CPA Whistleblower calls out La Quinta Measure A financial forecasts [Opinion]

I’m a retired CPA, but in the 1990s I was better known as the whistleblower in the largest Medicare fraud case at that time.  The suit alleged two sets of books being kept for Medicare reimbursement.  It settled in 2003 for over $1 billion.  On “60 Minutes in 1998, Mike Wallace called it a “David and Goliath” story.

The city of La Quinta opposes a citizens’ initiative to exclude short term vacation rentals from residential zones.  The city has prepared and publicized its version of the financial impact of a loss of STVR transient occupancy tax (TOT).  It’s another David and Goliath standoff.

I became curious about the city’s forecast of the impact of Measure A.  I volunteered to examine the city finances for Measure A proponents.  My review noted the city made 10-year projections as of November 2020 and February 2022 which showed increases in cash of $22 million and $110 million, respectively. These were projections prepared by the City Finance Department.  This indeed is a rosy picture of the future.  The $110 million forecast was used in preparing the 2022/23 budget at the Financial Advisory Commission meeting in May of 2022.

Suddenly, in July the city staff prepared a new 10-year forecast. It is titled Scenario 1 – “If the Initiative Passes”. This shows an entirely different picture of La Quinta finances.  It predicts a cash DECREASE of $65 million over the next ten years, as opposed to the earlier projection of a $110 million dollar INCREASE.  This is a $175 million dollar swing for the same City in one month.

How did this happen?  Age-old budgeting tricks.  Throw in millions of dollars more of expenses and cut millions of revenue.  Bingo!  It results in a $175 million dollar swing.  The Capital Improvement Plan (CIP) instantaneously increased from $20 to $92 million over the 10-year period.  Many other expenses also suddenly increased.

Transient Occupancy Tax revenue from STVRs was $7.1 million in fiscal year 2021/22.  The city now relies on Scenario 1 that shows this at $1.6 million in 2032.  Was the purpose of Scenario 1 to forge a rationale to oppose Measure A?  In the public forum, the City Council was decrying the loss of many millions of dollars due to the permitting of STVRs in commercial tourism zones only.  Scenario 1 supports their cause.

The City Manager stated recently the first 23% of residential STVRs were reduced with minimal economic effect.  With many new STVR developments coming online, why wouldn’t the next 77% have minimal effect?

The City laments should Measure A pass, funds would not be sufficient to cover police and fire protection.  HOGWASH!  Measure G was passed by voters to cover increases and has outperformed by millions of dollars annually.

In short, the city is crying poor and ignoring its robust financial position.  Do not be misled.

Measure A is affordable.  Trust the $110 million dollar projection of increased cash, not Scenario 1, that shows a loss of $65 million.

The facts enable David to slay Goliath. VOTE YES ON MEASURE A.


Image Sources

  • short-term rental: Pixaby