Standard & Poor’s, the money gurus who were such doomsayers during Stockton’s fiscal crisis, gave the city an attaboy last week, upgrading a $9.4 million municipal bond.
That’s the suits’ way of expressing increased optimism that Stockton can pay its debts or, more broadly, that the city has replaced its big spenders with competent money managers.
“The rating action reflects our view of the city’s sustained strong-to-very strong financial performance …” said S&P. The financial analysts also credited “institutionalized integration of a revised reserve policy,” meaning that savings is a part of every budget.
The city gets kicked in the teeth for its mistakes, so it deserves credit for improved money handling. That said, some wonder if the city has gone overboard.
Take that “reserve policy.” Stockton has accumulated a hefty $94.5 million in reserves. It plans to stash perhaps $9 million more this fiscal year. And to keep amassing money until reserves total $177 million.
For comparison, the city of Modesto’s reserves are $18.3 million.
This Scrooge McDuckism exasperates some citizens. They kvetch that the roads are potholed, trees dying, etc., part of the city’s staggering $1 billion in deferred maintenance.
Fiscal watchdog Ned Leiba has been saying so for years.
“The city has reported very large surpluses because it, year after year after year, does not spend what it budgets on police and fire and other noble uses,” Leiba wrote me back in 2015. Things haven’t changed.
On the contrary, City Manager Kurt Wilson wrote happily in this year’s budget, “The City’s adherence to prudent financial policies required discipline in the face of internal and external need-based pressures and has resulted in Stockton traveling from bankruptcy to being ranked one of the most financially stable large cities in the United States.”
For “internal and external need-based pressures” read: The public employees want raises, and everybody else wants something, too.
It’s commendable that Wilson & Co. can say no to interest groups that formerly ruled the roost. But can they say yes?
According to city policy documents, the city is saving for several reasons: to have two months’ operating capital; to remodel the new City Hall building; to afford raises for the public workforce when current contracts expire; for pension costs projected to increase (painfully) for at least a decade; and to gird for the next recession.
“We’re still trying to save for a rainy day to ensure we can hold on to what we have,” said city CFO Matt Paulin, “and not go through anything we went through before, the horrific layoffs and service reductions.”
The question is whether Stockton can be fiscally prudent without being the national poster child for austerity. When do prudent reserves become miserly?
Standard & Poor’s analysts view municipal fiscals through the narrow lens of a good or bad investment. We have to live here. Fiscal prudence is important, but quality of life matters, too.
Every year, “We know we’re going to have millions of dollars that we didn’t spend. It’s frustrating,” said District 4 Councilwoman Susan Lenz. “We always talk about things we cannot afford. Yet the prior year we can’t spend all the money.”
Lenz called “embarrassing” the recent revelation that city staff turned down hundreds of free trees, some with the first years of maintenance paid for, because the city might have to take care of them some day.
She said it’s time to address the myriad of little things in the city that have been neglected for years.
“I need garbage cans in Legion Park,” Lenz continued. “I was told, ‘Well, we can’t put more garbage cans in Legion Park because who’s going to pick those up?’ Well, OK, let’s everyone throw garbage on the ground. It doesn’t make sense.”
Lenz is a CPA by trade. “I know we have to save money,” she said. “But we don’t need $100 million in reserves. A lot of these things to me are small items that would make a big difference in peoples’ lives.”
I hope no one thinks I’m saying the city should go back to the reckless fiscal policies that bankrupted it. Or that considerations such as crushing pension cost increases are not serious considerations.
I just agree with Lenz: “I’m happy we’re in the position we’re in,” she said. “But on the other hand we need to stop looking like a bankrupt city.”
Contact columnist Michael Fitzgerald at (209) 546-8270 or email@example.com. Follow him at recordnet.com/fitzgeraldblog and on Twitter @Stocktonopolis.