Mayor Talks Oil, City Planning at State of the City Address

Hermosa Beach mayor Kit Bobko delivered the annual State of the City address Wednesday evening touching on multiple issues surrounding the small beach community including the Macpherson oil settlement, future city development and the city budget.

Macpherson Oil Settlement

One of the more lengthy portions of the mayor's speech revolved around the settlement of the Macpherson oil suit and the fact that oil drilling in Hermosa Beach will eventually go up for a vote by residents.

That settlement, Bobko said, was the best possible outcome for the city and added that the city could have been bankrupted had it not settled with Machpherson.

"Bankruptcy really was never an option for us... There were tremendous risks involved," Bobko said of the settlement. "We were at the edge of the legal earth when it came to this."

In what he called an effort to quash misinformation floating around, Bobko presented the results of a mock trial that predicted what would have happened if the city went to trial instead of settling with Macpherson (E&B now holds Macpherson's the oil rights).

According to the results presented by Bobko, 25 of 26 mock jurors decided against the city in the mock trial and 70 percent of them decided that Machpherson suffered damages as a result of the city terminating the company's oil lease. Bobko said the median amount the mock jury decided to award Macpherson was $284 million in damages.

"The idea that we were going to skate out of this unscathed... please put that out of your mind," Bobko said. "Anybody who thinks the settlement was a bad idea doesn't know the facts."

Bobko also said that the decision was so serious that one bad outcome if the city did not settle the suit was Hermosa Beach being disincorporated.

"In my view, the question wasn't whether or not we had oil, the question was whether or not we had a city... We were talking about disincorporation," Bobko told the audience. "It was that stark of a choice."

The mayor also reemphasized his commitment to make the city an "unbiased clearinghouse of facts" when it comes to disseminating information about the oil project and said the City Council will continue to remain unbiased until they eventually vote on certification of environmental reports.

Should voters vote down oil drilling in Hermosa Beach, Bobko said that the $17.5 million that will be owed to the oil company will not be immediate but at a "commercially feasible time," according to terms of the settlement.

"It is not 60 days; it is not immediate," Bobko said. "It is at a commercially feasible time."

City Planning and Downtown Development

On the lighter side of things, Bobko presented historic photos of downtown Hermosa Beach showing how the city has changed over the years and what has remained the same.

"You can still see it, there aren't any open parking spaces," Bobko joked as he brought up a 1920's era photo of Pier Avenue full of cars. Bobko also displayed a photo of Hermosa Beach in the 1970s.  "Again, not one open parking space and I think we still have the same parking meters," he joked again.

Bobko praised the city for successfully redeveloping Pier Plaza and Pier Avenue into the more modern version of itself that is seen today. He also promised the city still has more work it wants to do.

"We are not done yet," Bobko said. "We have fixed the plaza and the plaza is now amazing... Upper Pier Avenue – I don't think there is any debate that it is better now than it was."

Bobko talked about the future development of the land where the Mermaid restaurant sits as well as revitalizing the community center and civic plaza at the top of Pier Avenue. He also presented mock ups of future development of Hermosa Avenue and said it could be developed in the same fashion Pier Avenue was.

One of the goals, Bobko said, is to get more hotel tax and sales tax revenues from people who want to visit and spend time the city.

"The idea being to get people out of their cars walking and spending money," Bobko said. "This is going to be a community effort once we start talking about these things."

City Budget, Pensions, Strategic Plan

While presenting a draft of Hermosa Beach's strategic plan, Bobko placed special emphasis on the city's financial future and the number one goal for 2018 – a financially sound city government. 

Currently, 63 percent of the city's general fund goes towards public safety costs, which Bobko said is currently $18 million above budget.

"To talk about being a financially sound city without addressing public safety is like someone talking about losing weight without talking about food or exercise," Bobko said. "It can't be done... It is a hard thing to do, but you have to do it."

Bobko also talked about the city's pension obligations, which currently equate to approximately $4.8 million per year and could rise as high as $7 million per year by 2020, Bobko said. Even though the city recently switched to a two-tiered pension system, Bobko said the benefits won't take affect immediately.

"The two-tiered pension system is like telling someone on the Titanic not to worry, in 30 years we are going to have high speed boats that are going to sweep in and take you all away," he said.

On the revenue side, Bobko said that revenues are increasing by about five percent with 38.5 percent of those revenues coming from property taxes. The mayor said that only about 20 cents of every dollar of property tax goes to the city with the other 80 percent spread across Los Angeles and California.

"We think we pay a lot of property tax," Bobko admitted. "Unfortunately, Sacramento and other people in L.A. County take that money."

Bobko emphasized that some things will eventually need to be cut and the city will need to decide what is important and what is not.

"Some will tell you that we have cut back too much – Hermosa Beach is to the bone," Bobko said. "The financial part of it is going to be tough...These are the real issues we are talking about."

The end goal, Bobko said at the beginning of his speech, is to find a way to make Hermosa Beach the best city possible.

"The best little beach city - that is how we see ourselves," Bobko said. "We may have a different perspective on what we think the best little beach city is but generally, I think everybody wants what is best for Hermosa."