Ventura Comes After Vallejo? Some Thoughts on Municipal Finance in California

[courtesy of California Progress Report]

By Frank Pecarich

Bad investments may lead California cities other than Vallejo into dire financial straits. As we see below, Ventura's problem is different from Vallejo’s -- not labor contracts -- and the handwriting is not on the wall yet regarding the final outcome of their “investment”. But it is a wake up call to us and potentially other cities about their investment policies and procedures.

A few weeks ago after saying they believed they only had a minor problem with revenue this year, the City of Ventura came out with a revised position which said the City budget was in crisis. Well, they put it a bit differently in their March 19th press release with this euphemistic title, “City of Ventura Executes Immediate Steps to Preserve Fiscal Sustainability” With all due deference to the recent popularity of the term ‘sustainability’, after reading the press release I prefer my description of the situation as a ‘crisis’. I know that if I had this much jeopardy in my household budget, I’d call it a crisis.

As far back as 8 months ago, there were cities in California that were indicating deep concern about their budgets given the State’s economic problems. Last Fall, the City Manager of Bakersfield for example, publicly alerted the City Council that there could easily be a major revenue shortfall. More recently, the City of Vallejo announced severe conditions that could lead the City of Vallejo to bankruptcy. The decision to declare bankruptcy was finally made last week by the Vallejo City Council.

The City of San Francisco has for months now been planning major cutbacks to accommodate their shrinking revenue. Through all this and up to its March 19th announcement, the only problem identified by Ventura was a small shortfall of approximately $2 million, which is not even a 2% shortfall in their overall budget.