Why is Oceano taking from rate payers to pay for fire services?

May 27, 2020

OPINION by JULIE TACKER

Oceano Community Services District, like most every little government entity, struggles financially as a matter of course. This month they look to adopt next fiscal year’s budget. The news is not good, the 2020/21 preliminary budget identifies significant issues that pre-date the current pandemic; as proposed, the sewer fund will be robbed to pay for fire department services and the water fund is in serious deficit. There is an immediate need to raise water and sewer rates.

The fire fund, which pays Oceano’s portion of the Five Cities Fire Authority through a Joint Powers Authority with the cities of Arroyo Grande and Grover Beach was revised and approved last June. The district agreed to pay more than it can afford and an attempted to pass a ballot measure to fund their contribution, for $180 annually per parcel, failed by a slim margin. Another attempt to pass such a measure is also likely to fail, certainly now as the Coronavirus has had worldwide financial implications.

Oceano is now in the fire authority “wind down period” which leaves them in the fire authority until June of 2021 – if they can pay the agreed upon amount $1,138,148.

The three agencies are considering holding the funding formula together an additional year, to give Oceano another crack at passing another tax measure. But, the only way Oceano can fully contribute financially this year is by deferring a payment of $90,865 from an interfund loan made to their sewer fund. The proposal before the board today is to only pay the interest of $23,075 (6%) towards the debt. This approach, and the idea that they may draw from this same source the following year, is fiscally irresponsible. The classic cliché of, “Robbing Peter to pay Paul” fits here.

The interfund loans were established in 2017 to finally pay back the sewer and water funds for 2003 construction of the sheriff substation. Due to over-paying general managers, mismanagement, incompetence and procrastination the district had failed to repay the accounts earlier. By deferring payments the term of the loan will have to be extended each year that the principal repayment is deferred, further depleting sewer reserves and continuing to delay important infrastructure improvements which could lead to larger problems later on.

The water fund deficit is a consequence of several factors; a shortfall in revenue over the last several years is the result of reduced water consumption by the community. By design, a change in how administrative charges are being allocated between the water and sewer funds and unfunded and unanticipated costs associated with some large repairs in the system have also resulted in the fund being nearly $500,000 in deficit.

The state of these two funds, water and sewer, will require the district to implement a Proposition 218 water rate increase in the very near term.

At tonight’s meeting, the board will also consider giving direction to its fire authority representative, Karen White, on how to vote for a pay increase for the union represented firefighters. Negotiations, prior to the coronavirus, culminated in a 2 percent increase and a $1,000 one-time retroactive payment to these firefighters. White will argue, because the funding formula was agreed upon, the action to raise pay is “already approved” and if the fire authority board doesn’t increase pay to the firefighters, Oceano will still have to pay its agreed upon share.

Oceano is not immune to the financial effects of the coronavirus. ‘All bets are off’ right now while all government and the private sector is slashing services, cutting salaries, laying off personnel, implementing hiring freezes and deferring or cancelling contracts. Oceano needs to take a step back, look at their entire financial picture and make the same hard choices other agencies have had to make, including the reduction of administrative costs.