Op/Ed by Will O’Neill, Newport Beach Council Member
On March 12, 2020, our City’s Finance Committee met to discuss our city’s revenue assumptions for the following year’s budget. While COVID-19 was a topic, it was mostly an unknown variable with unknown financial consequences.
One week later, the Governor issued his stay-at-home order. Three weeks after that, the Finance Committee met again with much drearier projections. The budget adopted by the City Council for 2020/21 included hiring freezes, substantial revenue and expenditure cuts, and capital infrastructure deferrals.
Entire books will be written about events that occurred between then and now. For this topic, though, it is sufficient to be reminded how uncertain those months were for our families, our businesses, and our city as a whole.
This past Saturday, our City Council met for its annual planning session to discuss the priorities that we can expect to be placed into our next year’s budget. The projections are about as positive for the coming year as the projections were negative back in early 2020.
These positive projections are driven in large part by substantially increased property tax bases, more local spending that has driven up sales tax revenues, and transient occupancy tax collections that have rebounded on the back of short-term lodging.
Our largest operating expenses are, not surprisingly, salaries and benefits to our 700+ city employees. Also not surprisingly, our Police and Fire Department personnel represent that largest amount of the budget’s labor costs and are expected to continue to do so in the years ahead. In other words, we will continue to prioritize and fund public safety.
With our short-term operations well-funded, our City Council also addressed ways to improve our long-term capital improvement funding and debt management paydown.
Newport Beach will see a mixture of new projects (like the Junior Lifeguard Building), maintenance of existing projects (like road and streetlight upgrades), and replacing older projects (like the fire station/library at the end of the Balboa Peninsula).
Over the coming months, we will be refining a well-grounded existing plan for all of these projects and more.
Furthermore, we were heartened by the good news that our unfunded pension liability is expected to be reduced by nearly $100 Million from just a few years ago. This reduction occurs thanks to (1) a robust invest return last fiscal year by CalPERS and (2) substantial annual additional payments by the city.
While this is surely good news, that news is tempered by the fact that CalPERS has missed its investment return goal two of the past four years. If, though, CalPERS is able to obtain annual returns of 6.8 percent and future Councils stay the course, then Newport Beach will have fully paid off its unfunded pension liability by the year 2030. Once paid down, a future City Council will have the ability to decide what to do with an extra $45 million annually not needed to pay off its liabilities (don’t be surprised if past council members run again at that point!).
Hopefully that future council will use this additional discretionary amount to both invest in necessary large-scale projects like a new Police Station as well as tax relief.
In Newport Beach, we take fiscal responsibility seriously because we know families work hard for every cent that comes in and they want their elected representatives directly accountable for how and when we spend money. I’m grateful to live in a city where these values are homegrown and well-harvested.
Hon. Will O’Neill is a current Newport Beach City Council Member, in his third year as Chair of the City’s Finance Committee, and was Mayor in 2020.
Source: Newport Beach Independent