The Crumbling of California is Beginning - What Now Governor-Elect Brown, Beg?

Borrowed from The Wall Steet Journal

By Bobby White

HALF MOON BAY—This coastal city next month will begin an aggressive campaign to warn residents of severe budget cuts that lie ahead, as the cash-strapped town tries to avert insolvency.

Laura Snideman, appointed earlier this month as Half Moon Bay's city manager, says she and the five-member city council and top managers will meet in the next few weeks with residents to alert them about impending changes, such as potentially outsourcing the town's 15-person police department to an outside agency.
New city manager Laura Snideman, above, says the town faces painful choices.
The city has planned as many as a dozen meetings and will have a town hall gathering at the end of January, says Ms. Snideman. She adds that Half Moon Bay hasn't embarked on such an aggressive public outreach before and plans to walk residents through the city budget to show where cuts need to come from.
"The choices are no longer hard, they're painful," says Ms. Snideman, formerly an economic development manager in the city of San Mateo. She adds that she hopes by making the case for cuts, some residents will offer ideas or even volunteer to save some services and programs.
The campaign is the latest development in Half Moon Bay's long and winding financial descent, which has made it a poster child of the problems plaguing Bay Area municipalities. While many towns face budget gaps, Half Moon Bay is in especially tough straits. The city already has outsourced some public-works services, including trash, building inspection and health-code enforcement to independent contractors and private companies.
The city of 13,000 is essentially "turning into a functionally unincorporated locale," says Christopher Thornberg, a principal at consultancy Beacon Economics in San Rafael. "They're pretty much a city in name only, having turned over or outsourced most of their essential services."



City leaders say they expect to reach an agreement on the necessary cuts. But if they are unsuccessful, Half Moon Bay faces the prospect of a bankruptcy declaration, or even of disincorporation, effectively turning over governance of the city to the county. Neither step would rid the city of debt payments, which residents would continue to be obligated to pay.
Half Moon Bay's problems partly stem from a legal settlement over a real-estate transaction in 2007, when the city agreed to pay $18 million, twice its annual budget of $9 million. The settlement stemmed from a fight the city waged with a Palo Alto-based developer over a 25-acre patch of land that was under development for 83 homes, which city leaders blocked by declaring the area protected wetlands. To satisfy the judgment, the city sold $15 million of bonds and paid $3 million from its annual budget in 2008. The moves prompted leaders to go on a cost-cutting spree, which accelerated when the economy soured.
The city's fortunes worsened in November when voters defeated a measure to lift sales taxes to 10.25% from 8.5%, which would have yielded $1.4 million over the next seven years. That same month, California residents voted in favor of Proposition 26, which requires a two-thirds majority vote before a city can increase fees for services and permits. The combination has limited Half Moon Bay's ability to capture new revenue.
Overall, Half Moon Bay faces a $500,000 budget deficit for the current year ending July 30, down from the previous year's $3.4 million budget gap. Since 2007, total city revenue including sales and property taxes has fallen 14% to about $9 million. And debt payments from the legal settlement, which total about $1.1 million annually, have further dragged down the budget.
The city says it plans to tap its reserves to close the current $500,000 deficit. But after several years of using reserves to close the gap, officials say the fund sits dangerously low at nearly $900,000, down from about $2 million in 2007. The city estimates reserves could run out by September 2011.
Despite the financial crisis, Half Moon Bay leaders say they want to remain independent and haven't discussed merging the city with a neighboring municipality. Such a move would be impractical in any event. The city is bordered by unincorporated lands, forest and the Pacific Ocean. The closest cities are more than 10 miles east and north.
Instead, Half Moon Bay now is targeting its police force to further pare costs. The department is the city's largest expense, with $3.5 million allocated to it this year. Half Moon Bay is soliciting proposals from neighboring cities such as San Mateo and Pacifica for policing services.
The effort has caused controversy. Allan Alifano, a Half Moon Bay city council member, says the city is mimicking neighboring San Carlos 10 miles to the east, which outsourced its police department to the San Mateo County Sheriff in November. But while San Carlos garnered significant savings from the move because it hadn't previously cut police personnel or services, Mr. Alifano says the impact of outsourcing the police in Half Moon Bay will be more limited because the city has already gone through two rounds of layoffs and closed nearly a dozen programs and services operated by the police department.
Sgt. Dennis Loubal with the Half Moon Bay police says he doesn't expect a major disruption in police services as long as the incoming police department maintains the number of officers patrolling the street at any one time which currently stands at two.
Some residents say that while they welcome the coming discussions with the city, they remain worried about the outcome. "I'm definitely concerned about what's happening to the city," says Jude Damasco, a partner in an accounting firm who has lived in Half Moon Bay for more than 10 years. "We certainly don't want police presence to diminish, and we want the city to continue to look appealing."