Members of Santa Monica's Citizens Fiscal Committee Formally Ask that Group be Retained, Expanded

By Jorge Casuso

May 30, 2018 -- Calling Santa Monica's rising pension debt an "existential threat to our fiscal sustainability," two members of a residents committee on Tuesday formally called for the group to be retained and expanded.

In a letter to top City officials and neighborhood groups, Laurence Eubank and Dominic Gomez said members of the Citizens’ Fiscal Sustainability Committee "are ready to continue working with the City to address fiscal anxieties of residents."

The five-member committee was disbanded after its final meeting earlier this month ("After 'Frank' Exchange of Views, Santa Monica Citizen Committee Is Bid Farewell," May 10, 2018).

Eubank, a writer, and Gomez, the former CEO of Movius Interactive, also urged the City Council to include "new members from City Employee bodies, actuarial or pension experts, and the business community as necessary."

At least one neighborhood group quickly answered the rallying cry.

"I move the Wilmont Board vote to support this proposal and that we ask every other neighborhood group to endorse it as well," Wilmont Board member John Cyrus Smith wrote in an email shortly after the letter was sent.

City Manager Rick Cole, who initially called for the group's formation, said community input was needed but did not commit to retaining the committee.

"I certainly agree with you on the need to involve our citizens in meeting the challenge of long-term fiscal sustainability," Cole wrote Eubank in answer to the letter.

"I look forward to working with you and a broad range of citizens to ensure the City’s long-term fiscal sustainability and set realistic and responsible targets for achieving that."

Cole added that the Council, the Audit Subcommittee and City staff looked forward "to productive discussions about how best to do that."

Eubank and Gomez's letter reiterated the warnings the citizens committee had made concerning the City's looming pension debt.

"(W)hile Santa Monica enjoys a robust economy, we spend all the municipal revenue it generates and more, as illustrated by the city’s $461M unfunded pension liability.

"Given projected budget deficits in the near term -- shortfalls of $3M in 2019-20 and $19M in 2021-22 -- hard choices must be made to put our fiscal house in order.

"With the next recession -- certain as tomorrow’s sunrise -- the existing pension shortfall will likely balloon over a half billion dollars, becoming an existential threat to our fiscal sustainability."

Cole responded that Eubanks and Gomez's analysis provides "an unbalanced picture" by focusing on the long-term pension obligation without taking into account the City's net assets.

"It’s an unbalanced picture to cite the $461 million liability without citing the $2 billion in assets in the form of cash, investments and valuable physical infrastructure," Cole wrote.

"The City’s net assets, as you know, are the second highest per capita in Los Angeles County."

Cole added that the City's budget has had a $10 million surplus in each of the past three years, allowing it to make a $45 million advance payment last year on its pension obligations.

"We are the only City that I know of in Southern California besides Newport Beach that has made an advance payment of this magnitude," Cole wrote.

"That said, as we’ve discussed, I agree with you about the threat of the pension challenge -- as does the City Council."

In a February letter, Eubank urged the City to retire the unfunded pension debt by 2030 ("Member of Santa Monica Audit Advisory Group Urges City to Pay Down $461 Million in Unfunded Pensions by 2030," February 28, 2018).

The letter asks City officials to impose across-the-board freezes on salaries and/or hiring and “forego” capital expenditures to make the increased paydowns possible.

The City’s current biennial budget totals $1.57 billion, and its workforce includes about 2,300 employees, making its municipal budget among the highest per capita in the state.