Despite an impassioned plea from a former Mayor not to enact pay raises for employees that will cost the city more than $1 million per year, the La Palma City Council voted to approve a potential deficit in next year’s budget.
The City Council voted unanimously in its May 6 meeting to approve a series of measures and transactions that will ultimately provide city employees with payraises of more than 15 percent over the next three years.
The action came, however, not before a former mayor who helped dig La Palma out of a deficit following the 2008 financial crisis issued a dire warning.
Gerard Goedhart, who served eight years during a previous, and relatively serious, La Palma deficit said it took years, staff cuts, pay cuts and tax increases to escape.
His analysis, said Goedhart, points to red as he urged city officials to move with caution.
“I think it is important because if you approve this, you are going into a deficit,” he said, asking the city Council to discuss the matter before acting.
Deficit spending means spending more funds than the city has budgeted for a calendar year.
City financial advisor Mike Matsumoto said while the city’s budget of more than $22 million will show a $43,000 surplus this calendar year, there were some projections that indicated the new spending plan could produce deficits for the next few years.
In some cases, he said, the deficits could be as much as $400k.Moreover, he said city officials needed to transfer an additional $1.3 million this year alone to cover a three-year, three-step pay raise that will provide pay raises of over 15 percent to staff and police, the financial advisor said.
Goedhart said he has worked as a financial advisor since 1978, working with special districts and other cities on their financial modeling.Goedhart called one of the city’s charts “ridiculous,” challenging the city’s assumption that the city could grow itself out of deficit spending.
Conditions now are like they were in 2008, the former mayor and council member said.
He warned that the economy is slowing (which translates into a slowdown in tax revenue), saying also that the city has already raised its sales tax, and raised its hospitality (occupancy) tax, so Goedhart rhetorically asked where additional revenue would come from?
Mayor Pro-tem Nitesh Patel asked Matsumoto to again explain his financial modeling to assure residents that the council, specifically that the Council would remain financially sound even by approving the changes.
The Council Chamber’s weak audio made it difficult at times to understand Matsumoto, but he explained several financial formulas that indicated that despite several potential future projections, the city’s budget and its reserves of more than $20 million would be protected.
In addition, Interim City Manager Michael Egan said the Council receives regular projections of tax collections from HDL consulting well before any downturns, so the Council would have time to act.
“I feel comfortable with the numbers,” said Mayor Pro-tem Nitesh Patel, saying that in the future, the city can act immediately if the situation arises. He said, “Safeguards are in place,” he said, and if necessary, the city could reopen labor negotiations if the situation warrants.
“I’m not saying that we’d like to reopen the labor negotiations or anything like that, but that is a safeguard that has been put into place to protect the city,” he said.
When the city locked down for the COVID-19 pandemic, Patel said the city “gave no one raises,” and that the city “pushed it to another year.”
Patel further suggested that any future slowdown would affect other cities too, so action could be taken then.
“But to stop now and not do what we need to do out of fear, is not the way to act,” said the Mayor Pro-tem, but rather, “we need to act with caution, put in our safeguards, and move forward,” said Patel.
Patel then moved the pay raise resolution that authorized the financial adjustments, and it passed 5-0.
In other business, the La Palma City Council;
Proclaimed May through August as a “Drowning Prevention” period.
Recognized multiple players of John F. Kennedy High School’s basketball, cross-country, golf, football, soccer, volleyball, and wrestling teams for winning various championships, as Mayor Pro-tem Patel presented certificates to the young athletes.
In addition, Council member Janet Keo Conklin thanked the OC Board of Supervisors for recognizing Cambodian Heritage Month as she joined her sister Samone, both descendants of Cambodia/Laos, to thank the Council and other leaders for their recognition.
- Heard Keo Conklin recognize city leaders in honor of May being declared as Asian American Pacific Islanders (AAPI) Month.