Santa Paula’s Finances on a Precarious Path
The City of Santa Paula is in trouble and elected officials don’t appear concerned.
For some years now, it has been spending reserves to cover operating losses. Reserves have been depleted to dangerous levels. The five-year budget recently approved projects losses even with the benefit of the East Area development. The recent sales tax increase was spent on increased wages for almost all City employees and not for infrastructure improvements or building up reserves. The higher wages mean higher pension costs which have not been paid.
The City’s General Fund emergency reserve is dangerously low. The Government Finance Officers Association recommends a City maintain two months operating expense in emergency reserves. That would be $2.2 million in Santa Paula’s case, but it is down to $735,000, maybe three or four weeks’ worth.
The five-year plan is bleak with revenues growing at a lower rate than expenses. There is no happy ending when you’re starting out at a slight loss, or at best a break-even position.
Beginning 2020 and every year thereafter (when the reserves are gone) the City will be operating at a loss.
There is no funding for retiree health care costs, or replacement of aging vehicles and equipment.
The City’s water and sewer funds will need a significant infusion of cash in the years ahead. A rate study was completed last year but the City has been reluctant (politically?) to move forward with needed rate increases. Many workers in those departments will receive 15.8 percent raises over the three-year contract that started last fall.
The City Manager as part of the 5-year budget projection, wrote “the true cost of running the City cannot be fully captured without these liabilities being funded.” And yet he does not propose any plan to secure the funding.
To balance the current budget the Council approved taking $500,000 from water in-lieu fund to pay City water bills. VCTA has already questioned whether that violates both the Santa Paula Municipal Code and state statutes and potentially exposes the City to a lawsuit. The City has yet to respond.
And the City’s pension debt is approaching $30 million and CalPERS has announced that the annual payments to fund this debt are expected to climb to $4 million a year over the next few years, almost double what the City paid in 2017-18.
Council member Procter summed up City finances saying “I’m looking at it from a point of optimism”.
Anyone who lives or works in Santa Paula should be concerned. City management, the Mayor and the Council are just letting things happen and are not addressing the problems that are taking the City toward bankruptcy.
Or is that what they want?