Wills said.

More State Money Talk

Well, it didn't take long for the great state budget fight to heat back up.

Just yesterday we had a post or two about the financial problems our city and every city in the U.S. is caught up in. We also speculated that there might be more problems on the horizon. Californians were beginning to get comfortable with the notion that the geniuses on both sides of the Sacramento political aisle had solved our state's budget problems.

Now comes a warning from the state's Legislative Analyst's Office (LAO) that we're still likely to face an $8 billion shortfall, despite the budget agreement and the $31.5 in federal stimulus package money California is slated to receive.

The Sacramento Bee's Capitol Alert reported that the legislature's budget analyst, Mac Taylor declared yesterday that "the state's economic and revenue outlook continues to deteriorate." The Capitol Alert post went on to say:

"Even in the few weeks since the budget was signed, there have been a series of negative developments. Our updated revenue forecast projects that revenues will fall short of the assumptions in the budget package by $8 billion. Consequently, the Legislature and governor will need to adopt billions of dollars in additional solutions in the coming months to bring the 2009-10 budget back into balance."

Taylor had some more bad news for the state's political leaders. Because so many of the "solutions" adopted last month are temporary, "without corrective actions, the state's huge operating deficits will reappear in future years - growing from $12.6 billion in 2010-11 to $26 billion in 2013-14."

The Los Angeles Times also quoted Taylor in an article in today's paper:

California's economy in is such bad shape that Taylor's office anticipates that residents' combined personal income will be lower this year than it was last year, leading to fewer tax dollars for state coffers.

"I went as far back as 1950, and I could not find a situation in which personal income had actually declined in the state, so that's a rather unusual event," Taylor said at a news conference Friday.

Taylor's projections assume that the all of the various ballot measures the budget agreement depends on will pass in May. Those assumptions are far from certain, however. The California League of Women Voters issued a press release on Thursday coming out against Props 1A, 1C, 1D, and 1E. The League says these are bad policy:

“We oppose these measures because they are NOT the solution to our long term financial crisis, with the continuing structural deficit in the state budget and flawed budget process,” said Janis R. Hirohama, president of the League. “We make this decision with regret. We would support real reform to make the state budget process more accountable and give the Legislature and Governor effective tools to advance state priorities. However, these hurriedly drafted propositions, produced at the end of a flawed process that kept both the public and most legislators in the dark, will only make our fiscal situation worse.”

This bodes ill for the likelihood of the measures passing because you know there also will be plenty of anti-tax and small-government activists fighting the propositions. Here's the full LWV press release (click on the box in the upper right corner to enlarge):

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In case you were curious about how we got into this mess in the first place, there's a really good video that explains how our financial house of cards fell apart. We saw this on the Original Skrip, and also saw it on the Foothill Cities blog back when it was still a semi-regular blog.

The video's 11 minutes long, but it is worth watching if you've got the time to spare:


The Crisis of Credit Visualized from Jonathan Jarvis on Vimeo.

Bad News Bearers

We hate to be the bearers bad news on a Friday, but Claremont's new city council could be facing more financial problems than originally expected.

The Los Angeles Times reported Tuesday that, thanks to the plummeting real estate market, property tax revenues are falling for the first time in more than 10 years, making hash of a lot of fiscal assumptions local governments, including Claremont, had made coming into the year.

According to the article, San Bernardino County estimates its property tax base will fall 5.7% in 2009, and Los Angeles County Assessor Rick Auerbach was quoted in the Times as saying the county faces a 1.1% decline. That doesn't sound like much, but it amounts to a tax base reduction of $11 billion for LA County.

The article also said that the fall off is just beginning to ripple through the commercial real estate market as vacancies rise, so this decline in property tax revenue is likely just the tip of the iceberg. The Times article explained how this plays out on the local level:

This is bad news for local governments that have been relying on property tax proceeds to help make up the shortfall from reduced incomes and spending in their areas. Already, cities and counties across California have been freezing jobs, imposing work furloughs and pay cuts, postponing repairs and reducing some public services.

"Cities are calling us almost weekly now trying to find out where we are at and what kind of effects the reduced assessment will have on their budgets," said Larry Ward, Riverside County's assessor, clerk and recorder.

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Claremont's staff recently completed revisions to the city's budget for fiscal years 2008-09 and 2009-10 in order to cope with what had early this year been projected to be a $3.5 million budget deficit through June, 2010. In February, city staff balanced the FY 2008-09 budget, where they had projected the deficit to be around $1.5 million. That left $2 million for the next fiscal year.

The Claremont Courier reported on Wednesday that City Manager Jeff Parker announced that agreements had been reached with all of the city's employee associations to take pay and benefit cuts that will total $1,159,000 in FY 2009-10. (The article is not posted on the Courier's website, so you'll have to find a copy for yourself if you want to read it.)

The Courier's Tony Krickl reported that staff will not receive any cost of living adjustments for the remainder of their respective contract terms. Additionally, pay-for-performance bonuses (a legacy of the Glenn Southard-era in City Hall) and health and fitness reimbursements are things of the past. Police officers are also giving up a benefit called Compensatory Time Buy Back.

This all leaves the City still $841,000 short of balancing its budget. Parker was quoted as saying the remaining cuts would come through reduced operations expenses and a hiring freeze on "non-essential positions." (Hey, if they're non-essential, why do we have them in the first place?)

The City's emergency fiscal measures were needed primarily because of falling sales tax revenue. Recall that Claremont Toyota once accounted for something like 53% of the city's sale tax revenue, and you don't need to be told how car sales have fared in this recession.

The falling property tax revenues will surely force another round of adjustments, and we shouldn't forget that in June the city will hear from CalPERS about any increases in the amount the city's pays into its CalPERS employee pension account. Currently it's at around 13% of the city's payroll, but that could rise significantly if CalPERS investments continue to perform like every other investment asset class.

Given all these factors, there's really no reason to believe that the city's budget problems will end here.

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Claremont, like every other city in the nation, is salivating at the prospect of federal stimulus package money to help offset its budget crisis. However, the LA Times also reported that although the stimulus money coming to California figures to hit $31.5 billion through 2011, even that amount may not be enough to help the state in the short term:

Legislators had hoped to ease those new taxes and budgetary cuts with funds from the U.S. rescue package, but a fresh analysis of California's flagging fiscal situation suggests the state needs about $2 billion more than Washington is providing.

If he's right, the state will probably be unable to avert the $1.8-billion personal income tax boost and $1 billion in slashed spending that were part of the budget package Gov. Arnold Schwarzenegger signed into law in February.

[State Legislative Analyst Mac] Taylor's 48-page report comes one week before a meeting of Treasurer Bill Lockyer and Schwarzenegger's finance director, Mike Genest, who are empowered by the Legislature to decide by April 1 whether enough federal money is available to scale back the taxes and cuts. Schwarzenegger's finance experts have concluded so far that the available federal funds are insufficient.

So, even with that wad of federal cash, we should expect to wait until at least May 19 before we really know where we're going to end up with the state budget. That's when a number of the items approved in the recent state budget agreement go to the voters in a special election, and that's not figuring in the property tax decreases and other revenue shortfalls that might occur if the economy doesn't improve as quickly as the state assumes.