Managing our budget

By Rudy Fischer

There are multiple things we can do to keep our finances in good shape.

Because of inflation and escalating prices, over time our expenses will rise to meet our current revenue. But that phrase "current revenue" is important because it means we have time to find ways to decrease some of our expenses and to increase our revenue. That means the next city council will have to be creative and stay on top of spending. We are already doing some things such as looking at outsourcing services to save money and negotiating with our employees to keep salaries the same while enhancing their benefits. This latter is important because it will allow employees to pay less out of their own pocket for those benefits and will not cost the city more in PERS expenses (as a salary increase would).

Over the past several years there has been a great deal of discussion about whether the City Council should have put the Citizen's Initiative on the ballot or not. A judge decided that the City need not put it on the ballot because of the legal problems it would create for the city. The intent of the initiative proponents was commendable - to help the City get its public employee pension costs under control and protect the city's budget so that we can provide the services all of our citizens deserve. While I desperately want to see that, I don't want us to pass something that will get us sued by our employees, our 95 public safety retirees, their union, and CALPERS itself.

I don't know what happened at the Council meetings where this pension plan was adopted in 2002. Just about any first year college student with a calculator and a basic knowledge of math could have told them what would happen, though apparently the Council didn't have one of those on it at the time.

There is also a practical problem in trying to apply a solution for Pacific Grove only. Because the world doesn't start at David Avenue by Monterey and end at Sunset Avenue by Pebble Beach, we have to realize that what happens outside of Pacific Grove affects us also. If a fireman or police officer has a choice between working in a city that provides a pension based on a credit of 2% for each year of service and one that provides a pension based on 3%, where is that officer or firefighter likely to go?

That is why we need statewide pension reform so that pensions throughout the state can be set at reasonable terms and all California cities can actually negotiate contracts without having terms forced on them by PERS. At the same time, however, we as a city need to be willing to push back at PERS to put them on notice that they cannot just give their members more benefits without consulting the cities who pay for those benefits. In fact just this year alone PERS came up with almost 100 new benefits for their members.

This situation is not going to change until cities wake up and refuse to negotiate CalPERS contracts on the public union's terms. They also will not go away as long as Californians continue to vote for the continuation of taxes that allow the state to avoid dealing with this issue. The CalPERS headquarters is just down the street from the state capitol in Sacramento, and they have tremendous influence with our legislature.

We currently pay CalPERS on a regular basis, even though they do not justify those costs to the city until 18 months later. I believe that we need to push back and let them know that as of a certain date we will only pay expenses when justified on a current account basis. We also need to let CalPERS know that we will no longer pay for benefits that they give to their members until they have negotiated those benefits with us, and that we will withhold payment until that has happened and an agreement has been reached. The payments may need to go into an escrow account so that PERS can't say we are in violation of our agreement; but they should not get the funds until they get their house in order.

At the same time we need to engage with other cities to gather the forces that will be needed to push for a state wide legislative reform of CalPERS. When you are digging yourself into a hole you can't get out of; the first thing to do is stop the digging. Then you start filling the hole back up so that you can get out of it. I want us to stop digging and start filling.

Controlling our expenses is not the only way to manage our finances however. Another way is to increase the city's revenue, and the way to do that is to make it possible for our local businesses to grow and increase their revenue. When their revenue increase, so does our tax revenue. We should also reduce the barriers which allow people to fix up their homes if they want to. No one is going to force someone to improve their home and increase its value, but if someone wants to voluntarily do so shouldn't we allow that? That homeowner will then be paying property taxes on a more valuable property.

We are a city of homes - but we cannot forget that we have businesses here also. Since what the city receives back from the property taxes we all pay only covers about 26% of our city budget, we also need the tax revenue from those businesses so that we can provide services to the citizens of Pacific Grove, and I think we should have a supportive environment to help them succeed.

About 6% of the City's land area is devoted to business, yet nearly half of our city budget comes from the taxes and fees we receive from those business. A large portion of our budget also comes from the taxes that visitors generate, including TOT and sales tax revenue. In fact, visitor services seem to offer about the best prospect of increased revenues in the short term. A three night stay in a hotel gets the City more revenue for that month than the average property tax revenue of a home in the City. That is why we need to allow and encourage our hotels and bed and breakfast establishments to expand and improve their properties. To maintain our streets and infrastructure it is vitally important that the business sector stay healthy, and that is why we need to work with them + not in opposition to them.