Costa Mesa, Calif: A Flash Point for City Belt-Tightening

The Orange County city faces a backlash after its council voted to lay off 45 percent of the workforce to ease burgeoning pension costs

By Christopher Palmeri

Watching city government in action is usually a cure for insomnia. Not so the Apr.5 city council meeting in Costa Mesa, Calif., a wealthy coastal town about 40 miles south of Los Angeles. In a heated four-hour gathering, the overflow crowd broke into whooping applause after one resident called on the mayor to "fire yourself." Another invoked a Vietnam War sound bite when she said council members "had to destroy the village in order to save it."

The pulse-quickening meeting was the latest backlash against the city's plan to fire nearly half its municipal employees in an extreme budget-cutting measure. The main driver behind the proposal is Jim Righeimer, a Republican and longtime anti-union activist elected to the city council in November. On Mar.1 the 52-year-old real estate developer and his fellow council members voted 4-1 to send termination notices to 213 city workers, about 45percent of the total. A little over two weeks later a 29-year-old maintenance worker named Huy Pham jumped to his death from the roof of City Hall after being called in to receive his notice.

The suicide—and the radical budget measures that precipitated it—have made Costa Mesa a flash point in the debate over municipal spending. City governments across the country should rein in employee pay and benefits, says Scott Baugh, chairman of the Republican Party of Orange County. U.S. cities face a collective $14 billion in deficits next year, according to the National League of Cities. "It's a wake-up call," says Baugh. "We cannot continue down a course that's fiscally insane."

Righeimer calls Pham's death a tragedy but says he's committed to his budget-slashing agenda. "The community wants us to move forward," he says. The city of 116,000 has begun soliciting bids to outsource as many as 18 city departments, including street sweeping and animal control, in an effort to curb pension costs and deficits that have depleted $35 million of the city's reserves since the start of the recession. Righeimer says the cuts are necessary because Costa Mesa's pension costs have risen from $5 million annually a decade ago to $15 million this year and are projected to climb 60percent over the next five years.

Some say Righeimer is acting out of ideology instead of necessity. In 1998 he sponsored a state ballot measure to prevent unions from automatically withdrawing campaign funds from worker paychecks. Wendy Leece, a 62-year-old Republican council member and the only one to vote against the terminations, says she is skeptical of the estimates of the city's deficit and pension costs that Righeimer has been using. The budget for next year has a $15 million shortfall, she says, in part because it includes a "wish list" of street improvements and computer expenses that could be delayed for many years. They're "not real numbers," she says of Righeimer's projections. Righeimer says he welcomes an independent analysis of the city's pension costs.

Even if the numbers are accurate, "you don't give notice to that much of your workforce without doing studies," says Sandra Genis, a former Costa Mesa mayor and councilwoman. "I think we're putting the city through a lot of unnecessary stress and strain." Genis, a Republican whose dog is named for the late conservative commentator William F. Buckley Jr., says she believes Righeimer has broader political ambitions and is using dramatic action in Costa Mesa as a springboard to higher office. Righeimer says that's not the case.

The pink slips aren't final. The council's next fiscal year begins on July 1, but union contracts require six months' notice if jobs are being outsourced, so the terminations went out before details were finalized. Costa Mesa spokesman William Lobdell says the city hopes to have outside operators hire many of the fired employees. The Orange County Employees Assn., which represents half the workers being fired, has produced an online ad featuring the city's mayor, Gary Monahan, wearing a kilt and smiling in front of the bar he owns on St. Patrick's Day, the day of Pham's death. (At the Apr. 5 council meeting, Monahan apologized "for my shortcomings as mayor.") "We're working to educate the public," says Jennifer Muir, communications director for the group. Some of the fired workers repair emergency equipment, including police and fire vehicles. The cuts "could cause irreparable damage," she says. "There are a host of unintended consequences."

The bottom line: U.S. cities face a collective $14 billion in deficits next year. Costa Mesa may lay off nearly half its employees to improve its finances.

Palmeri is a reporter for Bloomberg News in Los Angeles.