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Mayor Alan Nakanishi: Lodi can show other cities the path to success

Contract, pension concessions led to solid fiscal footing, he says

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Posted: Friday, November 1, 2013 12:00 am

Mayor Alan Nakanishi described Lodi as the proverbial city on a hill, setting an example for other California communities struggling to recover from the Great Recession, at the annual State of the City address Thursday at Hutchins Street Square.

“Lodi has weathered the storm,” Nakanishi said. “On this day Oct. 31, 2013, Lodi has one of the best balance sheets of any city in San Joaquin County.”

Nakanishi gave some credit to city employees who made contract concessions such as taking furloughs and who now contribute to part of their pension costs, saying that it went a long way toward helping the city stay on solid footing as other cities like Stockton, San Bernadino and Vallejo face fiscal collapse.

He said forward-looking policies some adopted more than a decade before the 2008 economic meltdown are helping the city navigate the recession with little damage. These policies include capping city employees’ health care premiums and eliminating retiree health care benefits, he said.

With a strong reserve fund 16 percent, or roughly $6.7 million, of the city’s $42 million general fund and the ability easily pay off its debt service, Lodi has managed to retain a high bond rating, while many California cities and the state itself have seen their credit ratings drop to junk bond status, Nakanishi said.

City Manager Rad Bartlam backed up Nakanishi’s prognosis by detailing the city’s fiscal situation for the gathered crowd.

Bartlam said city revenues are back to where they were in 2008, when the bottom fell out of the economy.

He said sales tax revenue has seen a steady increase over the past couple of years, which has been helped by the opening of Costco and Home Depot stores in Lodi in the past year.

Property tax revenue has leveled out, and might see a very slight increase this year, he said.

“It means perhaps the bleeding has stopped,” Bartlam said. “We’re not going to go out and start ramping up too quickly, but the tourniquets may be loosening up a little bit.”

While city staffing has decreased by 20 percent since the start of the recession, to levels of 15 years ago, Lodi has been able to merge positions and work more efficiently to keep up the level of service people have come to expect. Much of the staffing decreases in recent years have been due to attrition, which means not replacing people who retire or quit.

Bartlam said Lodi has been able to attract stores like Costco, Home Depot and other new enterprises as well as see established local businesses expand because the city has the lowest permit fees in the county.

He also credited two programs that offer lower electric rates for companies, including one that offers a discount to companies that create new jobs in Lodi.

While things are going well for the Lodi, Nakanishi said there are two major challenges on the horizon the state’s prison realignment program and the skyrocketing costs of city employees’ pensions.

“The council does not take a Pollyanna-ish view of the future,” Nakanishi said.

Nakanishi worries that the realignment program could cause an increase in crime and overburden the county’s correctional facilities. The program was adopted to help California meet federal court orders to reduce its prison population by shifting lower-level offenders to county jails and having local authorities monitor them post-release.

Lodi Police Chief Mark Helms said it was too early in the realignment program to determine if it is having a negative effect on Lodi, but it is a concern.

Nakanishi said that the projections for pension costs the city must pay into the California Public Employee Retirement System could decimate Lodi’s coffers. This year, the city will pay $7.1 million for employee retirement plans. That figure is expected to balloon to $16.9 million by the 2019-20 fiscal year, under CalPERS estimates.

Nakanishi and other Lodi City Council members have been ringing the alarm bell on rising pension costs in recent weeks. He said state lawmakers and CalPERS officials must make changes to the state’s pension rules, or even relatively strong cities like Lodi are going to be crushed under the weight of their pension obligations.

Contact reporter Todd Allen Wilson at toddw@lodinews.com.

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