| Tuesday, May 24, 2005
Garden Grove's golden
Once upon a time there was a middle-sized city, not far
from the Magic Kingdom, that bemoaned its lack of revenues and
which set out to build for itself Great Edifices that would
draw the masses and thereby fill the city's coffers with
So the Council built six large lodges hoping that visitors
to the Magic Kingdom would stay in their fair city. But woe
unto the Council, as the lodges provided only a pittance of
the promised gold. The kingdom's magic seemed to end at the
So the high Council declared, "We must build our own
Attractions and then the hordes will come and then they will
spend their money in our city, called Garden Grove."
They proposed to build a Great Riverwalk, but not even an
overflowing storehouse of gold could fund it. So the Leaders
declared, "We must build a Theme Park," but that, too, failed,
after citizens of the city refused to let their homes be razed
to make way for it. So now, once again, the Leaders of the
city have an idea.
"We must build ourselves a Great Casino in the heart of our
town to draw the masses to it. It will be run by those we call
Indians." And if the citizens object, the Leaders have another
idea: "Two new taxes must be paid by those who live here, lest
our city face financial ruin."
And that's where our story begins. It is not a fairy tale,
although it is fairly grim.
CHAPTER 1: THE 'CRISIS'
As the introduction to our tale explains, Garden Grove
has long viewed itself, in the words of one past councilman,
as the hole in the donut. The cities around it have
attractions: Anaheim has Disneyland and the resort area,
Huntington Beach is Surf City, Santa Ana is the county seat.
The goal has been to fill that hole with something big, and
now officials are turning, for the second time actually, to a
casino. And they are using a financial pinch to raise the
This is the latest in the city's longstanding efforts to
bring new revenue to town. While most cities like to brag
about their strong financial position, the city of Garden
Grove has been forthright in admitting that it is in deep
financial doo-doo. City Manager Matt Fertal, with the support
of the City Council, has established a Fiscal Blue Ribbon
Committee to find solutions to this impending fiscal
The Blue Ribbon Committee, with members picked by the city
manager, has been spoon-fed a steady diet of propaganda. Slick
PowerPoint presentations detail the lack of revenues flowing
to city government. City staff called for committee members to
come up with their own ideas, which will then be presented to
the public, but most every city presentation ended up tilting
toward three ideas in particular: a casino, a public safety
tax and a utility tax. And the city manager has tried to keep
the lid on these discussions.
"They are making it appear as though they put together a
committee of well-intentioned citizens and community activists
and that, on their own, they came up with the proposal for a
casino and to create two new taxes," said Blue Ribbon
Committee member Tony Flores, a former candidate for mayor.
"But city officials fed it to us for four and one-half
meetings. They did nothing but push these ideas on us."
Fertal argues, "Certainly, that's not the case." He is
dismayed at public discussions of the committee, before it
makes its council presentation at the end of the month, and
argues that committee members have come up with these ideas
after realizing there is little left to cut in city
In its presentation to the committee, the city said:
"Although we have made great strides in improving the economic
base of the city, we are still not able to keep pace with the
increased cost of services." Officials blame unfunded federal
and state mandates, property-tax-limiting Proposition 13, the
state's dollar grab from local government in the early 1990s
and rising labor costs. City staff predicts a $12 million
deficit by fiscal year 2007-08 in an annual total budget of
about $159 million.
CHAPTER 2: THE TRUTH
Garden Grove is hardly the only city that has had to deal
with the aftermath of Prop. 13 in 1978, which by the way was
one of the best measures passed to control excessive taxation.
Every city also has had to deal with fundingshifts and
unfunded state and federal mandates. But rather than hunker
down and keep a lid on costs, Garden Grove embraced the fairy
tale idea that it could get the Big Score - luring a major
attraction to the city.
It threw itself into redevelopment, floating large amounts
of debt to pay for corporate subsidies for various projects,
especially hotels designed to cater to Disneyland crowds. It
has been one of the worst abusers of eminent domain on behalf
of redevelopment in the process, which has chased away small
businesses and middle-class homeowners.
The hotel-building spree has been less than an unqualified
success. As the Register reported last year, officials
predicted in 2000 that hotels would bring $33 million in
revenue between 2000 and 2004, but instead only brought in
$13.6 million during the same period. Once subsidies and bond
payments were considered, the city only gained $800,000 a year
from the hotels, according to the article. In 2002, the city
borrowed nearly $23 million to be used for a new redevelopment
project area, using city buildings as collateral to fund a new
The city's fiscal problems largely are a result of
increased pay and benefits for city workers, especially police
"Surprise, surprise," said Councilman Mark Leyes. "The
people who spend the money say we can't cut any more and we
need more revenues." The problem, as Leyes sees it, is not
Prop. 13 or unfunded mandatesor even the redevelopment
spending. "Over the last five to six years, not only did we
not cut the budget, but we increased spending," he said. The
council in 2001 spiked pensions for public safety officials by
As a bone to taxpayers, the council agreed that once
pension spending consumed 13 percent of the payroll, then
union members would have to split the increased cost through
payroll deductions. But in 2002 the council - with Leyes' the
only objection - agreed that taxpayers would take the entire
hit. Now the city pays 19 percent of payroll just to fund the
pensions and it's expected to top 30 percent in the next
"That single line item added $2.3 million in police costs
but it does not add a single policeman, buy a single bullet or
feed a single police dog," he said.
CHAPTER 3: GOOD NEWS
Despite these real problems, the city could make ends meet
with its current revenue base.
An analysis of the city's 2003 to 2004 Comprehensive Annual
Financial Report by Steve Frates of the Rose Institute for
Public Policy in Claremont and the Center for Government
Analysis (www.govanalyst.com), confirms what Leyes was saying.
Pension costs increased 51 percent in two years. But overall
revenues are on the rise, with sales taxes, property taxes and
charges for services (i.e., utilities) posting healthy annual
Frates argues that if the city simply froze salaries and
benefit increases for a couple of years (and even exempted
police officers from those freezes) that it could fix its
potential mess. He notes also that the predicted deficit is
fictional: The city actually will be $12 million short of the
money it would like to spend, that's all.
Fertal argues the city is as lean as it can be, and is one
of the lowest staffed cities.
But Frates argues that the city has been transferring
wealth from the public (taxpayers) to the public sector.
"Public employees are getting better salaries, more lavish
benefits and they're wealthier," he said.
The solution is to stop the transfers, not look for more
revenue from the taxpayer or gamblers.
CHAPTER 4: THE SCAM
Last year, the City Council got itself into a political jam
when members met with Las Vegas casino developer Steve Wynn
and signed a confidentiality agreement with him. Bill Dalton,
now mayor, Van Tran, now an Assembly member, and Councilman
Mark Rosen agreed to the terms of those secret negotiations.
Leyes was there but didn't sign the confidentiality
It turned into an embarrassing mess for the city. Many
Garden Grove residents don't want a Las Vegas-style casino in
their midst, judging by initial reactions to a newspaper
report. It was an election year, and in August, "Councilman
Dalton moved, seconded by Councilman Rosen, that staff cease
discussions with any casino interest and not pursue any casino
or gambling interest in the city of Garden Grove," according
to City Council minutes. The motion passed, and yet now, staff
- with the apparent consent of the council - is pushing the
casino proposal in its financial committee. It's even more
dubious this time around, especially since Gov. Schwarzenegger
said last week that he will not approve any new urban casinos.
But Garden Grove seems to specialize in dubious bets! (The
council is expected to be in Las Vegas this week to attend a
trade show, although Fertal said the city will not participate
in any gaming-related meetings while there.)
Flores thinks the staff had been in discussions with a band
of Indians because it is serious about building a casino,
despite the questionable reality of getting federal and state
approval. Leyes thinks the city staff might really want the
casino, but also thinks it might be using the casino idea to
scare residents into embracing two massive tax increases. The
city will say: OK, if you don't want a casino, then you are
stuck with the taxes.
Whatever the motives, city staff clearly is stage-managing
this "fiscal crisis" to lobby for some policies that will
bring it more tax dollars to spend as it pleases.
CHAPTER 5: THE FINALE
This has yet to be written, of course, but it's time for
Garden Grove residents to insist that city staff and council
members stop looking for the big score, and instead focus on
Aren't there any serious, less desperate ideas to
"The committee hasn't even addressed how we do things
financially and no one even wants to look at it," said Flores.
"That's what we should be about, that's why we should be
But don't expect that happy ending, not in Garden Grove,
with its track record of bizarre roll-the-dice proposals.
Instead, expect the fairy tale to end like this:
And so instead of doing the Right Things and building a
city based on sound finances, the Leaders continued to pursue
their Great Casino ... and continued to pursue Debt, Taxes and
Secrecy until the plebeians got fed up and elected new
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