Mailbag: Leaders, columnist cite misleading figures

A month ago Orange County Supervisor John Moorlach and Councilman Eric Bever co-authored a commentary on these pages decrying the fiscal management practices of our elected leaders and city staff. Unfortunately, Daily Pilot columnist William Lobdell picked up their baton and ran with it in a column of his own two weeks ago in which he perpetuates the misinformation generated by the earlier commentary.

Moorlach, an accountant, Costa Mesa resident and, according to Lobdell, the fellow who could have saved Orange County from bankruptcy if we’d have listened to him, took numbers provided to him by Bever assuming they were valid and pontificated about them. The problem is, some of those numbers on which Moorlach based his analysis were not accurate. Bever asked city staffers a couple questions and didn’t understand the answers. He thought he was adding apples and apples when he was actually adding oranges and tangerines.

In their commentary Moorlach/Bever said, “The city’s $50 million unreserved savings has dissipated in less than three years.” Lobdell, in his column, said, “The city has plowed through $50 million in savings in three years...” Unfortunately, that information is incorrect. We’re talking here about one of the components of the always-confusing “Fund Balance,” that segment of the budget that contains monies earmarked for specific circumstances in some cases and less-rigidly controlled requirements in others.

I like to think of the Fund Balance as a cash drawer of a cash register. It’s a large drawer that contains money, divided into compartments of varying denominations, plus coins of different values. In the Fund Balance “drawer,” there are two major sections, Reserved and Unreserved. The Reserved section includes amounts for things with legal requirements, like Inventories, Prepaid items, Debt Service, Encumbrances and, until recently, Self Insurance. The “Unreserved” section includes amounts that are “designated” for specific purposes, such as “working capital” — that’s the $14,125,000 commonly known as the Emergency Reserve or the “rainy day fund.”

This is the amount our leaders feel is essential for the continued operation of the city in the event of an emergency - earthquake, civil unrest, etc. Other sub-sections of that part of the drawer are designated for workers’ compensation claims; accrued compensated absences (vacations upon termination, for example); general liability claims; post employment benefits and a section designated for use to balance the following year’s operating budget. The remaining compartment is the “undesignated” segment.

The “Total unreserved” sub-total, which Moorlach/Bever and Lobdell call “Savings,” — for the fiscal year ending June, 2007, was $55,057,757. For FY ending June 2008 it was $50,467,786. For 2009 it was $33,716,155. The difference between 2007 and 2009 is $21,341,602, a significant amount, but not even half the myth shoved off on the readers by Moorlach/Bever and Lobdell. The number for the year ending June 2010 has not yet been authenticated, but city staffers estimated it will be in the area of $30,000,000 — still well short of that $50 million proclaimed by Moorlach/Bever and Lobdell.

The “undesignated” segment, that portion that might be available for use balancing the next year’s budget beyond the amount “designated” for that purpose, has gone from $13,984,367 at the end of FY2007, to $14,145,980 at the end of FY 2008 (It increased because the “self insurance” segment, $2 million, was shifted from “Reserved” to the “Unreserved” section of the drawer, down to $1,339,359 for FY 2009. By now it is likely the “undesignated” section of the Fund Balance is completely depleted.

In the budget adopted by the City Council earlier this year for Fiscal Year 2010-11, $9.4 million was “designated” from the Fund Balance account to help balance the budget — more than double the previous year. Due to the downturn in the economy, all forms of revenue — Sales Tax, Property Tax and the Transient Occupancy Tax — are down, so even that amount may not be sufficient, which is why the employee bargaining units have come back to the table with proposals to help mitigate that shortfall. The employee “contributions” recently approved provided $3.7 million in relief, leaving just about $6 million shortfall remaining. In previous years, we might have just used more from the “undesignated” Fund Balance segment.

Moorlach/Bever and Lobdell also are in a tizzy about the high percentage of the operating budget that is used for staff costs (Salaries and Benefits), ranging from 80% to “near 90%,” depending on which version you choose to believe. Actually, I’m not surprised at those numbers because, in response to the economic downturn over the past couple years, the municipal leaders have stripped most non-essential programs from the budget and laid off or encouraged early retirement for 122 staffers. We are now operating at 1980s staffing levels. Although those “staff costs” have been reduced, the remainder of the operating budget segments have been reduced much more dramatically, which was the plan. The city trimmed less essential functions and retained those that were critical to the safe operation of our municipal infrastructure. Those remaining staff costs, such as for public safety, are labor intensive, hence the higher ratio to the whole.

That doesn’t mean we shouldn’t be concerned about it, but it also doesn’t mean the sky is falling. As part of the recent negotiations with employee bargaining units one of them has agreed to a two-tiered retirement program for new hires. The firefighters earlier agreed to come back to the table to discuss reductions if other associations agreed to reductions in future years — longer than the one year to which they agreed. Those changes won’t resolve our current dilemma, but will help downstream.

Measure “L” passed by a narrow margin, which means we will probably see an increase from the Transient Occupancy Tax for the last half of this fiscal year. We do not yet know the direction sales and property tax revenues are going this year, but we soon will. By the time of the mid-year budget report in January we should have a good idea of just how deep our budget hole for this year actually is. Presently, we are about $6 million off target. The council could consider changing the rules by which the funds within some of the Fund Balance segments are managed, which might help our situation short-term. With no additional “undesignated” Fund Balance money to tap, if revenues do not increase to pick up the slack there will almost certainly be additional reductions in “staff costs” through layoffs or by further concessions by the bargaining units — that’s the only place there is any money left to trim.

In the meantime, it is not helpful for municipal leaders to garble the facts to suit their own personal political agendas, and it’s not useful for those reporting those “facts” to accept them on blind faith, regardless the esteem in which the provider of those facts is held.

Geoff West

Costa Mesa

Krom thanks supporters

Thank you so much for the extraordinary support and encouragement you provided over the past 20 months. The results are in and, while we had a respectable showing, the power of incumbency carried my opponent (U.S. Rep. John Campbell, R-Newport Beach) to victory in the 48th Congressional District.

Having won five consecutive races for local office, I can tell you that winning definitely beats losing. That said, this campaign has been an amazing education, and I know that everyone on the campaign team has gained a lot from the experience. I have been inspired by the incredible interns and volunteers who have worked thousands of hours to support our efforts. As for our campaign staff, they are the best. We may not have caught the brass ring, but we certainly raised the game a bit, and earned the respect and support of a lot of folks who had never actively involved themselves in a Congressional race before.

Our goal throughout has been to demonstrate that people are still the most powerful force in our democracy. I truly believe that. As the dust settles from one of the more interesting campaign cycles in recent years, it’s important to ask ourselves how we can expect to build a brighter future for America when the drum beat of negativity in Congress only gets louder and louder. I know there will be much analysis offered in the days to come.

We started with nothing more than the certainty that this Congressional District deserved better representation in Washington. We end this campaign feeling enormous gratitude for the thousands of people who contributed time and resources to support and sustain us over the past 20 months. Thank you for making it possible for us to look back on this effort with pride and the satisfaction that comes from undertaking a great challenge and seeing it through.

This has been one of the greatest experiences of my life. Whatever lies ahead, I know the lessons learned through this campaign will be put to good use.

Councilwoman Beth Krom

Irvine

Newport Bay restoration project

Editor’s note: The following is the text from a speech Councilwoman Leslie Daigle gave Saturday to mark the completion of the Upper Newport Bay Ecosystem Restoration Project.

I’m very proud and pleased to be a part of this program. Getting this done has been one of my highest priorities. For some time, I have viewed the Back Bay as the heart of our community: It feeds the glorious bay that defines what is extraordinary and special about Newport Beach.

It is critical to the natural environmental health of our city. It is one of our greatest recreational assets. And it is inextricably linked to our water-based economy.

It cools us, soothes us, beckons us, and gives us relief from the surrounding urban activities of a thriving community.

We learn in life that every heart slows, and one of biggest dangers is the buildup of plaque, clogging the arteries, and ultimately leading to death.

Today we celebrate a successful operation to clear the arteries, give the heart of our community new vitality, and extend its life for decades.

The beneficiaries are very real: The migratory birds and fish who love Newport Beach as much as any tourist, and who need it even more for their survival; our fellow citizens who walk, jog, bike, fish, kayak and canoe here; our coastkeepers and naturalists who keep constant watch over our bay; our residents who have been drawn to life surrounding this bay, just as Native Americans were first drawn to the cliffs around us more than 11,000 years ago — long before there was a Fashion Island to divert attention.

And our small business entrepreneurs whose investments have given us new, and exciting ways to enjoy the bay.

So I would simply say this is a very big deal for all of us — a significant investment in the long-term quality of life of this area — and so much more than just a costly, ambitious public works project.

At a time when there is a national debate about the proper role of government in our lives, this project is the poster child for the wise and proper use of precious taxpayer dollars. By that I mean, it is a project of local, regional, state and even federal interest and significance.

And it is a project involving navigable and environmentally sensitive waters that is the primary responsibility of government to undertake.

It is as important as any infrastructure project we could ask our governmental entities to undertake for a long-term benefit of this city and this region.

There are many people whose help and leadership have brought us to this happy day. I will only single out three individuals and two organizations, who I believe have played critical roles that cannot be denied, underestimated, or overstated: The first is our senator, Dianne Feinstein, who put her reputation, determination and influence behind this project for all the right reasons.

The second is Congressman Ed Royce, from upstream, who supports watershed solutions. He authored the House legislation to enable the restoration.

The third is our city manager, David Kiff, who made it one of our city’s highest priorities, and helped organize and lead the effort.

The fourth is the Army Corps of Engineers, who play such an important, but often unheralded role in large scale projects of this nature.

And the fifth is The Irvine Co., which has done so much to protect, enhance and define our quality of life, for its guidance and advice throughout.

I hope I fairly represent the deep appreciation felt by my city colleagues, past and present, who have waited so long for this special day.

Councilwoman Leslie Daigle

Newport Beach