Newport has its eye on future finances

Noaki Schwartz

NEWPORT BEACH -- A financial forecast predicts the city will suffer an

economic downturn in five years and therefore must come up with a minimum

of $1.2 million annually to offset the effects.

“The next five years look good, [but in] 2004, revenues versus

expenditures will fall off unless something changes. The city needs to

come up with more funds,” said Dennis Danner, administrative services

director.

The report, which was requested by Councilwoman Norma Glover a month ago,

summarizes a year-by-year account of the city’s revenues and expenditures

and offers fund-raising suggestions.

Newport Beach spends $80 million each year to run the city, nearly 70% of

which goes to staff expenses, said Danner. It is this chunk, combined

with a cyclical economic downturn, that will tip the budget in five

years.

“Inflation will be heating up, [there will be] pressure on employee

salaries and the economy will slow down,” Danner said.

Recalling the economic problems the city suffered in the mid-1990s,

Glover and other council members want to be prepared this time.

“Looking at the fact that [Newport] is not on a freeway and it’s 50% in

the ocean -- we just don’t have any avenues of new reserves coming in.

The city is pretty well built out,” said Glover, adding that she believes

the council needs to look at bringing more high-end tourists into

Newport.

A number of developments are being proposed for the city within the next

year -- the Newport Dunes hotel, Newport Center expansion and the

Sutherland-Talla Marinapark proposal. Because of this, the council will

be faced with many difficult decisions, said Mayor Dennis O’Neil.

In order to keep up Newport’s services, council members -- with a

predicted economic downturn in mind -- expect a struggle in locating new

sources of revenue that will be a benefit for the city’s overall

well-being.

“[These developments] generate a lot of municipal revenue, but can cause

traffic congestion and other environmental impacts,” said O’Neil, adding

that council members need to thoroughly review their options.

The five-star resort proposed by Sutherland-Talla alone has estimated it

will bring in a tempting $2.8 million in annual city revenue.

The 10.71-acre property on the Balboa Peninsula currently houses American

Legion Post 291, the Neva B. Thomas Girl Scout House and the Marinapark

mobile home park. Each entity has a lease with the city that will come up

for renewal within two years.

But Bob Caustin, president of Defend the Bay, said more development is

not the way to go.

“I’m highly skeptical that [the city] needs $1.2 million more. It

conveniently matches the Dunes’ projected revenue stream,” Caustin said.

“They’re selling the city short and sacrificing quality of life for past

sins, and at the same time, creating future sins to be paid for by future

generations.”

In addition to developments, council members will consider 14 other

proposals suggested by the report, which could annually raise between

$10,000 and $500,000 in city revenue.

Among these are suggestions that the city could increase or implement

service fees, charge penalties for late bill payments and possibly even

partner with corporations for marketing opportunities. If these efforts

are employed to the fullest, it would raise the $1.2 million needed to

offset the predicted economic downturn.

But community activist Tom Hyans said the council should take an honest

look at its own expenses.

“There are two ways to balance a budget: one is to increase revenue and

the other is to decrease expenses,” he said.

During the mid-1990s budget crunch, decreasing expenses is exactly what

the city did. The council cut staff by 15%, Danner said. City employee

numbers were cut from 750 to 650 people.

“It was rough. The entire country was in a recession and it drastically

affected property tax and sales tax,” Danner said.

Capital projects, such as expensive road projects, were also reduced. In

spite of this, however, the city was able to maintain the level of

services for which Newport Beach is known, Danner said.

“It’s about $24 million just to run the police department. Property taxes

alone can’t even run the police department,” O’Neil said.

But it is this expensive service that Hyans thinks needs a closer look.

Privatizing some city services such as the fire department or lifeguard

services -- as other communities have done -- could significantly cut the

city’s expenses. The downside to that may be reduced service levels.

Staff is exploring revenue options and will present their findings to the

council on an ongoing basis. City officials also are making a comparative

study to look at Newport Beach’s spending and revenues compared with

other cities in Orange County. The report should be released within the

next month.

Copies of the financial forecast are available at the administrative

services office at City Hall, 3300 Newport Blvd.

FINANCIAL FOCUS

Should the city focus on generating more revenue for a predicted economic

downturn, or should it attempt to decrease expenses? Call our Readers

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