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Commentary: Union wants city to break the bank

October 24, 2011|By Colin McCarthy

I was interested to read the latest fictional spin piece by Orange County Employees Assn. mouthpiece Jennifer Muir on Costa Mesa's financial situation ("Community Commentary: Don't believe City Hall's spin on finances," Oct. 22).

Ms. Muir contends that a union-retained accountant has found $26 million in hidden money that the city could use to pay employee salaries. Here is the truth about the union's so-called "cost savings."

Draining our reserves: Yes, the union wants us to further reduce our reserve account down to 10%, in order to pay employee salaries and benefits. This is not only financially risky, it's just plain stupid. The best practices for local governments dictate a 17% reserve, not 10%. We need to be putting money back in our reserves, not depleting them to pay salaries.

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If you've been watching what's happening in the city of Santa Ana, you know that using your reserves to pay your monthly bills has pushed that city to the literal brink of bankruptcy.

Eliminating our self-insurance fund: Yes, the union wants us to take money out of our self-insurance fund — a fund in place to protect the city and residents from claims and lawsuits — in order to pay employee salaries and benefits. The problem is that this fund is for claims that have already been made. How do we pay those claims?

Pension obligation bonds.

Yes, you read that correct. The union actually suggests that the city incur additional debt through pension obligation bonds. It's like paying your Visa card off with your MasterCard — debt on top of debt. This way they can free up city funds now to pay salaries and benefits.

Our children get stuck with the additional debt down the road, more of the kick-the-can approach to solving our budget problem.

If you Google pension obligation bonds, you will see the financial mess that happened in the state of New Jersey, when they bought into the pension obligation bond scam. It's troubling that the union accountants would ever recommend such a risky proposition for our city.

Notably, none of the union representatives, or their accountants, actually live in Costa Mesa. Maybe that explains it.

The union's proposed recommendations have been panned by the city's financial staff, and even criticized by the union's own accountants, who claim that if these proposals were adopted, they could lead to a serious cash crisis for the city. Even the union's own accountants can't recommend the city adopt these risky proposals.

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