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  New Hyper-RPA-Controlled City Council Challenged by Pension Debt
January 10, 2023

The following article appeared in the East Bay Times. The biggest challenge the new City Council will face is getting control of labor costs, and especially unfunded pension liabilities. This will be difficult for the RPA-controlled City Council because they are, in turn, controlled by public employee unions SEIU Local 21 and IFPTE Local 21, who want to expand government, increase the number of employees and increase benefits. This should be interesting.

Richmond can’t shake ‘high financial risk’ of pension debts and mismanagement, state auditor reports

The city will submit a plan to address its fiscal struggles on Monday

RICHMOND CA – FEB. 24: A view of downtown and Nevin Avenue are seen from this drone view near Civic Center Plaza in Richmond, Calif., on Wednesday, Feb. 24, 2021. (Jane Tyska/Bay Area News Group)
RICHMOND CA – FEB. 24: A view of downtown and Nevin Avenue are seen from this drone view near Civic Center Plaza in Richmond, Calif., on Wednesday, Feb. 24, 2021. (Jane Tyska/Bay Area News Group)

By KATIE LAUER | | Bay Area News Group

PUBLISHED: January 9, 2023 at 2:27 p.m. | UPDATED: January 10, 2023 at 5:41 a.m.

Richmond is already trying to tackle one of its New Year’s resolutions: get off the state auditor’s “Top 10” list of cities that handle taxpayers’ money poorly.

After analyzing a long, spotty history of managing budget deficits, public housing responsibilities and ballooning employee compensation, the state auditor’s office compiled a list of 11 recommendations to help city officials try to dig themselves out of an ever-looming financial mess.

Last month, the Richmond City Council approved a corrective action plan laying out a timeline of next steps, which City Manager Shasa Curl will submit to the state by Monday — one day before a new lineup of elected officials kicks off the first City Council meeting of 2023.

The good news: Richmond successfully moved from the ninth to the 10th California city at greatest risk.

The bad news: The state auditor still questions whether the city, which faced a debt burden of $250 million in June 2021, can salvage a semblance of financial stability any time soon.

One of the most pressing issues acting California State Auditor Michael Tilden highlighted was that Richmond anticipates having an annual deficit of $6.7 million from now until 2028. He said those grim projections may still be too optimistic — warning that reserves could be depleted so low that city officials would not be able to cover more than two weeks of expenses by fiscal year 2027-28.

Additionally, Tilden reported that the city paid more than $35 million in retirement costs in fiscal year 2020-21, which accounted for almost a quarter of all general fund expenditures. To make matters worse, CalPERS anticipates Richmond’s annual pension costs will reach $53 million within five years.

If the city wants to best set itself up for success, the state audit recommended that Richmond expand its five-year financial projections to include plans for funding operations during a recession or economic downturn, eliminate unnecessary jobs, and dedicate resources to ensure that the city’s Housing Authority complies with federal requirements in order to receive proper funding.

During the Dec. 20 Richmond City Council meeting, Deputy City Manager Nickie Mastay said progress on these changes must happen fast, because the first update on how the city is succeeding — or struggling — with the state auditor’s suggestions is due May 10.

While Councilmember Gayle McLaughlin acknowledged that the city needs to be financially stable, she said during the meeting that she wants to see a balanced approach to any financial overhaul, in order to maintain the long list of services and support that many of Richmond’s 116,000 residents need — from extending library hours to providing rent assistance. The median household income in Richmond is $72,463.

“It’s really important to have solid financial accountability and sustainability, but we also need to meet the needs of our residents,” McLaughlin said. “Our community is clearly different than some cities that have more high-income residents. We have a large amount of low-income community members, and we need to lift them up.”

Outgoing Mayor Tom Butt, who is finishing up his last week in office, agreed that these financial audits often fail to recognize that cities like Richmond have fewer tax dollars flowing into city coffers to fund programs and pay off debts.

“I think the state has, for whatever reason, picked on Richmond for years,” Butt said by phone Thursday. “We have a lot of unique challenges, but rather than reaching out asking how they can help, the state seems to ask, ‘What can we do to make you feel bad?’ ”

However, he was also quick to push the onus back on McLaughlin and other members of the Richmond Progressive Alliance, which successfully held onto its political majority of elected leaders for another four years.

“I blame a lot of this on the RPA — they have a list of priorities that are not aligned with sound revenue management, and I don’t think they understand these issues,” Butt said, calling out RPA priorities such as creating a public bank and reducing the size of the police department. “We do the best we can, but we have a lot of burdens that are, in some respects, unfair, and we’re going to be continually challenged to do this."