By Steve Stewart, Dana Point

In his May 15 State of the City address to the Chamber of Commerce, Mayor Carlos Olvera was quoted as urging us all to “Catch the wave. Catch the wave we are on right now.” Exactly what wave is he thinking of? Could it be a wave of financial crisis that may be crashing on Dana Point?

Consider our city’s financial position. Three straight years of deficit spending (2011 through 2013), were followed in 2014 and 2015 by massive and reckless expenditures exceeding $20 million just for streets, sidewalks and landscaping in Town Center. Our general fund reserves, which were $45 million in 2008, are expected to be only $15 million at the end of this year. Where did that $30 million go? Most of it went to Town Center. Our city now has a small fraction of the millions in financial reserves held by better governed local cities, such as San Clemente and Laguna Niguel.

Mayor Olvera went on to say, “Let visitors pay for it while we enjoy it,” referring to room tax our hotel visitors pay. Sounds like the good times will never end, except our city has been spending much more than we take in, including room tax revenue, for a long time. Does the mayor understand how he is risking the city’s financial future by banking on the tourism industry to fund his reckless spending? Tourism revenue to the city dropped by millions in the 2008 recession and its aftermath. Does he really think that cannot happen again?

Does the mayor know there is almost no money (capital budget reserves) left to pay for the inevitable replacement of $200 million in city assets such as streets, vehicles, park fixtures, building interiors, computers, etc.? Those assets are aging and deteriorating as all infrastructure does. How are we going to replace them with such low reserves? San Clemente has $50 million reserved for such purposes. Laguna Niguel has $75 million. At the end of fiscal year 2015 Dana Point will have $15 million.

As if this story were not bad enough, there is now a proposal before the City Council (brought to you by some of the same people who pushed the Town Center project) to radically restructure property developer parking obligations in Town Center. The amount of required parking is reduced from the original code and developers will be given credit for their street parking spaces toward their obligation. Instead of developers paying $40,000 per required space to hand off their obligations to the city, which would use the funds to buy parking spaces, they are let off the hook and the taxpayers will cover that burden. The unfunded liability transferred to the city and the taxpayers by this proposal could exceed by a wide margin the $20 million we all just spent on PCH and Del Prado, including the nearly $600,000 arch being installed at the north end of the newly renamed Lantern District. Should a city with hugely underfunded reserves be spending $600,000 on a decorative arch?

Some people think we should just “catch the wave and let some visitors pay for it.”

Sounds pretty risky to me.

About The Author Dana Point Times

comments (1)

  • Excellent, but very alarming article, Mr. Stewart! What on earth could our Council be thinking? Let me get this straight. Our reserves went from $45 million to $15 million in 7 years, most of it spent on one project – Town Center — and that project doesn’t seem to be producing any major return on investment (i.e. sales taxes and property taxes) any time soon. What an unwise investment! What were they thinking? ( Oh yeah, Solyndra was already taken.) All that hard earned taxpayer money spent in one part of town, with no payback in sight? Incredible.

    Worse, they’ve placed us in a scary position in terms of reserves going forward. I took a look at the budget on the City’s website and it shows that about $9 million of that $15 million is for cash flow and emergency reserves. That means that only about $6 million is available for major capital projects or unforeseen events like a major downturn in revenue. In 2008/9, TOT declined $8 million in one swoop when the recession hit. What happens if that very real possibility happens again? Do they really want to play so close to the wire? How can these guys call themselves fiscal conservatives (like they love to do at election time) when they’ve spent us into if not dangerous, at least imprudent territory? How do they justify running our reserves so low when neighboring cities have much greater protection against contingencies? Besides TOT volatility, we have very real risks like earthquakes, fire, landslides, or just unforeseen major repairs on infrastructure.. This city has been around for quite awhile. How old are all those $200+ million in assets? What happens when they start to deteriorate?

    Oh yes, and I also noticed that they cleaned out their own $2.5 million capital projects reserves and then, in the new budget, crow about paying half of it back? They raided it and another State reserve in order to plow another $8 million into the Del Prado improvements, and did it right after last fiscal year end so no one would notice. Guess they hoped to return those funds before anyone was the wiser, but now they have to explain why those reserves, that were such a good idea a few years ago are no longer needed. Wow. I hope those palm trees were worth it.

    Of even more concern is that these guys seem to think the gravy train will go on forever. They show a less than $800,000 increase in reserves in the two year budget. At that rate, it will take 75 years to pay back the $30 million they spent in just 7 years. And worse, a big proportion of City expenditures, like the Sheriff’s Dept. which is a third of the budget, are virtually fixed. “Ride the wave” indeed! At this rate, we might ride that wave right into the jetty.

    Thanks for having the courage to expose this. Let’s hope voters start paying attention before it’s too late.

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