Commentary

I am fully aware that probably some 8 out of 10 people do not appreciate media pieces that are heavily focused on numbers. When I practiced as a Certified Public Accountant and Certified Financial Planner, I realized that most people need professional assistance for many of their fiscal decisions.

Watching personal finances is critical. But, our focus should also be on the financial well-being of our homeowner’s association, city, state, and nation, as it has an impact on our budgets. Do we know how they are doing? Since you rarely receive financial statements, somebody should be informing the public.

What’s happening to the balance sheets and income statements of your municipalities will impact you in some form or fashion. Are they exercising proper fiscal stewardship? Or have they been manipulated into stretching tax dollars too thinly, thus reducing law enforcement staffing or other critical services?

The recent daily news seems to be about the debt ceiling. And household consumer debt has reached a new high watermark of $17.5 trillion. Collectively, do we know how to manage money properly?

Back in 1994, while a candidate for Orange County Treasurer-Tax Collector, I tried to explain the craziness of the incumbent’s investment scheme. The mainstream media just didn’t get it. The visual media completely ignored the race, as television reporters do not seem to do numbers. Dealing with members of the media was very aggravating.

John Moorlach at his office in Newport Beach, Calif., on March 9, 2021. (John Fredricks/The Epoch Times)

At the time, now-United States Congressman Tom McClintock told me that raising concerns about accounting and investment matters was a “MEGO” issue (My Eyes Glaze Over). Really? The media just ignores the fact that a municipality maybe going broke the old-fashioned way, by spending more than it takes in, and doesn’t cover it?

Even though I clearly spelled out what was going on, when the ship hit the sand, with Orange County’s nearly $1.7 billion in investment losses, it supposedly came as a complete “surprise” to the local media. Consequently, in the county’s bankruptcy story, the media shares a portion of the blame.

The March 1995 issue of the American Journalism Review had a full accounting by Susan Paterno, now with Chapman University, titled “When the Watchdogs Don’t Bark—The story of Orange County’s imminent financial debacle was handed to the Orange County Register and the Los Angeles Times. But the rivals in one of the nation’s most bitter newspaper wars blew it.”

Should a recession arrive, and they do on a regular basis, it will have a significant impact resulting from reduced city revenues and growing pension and other post-employment benefit liabilities. The financial squeeze could be very detrimental to the provision of services. It may even, as was the case for the California cities of Vallejo, San Bernardino, and Stockton, lead to the filing of Chapter 9 bankruptcy protection to deal with creditors. Will newspapers cover this potential before it’s too late?

Is Your City on the Brink of Bankruptcy?

First, let’s find out if your city should be a news story. The State Auditor provides a scoring dashboard to address the fiscal status of California’s cities. If you want to know how your city is performing with its fiscal stewardship responsibilities, just go to https://www.auditor.ca.gov/local_high_risk/dashboard-csa. It’s updated every year, and news releases occasionally announce changes in the status of various cities. The data for 2021-2022 was released the week of Oct. 15, 2022.

Second, let’s take the recent example of a city with poor metrics that somehow has escaped good reporting by the major media outlets. Where did the city of Costa Mesa place? Answer: In 26th. But the ranking started at the bottom. Out of 482 California cities, 95 percent ranked higher!

According to the State Auditor’s Dashboard, Costa Mesa was in 60th place the prior year. Dropping 7 percent, 34 places, should be big news. Shouldn’t Costa Mesa homeowners know how poorly its city ranked?

Costa Mesa Civic Center and City Hall in Costa Mesa, Calif., on Nov. 16, 2020. (John Fredricks/The Epoch Times)

CalMatters? Nothing. Voice of OC? They did not cover the 2022 data release. The Daily Pilot and the Los Angeles Times were silent. Why would liberal-leaning publications say anything? Costa Mesa is a progressive-run city, like San Francisco. This is not something these publications would want to bring up. Is it collusion? Intentional? Or financial ignorance?

Finally, let’s acknowledge some coverage of the State Auditor’s hard work. The Orange County Register at least provided a piece the week the updated listing came out. It was by long-time reporter Teri Sforza and it was titled “Is your Orange County city at risk of financial meltdown?” But it was a “let’s move along—nothing to see here” story:

“Costa Mesa also struggled with downward revenue trends, which dropped by about 1 percent a year over the past few years, as well as the burden posed by pension costs.

“But the revenue situation is looking up this year, Costa Mesa said, with sales taxes surpassing pre-pandemic levels and hitting the highest level ever at the close of Fiscal Year 2022 in June (about $77.3 million). General fund reserves also increased despite the pandemic, and at 33% of general fund revenue far exceed the ‘industry baseline of 10%,’ said finance director Carol Molina.”

With one recent year of increased revenues, should that make residents feel comfortable? No.

At least the Orange County Register’s Editorial Board was more honest about the State Auditor’s findings in their Oct. 2, 2022 piece:

“Costa Mesa went from 137 in 2016-17 to 52nd in 2019-20 ... [with] annual pension spending roughly 18% of government-wide revenues.”

Southern California News Group Editorial Board member John Seiler notes Costa Mesa’s last place position in Orange County in his Oct. 15, 2022 op-ed. After the November elections, its Editorial Editor, Sal Rodriguez, noted the 26th worst standing in his Nov. 27, 2022 op-ed.

The newspaper providing the hard numbers was The Epoch Times, providing visual graphs, showing Costa Mesa in 34th place out of 34 Orange County cities for 2017, 2018, 2019 and 2020 on April 14, 2021. A graph showing how far Costa Mesa dropped in a ten-year period, from 20th to 34th, from 2010 to 2020, was provided on June 24, 2021. The 2021 rankings were provided on May 27, 2022. The rankings for 2022 will be ready soon, as the city of Laguna Beach’s outside independent auditors are taking a very long time to complete their engagement. Spoiler alert: Costa Mesa is still in last place.

It’s great to see good coverage on such a critical subject. The joke back in 1995 was that a reporter could understand an elected official accepting an unreported $10 gift, but not a $7 billion portfolio on the verge of imploding. Even recently, reporters in California could understand a small amount of the inappropriate state spending of $280,000, which for Sacramento is mere budget dust, but they are ignoring that Costa Mesa had an unrestricted net deficit of $244 million as of June 30, 2021.

The Epoch Times is leading the Orange County media community in providing the data its subscribers need to make better choices about where to live and how to vote intelligently for city leaders. When municipal finances start to unravel, with a recession on the horizon, its readership will not be surprised.