THE GOOD, THE BAD, AND THE UGLY

On June 28, 2012, Stockton, CA (population 300,000) became the largest U.S. city ever to file for bankruptcy.  This agricultural center about 80 miles east of San Francisco filed for Chapter 9 protection, which is a special type of bankruptcy reserved for public entities.  The root of their problems began back in the 1990's, when real property values were soaring and the U.S. stock market was booming, bolstering stock and pension funds.  With soaring real estate values, a slew of new tax revenue came to Stockton.  Assuming that the good times would last forever, Stockton gave first their firefighters, then all their employees, full health care coverage for life, offered generous pension deals to all employees, approved spending on large projects to raise Stockton’s profile, and lowered the retirement age for city employees.  A downtown high-rise building was acquired for a new city hall, and the downtown river front was revamped.  Now, many of the employee concessions given by the city will be axed as part of the bankruptcy process.  Stockton has earmarked $3.5 million in bankruptcy legal fees.  With the real estate crash, the poor economy, and the elimination of Redevelopment by the state, it is now time for spendthrift cities to pay the piper.  (Mammoth Lakes has also filed bankruptcy, with San Bernardino next.  Other CA cities will surely follow.)

Meanwhile, in Visalia, the current and past city councils, along with city manager Steve Salomon and staff, have been frugal with our financial resources.  In recent years, some general fund reserves were needed to balance the budget.  This year we passed Visalia’s first balanced budget in four years without having to dip further into reserves.  Traditionally, Visalia city councils pass two-year budgets, and then makes adjustments as needed during the course thereof.  Borrowing from staff reports and using a movie metaphor, let’s examine the new city budget for fiscal years 2012-2013 and 2013-2014.

THE UGLY
The city has fewer employees per 1,000 population now than it had 20 years ago.  Amongst the  difficult choices the council had to make in July was to collapse departmental structure due to the loss of redevelopment funds.  In particular, the position of Ricardo Noguera as housing and economic director was eliminated.  Ricardo has done a wonderful job in assisting to attract new businesses to Visalia over the years.  Other positions eliminated included two park tree trimming positions and that of a financial analyst.  City-paid retiree health care benefits were previously trimmed by the council and will be phased out completely over the next few years, and retirement age for new city staff has been raised.

THE BAD
While sales tax revenue has stopped declining and is beginning to grow, property taxes have not grown and interest earnings are almost non-existent as a revenue source.  Three years ago, the council gave ourselves and city employees a 4% pay cut, and since then no raises, other than required increases in pension and health costs.  As a result of collapsing departmental structure, employees have been moved to new assignments in response to the loss of redevelopment funds, reduction in federal grants and changing needs of the city.  The general fund subsidy of the convention center’s operating budget was reduced, and we authorized a variety of operational cuts to departmental budgets.

THE GOOD
On the brighter side, the city’s enterprises have continued to respond to a growing community, adding facilities and services to meet growing demand.  The transit system and solid waste enterprises have received grants to fund some of their capital needs, and are operating solidly in the black.  The water conservation plant (sewer plant) upgrade moves ahead with a  planned $100 million plant upgrade which should be completed by next year.  This upgrade will meet the goals of improved water quality of sewer discharges and potentially recharging the city’s over-drafted aquifer.  With its increased capacity, we will continue to be able to attract new businesses and service expansion needs, in particular in the industrial park.  The city’s two main general fund revenues, sales tax and property tax, appear to have reached bottom.  Sales tax revenues have had consistent growth since 2010.

While we are not out of the woods yet, Visalia’s economy continues to grow and improve.  Although Visalia probably won’t make the national headlines like Stockton, the Jewel of the Valley continues  to sparkle.

DONUTS AND DISCUSSION
In an ongoing effort to be available to our citizens, I have started informal Saturday morning get-togethers which I’ve  entitled “Donuts and Discussion,” open to all.  Fire Chief Mark Nelson and I held the first one at the “Donut Factory, Etc.” on N. Demaree in July.  Many thanks to our hosts (they have terrific gourmet donuts, be sure to try their “man donut” with bacon!).  Our next D and D will be Saturday, September 22 at Panera Bread on South Mooney, 7 to 8:30 a.m.  Police Chief Colleen Mestas will be there with me.  Feel free to drop by for a pastry, and to visit about city issues.

Warren Gubler
Visalia City Council Member