Financial Problems | Lost Coast Outpost | Humboldt County

Patrick Cloney asks Natalie Arroyo, Kim Bergel, Mike Newman

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Financial Problems

Eureka’s solution to its economic woes: loss of revenue and increasing multimillion dollar per year pension debt payments, was Measure H, which more than doubled Eureka’s sales tax. With HumCo in the same debilitated economic situation, loss of revenue and pension debt increased from $220 million in 2015 to $330 million in 2021, which caused pension debt payments to increase by $17 million per year for at least the next decade (for a total of over $1 billion in payments over the next decade), what is your financial plan for HumCO’s debilitated financial situation?

— Patrick Cloney

Responses

Natalie Arroyo

Hello Patrick,

I know this is a top priority for you! I disagree with some of the ways you construe this information, but I of course understand the essence of your question. My take, briefly - Eureka has significant deferred maintenance needs for  infrastructure that predate my time on Council, and we also live in a challenging environment with high rainfall and tectonic activity which impact roads, our sewage system, and more. However, in the past two years we have been able to do exponentially more to improve our infrastructure through a combination of tax revenue, the hard work of earning publicly-available grant dollars, and creative approaches. I’m very proud to see the City improving parks, roads, water quality, and much more. I think these are worth the cost. Measure H is a 1.25% tax that replaced a .50% tax. Both were overwhelmingly supported by voters, as folks recognized that our infrastructure repairs were sorely needed, gas tax and other revenues were ebbing, and the spirit of addressing our own challenges head-on is strong in Humboldt! 

The matter of pension debt and reform is a complex one which every jurisdiction in California struggles with. The County and the City are not alone. Thankfully, the PEPRA reforms have allowed us to see that relief is on the horizon. We still have to pay our obligations to current and past employees, so agencies continue to pay on our debt. Right now, most agencies are seeing higher payments, which will taper down in a few years. Strategies like refinancing debt when interest rates are favorable, or setting up additional funds to make extra payments are possible. I don’t want to commit to one strategy without hearing input from staff and weighing their expertise. 

I am well aware from all of your correspondence with elected officials, letters to the editor, etc. that this issue is one you are focused on. I’d be interested to hear what trade-offs you would make in favor of paying down debt faster. Would you suggest that local agencies reduce staffing, reduce services, sell land or property, or something else? I respect your perspective and would genuinely like to know. The toughest part of the job is deciding how to spend resources amongst many worthy and crucial causes. I am always open to hearing how we could do that better. 

Thank you for inquiring!

Natalie

Kim Bergel

Unfunded pension liability impacts all California agencies. I know this topic is a passion of yours Patrick as we have had this conversation many times. In theory, there are only a limited number of ways to address this.  Increase funding of the pension fund – which either means greater contributions from employees (lowering their income); increasing taxes; or decreasing spending.  The only other means by which the pension fund increases is if the fund is well-invested so that it grows when the economy grows and we hope that the economy grows over the long term.  But we know that’s possible.

Unfortunately, nobody in any jurisdiction has come up with any magically painless solution. What I promise to do is listen to the experts and with my fellow Board members try to formulate a policy which preserves the fund with the least amount of pain possible.  But we also have roads to fix; an economy to rebuild; and services to provide.  I have no illusions that it will be easy, but I am hopeful that when we drop the bickering and blameshifting and look at where we agree and build from there in a constructive manner we can work through these issues and come out much better.  

Thank you Patrick