While city leaders are expected this week to give initial approval to the Long Beach fiscal budget, a litany of obligations and initiatives were left out—everything from repairs to city streets to employee pension contributions.
These so-called “unfunded liabilities” will have to be dealt with in the foreseeable future, but they often get punted as other priorities emerge.
The cost to address roads and deteriorating street conditions is projected to cost $1.77 billion. That estimate is the cost the city would pay to fix all of its roads in a five-year period, according to Public Works Director Eric Lopez.
“Obviously the solution is going to be a multi-year effort beyond five years, but the study focuses on a five-year snapshot,” Lopez said Aug. 3 of the recently completed pavement management plan that produced the $1.77 billion estimate.
The city’s 2018 pavement management plan said that the average replacement cost of roads is about $2.8 million per mile, and noted a dramatic rise in the cost of concrete that will affect the cost of curbs and sidewalks. Long Beach has about 1,000 miles of roads and alleys.
Alley paving ($98 million) and sidewalk management costs ($631 million) are based on cost estimates from 2018 and 2019, respectively.
A presentation given by Lopez earlier this month showed that the city has yet to complete road repairs identified in a three-year, $150 million Measure A infrastructure plan unveiled in 2016. The city is expected to spend $1.5 million out of the $74 million in revenue Measure A generated this year on streets and alleys.
A legal settlement stemming from a 2014 lawsuit over public walkways being in violation of the Americans with Disabilities Act requires the city to spend $189 million over a 30-year period that began in 2017, which could eat into general funds that would be used for other city infrastructure projects.
Combined with sidewalk management, the costs to address the unsafe public walkways could escalate to over $631 million. The 2022 proposed budget includes $4 million in Measure A funds being used to address ADA violations.
The costs don’t end there.
Long Beach has $394 million it needs to invest in stormwater protection systems and another $647 million in city facility repairs. Those costs don’t include what the city might do with the Queen Mary.
A study session held by the City Council in July revealed that the city’s options could range from $105 million to scrap the historic ship, to over $500 million to dry-dock the ship.
Trimming the city’s trees regularly, something that is not currently done, could cost up to $1 million per year. Watering the city’s plants, trees and turf would require an additional $1.3 million annually. The city’s current budget allows for 56% of actual water needs.
One of the biggest costs the city needs to cover in the coming years are required contributions to CalPERS for public employee retirement accounts, which are projected to cost Long Beach taxpayers $1.2 billion.
Grace Yoon, a budget manager with the city, said that the city had once been one of the best funded entities when it came to city employee retirement accounts, but the 2009 market collapse left it as one of the agencies that was hurt the most.
The city is less than 80% funded for both public safety and non-public safety employees and increasing contributions to help pay down the city’s unfunded obligations could lead to budget cuts elsewhere.
“As a city we have to make those decisions on where to invest,” Yoon said, adding that certain things like pensions, ADA compliance issues and future oil field abandonment costs related to the city’s drilling operations take legal precedence over things like fixing streets and trimming trees. “We’re more on the hook to find a way to pay certain things down.”
Yoon said that recent changes to how the city is approaching the CalPERS issue like prepaying pension costs, which can save the city a few million dollars per year, and recent high investment returns can positively affect the city’s future contribution rates.
By the time contributions are expected to peak in 2030, the city could be contributing as much as 63% of payroll for some city employee groups.
Yoon said that pensions are a big focus of the city but there are general concerns about the continued outpacing of costs related to the tax revenue the city brings in. Her team is watching how the city’s economy recovers from the pandemic but given the projected budget shortfall “challenging and difficult decisions” could be coming, she said.
“Overall, it is common that there will be more need than there are resources for, but it’s also a matter of how we balance out the needs that are immediate, like operations,” Yoon said.
An assessment from the California State Auditor’s office released this month looked at hundreds of California cities and ranked them based on financial factors including debt, general fund reserves, revenue trends and pension obligations. Long Beach was rated the 23rd least financially healthy city out of the 423 cities that were part of the analysis.
The rankings were based on 2020 data and Compton was ranked as the city with the worst fiscal health while Calimesa was designated as the best.
The biggest concerns listed by the auditor’s office were Long Beach’s $3.4 billion debt burden, which was 19th worst in the state, future pension costs the could eat up 11% of government wide revenue and other post employee benefits like health and dental coverage that are completely unfunded.
Editors: Note: A previous version of this story said there were 414 cities surveyed and listed Laguna Woods as the best. The story has been updated.
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