Recently two major California cities, Stockton and San Bernardino, have declared bankruptcy. Other cities are following suit. Maybe Stockton and San Bernardino needed a Measure V.
Measure V would require the city of Berkeley to publicly report its financial obligations for the next twenty-year period, including unfunded pension liabilities and bond obligations for capital assets and infrastructure improvements. The measure also requires a report of the yearly expenses needed to meet those obligations.
Stockton and San Bernardino have turned to bankruptcy to get out of their obligations to bondholders and retirees. When escalating costs exceed revenues, the result is insolvency. Once a city is insolvent, the only solutions are: raise revenues or default on obligations and declare bankruptcy. The result is painful and far-reaching, and, in the end, the entire community pays. How does this happen?
The largest costs faced by cities are pension and post-retirement benefits for city employees. Many city councils find it easy to promise large pensions in the future because they don’t come out of current cash flow.
The mayor of Stockton, Ann Johnston, explained that as a city council member she voted for expensive pension measures. “We didn’t have projections into the future of what the costs might be…I learned that you don’t make decisions without looking into the future”… “Nobody gave thought to how it was eventually going to be paid for,” said Mr. Deis, the city manager. A month before his city ran out of cash, San Bernardino’s mayor Pat Morris said in a July 11th video, “This is a revelation by the city manager and the director of finance that with regard to our cash flow…we have insufficient cash flow to pay employees beyond mid-August…” The bankruptcies of both Stockton and San Bernardino were a long time coming but city officials seem to be the last to know.
The city councils and mayors of both Stockton and San Bernardino appear unaware of the financial state of the cities they represent. They have run their city finances like a teenager with a new bank account--looking at the current balance on the ATM screen and forgetting about the outstanding checks.
In Berkeley we need Measure V, the “FACTS” Initiative (Fiscal Accountability, Clarity, Transparency, and Sustainability), to make sure that the mayor and city council are looking beyond today’s ATM screen. Measure V requires the type of reporting that a fiscally responsible mayor and city council should be doing all along.
We need Measure V to promote fiscal accountability, good governance, and help keep Berkeley on a sustainable fiscal course. Vote Yes on Berkeley Measure V.
Priscilla Myrick is a Berkeley resident and former CPA and chief financial officer