La Quinta ‘will experience a significant loss of revenues and cash flow if Measure A passes,’ George J. Batavik says [Opinion]

I wish to respond to a recent opinion post by Jim Alderson titled “La Quinta Measure A Financial Forecasts Called Out.”  Like Mr. Alderson, I am a CPA.  My resume also includes being the Controller and Chief Accounting Officer of Texaco Inc., and a Board Member of the Financial Accounting Standards Board, which establishes financial accounting and reporting standards for all U.S. Companies.

After retiring in 2008, I became a resident of La Quinta, and began serving the City of La Quinta. My first service was on the Special Advisory Committee which studied in great detail the City’s revenues and expenditures, which lead to the passage of Measure G.  I currently serve on the City’s Financial Advisory Commission which provides review and advice on the city’s finances, including Annual Budgets and Updates, the audited Annual Comprehensive Financial Report, 10 Year Financial Projections and the planned Capital Improvement Program.  Suffice it to say, I have a strong working knowledge of all elements of the City’s Financial Position.

Mr. Alderson refers to city 10-Year Projections as of November 2020 and February 2022 which he claims show robust positive projections for cash on hand.  What Mr. Alderson failed to state is these Projections did NOT include a reasonable amount for Capital Improvement expenditures, nor did they take into account the overall economic impacts of the potential passage of Measure A, which would permanently eliminate a large number of short-term vacation rentals in La Quinta by Dec. 31, 2024.

After the Measure A Petition was filed in April 2022, City Council directed the City’s Finance Department to prepare, with the help of outside economic consultants, new 10 Year Projections assuming Measure A is approved (Scenario No. 1), and assuming Measure A is not approved (Scenario No. 2).  Scenario No. 1 includes the expected impact of Measure A passage which includes the loss of permitting fees, Transient Occupancy Taxes on short-term rental income, and other negative economic impacts caused by a drop in tourism-related income.  Both Scenario No. 1 and Scenario No. 2 include an expected level of Capital Improvement expenditures (approximately $9 million per year which approximates current spending levels, versus only $2 million per year in the November 2020 and February 2022 Projections).

Both Scenarios project a cash deficit after 10 years, with Scenario No. 1 showing a $19.1 million shortfall and Scenario No. 2 showing a $13 million shortfall.  These shortfalls are NOT the result of “age-old budgeting tricks” as Mr. Alderson suggests.  Rather they are a proper refinement to the City’s 10 Year Projections to provide all residents with better up-to-date information to consider before voting on Measure A.

Do NOT, as Mr. Alderson suggests, trust the earlier and inaccurate 10-year projections showing robust cash on hand for the city.  Instead, residents should use the updated scenario No. 1 and scenario No. 2 for their comparison of the economic impacts to the city if Measure A passes.  A comparison of these two scenarios clearly shows the city will experience a significant loss of revenues and cash flow if Measure A passes.


Image Sources

  • Vacation Rentals: iStock