Pacific Progressive

Fixing Tustin's Decaying Water System Discussion Delayed to Oct 20

The third time was not the charm last night at the Tustin City Council meeting.  The hot potato of water rate increases to fix a falling apart system was supposed to come back for the third time in three months but was delayed until the October 20 meeting due to the absences of Councilmen Palmer and Gavello.  Staff worked to craft six proposals presented in the 127 page report (follow links to Oct 6 agenda).  

These problems did not evolve overnight. Rawlings Reservoir has had cracking problems since 1991.  Tustin is not a dry, poor, dusty desert town with limited resources for capital. Tustin is, according to Forbes magazine, a good place to live. So why is Tustin in this situation?

The six options created by staff range from fixing the problems and rebuilding cash reserves called for by prudent fiscal management (Options 1 and 2), fixing the water infrastructure on a five year schedule and not building reserves for five more years (Option 3), fixing only a few things and not building reserves for five more years (Option 4), fixing a few things and  not building reserves at all (Option 5), and just raising rates to keep barely even and putting the problem off for another day (Option 6.) 

Option 1 - Allows debt to be issued in February 2010 to build a new Rawlings Reservoir and fix the Tustin Avenue Well.  Simon Ranch Reservoir and Booster Station and Beneta Well can be fixed in FY 2012-13. Completes other pay-as-you go projects.  Meets existing bond covenants.  Cash reserves replenished within five years.

Impact of State Budget Cuts on Orange County

State budget cuts caused by an obstructive minority of Republicans in the State Legislature are causing hardship for all Californians. Even though the majority rules when it comes to deciding elections, a minority in the State Legislature can force the rest of California to live in a way that they didn't vote for.

In Orange County, the pain is made worse by the Supervisors unwillingness to backfill programs cut by the State or to aggressively seek other sources of funding.  At the most recent Orange County Board of Supervisors meeting, the pain of budget cuts was laid out in detail. 

• Eliminate Prop 36 Substance Abuse and Crime Prevention Act Funding  -  $1.1 M Probation Department, $328,483 District Attorney, $328,483 Public Defender , $4,1114,760 OTP 10 full time positions in Probation Department, 9 other positions
• CalWORKS - $481,491 and 5 full time positions
• HIV Reduction- $1,399,109 and 9.5 full time positions'
• Early and Periodic Screening, Diagnosis, and Treatment Services (EPSDT) - $470,066
• Eliminate Maternal, Child,  and Adolescent Health - $65,304
• Children's Dental Disease Prevention - Healthy Smiles - $240,219
• Adolescent Family LIfe Program - $550,762
• HIV Prevention - $441,482
• Mental Health Managed Care - $4,313,800
• Statewide System Automation for Social Services Agency - $249,691
• Medi-Cal Administration - $700,000
• In Home Supportive Services (IHSS) Public Authority - $578,397
• Child Welfare Services - $5 M
• Foster Care Administration - $2,809,703
• Transitional Housing Program (THP) Plus - $313,877
• Redevelopment Agency Revenue Shift - $8,788,594
• Community Based Services Programs - $268,390
• General Fund Fund Prop 1A Suspension - $37 M
• OC Parks Prop 1A Suspension - $4,100,000
• OC Libraries Prop 1A Suspension - $3,100,000
• Flood Control District Prop 1A Suspension - $5,300,000
• OC Fire Authority Prop 1A Suspension - $13.8 M

The documents presented to the Board of Supervisors are here:

Download StateBudgetImpactsSept09

Download CountyBudgetImpactsSept09

Update: Impact of State Budget on Orange County

Property Tax Borrowing by the State (Prop 1A)

Under terms of the new budget, the State will borrow property tax revenue from the Counties. The Counties are creating bonds thru the California Statewide Communities Development Authority (CSCDA) to purchase the receivables due to cities, counties and special districts which will have the property taxes borrowed. By creating the bonds, the cities, counties and special districts will receive cash flow from the sale of bonds to offset some of the loss of cash from property taxes.

Timing is going to be an issue.  The first installment of property taxes will be transferred to the State by January 15, 2010 but securitization cannot occur until March 2010, two months later.  Several parties including the League of Cities are working with the State Department of Finance and the State Legislature to have this situation fixed.

In Orange County, the estimated gap between borrowing of property tax revenues and issuing bonds will impact the General Fund by $37 million, OC Parks by $4.1 million, OC Libraries by $3.1 million, and the Flood Control District by $5.3 million.

Outlook for the Economy

In July, unemployment rose from 11.6% in June to 11.9%.  Job losses are slowing down, but job losses are continuing. There were 63,000 jobs lost on average each month from March to June 2009 compared to 87,500 lost from November 2008 to February 2009.  

Residential real estate shows signs of stabilizing with the number of sales up 20% from last year.

The cash flow situation is not good.  Most sources of revenue are running behind projections.

• Personal Income Tax was $74 million below the May Revise budget.
• Sales Tax was $76 million below the May Revise budget. 
• Corporate tax revenue was $104 million above the May Revise budget.
• Vehicle License Fee (VLF) was $36 million below May Revise budget.
• Other taxes were $8 million above May Revise.

More Problems with Tustin Investment Management

How Tustin manages investment money was the topic again at the City Council meeting on August 4, 2009. The money Tustin invests is money that can be needed to pay bills (meet obligations.)  The investment policy is designed to protect the principal and maintain liquidity.  Not losing money but retaining the principal takes priority over making money.  Another way of looking at Tustin's investment accounts is this is the savings account for Tustin (or money market checking account), not a stock market account. 

A review of the current investments was made and it was determined that Tustin's investment policy had not been followed.  A $3 million security (bond) issued by Merrill Lynch, now owned by Bank of America, rated single A had been purchased. Tustin's investment policy requires that corporate securities be rated AA or higher by Moody's or Standard and Poors. 

 City Treasurer George Jeffries admitted that he knew the rating of the security did not meet the requirements of Tustin's investment policy when he made the purchase.  The clip below shows the discussion with Jeffries regarding the purchase of the security that does not meet required city standards. 

 Later in the meeting (available online),  Jeffries makes a statement which sounds like he is saying that he can count on his hand the number of times he has purchased securities which met Tustin's investment policy.  If this is what he meant to say and if this is what has happened, Tustin's stewardship of city funds is questionable at best.

After the discussion with Jeffries has ended (not in the clip but available online), Councilman Jerry Amante stated that he wants to change Tustin's investment policy to obtain a higher yield.  The purpose of these investment accounts for Tustin is not to make money, but to hold the value of money that may be needed to pay obligations.  These investments are, in effect, Tustin's saving account, not their stock market account. The objective of an investment pool like Tustin's is to match the yield of Treasury securities, not stock market or other funds. A good financial manager understands that different investments have different uses and yields.  Changing Tustin's policy to make more money by allowing riskier investments does not make sense for Tustin's city savings account.

Review Tustin's investment policies for youself. Each policy has been signed off by Treasurer George Jeffries:

 Download 2009InvestmentPolicy

Download 2008InvestmentPolicy

Download 2007InvestmentPolicy

Download 2006InvestmentPolicy

Download 2005InvestmentPolicy

Quarterly investment report reviewed at August 4 meeting:

Download 07 QUARTERLY INVESTMENT REPT 08-04-09

 

Tustin Water System Needs $45 Million in Capital Improvements

Tustin has serious problems with the city-owned water system - $45 million in capital improvements are needed on fixed assets valued at $40 million including repairing a collapsed reservoir and a rate increase has been voted down by the city council. What is the magnitude of Tustin's problem and how did it get this bad?

Tustin's Water System

The city of Tustin acquired the Tustin Water Works in 1982. Tustin Water works was founded by Charles Willard, who sold the business to C. E. Utt in 1897.  The Utt family operated Tustin Water Works until the city acquired the assets.

During the past 26 years, assets have been added to the system to support the increase in population.  Currently, there are 170 miles of pipe, 14,106 water meter connections, 13 wells, 2 water treatment plants and 6 reservoirs in Tustin's water system.  

The goal is to use 80% pumped groundwater and 20% purchased (imported) water to meet the city's needs.  Groundwater is supplied from the Orange County Water District (OCWD) basin and costs $350/acre foot.  Tustin purchases water from the East Orange County Water District (EOCWD), Municipal Water District of Orange County (MWDOC), and the Metropolitan Water District (MWD).Water purchased form these agencies costs $603/acre foot.

Tustin's city owned water system does not serve the entire city.  The eastern part of the city is served the Irvine Ranch Water District (IRWD.)

What Has Been Rejected

The proposed rate increase which included money to fix water delivery infrastructure was rejected by the City Council. The proposal included rate increases of about 10% a year for residential customers and implemented a new tiered rate structure tied to usage and water meter size.  The rate adjustments from water suppliers MWD and OCWD are being passed-through automatically so the water district does not have to absorb the rate increase.  The 10% increase is in line with what Tustin has historically done - put off rate increase until the last minute, then do a big increase.  

Additionally, a capital fee is assessed on all water meters as a way to raise money to build and repair infrastructure.  The capital improvements include issuing $30 million in bonds (on a system with a book value of $40 million.)  The $30 million will be spent as follows:  $14 million for Rawlings Reservoir, $4 million for Tustin Avenue well, $8 million for Simon Ranch Reservoir and Booster Station and $4 million for Beneta Well.  The problem Tustin faces in issuing the water bonds in a soft market is the market is unwilling to issue or buy bonds for a water operation which is not at least breaking even. Tustin's water operation currently operates at a loss, making a rate increase needed to make the bonds saleable.

Budget Cut Mandated Restructuring of Sheriff's Department Finalized

Orange County Sheriff Sandra Hutchens has released details of the budget mandated cuts to her department.  In late July 2009, Sheriff Hutchens presented her plan for dealing with the drastic cuts to her department.  Part of the plan included "chopping at the top" - asking several senior staff members to take early retirement or layoff.  The cuts for FY 2009-10 total $28 million and the expected cuts for FY 2010-11 are an additional $60 million.  Sheriff Hutchens has said that she views these cuts as temporary because maintaining this level of service, in her opinion, could cause long-term damage to public safety and the Orange County Sheriff's Department.

The structure of the new organization significantly differs from the existing organization.  The organization seeks to do the same amount of work with significantly fewer people.  Sheriff Hutchens objective in creating the new structure was to impact front-line public safety as little as possible. She did not want to cut the first responders - Sheriffs in cars assisting the public, 911 operators, and investigators.  The new structure includes an increased workload for Sheriff Hutchens as she becomes responsible for the Coroner and Crime Lab/Support Services.

Brea Uses Recently Released Prop 40 Funds for Park Improvements

Brea put some park improvements on hold after receiving a letter in November 2008 telling the City that Prop 40 projects might not have the money to move forward.  Since that time, the bonds to fund Prop 40 have been sold, and the money is now available.  

Brea had planned to spend $356,163 on park improvements under Prop 40.  Of that amount, $157,458 was spent by November 2008 and won't be reimbursed by the newly released funds.  The projects that are receiving reimbursement are:

• New Backstops and Dugouts  $88,631
• New Concrete Picnic Tables $24,613
• New Drinking Fountains $14,728
• New Play Structures $17,064
• New Restroom Hand Dryers $7,160
• New Slides $3,372
• New Park Ordinance Signage $1,890

For more information, contact Sean Matlock from the Brea Community Services Department.

Prop 1A Property Tax Borrowing Beginning

As part of the state budget package, cities, counties, and local governments were required to lend property tax revenues to the state with a promise of being repaid in three years with interest. The League of California Cities and the California State Association of Counties are structuring bonds to receive the monies being borrowed upfront (now) instead of in three years. The bond securitize future payments by the State and remit the proceeds to the local governments who choose to participate in the securitization. 

California Communities, a joint powers authority sponsored by the  League of California Cities and California State Association of Counties, is overseeing the process. Structuring, timing and application details of the program are being worked out.  The California Communities website will have updated information available.

Orange County Making More Cuts Due to New State Budget

The county finance department is starting to assess the impacts of further budget cuts coming from the State as a result of the newly passed budget.  For FY 2010-11,  the gap for Orange County is expected to be $7-8 billion, with some estimates putting the gap as large as $15-20 billion.  The estimated gap assumes that the economy will start to rebound in the fourth quarter and the state will not have a deficit at the end of the year.  

In addition to outright cuts, there are also policy changes for health care programs which reduce the number of eligible people and reduce services.

At signing, Governor Schwarzenegger used the line item veto to remove more funding from the budget fill.  The areas impacted are:

• Child abuse lost $80 million
• Medi-Cal lost $60 million for eligibility services
• Healthy Families, low cost health care for children in families that don't qualify for Medi-Cal, lost $50 million
• AIDS prevention lost $52 million
• Open space funding thru the Williamson Act lost $28 million
• State parks lost $6 million, causing some state parks to close

The impacts to Orange County overall are currently estimated to be $100 million.  In Orange County government, the General Fund will lose $37 million, OC Parks lose $4.1 million, OC Libraries lose $3.1 million, and the Flood Control District loses $5.3 million.  The total cuts to Orange County level government is $49 million.

Los Rio Park Opens on August 29 - Make Your Reservation for the Ceremony

San Juan Capistrano opens a new park on August 29.  Los Rios Park, in the Los Rios district, opens on Saturday, August 29 with a ceremony at the park from 11:30 AM - 1PM.  The ceremonies feature Ballet Folklorico dancers, basket weaving, pony rides.  Popcorn and light refreshments will be complementary and hot dogs, drinks and snowcones will be $1 each.  

The park is in the historic district bordered by Ramos Street, Paseo Adelanto, and Los Rios Street.  The passive park features picnic areas and a children's play area.  Walking paths connecting Los Rios Street, the Montanez Adobe, and the Trabuco Creek Trail are some of the other features.

Call 949-493-5911 to make your reservation.

What Does That County Department Do?

One way to find out is to look up their departmental business plan. Each department of Orange County government must write an annual business plan. The County CEO monitors the plans. The plans include goals and key measures of success.  For instance, the only measure of success for the District Attorney's Office is adult felony convictions.  

Number of Uninsured California Kids May Double

A new deal to balance California's budget may have serious repercussions for the health of the state's children, while South Carolina grapples with health cuts of its own.

"California's budget deal is expected to nearly double the state's number of uninsured children and puts a spotlight on a key provision in the health-care bills in Congress," the Wall Street Journal reports. "Gov. Arnold Schwarzenegger this week signed a revised annual budget to close California's $24 billion shortfall, including a $1.4 billion cut to Medi-Cal, the state's version of Medicaid. In addition, California slashed $178.6 million from Healthy Families, its version of the Children's Health Insurance Program. In all, California's cuts could raise the number of uninsured children in the state to two million, up 915,000 from about 1.1 million in 2007, estimated the Children's Defense Fund, an advocacy group that backs coverage for uninsured children. The UCLA Center for Health Policy Research, a nonpartisan research organization, called the estimates reasonable." 

California's cuts "throw into question some aspects of the federal health-care bill now winding its way through Washington.

Furloughs for Costa Mesa

The subject is furloughs on Tuesday night in Costa Mesa.  At the August 4 City Council meeting, closing a budget gap by using time off will be discussed.  Here's the plan, so far.

The Costa Mesa Police Association and Costa Mesa Police Management Association (CMPA and CMPMA respectively) have been asked to take 104 hours of unpaid leave thru August 28, 2010, which is a 5% pay cut.  The VantageCare RHS Program would be suspended for 26 pay periods (approximately 1 year.)  The VantageCare RHS Program is a health savings program for employers who have promised health care benefits to retirees.  This program allows retirement health care liabilities to be pre-funded. In exchange for the concessions, Costa Mesa will give 2 years of additional service credit to the CalPERS account. Additionally, the Cash Out of Vacation Leave provision of the current contract will be amended until August 29, 2010.

Employees covered by the Costa Mesa Employees Association (CMEA) are asked to take 104 hours of unpaid furlough time by August 28, 2010. This is the equivalent of a 5% pay cut.  The VantageCare RHS Program contribution is suspended for 26 pay periods. CMEA employees get an additional 2 years of CalPERS credit and a one year contract extension.

Management, employees not represented by a bargaining unit, and the fire department have also been asked to take a 5% pay cut.  It is projected that $2.5. million will be saved during the next fiscal year by these actions.

Rainbow Disposal Doesn't Sort Out Recyclables

The Orange County Register reported about the state of recycling in Orange County. One area discussed was if trashhaulers remove items that should be recycled from the waste stream to reduce the amount of trash going into the landfill.  Waste Management does.  

Rainbow Disposal stopped pulling recyclables out of trash because it cost them too much to do it. So, if some one put their entire week's recycling into the wrong bin by accident, Rainbow Disposal would send a full bin of recyclables to the landfill.  

From the article:

For Rainbow Disposal Co. Inc., it was an economic decision to stop sorting the trash last fall, said Sue Cooper, vice president of Environmental and Public Affairs. "We used to when the markets for recyclables was high. We would make enough off that material to hire the people to do that."

The company has no plans for resuming trash sorting until the prices of the recyclable commodities comes back up. And what drives that, she said, is consumer spending in general and also purchasing of recycled products that create demand.

In the cities served by Rainbow (Fountain Valley and Huntington Beach for residential service), was any notice given of this change? Is anyone in cityhall auditing the contract and waste diversion targets for Rainbow Disposal?

Now we know why  Rainbow Disposal is so cheap compared to other trash haulers.

Stimulus Money - How California Counties Stack Up

Each state has a site to track recovery spending. It's interesting to see which counties got money and which didn't. It's surprising and says a lot about the elected officials in those counties.  Figures are pulled from the state website on July 26, 2009.  These are funded projects and not all funded projects may be listed on the state's  website, according to the disclaimer.

Alameda    $244,910,043 - $7,043,455 for education, $7,064,466 for job programs, $8,085,000 for Camp Parks RFTA, $222,717,122 for transportation projects

Alpine    $7,574 all to Alpine County Office of Education

Amador    $2,322,692 - $1,219,031 for education, $1,103,661 for transportation

Butte $18,691,450 - $4,048,630 for education, $9,220,700 for transportation, $5,422,120 for water & environment

Calaveras    $1,135,444 all for education