For the past decade the leadership of the City of Sonoma has been living in the land of make believe, largely ignoring the inevitable financial abyss at its feet and pretending that its fairytale will have a happy ending. It’s not that there aren’t many wonderful things about Sonoma; on the contrary, there are so many they’ve diverted the City Council and city staff from dealing with a financial problem of epic proportions, its pension crisis.
The fairytale left a trail of bread crumbs, a litany of merrily getting lost in the woods while not seeing the forest for the trees. The first crumb was dropped when the city felt financially flush, back in 2008. Having recovered from near bankruptcy in 1994, by 2008 financial reserves were strong. With a city council that had not experienced the stress and rigor of having no cash, the temptation to overspend while relinquishing revenue sources was too great. The city dismantled the 25-year-old Parks and Lighting Districts which were supported by property tax assessments put in place before highly restrictive Proposition 218 which mandated voter approval. The $200,000 a year revenue stream seemed like a drop in the bucket at the time.
The next big crumb dropped when redevelopment funds were discontinued by the State of California in 2012 and the city made no effort to replace those enormous revenues–revenues that in part had been used in part to support salaries and city activities, in addition to affordable housing and redevelopment projects. Meanwhile, the whittling-away of the city’s general fund revenues continued as the cost of government relentlessly climbed.
A huge opportunity was squandered – along with a massive chunk of potential revenue – when Sonoma allowed the Tourism Improvement District (TID) to be formed by the major hotels in town. The two-percent “self-assessment” added to visitor hotel bills supplanted what could have been a two-percent increase in the Transient Occupancy Tax (TOT) that would have gone into the city coffers and could have funded its pension plan. Instead, the two percent was dedicated to promotional spending to boost hotel occupancy. To make matters worse, in 2015 the contract for the TID was extended by ten years, and cancelable only by the TID itself.
Now roughly $800,000 a year is diverted to fill rooms at hotels that are owned by corporations, some valued in the tens of billions. And this will continue for another seven years.
Meanwhile, crumbs were dropped in the laps of various non-profits, all good organizations doing good work for the community. With their hearts on their sleeves and sentimentality overruling reason, staff and council continued to ignore the financial danger lying ahead, diverting its attention to feel-good proclamations and patting itself on the back. The question is, will the fairy tale continue or is it already too late?
The City of Sonoma is walking straight into bankruptcy. Its underfunded pension liability, the wolf in the forest, is about to strike and gobble up not just bread crumbs, but the whole loaf. Our current city council may preside over the worst economic calamity to ever strike us, a bloody financial hemorrhage that can’t be stopped. We’re not alone, many cities are in the same situation. But holding hands together while walking through the dark forest won’t save us; to end this grim fairytale, we’ll need to swing the financial axe.
— Sun Editorial Board