Deficit Spending Sets Questionable Pattern for New City Council

• Concerns Are Raised about Possible Impact on Municipal Bond Rating

BY BILL KOENEKER

The Malibu City Council, ignoring the advice of staff, approved a final budget for fiscal year 2010-2011 this week that is not balanced and requires the city to dip into its undesignated general fund reserves.

“We do not want to get into the practice of this. This is a one-time appropriation,” admonished Administrative Services Director and Assistant City Manager Reva Feldman, who had told members at the outset of the meeting that she could only find an additional $113,000 for extra expenditures.

“We were not able to come up with additional revenues,” Feldman said.

It is the first time in recent history that any city council has not adopted a balanced budget.

Dipping into the undesignated general fund reserves was never such a critical element until the city started borrowing money. The $8 million goal was set by a previous council years ago when the budget was $16 million. The proposed budget for next fiscal year is more than $30 million.

Experts in the past have told previous councils that many cities keep a goal of 50 percent of the amount of the budget in the undesignated general fund.

Despite the prudence urged by its staff, council members, with Councilmember Pamela Conley Ulich absent, insisted there are items they want to spend money on, including an additional sheriff’s department motorcycle unit for one year, more funds for several grant fund programs and money for clean water studies.

ASPCH members had urged the council to spend the extra money on another motorcycle unit, insisting that public safety is the number one priority for the council.

City Manager Jim Thorsen, to no avail, reminded the council that Malibu spends on law enforcement two to three times more than what other like cities do such as Westlake Village, Calabasas or Hidden Hills.

After a lengthy discussion, the council agreed to appropriate $179,000 for the motorcycle unit (see separate story), another $100,000 for water studies, $12,500 for grant fund programs and $4000 for an employee orthodontic program.

“Will this affect our bond rating?” asked Mayor Jefferson Wagner. Feldman said she did not think so, unless the council dipped below $8 million in the undesignated general fund reserve.

No one asked, however, if the deficit spending practice could send  a red flag to the bond rating company.

Councilmembers Lou La Monte and John Sibert, members of the Administration and Finance Subcommittee, who had made the recommendations for the grant program watched as Rosenthal dipped into city coffers and gave thousands of extra dollars to Malibu Foundation for Youth and Families and to Friends of Malibu Urgent Care.

Feldman had told the council at a previous session that there are additional costs from the current budget in the upcoming budget which is reflected in an added $116,000 for law enforcement and another $526,000 for street repairs, so that the money Rosenthal requested is now coming from the general fund rather than the grants and funding allocation that has all been spent.