The next few years portend what I am characterizing as “the mother of all recessions.” The first step in the traditional 12-step process is to get over the denial and admit this will be an unpleasant situation that is out of everyone’s control and must be addressed immediately.

This is no time to be a bitter clinger to the progressive notion that bigger, centralized government will fix California’s woes. Kudos to Gov. Gavin Newsom with his recent executive order temporarily halting a faddish policy idea, considering the science – like the virtue-signaling single-use plastic bag ban.

Now that grocery store clerks are a vector for the spread of the virus, most stores are prohibiting the use of reusable bags, and rightly so. It’s unfortunate we have to have a pandemic to come to these realities, but I digress.

In this down-cycle process, the first step is damage control. A municipality must reduce its overhead now. For Los Angeles Mayor Eric Garcetti to say a month ago that there would be no layoffs is the trait of an inexperienced crisis manager. It was not only inappropriate to say this, but it was false.

This week he said there would be furloughs. That’s also not close to reality. One of the biggest items in governmental budgets is salaries and benefits. There will be layoffs and lots of them. And they will occur not only at the county and city level, but at the special district level as well.

The next step is to ride through the months of slow recovery as lean and mean as possible. It will be a time to establish multi-year budgets, to review current revenues and spending, especially sinkholes, and to mitigate them.

Usually, there are four basic areas to review in a turnaround which apply to individuals and all other entities:

  1. Where can revenues be raised? Governments always look to the taxpayers for more and more taxes. Sometimes it works. But, in a recession, it’s next to impossible.

Orange County attempted it in 1995 with Measure R. This ballot measure proposed to raise the sales tax. It failed. The voters were not going to give more money to the government that just lost $1.7 billion. Voters are not enablers. 

They may feel sorry for you, but they also hate the mismanagement of their precious resources. And, there is still mismanagement that needs to be addressed.

  1. Cut expenses. This is the no-brainer. But, it is very painful. Trust me, as an Orange County Supervisor, I had to work with my colleagues to weather the Great Recession, resulting in more than 1,000 layoffs. But, it must be done.
  2. Refinance debt. In this marketplace, with municipalities teetering near the brink of Chapter 9 bankruptcy, it will be difficult to refinance high-interest-rate debt with lower interest rates. Investors (lenders) are not stupid.
  3. Sell unneeded assets. What real estate can be jettisoned at a reasonable fair market value? What can be converted to cash? Unfortunately, recessions are buyers’ markets. The days of high real estate values have just been put on hold. So, fire sale prices will, regretfully, be the norm with this strategy.

There is a fifth, but rarely seen alternative. It was successfully pursued by Orange County after the bankruptcy. 

Whom can the municipality sue for damages? The more than $800 million that was received in litigation settlements, most after my deposition testimony efforts, helped address the bankruptcy debts in a faster manner. But, I don’t see a Merrill Lynch-type party to pursue in the coronavirus pandemic, other than the country of China. Good luck with that.

These will be difficult days. From my research of states, cities, counties and school districts, the vast majority were already in poor fiscal shape. Those reports are on my website.

What happens when a city council has not made it to the first step and is still in denial? Its city manager resigns. If residents and the elected leadership do not know and appreciate the gravity of the current situation and fail to learn and grow and step up to the plate, why should seasoned municipal executives waste time banging their heads against the wall?

For a classic example, see what occurred last week with Santa Monica’s city manager, Rick Cole, who just resigned. “The protracted struggle over pension reform has eroded the good will I previously enjoyed with our unions,” he said. 

“I am offering to step aside now to facilitate the restructuring that must take place, knowing we will need to make reductions in staff at every level of the organization – literally from the top to the bottom.”

The resignation of this well-respected city manager will not be the last in what is still the beginning of the mother of all recessions.

John M.W. Moorlach represents the 37th District in the California Senate