Reducing Newport’s revenue stream threatens city service

Candidates in the City Council election are focusing on the city’s debt, which is a good thing. The present value of our certificate of participation (COP) debt is about $114 million, and our unfunded pension liability is $275.4 million (not the $500 million estimate widely circulated).

The real question is: So exactly what are you going to do about it?

Councilman Scott Peotter and, later, Finance Committee member Will O’Neill proposed refunding the existing Civic Center COPs, despite a report from our financial advisers that this would cost an additional $20 million. When confronted by these facts, it was blithely suggested that we simply “hire new consultants” in the vain effort that they could make the math produce a different result. This is simply reckless.

Peotter suggested that we should have issued callable debt instead of Build America Bonds. This would have increased debt service by $718,000 per year, or a minimum of $7.1 million until the first call date. If rates move up, the total additional cost would exceed $20 million. We need to make financial decisions based on evidence and fact, not irresponsible political rhetoric or slogans.

Both the prior and the existing councils made prudent decisions to re-amortize our pension debt to increase our payments and pay off the obligations faster. Once again, Peotter proposed speculating in the stock market with the additional payment rather than using it to reduce our pension obligations. These additional funds do not reduce our pension costs by 1 cent unless, and until, they are deposited with CalPERS. Despite this additional funding, our pension liability increased last year from $252.6 million to $275.7 million.

This increase shows why candidate proposals to reduce revenues, such as a cut in the business license tax for big businesses, cuts in the mooring fees paid by nonresidents, failure to raise sewer fees, selling revenue producing assets, such as the old city hall site, and not adjusting fees to recover costs are so irresponsible.

In the past two years, the City Council has either cut revenues or failed to approve recommended increases in the amount of more than $4 million. Peotter has proposed an additional $3 million in revenue cuts. Many candidates have endorsed this irresponsible course of action.

Cuts in key public safety, senior services and infrastructure improvements are inevitable, if we continue. Of course, many key political donors have directly benefited from these revenue cuts.

By the way, despite assertions to the contrary, the Team Newport budget for this year increased spending for operations from $260 million to $270 million. (With the completion of Marina Park, capital project spending is down).

Voters should question candidates who are telling you they will reduce debt, cut revenues and fund major projects all at the same time. Their math doesn’t add up.

KEITH CURRY is a Newport Beach councilman.