By Eric Licas
The Review
The city of South Pasadena’s spending will outpace its revenue by millions of dollars over the next five years, and in the event of a recession, its reserve funds could be exhausted within just three years, according to financial analysis discussed during a special joint session of the City Council and Finance Commission last week.
The city has been operating in the red for several years, South Pasadena Finance Commission Vice Chair Sheila Rossi said during the Wednesday, Feb. 21, meeting.
According to a report conducted by the consultancy firm NHA Advisors, the cost of South Pasadena’s expenses will be $3.7 million higher than the money it is projected to bring in by the end of this fiscal year, which concludes on Sept. 30.
If nothing changes, analysts predict that the city could continue to run increasingly larger deficits. That would potentially shrink its reserves from more than $16 million in 2024 down to just $2.9 million by 2029. And if the economy were to enter a recession, reserves could be “depleted” within just three years, according to the report.
“Despite the enormous projected deficit and the disastrous five-year projections, we have not been presented anything, any report, any discussion or any analysis about a plan to move forward and stop the downward spiral in which we now find ourselves,” Councilwoman Janet Braun said during last week’s meeting.
She repeatedly described the findings in the advisors’ report as a “financial nuclear bomb.”
Mayor Evelyn Zneimer called the city’s present situation a “fiscal emergency.”
Councilman John Primuth, taking a more reserved approach in the evening’s discussion, still expressed concern over the state of South Pasadena’s budget.
“I’m not sure we’re exactly at a fiscal emergency,” he said. “I think we’re trending in a way that needs course correction, big time.”
In the report, analysts used a granular, line-by-line breakdown of the city’s spending and revenue to form their year-over-year predictions. Members of Council and the finance commission noted that the advisors hired by the city had access to far more detailed information than what they themselves typically receive in reports from city staff.
“This is the exact kind of reporting that we desperately needed for a decade,” Rossi said.
She said that for the past seven years, city employees have not provided enough information about financial matters to allow elected officials to make “well-informed decisions.” Rossi said documents they receive rarely contain itemized descriptions of expenses or distinguish between one-time and recurring costs.
Rossi went on to suggest city staff had avoided the oversight of the finance commission, and that the City Council had not done enough to scrutinize the expenses they approve.
“They don’t want it to go before the finance commission,” Rossi said. “They want it to go before you (the City Council), because quite frankly, they know that if they send the appropriations to you, you won’t ask the questions. Because you haven’t been asking the questions.”
Added Rossi: “This is going to sound harsh, but if you’re not willing to put the work in to actually address some of these issues, then you actually should probably step down, right? It’s kind of at that point if you’re not willing to say what’s going on and let’s change our behavior, then you have to consider: are you actually serving the community?”
At least one Councilmember, Mayor Pro Tem Jack Donovan, appeared to acknowledge those criticisms.
“I have to blame myself for a lot of it, because the finances have not been a priority for this Councilmember,” he said. “They need more attention on my part, and I will be doing that.”
South Pasadena City Manager Armine Chaparyan said she looks forward to working with Council and the commission, and sees their collaboration as an opportunity to shape the city’s future.
Councilmembers unanimously voted to set up an ad hoc committee made up of Braun, Rossi, Zneimer and finance commission chair Peter Giulioni. The informal body will use the tools provided by the analysts and detailed information about South Pasadena’s finances to find ways to fix the city’s budget.
The City Council also decided to hold off on approving a list of midyear appropriations that would have added more than $779,000 in expenses, pending a review from the finance commission.
“I’m generally not opposed to these, but we’re looking at insolvency in three to six years,” Braun said. “So again, I think we need to start imposing the financial discipline this city needs to take on.”
She also suggested imposing a hiring freeze for all positions except those related to public safety and critical finance matters, as well as moratoriums on non-essential travel by city staff and the hiring of more analysts.
“We’re not going to simply be able to cut our way out of these kinds of problems, I have to be really clear about that,” South Pasadena Finance Director John Downs said. “It’s multifaceted. We have to look at revenue sources.”
First published in the March 1 print issue of the South Pasadena Review.
