by Haddon Libby
I got a few people in high places upset with me recently because of an article I wrote on “The Misuse of RDA (aka Redevelopment Agency) Funds”. I was told that I don’t understand government accounting. Government accounting, I was told, is “bucket” accounting and totally different than the real world.
Let’s walk through “bucket” accounting and see who understands it best – me or those justifying excessive, selfish spending that explains in part why California is on the brink of financial catastrophe.
In the article, I said that 52% or over $5 million of Indian Wells’ operating expenses were attributed to RDA – a statement attributable to a broadcasted offsite meeting between the city council and Rod Wood, the city manager of Indian Wells. Woods’ comment applied to the consolidated annual financial statement year ending June 30, 2011. I was told that the real number was “only $3.7 million” for the most recent fiscal year ended June 30, 2012. Either way or either year, the point is the same.
Fund accounting is supposed to be for greater accountability versus clearer financial understanding where monies must be dedicated toward specific buckets of spending. The mantra in government is that you “use it or lose it” once money is put in a bucket. Heaven forbid that we use the money to pay down debt or reduce taxes.
RDA funds were supposed to be used to reduce blight and build low to moderate housing. Attributing city operating expenses to RDAs was not the intent of the RDA bucket of funds. The problem caused by using these monies for operating expenses is that this use does not create more taxable income for the city and state or increase affordable housing inventory. As RDAs are funded with the property taxes of the city where the monies were spent, this leaves both the state and the city in greater economic peril. Stated differently, the state has a lower revenue base from which to provide its services while the city spent monies that its general tax base could not support were it not for the RDA cost transfer. Using Indian Wells as the example, the end result of the dedication of property taxes toward the IW Club and other projects is that the state needs a new source of income to offset this lost revenue source while city expenses were allowed to grow beyond the natural levels that the budget could support.
The response I kept hearing was that “it’s free money” to the city and “we (the city) don’t owe the money, a subsidiary of the city owes it”. The “only way” that the city would get stuck with the bill is if “property taxes fell below 1984 levels – an impossibility”.
This “free money, why do we care” mantra is exactly why all levels of government have overspent. You and I both know that nothing is free in life. If you take all of the money out of one “bucket” to fund another “bucket”, the empty bucket will need refilling. The answer shared with me is that “someone else” will have to pay that, not the city. I’m pretty sure that you and I are that someone else. It is this selfish, wasteful thinking that pervades all levels of government and has our country and state poised for financial calamity and a lower standard of living for generations to come. It is this skewed way of thinking that justified the excessive retirement packages for government workers that has every state worker pension fund in California deeply underfunded. On the underfunding of pension funds, I was told that the general tax revenues of the state will solve the pension underfunding problem so once again the City of Indian Wells will not be on the hook.
Guess what? The residents of the city will be on the hook along with the residents of other cities! It takes real leaders to stand up and talk about this as opposed to buying in to the current ways that are a generally wasteful, self-serving and corrupted manner of managing taxpayer funds.
Oh, I was also told that the residents of Indian Wells (particularly retirees in gated communities) as well as those across the Coachella Valley “don’t care” about these things. If we are going to change the cultures of Washington DC and Sacramento, we must start in towns like Indian Wells. We need leaders who will stand up and say that the current ways are corrupted and are the reason our state and country are in this financial mess. We need leaders who will fight to change this mentality. I have a hard time believing that “retirees in gated communities” are as selfish and uncaring as they are purported to be.
I guess we will find out in November as I am running for City Council under the mantra of principled leadership, conservative financial stewardship and the elimination of crony capitalism.