PVE Financial Issues
“It takes two to speak the truth — one to speak, and another to hear”
Issue 1: PVE’s expenses are greater than its income. Since 2014 expenses have increased by $4.5 million
ISSUE 2: PVE’s unrestricted funds (reserves) have been depleted by $10.3 million since 2010
ISSUE 3: PVE’s pension debt has increased by $4.5 million since 2015
Data Sources
For the PVE’s FY2017 Audited Financial report (page 9, 22, 23, 27, 102, Appendix G), click here.
For the Budget, click here.
Additional sources and graphs are here.
Sources for INCOME vs. EXPENSES: Please see PAGE 101 of PVE’s Comprehensive Annual Financial Report (CAFR),year ended June 30, 2017 — click here.
Sources for FUNDS BALANCE: Please see PVE’s Comprehensive Annual Financial Report year ended June 30, 2017, found on page 102, proprietary funds found on page 27, and forecast years found on page 5 of the Memorandum dated June 26, 2018, to the City Council from the City Manager entitled, “Approval of the 2018-2020 Budget and Capital Plan…”— click here.
Sources for PENSION DEBT: Please see Attachment G of PVE’s Comprehensive Annual Financial Report, year ended June 30, 2017, found on page 165 under Net Pension Liability — click here.
2018 Forecast: CalPERs representative made a presentation to the City Council on 5/30/18 that included an estimate of the 2018 pension liability of $14,250,000, in addition there is a $500,000 Special Retirement non-CalPERs pension liability for a total of $14,750,000. The newly released CalPERs statements show: $14,300,000 (as of' Aug 2017). Combining with the $500,000 Special Retirement non-CalPERs pension liability (as of 7/31/2017) per the 2017 PVE CAFR makes a new estimate of $14,800,000.
An Open Letter to the Residents of Palos Verdes Estates
On June 26 the PVE City Council approved our City’s budget for 2019, which includes the $5 million revenue from the Measure E parcel tax. A group of citizens with strong financial backgrounds reviewed the budget and were alarmed to find a $2.8 million shortfall.1
The City’s plan is to cover this shortfall by tapping into our available funds. Available funds are used to keep the lights on and pay employees and suppliers. Our available funds have been dwindling since 2014, and if we continue at this pace our funds will be totally depleted in fewer than six years.2 This is called bankruptcy.
Since 2014 our current City leaders have:
1. Permitted spending in excess of revenue every year.3
2. Increased annual expenditures by $4.5 million.4
3. Decreased available funds by $6.7 million or 31%.5
4. Increased pension debt by $4.5 million in just the last two years.6
5. Replaced consultants (without pensions) with new employees (withpensions), including several highly paid managers.7
6. Led and enabled the sale of Parklands to private parties, opening a precedent for a last-resort measure to avoid bankruptcy.8
In response to this troublesome situation, a petition has been developed to present to City Council, listing measures that will restore our City’s financial health and maintain it in the future. The petition is attached and can also be accessed at https://www.pvrrg.org/sign-petition.
Notes to Open Letter:
1) Please see page 5 of the Memorandum dated June 26, 2018, to the City Council from the City Manager entitled, “Approval of the 2018-2020 Budget and Capital Plan…” — click here. The last line of the table, “Total Governmental including Internal Service Funds,” lists a projected fund balance of $25.1 million for fiscal year 2018 and $22.3 million for fiscal year 2019, a decrease of $2.8 million.
2) Please see page 5 of the Memorandum dated June 26, 2018, to the City Council from the City Manager entitled, “Approval of the 2018-2020 Budget and Capital Plan…”— click here. Available (unrestricted) funds consist of the General Fund, the Capital Improvement Fund, the Equipment Replacement Fund, and the Insurance Fund. Therefore the unrestricted funds for fiscal year 2018 equal $18.3 million and that for fiscal year 2019 equals $15.5 million, a decrease of $2.8 million. If these funds continue to be depleted at the same rate, they will be completely gone in 5.6 years beginning in 2019. ($15.5 million divided by $2.8 million/year equals 5.6 years.)
3), 4) Please see page 101 of PVE’s Comprehensive Annual Financial Report, year ended June 30, 2017.— click here. The line “Net (expense)/revenue” shows that expenses have exceeded revenues every year since 2008. The line “Total governmental activities expenses” shows that from 2014 to 2017 expenses increased from $20.1 million to $24.6 million or by $4.5 million annually.
5) Please see PVE’s Comprehensive Annual Financial Report, year ended June 30, 2014.— click here. Note that available (unrestricted) funds consist of the General Fund, the Capital Improvement Fund, the Equipment Replacement Fund, and the Insurance Fund. The General Fund ($9.8 million) and Capital Improvements Fund ($8.4 million) are found on page 22. The Equipment Replacement and Insurance Funds together totaled $4.1 million under the row entitled “Cash and Cash Equivalents” (see page 28). Thus the total unrestricted funds in 2014 were $22.3 million. Now, going back to page 5 of the approved budget for 2018-2020 (see notes 1 and 2 above), recall that the unrestricted funds for 2019 were $15.5 million. Therefore unrestricted funds are expected to go from $22.3 million in 2014 to $15.5 million in 2019, a decrease of $6.7 million or 31%.
6) Please see Attachment G of PVE’s Comprehensive Annual Financial Report, year ended June 30, 2017, found on page 165 of this PDF.— click here. The line “New pension liability” shows an increase from $8.5 million in 2015 to $$13.0 million in 2017, or $4.5 million in just 2 years. (Prior to 2015, PVE did not publish the amount of pension debt.)
7) Please see page 5 of the essay, “The Dollars and Cents of City Services,” authored by the City Manager in February 2017— click here. All nine positions in the chart are new.
8) Please see PVE Openspace.com— click here.
Petition to PVE City Council
If you would like to urge the Palos Verdes Estates City Council to exercise greater financial discipline, please sign this Petition.
We, the residents of Palos Verdes Estates, strongly urge the City Council to:
Plan for expenses to be less than revenue
Restore fund balances to prudent levels (e.g., 2010)
Reduce pension debt annually
Please help our city by volunteer to gather the signatures of your resident family, friends, and neighbors to sign the petition either online or by paper. You can click here to download the paper petition and return it by email at info@Pvrrg.orgor fax to (310) 349-3381.
To download a PDF of the graphs above to send to your friends, click here. If you'd like to share the petition with your friends, click here.
If you’d like to refer to the sources for the graphs in the petition, click here.
Volunteer – Please Help Us to Help our City
To volunteer your help in this petition campaign, please let us know: