10 Things you should know about El Cerrito’s financial crisis

Many more people have been engaging in dialogue around the state of El Cerrito’s finances. People want to know how we got here. Here are some essential facts you may not know.

  1. Starting in 2016-17, our independent auditor warned that the city might not continue to be a “going concern,” meaning it was at risk of bankruptcy. The city failed to take effective action each time, and even increased personnel costs by about $4M since 2017.
  2. In June 2019 the city manager and finance director told council everything was okay. Things were not okay even before COVID. City staff had also reported that the 2018-19 fiscal year ended in a surplus, but a later audit revealed a $2.9M cost overrun, with no notification to the city council and no budget reductions.
  3. El Cerrito has no reserves and has been making no effort to fill their reserves. Council was told that the Transfer tax would build reserves but instead much of it was used to pay firefighter overtime. 
  4. El Cerrito borrows money every year to keep afloat. The most thus far was two years ago when they borrowed 9 million which was up from 6 million the year before. We borrowed 8.5 million this year and it cost over 100k to do so because of our high risk.
  5. The State Auditor currently has the city at #6 in the state as most likely to go bankrupt. This is up from #7 last year. 
  6. The State Auditor is currently auditing the city. The audit results are due in February. 
  7. Until early in 2020 each of 26 management employees was receiving a $300 a month car allowance ($330 to the city manager) regardless of whether their job required travel or if they had access to a city car. No paperwork was needed. This cost $100,000 a year.
  8. Our current bond rating is one step above junk bond. This means our ability to borrow for anything is greatly impaired and if we do get a loan it will cost much more.
     
  9. El Cerrito increased local taxes four times since 2010. Today our combined sales, transfer, and utility taxes make El Cerrito the California city with the highest combined tax rate, yet the city continues to slide into more financial distress.
  10. The city’s taxable sales fell by 5% from 2009 to 2018, while those in nearby cities grew substantially: Albany +25%, San Pablo +47%, Richmond +54%, Pinole +35%). During that period, only 17 cities in the state had a decline; the rest averaged 54% growth! City staff didn’t alert the city council or act to combat the decline. We have no economic development team or plan.

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