Our city hall debt may be a seemingly large number, but our unfunded pension liabilities make that pale in comparison, and are among the worst in the state. Newport Beach ranks #36 as the worst offenders in unfunded pension liabilities amongst more than 1,000 districts throughout California, and we rank third in a neck-and-neck race between Santa Ana ( $20,684 / Household), Brea ( $20,113 /Household), and Newport Beach ($19,062 /Household).
We are effectively borrowing on this debt at a whopping 7.5% interest rate, and under our current financial management plan, we are set for our city to fiscally spiral downward in about 9 years– and that is if everything goes “as planned”. Needless to say, our unfunded pension liabilities need some serious changes. Let me repeat that, because this is extremely important: If everything continues as-is, we will hit an unrecoverable downward spiral of not being able to pay our debts, starting in about 9 years. Nine years, everyone. Please pay attention to this.
This is something I brought up during the last election cycle when “Team Newport” promised financial responsibility. What has happened since then? We have seen department heads receive regular raises in the tens-of-thousands of dollars and we’ve watched entire departments increase in size. It strikes me that this would be the opposite of what should be happening here.
Mayor Diane Dixon has been at the forefront of increasing our unfunded liabilities all while telling the papers that our unfunded liabilities “keep [her] up at night”. She’s the one who advocated (and received) a tripling of police on Balboa Peninsula during the two lowest crime years in our city’s history. With Balboa Peninsula crime dropping faster than any other area of the city– by double digit percentage points year over year– it’s hardly the time to triple the police force if what truly concerns you is unfunded pension obligations.
Before Team Newport was elected in 2014, I spoke with official and unofficial leaders of our local PD and Fire to figure out what can be done to help reduce the cost and stop our servicemen from being routinely demonized for a debt that the city itself decided to leave unfunded. (Classic politics: Strike a deal, refuse to fund it, and then blame the other party for the debt). Their solution then was the same as it had been for years: The city must honor its existing agreements, but the officers themselves would be happy to support reducing wages and pensions for new-coming employees.
This “don’t mess with us, mess with the new guys” approach may strike some as hypocritical, but the fact is, Newport came to an agreement and regardless of how bad (or even incompetent) the city was at negotiating, we must fulfill our existing agreements.
This strategy is no secret, so why are we– so many years later– still hiring new people under unsustainable plans? I am sure we have the best negotiators the money can buy on our side– we certainly pay them enough to be– so I won’t speculate. But I will say that our local police and fire unions (unions, not the officers themselves) spent $74,730.6 (NBFD Union @ $36,994.83 + NBPD Union @ $37,735.77) in the 2014 election cycle, and spent $66,926.05 (NBFD Union $16,926.07 + NBPD Union $49,999.98) during the 2016 election cycle, and will now have 6 of 7 union-backed candidates on council. So why isn’t the council acting to decisively fix our pension problem? What a mystery.