City sticks with reserve policy

The clearly divided council narrowly voted 3-2 to ask property owners — commercial and residential — to fund the entire levee bond after an analysis showed allocating millions from reserves to pay it down might only save the average homeowner about $62 a year.

“Responsible policy doesn’t mean I would give away my reserve money and have no safety net for rainy day and go ahead and spend it to reduce my assessment by a certain amount,” Mayor Sam Hindi said, according to a live video of the meeting. “The question is not, do we want to put the money or not, [it’s] does it make the financial sense to do it in the bigger scheme, the bigger picture of this whole thing?”

Hindi and councilmembers Charlie Bronitksy and Herb Perez voted to proceed with the $90 million bond in June. Vice Mayor Gary Pollard and Councilwoman Catherine Mahanpour had sought a motion to allocate $10 million in reserves toward the project that seeks to meet federal mandates Foster City raise its levee or face being pulled into a flood zone.

The five councilmembers also unanimously directed staff to return with an analysis of how much the city could be on the hook for in a disaster. In the meantime, the city will maintain its current reserve policy of having a minimum of 33 percent to 50 percent of its annual operating budget — which is about $20.6 million.

The issue peaked in controversy as a range of ideas have sprouted up, such as a new community center and an affordable housing development, although no decisions have been made and no funding has been allocated. A citizens group formed over concerns about the impacts of development and housing in the city has urged officials to use the funds to reduce the cost of the levee bond.

“In a recent citywide poll [on Nextdoor.com], the majority of us voted to spend our budget surplus to pay down the upcoming $90 million levee improvement bond, this will reduce the burden on homeowners and indirectly renters as well,” said resident Robert Nelson.

Resident Phyllis McArthur also suggested “Foster City use this excess reserve to pay down the levee project and thus returning the funds to the taxpayers.”

Pollard and Mahanpour suggested a compromise could be to allocate $10 million toward the levee.

“There is no question the levee is one of Foster City’s most important assets,” Pollard said. “Because the city currently sits on $20 million excess reserves that belong to the residents of Foster City, I feel it is only fair that at least part of the reserves be used to alleviate the burden when we’re asking them to take this on.”

But the majority of councilmembers disagreed, instead stressing the nearly $40.7 million in general fund reserves might not even be enough to respond to a disaster, either financial or natural.

“You know why we survived [the recession] so much better than any other city? Because we didn’t spend the reserves. … Spending that money is not a fiscally conservative thing,” Bronitsky said, before vowing “I will never vote to use these funds for spending” on something other than an emergency.

Bronitsky also noted other obligations, such as pension liabilities and its portion of the wastewater treatment plant overhaul — a joint project with San Mateo that’s being funded by sewer ratepayers.

Almost all of Tuesday’s public speakers urged the city to allocate reserves toward the bond project, with some questioning whether the city had done all it could to negotiate with the Federal Emergency Management Agency. FEMA has indicated all of Foster City could be declared a flood zone if it doesn’t raise its levee system. The project is now years in the planning, and officials note the annual bond payments would be much less than flood insurance rates that can be in the thousands of dollars.  

Still, reducing the amount the city will have to seek in loans was an option some sought to consider.

“This would be a little way for us to give back to the residents and the businesses. I think the reserve fund will be built up again, I’m an optimist, so I hope we don’t see any more disasters or emergencies,” Mahanpour said. “By only using $10 million of it, we are still leaving some of the general fund reserve there.”

But others pointed to the possibility of hurricanes, earthquakes or wildfires striking the community built on Bay fill, along with a distrust for being able to rely on FEMA to fund repairs. The councilmembers who preferred to keep a hefty rainy-day fund noted they’ve been inundated with emails from concerned residents opposed to spending reserves on projects other than the levee.

Several councilmembers lashed out, some defending their love for the city others with more pointed critique of residents they suggested were misinformed.

“The idea that this is your money, this is not your money, it is no more your money when you pay PG&E,” Perez said, before later adding “when the earthquake comes, and it will come, and the water tower falls, and it will fall, and you need to rebuild it, good luck trying to go to the bank, good luck trying to find $20 million, $10 million to fund it.” 

samantha@smdailyjournal.com

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