City Council learns Antioch again facing bankruptcy

In spite of the additional $6 million from Measure C, each year

By Dave Roberts

Antioch’s budget, which teetered on the brink of bankruptcy during the Great Recession resulting in massive employee layoffs, reduction in city services and closure of City Hall one day a week, is once again headed toward bankruptcy unless significant cost-cutting measures are taken. That was the bad news from Finance Director Dawn Merchant at a City Council budget study session on Tuesday, April 11th.

Antioch’s $52.7 million General Fund budget is projected to begin deficit spending by $2.6 million in July of next year due largely to increased police staffing, pay and benefit hikes for all city employees and increased payments to the California Public Employees Retirement System. The deficit spending will occur despite the city receiving more than $6 million annually from the city’s Measure C half-cent sales tax hike that was passed in 2013.

That tax is due to expire in four years. The loss of that revenue would result in the city running a $12.5 million deficit in the fiscal year beginning July 2021, according to budget projections. And the city could be bankrupt and $10 million in debt the following year, increasing to $25 million in debt the year after that.

“It’s really important for council when making any decisions going forward, based on projections going forward, to consider the fact that Measure C needs to be looked at to either be renewed or some other revenue measure in its place,” Merchant told the council. “Otherwise once that ends, the city is going to be in a significant financial bind that we could find ourselves in. We could have to lay off police officers. The Police Department is over 70% of the General Fund budget.”

But employee costs are increasing so fast that even if Antioch voters approve an extension of Measure C, the city could still be facing bankruptcy in the budget year starting July 2023, according to a budget chart. Essentially, extending Measure C would only stave off bankruptcy for about a year and a half. As a result, the council may have to make tough cost-cutting decisions in the coming months before the 2017-18 budget is adopted on June 27.

It’s unclear, however, where those cuts would occur. Employee salary and benefit costs comprise the vast majority of the budget. But instead of holding the line on employee costs, in November the council approved more than $9.2 million in salary and benefit hikes over five years.

The other potential area for cost savings involves quality of life services. The city currently provides:

  • $1.1 million in subsidies for recreation programs and the Antioch Water Park, which is projected to increase $107,151 in the next fiscal year.
  • $501,222 for Animal Services, which is projected to increase to $873,735 in two years.
  • $455,000 for the Lone Tree Golf Course. The course also is years behind on $951,756 in debt service payments to the city, and is unable to repay two other loans totaling $1.1 million.

In addition, the Antioch Marina will need a $120,000 subsidy starting in 2019. And council members have expressed interest in increased funding for the Lynn House Gallery and to begin funding the July 4th and Holiday DeLites events.

Council Member Monica Wilson suggested cutting the city subsidies for the water park, golf course, marina and animal services.

“We are at that point where we really need to make that tough decision on can we carry the weight of the cost in those four areas,” she said. “We have looked at different organizations or companies that would come and maybe finance those things. I go to the golf course from time to time. I think it’s a great thing. But, unfortunately, I don’t think we can keep carrying that load. We’ve definitely come to the point where we need to make that decision on that area.

“On special event funding, we need to look at a definite finite amount of money that we can work with different groups. We need to look at how much longer we can support events. We want to support events but we really have to look at how much we can support the different events. How much are we able to afford to these different events.”

But Mayor Sean Wright advised the council to be cautious in cutting amenities that improve the city’s quality of life.

“When we look at the four subsidies that we do, it’s only $2.7 million, which is about 5% of our total General Fund money,” he said. “If Measure C does not get extended, we run out of reserves in 2022-23. If we do extend it, we’re only extending ourselves an extra two years to really be in that same boat. So really what we’re looking at is an increase in [employee compensation] contracts and an increase in PERS. For us to be able to save $2.7 million still doesn’t get us out of the hole.

“What’s coming as an avalanche is much bigger than $100,000 for events or $2.7 million. So looking at our budget I think we need to be fiscally prudent. But when you’re looking at a police officer or a code enforcement officer or doing things that increase the viability of economic development and community, for us to save $150,000 it’s like taking a large business and deciding that ‘You know what, in three years I’m really going to be suffering so I’m no longer going to market, I’m going to stop marketing now to save the money for three years that we’re going to need.’

“And ultimately what you do is you cause your demise because you stop doing things that would attract future development and future monies. So I think we need to be very careful in our conservative approach to look at what do we need to do to make our community something that economic development wants, that people want to come to, people want to live in, our home values go up so we increase that, we increase property taxes, we increase businesses.

“We need to be very careful. If we limit and cut ourselves, we’re still going to be in the same place. If we save $3 million a year we might postpone it one year, but we’re going to be in the same place with this oncoming avalanche of PERS and increased [employee] costs. We need to be very conservative and prudent, but smart in our decision-making so that we don’t lower the viability of our community. Sometimes spending an extra $100,000 on something that makes our community better, people want to live here, is money well spent in the long run – even though it looks like in three years that may be something we have to be careful of.”

Several residents agreed with Wright that the city should not cut recreation and animal services. Others urged the council to cut costs by renegotiating the contracts with city employees.

“We cannot tax ourselves out of this problem,” said former Council Member Ralph Hernandez. “This has existed for many years. It’s a train wreck that has been heading for a couple of decades. It’s time this council addresses it and takes honest-to-goodness action. Reopen negotiations on [employee] contracts and … be honest with them and tell them the truth: ‘We have X dollars….’ The [employee] organizations meet or they don’t. If they don’t, you impose what is needed to keep this city viable and avoid bankruptcy.”

William Leroy was also concerned about employee costs, which include $142 million in the city’s unfunded liability for retirement benefits.

“There’s over half a million dollars sitting up there in campaign contributions that got you into the seats you’re in,” he said. “And we pretend that that’s the taxpayers donating money to your campaign, when in fact we know it’s so that you can get up there and do the unpalatable like passing taxes. The way the system works is the police endorse you because you turn around and endorse their pensions and wages. And I can’t blame them for wanting more money. I do blame you….

“It continues on this game of pretending you are not bought and paid for, when in fact you are. You don’t represent us. You take our money. I think the police ought to be arresting you because that’s called theft. I’m really sad that you do this. I wish somebody would break out of the ranks and do something honest and good for the people of Antioch.”

The council’s next budget study session is scheduled for April 25 in which they will discuss the five-year capital improvement program and any outstanding issues from Tuesday’s session.

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the attachments to this post:


General Fund Projection Chart


General Fund Projection Graph


26 Comments to “City Council learns Antioch again facing bankruptcy”

  1. Just a thought says:

    It is the pensions that have to be sustained for a good long time because the people leaving are young. 50’s. So you have to maintain their pensions, their medical (if applicable) etc. No municipality can sustain that for long until the till runs dry.

  2. Skip says:

    If we file for bankruptcy, it will be layoffs and threatened pensions for the city employees. The pay deal they negotiated should have been criminal. I say, lets let it happen and then the new mayor can renegotiate their pay.

  3. Skeptical says:

    It seems to me that the root of the problem is Prop 13 which prevents the city from raising property taxes to fund the things we need. On the East Coast, towns and cities can tax houses, land, cars and other property to get needed funds. Here in CA we’re handcuffed by Prop 13. Raising sales tax doesn’t work anymore as retail moves online. Let’s fix Prop 13 so that our municipalities don’t starve to death.

    • Publisher says:

      Skeptical,
      Thank you for reading the Herald and for your comment.
      However, I have to completely disagree with you. Prop 13 affects all cities. Yet, why aren’t other cities facing bankruptcy?
      Because their council members make responsible spending decisions and don’t continue to give away the shop mainly to the police, as well as other employees when we don’t have the money.
      This is the third, overly expensive pay and/or benefits increase the police have received since the early 2000’s starting with the 3% at 50 benefit that has proven to be too costly. Then again in 2007, just as the economy started to turn down, the council at that time gave the cops a rich 6-year contract. The city is still digging itself out of the hole those two decisions caused.
      Yet, even after we voted to raise the sales tax by a half cent in 2013 with the passage of Measure C, after the council promised us they would hire 22 more police “immediately”, we only have 11 more police even though the city has been receiving an additional $5-$6 million per year for the past three years. Plus, this doesn’t take into account the additional revenue from Measure O, the business license fees on residential rentals.
      It’s time for the council members to face reality and stop spending money they don’t have. That council majority voted for the pay raises. It’s time they went back and in the face of our financial challenges, renegotiated the contracts. The city employees must understand we can’t afford them. Plus, they need to budget based on not expecting Measure C to be renewed.
      I find it very disingenuous of City Finance Director Dawn Merchant saying the first place that would have to be cut is police – the number one purpose for our city government to exist. They always want to cut the basics, first. Council Member Wilson is correct. It’s time to cut the extras, the non-necessities. And get us what they promised us and what we’re paying for – the total 22 additional police to help make Antioch safer. That will help make our city more attractive to businesses, which will locate here and grow our economy. The result will be more sales and property tax revenue for our city so we won’t have a need for additional taxes.
      Allen Payton, Publisher

      • PV says:

        Prop 13 doesn’t apply to all the new developments. Maddening.

        • Publisher says:

          PV,
          Thank you for reading the Herald and for your comment.
          However, please explain your comment. How does it not apply to all homes, including new homes in California?
          Allen Payton, Publisher

  4. Frederick Rouse says:

    Nothing new here. Waas mentioned several times over and over. http://antiochherald.com/2016/11/p25085/

  5. Marty Fernandez says:

    I have stood in the council chambers for years over and over explaining this to various councils. This council the responsible members are Ogorchock, Tiscareno and Wilson. Add to that Harper and Rocha. They should ALL be held responsible for the bankruptcy of this city. The only thing we can do is renegotiate the contracts and when it was mentioned in the last budget meeting you could hear the wind being sucked out of the room. But face it folks. MORE taxes or renegotiate the contracts. Either way, we the taxpayers will be liable. Most officers and city employees do not live in Antioch. They don’t give a darn. Fact.

    No business of any worth will ever come to Antioch with all the baggage this city has.

  6. Marty Fernandez says:

    The only place Prop 13 can be changed and probably should be is to remove the industrial properties and other business properties like Chevron out of 13 and have them taxed normally. It would be a bitter fight but it would be the correct thing to do. We have tried it before and failed I believe.

    • Kris Hunt says:

      Mr. Fernandez, please quit blaming Prop 13 for the failings of the Antioch city council. Irresponsible spending is the problem.

      • Marty Fernandez says:

        Kris, I do not blame prop 13 for anything and I did not state I did. The guy named Skeptical did. No one blames the City of Antioch for our problems more than I do. I have been vociferous at council meetings for over 15 years and that is how long this has been going on. More taxes are collected from new housing than prop 13 anyway. When you were the head of CoCo Tax you and I talked often. I take offense at you not correctly reading all my posts and jumping down my throat.

  7. Loretta Sweatt says:

    I agree with Monica Wilson. The Water Park, The Event Center and Animal Services need to be sold off to the highest bidder. Those should be owned and operated by private corporations. I also agree with the Allen Payton, Don’t Cut The Police or intended Measure C funds for blight and code enforcement. Nothing else matters if this city is not safe! It must be Safety First! It’s ok with me if City Hall goes back to 4 days a week, or less employees, and run a tight ship at City Hall. Nobody can afford more property taxes and there are too many houses in default on taxes and in foreclosure as it is. I suggest a comprehensive approach with common sense! It’s shameful that funds were squandered when plentiful and then the burden passed on when they were not. Now leaders have to clean up the past mistakes, take responsibility for the present circumstances and step up to the plate to design a practical future without excessive monetary guarantee but rather practical reality.

    • Publisher says:

      Loretta,

      Thank you for reading the Herald and for your comments.
      But, I have to disagree with you about selling off city assets. Rather the city council can vote to contract out the operations, especially the water park, as I proposed when I was on the council, when it first opened. I actually called Water World and they said they were interested, but not at that time, as they were just getting ready to open their Concord location. Perhaps now they’d be interested.
      Allen Payton, Publisher

      • Loretta Sweatt says:

        Thanks Allen, I’m glad you listen to people and engage with them. It means a lot. Yes, what you said above; is a great idea. I was going to mention that about Water World. Thanks for posting that. Getting those assets off the back of the City, including the Marina and Humphrey’s I feel would be a relief. Antioch cannot and should not support ventures whose maintenance can or does end up on the taxpayers. The City needs to make practical choices and stick within the budget, spending below budget would be a novel idea too.

  8. RJB says:

    Let it go bankrupt. There are NO city services. Code Enforcement is a joke, ordinances not being enforced, Police come 3 hours after they have been called… the list goes on.

    Let it go broke and allow neighboring cities and the county to do the law enforcement and city services. Probably will have a faster response time.

    • Kris Hunt says:

      Bankruptcy is expensive and divisive. It would make more sense for the council to step up and do their job. It sounds to me as if this group of weak “leaders” is simply using this as a campaign for another tax increase.

      • RJB says:

        Your reply makes absolutely no sense.

        • Marty Fernandez says:

          They ARE using this for the passage of MEASURE C for another 2 years. All that would do is extend the bankruptcy 2 more years. It will still happen. Do not vote for the extension of Measure C. NO NO NO. They should have filed for bankruptcy back about the time Vallejo did and this mess would have been cleaned up. The weak leaders Kris Hunt is talking about are Wilson, Ogorchok, and Tiscareno. Shame on them.

  9. Mark Jordan says:

    The following was sent to the City Council the day of the Council Meeting 4/11/2017

    As to the Budget Staff Report to the City Council from Director Merchant dated 11 April 2017:

    Agenda Item 1 page 1 / The actual unfunded CalPERS amount is somewhere between $150,000,000.00 and $160,000,000.00. One hundred and forty million is a low end number.
    Page 2 / Measure C will sunset and will not be renewed by the voters. The mismanagement and lack of performance will cause it to fail. I would not vote for a renewal and would work to defeat a renewal.
    Page 3 / Transfers from Water and Sewer, if as stated the City is doing a new study please know that if the City of Antioch attempts to transfer funds for Police Services I will immediately file suit to stop the transfer. The City of Antioch must stop the shell game with transfers.
    Page 3 / Memorandum concerning salary increases. This never should have been approved and needs to immediately be addressed by opening renegotiation with Police and other employees.
    Page 4 / Contract Code Enforcement / Fines should be equal to have this break even. There should not be a $175,000.00 deficit.
    Page 4 / Golf Course / The entire golf course and facility is most likely not worth more than 5 million dollars in the open market. In fact the value may be as low as 3 million. But the total amount owed to the City is not in any way sufficient to effect the budget shortfalls that we are looking at in 2018 to 2021.
    Page 6 / Measure C /See information in item 2 above.
    Page 7 / Measure O/ The City still fails to collect all the money due. We just took in 3 new management accounts and none of the properties were registered with the City. From the consumer side view this is a near failure on the part of the City.
    Page 8 / June 30 2019 Proposed Budget. Director Merchant states correctly that nearly 3.5Million Dollars of expenditure increase is due to Salary and CalPERS. Looking at anything else will not correct, fix or effect the road to Municipal Bankruptcy.
    Page 9 / Employees need to pay 50% or more of any fees paid to CalPERS. Additionally, the City must terminate “Defined Retirement Benefit” and move to “Defined Retirement Contribution”.

    The City of Antioch has 24 months until massive negative spending begins. Bankruptcy is no more than 24 months from that time. You can no longer kick the can down the road.

  10. RJB says:

    Just realized that this poorly ran excuse of a city will not only want you to renew another measure C tax increase, but will keep asking the public to renew every time it expires until we get to a sales tax of 20% and higher.

    No matter how much money you give to city council, this disgusting city will still be broke because all of your tax dollars goes to proving city services for the ghetto hood rats that use up the majority of police services.

    LET IT GO BROKE AND BANKRUPT. WE NEED A RESET. LET OTHER GOVERNMENT ENTITIES STEP IN AND CLEAN THIS MESS.

    • Marty Fernandez says:

      RJB There is no one to clean up the mess but the tax payers. The pensions would be cut but we would still be on the hook!

      • RJB says:

        Let it go broke, Marty. Let real leaders step in and fix it after the dust settles.

        There is no hope in Antioch, only criminal filth. Let it fall under its own weight of BS so we can rebuild a new city.

  11. Loretta Sweatt says:

    We can’t cut police. We need more police. Like 200 police officers total. Would Water World invest in a high crime city and expect sufficient investment returns? If the city goes bankrupt, won’t all the city assets be auctioned off to the highest bidder? Antioch has to be Safe and Beautiful. That’s job number one! Nothing else matters, it’s all secondary to beauty and safety. And Volunteers can’t do it all by themselves.

  12. Marty Fernandez says:

    I would be happy with safe and clean.

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