Mayor John Stephens Misrepresents His Financial Record

Costa Mesa still risking bankruptcy

Even if you don’t live in Costa Mesa, as I now do, you’ll find this interesting. It’s how Mayor John Stephens is representing his record to voters ahead of next Tuesday’s re-election bid. He’s running against John Moorlach, with whom I worked as press secretary when he was in the California Senate. Moorlach is warning the city’s finances increasingly are becoming unbalanced, and in the worst shape of any city in Orange County. I wrote about that here, with all the details.

Somehow the Stephens campaign got my phone number, and sent me a text message plumping his campaign:

Hi John, this is Mayor John Stephens. In the six years I've been serving on council and as Mayor, our budget has never been stronger (balanced with ample reserves). We have more first responder staffing and street and parks improvements than ever before. That's why residents, business owners and our police and fire associations support my campaign. My opponent is attempting to mislead voters with false crisis claims to justify privatizing (outsourcing) our city employees, and freezing all capital improvements. Don't fall for these tired deceptions!!

That misrepresents Moorlach, who has said nothing of the kind. As to the budget “balanced with ample reserves,” it’s like “balancing” your family budget by borrowing $50,000 on your credit cards. Can’t do that for long.

Two weeks ago the OC Register reported on the state auditor’s report card on OC cities, finding Costa Mesa is one of the cities at “moderate risk of a financial meltdown.” Sounds good. But as the article notes:

11 of O.C.’s cities are perhaps too close for comfort. They’re the yellow Proceed With Caution cities, offering “moderate risk” to their residents. Main culprit? All that money they’ve promised public service workers (mainly cops and firefighters) for retirements, which they haven’t quite saved up yet….

“Moderate” sounds sort of nice, but while these cities emerged with an overall moderate risk rank, many hit pants-on-fire-red in several individual categories, so residents should pay attention….

Costa Mesa also struggled with downward revenue trends, which dropped by about 1 percent a year over the past few years, as well as the burden posed by pension costs.

To be fair:

But the revenue situation is looking up this year, Costa Mesa said, with sales taxes surpassing pre-pandemic levels and hitting the highest level ever at the close of Fiscal Year 2022 in June (about $77.3 million). General fund reserves also increased despite the pandemic, and at 33% of general fund revenue far exceed the “industry baseline of 10%,” said finance director Carol Molina.

However, the numbers used by the auditor were the Audited Comprehensive Financial Report for the fiscal year ending June 30, 2021, 16 months ago. Now a recession is hitting us. Nobody knows how bad. But the stock market is down about 20% for 2022. Some stocks crucial to California are plunging. META/Facebook is down about 75% from its peak in August 2021.

The Federal Reserve board just boosted interest rates again to fight the inflation of President Biden, like Stephens a Democrat with a huge budget debt, in Biden’s case $31 trillion.

A bad recession quickly would tank Costa Mesa’s unbalanced budget, requiring massive tax increases or budget cuts — or bankruptcy. It’s easy to be at “moderate risk” in boom times, but it’s another matter when the boom ends and the bills keep coming due. Boom times should be used to pay down debt. And with the now passing boom having lasted a decade, this city should be debt free.

Another Stephens text message to me read:

John Stephens is the ONLY candidate for Mayor in Costa Mesa supported by the Costa Mesa Police Officers Association, the Costa Mesa Firefighters Association & the Veterans Alliance of Orange County. Our cops, first responders & veterans support Mayor Stephens because of his proven track record. John Stephens has worked hard to keep Costa Mesa safe & reduce emergency response times. He's a leader we can trust!

That just explains it right there. The cop and fire unions don’t want their precious pensions and other post-retiree benefits tampered with, even though reform clearly is needed to prevent potential “haircuts,” like in Detroit — and Moorlach is just the man to do it. As he did with Orange County after its 1994 bankruptcy, when treasurer; and during the last financial crisis, 2007-10, when he was a supervisor. For the latter, he worked with the county union for a great reform of retiree medical care.

The unions are making a big mistake here. The City of the Arts in reality is NOT in good financial shape, and it’s their futures that are at risk.

For the record, I’ll post below the flyers Stephens is stuffing in my mailbox. Notice on the last page, the woman in the middle supporting Stephens is none other than Katrina Foley, who wrecked the city finances as mayor, and now is doing the same as an OC supervisor. She’s now running for re-election against state Sen. Pat Bates, like Moorlach a fiscal hawk. Foley in March 2021 defeated Moorlach for that seat on the board.

Stephens lists all the stuff he spent money on, but what good is that when the bills come due and a recession takes away a big chunk of the revenue?