Marina Budget Solution

With the Marina City Council meeting Tuesday night to discuss the budget issues that face the City, I want to post a "Letter to the Editor" that I submitted to the Gazette last week. After the Council's decision not to choose an developer for Cypress Knolls this letter is even more important.

More later...

The Marina City Council has embarked on a series of scheduled meetings regarding the 2011-12 budget and an unknown number of ad-hoc meetings on the same subject. For the past few years the City Council has not dealt with the income side of the budgetary process; rather the Council has relied on cuts and union renegotiations. If not for a couple of then City Council members and the willingness of the public to tax itself, we would not have any additional income.

This Council has already signaled that they will continue to center their discussions on the expense side of the ledger. It is my opinion that the answer to Marina’s long term budget issues is not that difficult to solve and it does not include additional cuts.

First, let’s understand what the future looks like for Marina today from a larger prospective. The Federal deficit will continue to limit their ability to push funds to local and State governments. Second, the State of California will continue their attempts to take monies from Cities, or at the least, push expenses back to Cities and Counties. This will not change for several years so there is little or no help from outside sources for years to come.

Even with the new taxes that voters approved, (approximately $1.8 million in new funds) the city will still have a structural annual deficit and will need to draw from our reserve fund. While this is not optimal we know this will not last forever and time is not on our side as we wait for the housing market to improve. At current levels we have about 2 years before our reserves are depleted. We can only hope that the housing market improves in that time and that we start to see new homes added to our tax base to help balance our future budgets.

On the expense side, we know that we are at an absolute base level for our Police, Fire, Administration, and Recreation departments. With crime increasing on most levels, due primarily to ongoing economic issues, we cannot jeopardize our community by cutting any additional public safety services. In fact, the community told us this by approving the new taxes. Our administrative departments are substantially understaffed and cannot lose anyone else and still perform the basic functions we require.

All that said, do we have any options that are not being considered? The answer is a resounding yes!

The City of Marina is the owner and the property manager for both the Abrams and Preston Park housing communities. The City Council has repeatedly underfunded the maintenance funds for these communities to the determent of both those that live there and the long term value of the properties. This is not a desirable circumstance for either community but I want to focus on Preston Park for now.

It is my understanding that Preston Park is valued somewhere between $50 and 60 million dollars. For the purposes of this exercise let’s say that number is the conservative $50 million. It is my opinion that the City needs to sell this property with all the current restrictions in place, (i.e.; the property would stay at least 20% affordable). It should be noted that while the residential housing market is still troubled, the apartment market is very robust, so sales of this property would be very possible. So let’s assume that we can get $50 million for Preston Park; half would go to FOR A (a very willing partner in the sale) so the City of Marina would net approximately $25 million.

Now, let’s further our example with a couple of hypothetical Council actions with those funds. First, take $1 million for deferred CIP projects like fixing pot holes and back fill a couple of much needed staff positions. Next, take a second million and honor our contracts with our police and fire personnel for the cost of living increases they deserve. That would leave $23 million. Finally, add three million to our immediate reserves thus extending them for at least one to two more years. We would still have a $20 million dollar balance.

I would suggest setting this aside in an investment fund with the Monterey County Treasurer or outside professional management. At today’s current rates, investing these funds in a series of properly laddered and balanced AAA rated bonds would garner approximately 3 to 5% interest. An average rate of 4% would generate approximately $800,000 annually (5% would generate $1,000,000 annually) that would be available to our general fund. This number all but replaces the income we currently use from Preston Park funds today in our budget. If Abrams is included the numbers improve even more, but since there is a note on this property the net balances would not change drastically.

An additional benefit is that a $20 million cash reserve would significantly improve the City’s credit rating thus reducing the cost of any bond financing that might be desired in the future.

It is my opinion that the long term health of the City’s finances can be met with this plan. It also gets the City out of the residential property management business which is not the proper role of government. This plan breaks the dependence on any outside sources for the future health of our City and allows us to determine our own destiny as other entities struggle with their own long term issues. I believe this is an option that must be thoroughly considered and acted upon over the next 12 to 18 months.