Monday, October 24, 2011

What Kind of California Town Do You Live In?

While much of California is a mess these days as a consequence of the weak economy and years of overspending, it's important to remember that there's a lot of variation across its towns and cities, in terms of fiscal health and the ability to take their troubles seriously. Not all governments are created equally irresponsible here. As these three stories illustrate, California cities often fall into one of three types.

Deadbeats. If you read this blog regularly, you're probably aware of many municipal governments openly flirting with bankruptcy these days — the cities of Montebello, Santa Ana, and Bell come immediately to mind, along with the Mendocino County Recreation and Parks District. There are also many governments right on the edge of major financial trouble. As an example, consider Stockton. Back in May, the Central Valley city was struggling to close a mammoth $37 million hole in its budget. Though it ultimately fixed that deficit, the problems created by years of overspending and borrowing on a foolish downtown revitalization effort remained, and yesterday, the city warned it could default on redevelopment bonds issued in 2006. According to an October 12 filing with the SEC, the debt service on those bonds exceeds revenue by almost $900,000. In other words, the city is broke.

Welfare Queens. Of course, not being completely out of money doesn't mean your government is doing well. As an example, consider the city of San Bernardino. Unlike Stockton, it isn't broke; but as one of the poorest cities in the country, it's hardly doing well. Almost half of the town's residents are on welfare — either Medi-Cal, food stamps, or cash assistance — and all told, it receives a staggering $524 million a year in federal and state welfare assistance. In other words, San Bernardino's economy consists in large part of cash transfers. It's not in danger of declaring bankruptcy, but ask yourself whether paying people to be poor is a sound model for an economy that leads to greater wealth.

Beacons of Sanity. With all the bad news these days, it's important to remember that there are municipal governments in the Golden State trying to do right by the taxpayers. The most obvious example, of course, is Costa Mesa, which is attempting to implement steep cuts in spending to get out ahead of ballooning pension costs before they turn into a crisis. Yet the town of Pleasanton, in Alameda County, also deserves a tip of the cap. In addition to being one of the nicest towns in northern California, Pleasanton is embarking on a plan to cut its pension debt by at least 10% in the next five years. Currently, city employees contribute almost nothing to their retirement benefits; under the City Council's new plan, concessions on these contributions will be used to pay down its unfunded liabilities ahead of schedule. While the plan doesn't go far enough — Pleasanton's unfunded liabilities sit somewhere between $82 million and $144 million — they've got the concept right: taking on short-term pain and deferring spending in order to keep debts from snowballing.


  1. JustinOct 24, 2011 09:15 AM
    I live in a town that is spending a lot of money from the beautifully-ironically-named "Putting America To Work" Act... taking more than a year on a project that most people in the business estimate could have been done properly in two months. As a result? Several business closed, many have had to lay off people. (The local gas station owner told me personally that 2011 might be down 60% for him.)

    But whoever got the contract from the government sure has it made...
  2. RobOct 24, 2011 09:18 AM
    As it happens, I don't live in a town at all, but in an unincorporated area (Rossmoor) that our county supervisor, John Moorlach, has been trying to force into incorporation for as long as I've lived here (four years). I don't understand his zeal; I suspect it comes from the county not wanting to provide services for (relatively) densely populated areas. The locals, many of whom are original owners from when the neighborhood was first developed in the 1960's, opposed incorporation by 2-to-1 margins, and so now he schemes to chip off sections to cede to neighboring Los Alamitos. In his grander dreams, he envisions Seal Beach, Los Alamitos, and Rossmoor becoming a "supercity", presumably on the grounds of more "efficient" government (i.e. easier to raise taxes or some such nostrum).

    I used to have a lot of respect for Moorlach, especially in his role following the county bankruptcy in 1994. Years in office have infected him with a kind of power madness that claims so many elected officials.
  3. GSLOct 24, 2011 09:24 AM
    There's a lot to admire about Moorlach, but he is a strange character: back in August, he gave a detailed interview with the Register that seemed to be raising the alarm on pension liabilities and the threat of a second bankruptcy. Then he reversed course and said he was just stressed out about the issue. Um, okay?
  4. RobOct 24, 2011 09:26 AM
    Translation: "Oh, shit, I forgot I might need the Sheriff's Union help on my reelection bid."
  5. GSLOct 24, 2011 09:36 AM
    Translation: "Appearing emotionally unstable will hurt my re-election bid less than not getting the Sheriff's endorsement."
  6. RobOct 24, 2011 11:53 AM
  7. AnonymousOct 24, 2011 02:34 PM
    Carlsbad seems to have some semblance of sanity:
  8. GSLOct 24, 2011 05:28 PM
    True. And nearby Oceanside is also not immune to good ideas.
  9. AnonymousOct 24, 2011 09:02 PM
    The Unincorporated San Diego County is doing a pretty decent job staying solvent and in the black considering its high unemployment rate. As municipalities go, it's using fairly responsible budgeting.
  10. Mike McCarthyOct 29, 2011 02:46 PM

    'whether paying people to be poor is a sound model for an economy that leads to greater wealth'?
    Is your point that these people are bad and don't deserve the support of the rest of us? What would be a better plan?
  11. Nick EmptageOct 29, 2011 02:49 PM
    My point is that systemic, entrenched poverty is a predictable consequence of California's hostility to private enterprise. I make no judgment about the people in question, but they need opportunity more than they need "help".