Sounding Off: Cuts needed to balance city’s budget

I read with considerable surprise, the Jan. 15 Daily Pilot article, “Pension Liability Concerns Officials.” It reports that between Newport Beach and Costa Mesa, the two cities have a combined estimated unfunded pension obligation of nearly $250 million.

For Costa Mesa, this bleak news comes after some officials have been celebrating the fact that Costa Mesa’s budget shortfall for the remainder of the year had decreased from more than $6 million to less than $1.4 million.

Even with the recent reports of increased sales and property tax revenue, Costa Mesa’s larger budget picture is more depressing than what has been presented. The city is budgeting next to nothing for capital improvements and must address an estimated unfunded pension obligation larger than its current operating budget — not to mention the fact that the city must now work to replenish the fund balance, or “rainy day fund,” that it has relied on for the past few years to make ends meet.

By conservative math, Costa Mesa will need at least $15 million to $20 million more in annual cuts or additional revenue over the next five years just to get back to even. Even is defined as acceptable roads, a safe and secure rainy day fund and manageable public safety costs that the city can accurately forecast for future years of solvency. Clearly, we are not accomplishing these basic goals. We may be pennywise, but we are pound foolish.

But from where will additional revenue come? The voters of Costa Mesa only narrowly approved a recent increase to our hotel bed tax that may yield an additional $1 million to $2 million annually.

However, that is a drop in the bucket compared with what is needed, and we can’t tax our way out of this mess.

As a city, Costa Mesa has limited means of increasing revenue. You can ratchet up the business, dog and other license “fees,” but they will not generate the millions of dollars needed to get this city back into the black. We can’t count on a miracle from Wall Street, or a bailout from Washington.

Without an infusion of significant additional revenue, the city’s only option is to make further cuts to balance our books.

But where to cut? Our roads and parks are already neglected, city programs have been eliminated and the prized dog poop bags are gone. Perhaps most importantly, these services account for less than 20% of our annual budget.

The lion’s share of cuts will have to come from the lion’s share of our budget — employee salaries and benefits.

Tragically, salaries and benefits now account for more than 80% of our yearly budget. That figure ballooned when times were good, and now the chickens have come home to roost. The reality is that when you commit this much of your budget to salary and benefits, that’s from where the cuts have to come.

Unfortunately, the city has locked itself into further contract extensions with the public-safety units, which provide only minimal short-term cost savings and do more long-term harm.

Funny — the $110 million pension shortfall wasn’t brought forward during those votes.

This city will be forced to make cuts to salaries and benefits in order to right our wayward ship. Sadly, these cuts will come by way of layoffs. We simply cannot continue at this pace. The sooner we realize this, the more jobs we can save.

City Planning Commissioner Colin McCarthy is a father, husband and Costa Mesa resident.