Statistics alone cannot easily determine a city’s fiscal health. A column (Jan. 22) recently touched on the markedly different reports ranking the financial health of California cities: the state controller’s on-line dashboard, and the more recent report by state Sen. John Moorlach, R-Costa Mesa. Recently, I provided commentary in response to the significant distinctions between the reports. When asked how two reports can be so different, I answered, “You know what they say about statistics …”
The interactive features of the state controller’s dashboard provide an engaging platform to review municipal data. Unfortunately, much of it is outdated since the data comes “from financial indicators … for the fiscal year 2016-17, with certain limited information dating back to the fiscal year 2014-15.”. Many San Gabriel Valley cities have taken serious steps to improve financial stability, including Monrovia, San Gabriel and Baldwin Park, which is not reflected by the dashboard.
The Morlach report weighs heavily on debt, and it determines the rankings on a per- capita basis. One must be aware the per-capita basis may skew rankings. In reviewing the report, it appears to me there are wide fluctuations in both directions, varying for cities with large or small populations.
What was not considered in the state controller’s report is that quite a few cities have very recently issued pension obligation bonds to pay down California Public Employees’ Retirement System (CalPERS) debt. Such bonds are saving Baldwin Park $23 million over the 25-year term of the bonds. Some residents questioned Baldwin Park for going into debt, but this is much like refinancing your home loan at a much lower interest rate to lower your payment, which usually is a no-brainer.
Speaking of refinancing, Baldwin Park also recently refinanced some existing bonds, which is saving Baldwin Park several million dollars, another item not reflected in the recent rankings. Almost any successful business or home owner would agree that sometimes debt is necessary as long as you don’t get in over your head — perhaps to start up a new business or to buy your first home.
Sometimes debt is used by cities to invest in the future to make improvements that may have spin-off benefits, such as improving the community or spurring other new developments. An example is Baldwin Park’s issuance of bonds to finance Metrolink rail crossing safety improvements. By bonding against voter-approved transportation taxes, Measure M funds, Baldwin Park immediately began the rail-crossing quiet-zone improvements, allowing for Baldwin Park to apply for a quiet zone where trains aren’t required to sound their horns.
City managers need to be ever-vigilant. In my younger days, a wise old city finance director once told me, “It’s not the recessions you have to worry about; it’s during the good times when cities get in trouble.” Looking back on the Orange County bankruptcy, with these rising public pension costs, we are all dealing with tough problems today. (Yes, there have been pension reforms. However, they will take decades to be fully effective.) Other indicators of a city’s fiscal health are its bond rating and general fund reserve. A city with an AAA- bond rating and a rainy day reserve fund at least equal to 18% of its annual general fund budget is considered pretty financially sound.
Don’t be afraid of all public debt. Let’s be wise about it and how we make investments. I predict when we look back at Inglewood’s NFL stadium in 10 years, we will see the city made a brilliant investment. Oh, and if you don’t know what they say about statistics, Google it; there are many fitting phrases. My favorite: “Facts are stubborn things, but statistics are pliable.”
Shannon Yauchzee is city manager of Baldwin Park.
2020-02-09 15:02:58Z
https://www.pasadenastarnews.com/manipulative-statistics-skew-view-of-san-gabriel-valley-cities-finances
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