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Posted on: August 15, 2019

Tustin was ranked #1 out of 34 Orange County Cities on Senator Moorlach’s Finances Report

2018 CAFR

Tustin was ranked #1 out of 34 Orange County Cities on Senator John Moorlach’s OC City Finances Report as reported to the Orange County Register:

FINANCE 
Half of O.C. cities are in a positive fiscal position 
By John M. W. Moorlach

High net worth individuals are ranked by magazines. Ranking cities by a similar approach now finds the city of Tustin at the top of the list among Orange County’s 34 cities.

Compared to the year before, Irvine moved up a notch, to second place from third and Laguna Beach moved from fourth up to third.

Updating my report on OC city finances from last year, half of the 34 city balance sheets in Orange County are still in the black. I base my rankings on each city’s Comprehensive Annual Financial Report (CAFR).

The CAFRs are for fiscal years 2017 and 2018, ending on June 30 each year. As audited financial statements, the CAFRs are by far the best resource for analysis of a city, county, school district or state budget.

In each CAFR, I specifically look for the Unrestricted Net Position (UNP) because it reflects the net assets minus the net liabilities. Hopefully, this amount should be positive, as every operating entity should have more assets than debts to pay its creditors.

Then using census data, I divide the UNP by the city’s population. The per capitas produce a range with which to compare similar entities and reflects each resident’s share of the net assets or net deficit.

The biggest change this year is the inclusion of retiree medical liabilities, as now required by the Government Accounting Standards Board. Some cities started recognizing this unfunded liability a year or so earlier than this year’s deadline.

The combined year-over-year change in the UNP for Orange County’s 34 cities has reduced their net worth by $631 million in the last year. The overall retiree medical liability inclusion of $469 million represents three-quarters of the cumulative decline.

We should be thankful since there are more dismal balance sheets in other counties. For instance, the Los Angeles Unified School District had to add $15 billion to its liabilities this year for its actuarial accrued retiree medical obligations.

On the flip side the cities of Mission Viejo and Stanton overfunded their contributions for funding toward retiree medical commitments and report the balances as assets. This is unusual, but reflects a proactive posture.

The state of California is enjoying additional personal income tax revenues. But this not a source cities participate in. Cities are watching every dollar, addressing every increase in pension plan contribution requirements and dealing with debt obligations from retiree medical promises made many years ago. Sacramento is not sharing its largess with its 482 cities.

In spite of these pressures, 12 of Orange County’s cities have had positive movement, year over year, with their UNPs: Tustin, Irvine, Laguna Beach, Dana Point, Lake Forest, Laguna Woods, Aliso Viejo, Villa Park, San Clemente, Rancho Santa Margarita, Stanton and Huntington Beach.

Such improvement shows positive progress can be made. However, the granting of generous defined benefit pension and retiree medical plans has come home to roost. And their impacts are becoming more transparent and measurable.

The other 22 cities felt the impact of having to now include what are also known as Other Post Employment Benefit (OPEB) liabilities on their balance sheets. Using the city of Anaheim as an example, the retiree medical cost of $138.2 million was 98 percent of its Unrestricted Net Deficit increase of $141 million.

City councils, going forward, must remain keenly aware of their employee bargaining efforts or find themselves continuing to decrease staffing levels.

In times of a growing economy, balance sheets should be going up, not down. Withstanding an economic leveling or decline will be the challenge facing many of Orange County’s cities in the months and years to come.

You should be able to do your own research with the CAFRs on the finance pages of your city’s website, or you can call the city for a hard copy. John M. W. Moorlach, R-Costa Mesa, represents the 37th District in the California Senate.

THE TEN HIGHEST RANKED           
CITIES IN ORANGE COUNTY           
ON A PER-CAPITA BASIS
           
1 Tustin                    $1,835                   
2 Irvine                     $1,601                   
3 Laguna Beach       $1,540           
4 Cypress                 $1,517                   
5 Laguna Niguel       $1,032           
6 Dana Point            $733           
7 Lake Forest           $698           
8 Laguna Woods      $599           
9 Aliso Viejo             $564           
10 Villa Park             $491                    

THE TEN LOWEST RANKED
CITIES IN ORANGE COUNTY          
ON A PER-CAPITA BASIS        
  
25 Orange                      ($1,051)
26 Westminster              ($1,068)
27 Fullerton                    ($1,179)
28 Huntington Beach     ($1,256)
29 Fountain Valley         ($1,288)
30 Newport Beach         ($1,374)
31 Santa Ana                 ($1,482)
32 Anaheim                    ($1,545)
33 Brea                           ($1,740)
34 Costa Mesa               ($1,949)

Click on the link to view Tustin's CAFR:
https://www.tustinca.org/Archive.aspx?AMID=43

Click on the link to view Senator Moorlach's article:  https://moorlachupdate.com/2019/08/04/moorlach-update-state-and-oc-cities-finances-august-4-2019/

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