Guest Opinion | Councilmember Rick Cole: The Fiscal Reckoning Is Here

Economist Herb Stein famously observed: “Things that can’t go on forever, don’t.”

Across America, governments at every level are coming up against the painful reality of “Stein’s Law.”

The quickest way to understand Pasadena’s fiscal challenge is to look at the street in front of your home.

In 2020, an independent audit of Pasadena’s streets concluded that the City needed to invest at least $13.6 million annually in street maintenance to begin bringing all our 343 miles of streets into good repair. Yet over the next three years, the City budgeted an average of just $4.85 million a year—barely a third of what was needed.

That may seem to have saved money — in the short run. It will cost us much more — in the long run.

Today, 135 miles of Pasadena streets remain in good enough condition to be maintained through periodic slurry seal treatments at roughly $500,000 per mile. But 208 miles have deteriorated to the point where they require repaving or complete reconstruction at costs ranging from $800,000 to $1.4 million per mile.

Deferring maintenance didn’t reduce the bill we have to pay. It simply made it larger.

Recognizing that reality, former City Manager Miguel Márquez made infrastructure investment a priority. His first budget more than doubled annual street funding to $11 million. The following year’s budget invested another $10.2 million, and this year’s budget continued that commitment at nearly $14 million.

Yet even that progress illustrates the challenge. Inflation has pushed the 2020 recommendation to roughly $17.6 million annually, but the budget we adopted for the fiscal year that starts July one is just $11.1 million. The City Council ranked street maintenance and safety among the City’s five budget priorities, yet what we could squeeze out of our current resources still falls short of what is needed. So we continue to rack up higher costs for the future.

And streets are only one element of a much larger problem.

Over the next five years, Pasadena faces roughly $2 billion in unfunded capital needs to maintain and modernize aging infrastructure. Streets, parks, sidewalks, fire stations and safety improvements all compete for the same limited dollars.

The same story is playing out all around us.

The Pasadena Unified School District recently imposed $30 million in budget cuts while grappling with declining enrollment and contentious debates about school consolidation. Los Angeles County voters narrowly approved a sales tax increase to stabilize funding for public healthcare. Sacramento is debating new taxes to address a structural deficit. Our national debt is higher in relation to the economy than at any time since World War II and the Social Security Trust Fund will run out of money in just six years.

These may seem like separate issues, but they each reflect a common threat: the cost of meeting public needs is growing faster than the public resources available.

This stark reality is not because of a recession. The stock market remains near record highs. The challenge is more fundamental. Governments are confronting the cumulative consequences of years spent deferring maintenance, underinvesting in infrastructure, avoiding structural reforms, and pushing costs into the future. Short-term decision-making produced the long-term consequences we can no longer escape.

Fortunately, Pasadena is currently financially strong. Our budget is balanced. Our General Fund reserves exceed 20 percent.

But complacency is not a luxury we can afford.

How do we close the growing gap between public needs and public resources before we find ourselves in crisis?

First, we must grow our economy. Earlier this week, the City Council took the first step toward establishing a financing mechanism that would use future property tax growth to fund infrastructure and placemaking investments in long-neglected commercial corridors such as North Lake Avenue, North Fair Oaks Avenue, and Lincoln Avenue. Previous Councils invested in Old Pasadena and South Lake and we continue to reap the benefits – it’s time to apply the same formula to areas with high vacancies and untapped potential. We also need to continue reducing unnecessary barriers that make it harder than necessary to invest, build, and create jobs in Pasadena.

Second, we must innovate and economize. I sometimes joke that Pasadena shops at Williams Sonoma when Target might do just fine. City government has understandably developed a preference for premium products, premium services, and premium processes. Sometimes that’s justified. Sometimes it isn’t. Successful businesses continually strive to drive down costs – we often just assume current costs and add inflation. We need to challenge ourselves to deliver high-quality public services at lower cost through greater efficiency.

Third, we need to become more disciplined about measuring results. Businesses routinely evaluate return on investment. Government usually measures how much money was spent rather than what outcomes were achieved. Whether we call them performance measures or key performance indicators, we need better tools to identify what works, what doesn’t, and where scarce resources can achieve the greatest bang for the buck.

Above all, we need to prioritize.

Every budget reflects a set of values. The temptation in a diverse community is to try to fund every worthy cause, satisfy every request, and avoid difficult tradeoffs. But resources are finite. Choices are unavoidable.

Years ago, when I served as City Manager in Ventura, the Police Chief shared an insight I’ve never forgotten.

“We can do anything,” he told me. “We just can’t do everything.”

That’s wisdom worth remembering.

Pasadena is not immune from the widening gap between public resources and public needs. The fiscal reckoning confronting governments across America has arrived. We won’t be bailed out by the State, Federal or County governments. They are each in worse financial shape than we are.

Pasadena can avoid their fate—but only through discipline, innovation, and a willingness to make difficult decisions before they become unavoidable.

I believe my colleagues on the City Council recognize that the day of reckoning is no longer somewhere in the future. It has arrived.

Our task now is to work with the community to meet it head on.

Councilmember Rick Cole serves on the Council’s Finance Committee. A former Chief Deputy Controller for the City of Los Angeles, he is a member of the Government Finance Officers of America.