Nine months after Costa Mesa city leaders declared that the town could face insolvency by the fall and issued layoff notices to almost half the workforce, the city announced Monday that it finished its fiscal year with a $3.8-million budget surplus, its first in four years.

Costa Mesa spokesman Bill Lobdell described the surplus as “great news,” which he attributed to additional sales tax revenue and cost-saving measures like reduced road maintenance and greater employee contributions to pensions.

Lobdell said that despite the improving financial picture, the city would continue with efforts to outsource a large number of services, because it still faces significant budget challenges, including deferred maintenance and $255 million in unfunded pension and retiree medical liabilities.

“There’s just no way any government agency can operate long term on that,” said Lobdell. “We’re still in a large financial hole.”

But a union spokeswoman said the surplus shows that the city’s outsourcing plan “is completely politically motivated.”

“This just demonstrates, once again, that the City Council can’t be trusted,” said Jennifer Muir, Orange County Employees Association (OCEA) spokeswoman in a written statement. “They’ve continued to deceive taxpayers this entire time, trying to sell a manufactured budget crisis to advance their political agenda.”

Costa Mesa made national headlines in March when it issued layoff notices to nearly half the city’s workers. City leaders said at the time that the city could face insolvency by the fall and described the move as part of a larger effort to outsource city services.

The city’s employees union, which is represented by OCEA, then filed a lawsuit against the city, and a preliminary court ruling has prevented any outsourcing to private firms until the case is resolved. A trial is scheduled in April.

This year’s surplus pushed Costa Mesa’s reserve fund up to about $10 million last month, which Lobdell said is still $4 million short of what city policy requires to be set aside for natural disasters and other emergencies.

“It’s nice to have this surplus,” he said, but “it doesn’t even get us back to the minimum for our emergency fund.”

But Muir said the city is simply changing its argument to justify outsourcing.

“The fact of the matter is, there’s plenty of money in the budget, and they’re admitting that there’s plenty of money in the budget,” Muir said in an interview.

Regardless of the criticism, “The city is committed to exploring the viability of outsourcing,” said Lobdell.


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