Tuesday’s FY25/26 budget presentation of the preliminary budget by Claire Coleman marks a significant step forward. The extensive outreach efforts and increased transparency throughout the budgeting process are impressive and commendable, laying a strong foundation for informed decision-making and fiscal responsibility. Claire’s talent is evident, as she overshadowed the Finance Director (who hasn’t presented during this budget cycle) with her clear articulation of the budget and ability to answer most questions. However, the limitations of the Finance Director and City Manager dim Claire’s light, preventing her from implementing the necessary cost-containment measures to stop the consistent use of reserves to make midyear budget adjustments to revenues and expenses.
During the city manager’s introduction, she emphasized that her consultants were trusted because they consistently provided accurate information. However, earlier this year, they had to reduce the property tax by $1 million due to a significantly inaccurate forecast. The shortfall was covered by a reduction to the general fund balance.
The city manager has convinced the city council that any budget cuts will inevitably lead to service reductions, which is essentially a fear tactic. Moreover, she lacks an understanding of the operational impact, as the city manager has not conducted the study requested by the state auditor four years ago to determine the appropriate staffing levels and operational impacts.
Meanwhile, the City Manager lacks confidence in the new Finance Director, who remains silent at the dais while others present and answer budget-related questions during each presentation. However, her Executive Assistant, Will, has taken a lead role with Claire in outreach and budget presentations, while Crystal simply sits and smiles. The city doesn’t need Crystal, Claire, and Will. Additionally, there is an Assistant City Manager and four Battalion Chiefs, none of whom directly impact service delivery.
With only $7.8 million in unrestricted reserves, the reliance on reserves to balance the budget will drain the bank quickly – remember they used over five million in reserves to balance shortfalls this year.
Here’s the history to substantiate the six + year fiscal mismanagement:
In 2019, the El Cerrito Committee for Responsible Governance (ECCRG) reported significant financial concerns. As you will see, except for the financial bailout from the federal government during the pandemic, the financial situation has been dismal. In November 2018, the City of El Cerrito found itself in a precarious financial position when the independent auditor issued a “going concern” statement for the second consecutive year. This declaration, appearing in the Comprehensive Annual Financial Report (CAFR), highlighted serious doubts about the city’s ability to continue its operations without significant fiscal restructuring. Six years later, in 2024, the ramifications of these early warnings are still being felt.
During the June 4, 2019, city council meeting, the city’s then Finance Director, Mark Rasiah, and City Manager, Karen Pinkos, presented a more hopeful financial outlook. Rasiah confidently expressed that the “going concern” statement would likely be removed by the end of the fiscal year, supported by Pinkos’s reiteration of their conservative budgeting practices. Pinkos stated, “We are being cautious and conservative,” and emphasized efforts to increase the fund balance reserve. Rasiah added, “We have proved [the independent auditor] wrong. So, I think the going concern concept will be removed at the end of fiscal year 19.” This sense of improvement was further endorsed by a council member’s observation of Rasiah’s positive demeanor: “It’s nice to see you smiling because that means we should worry less.”
However, this optimism was short-lived. Just a few months later, in January 2020, it was disclosed that there had been a $2.9 million cost overrun, and the “going concern” statement reappeared for the third consecutive year. This raised serious questions about the city’s financial oversight and management. How could the city council have been assured of financial stability in June 2019, only to face a starkly different reality by October 2019, when El Cerrito was identified as the 7th most at-risk city for bankruptcy in California?
For years, the City sought municipal payday loans to meet payroll obligations.
Federal Bail Out/ RPTT
El Cerrito’s coffers received a significant boost with $18 million from Real Property Transfer Tax and an additional $6 million from the federal American Rescue Plan Act (ARPA) funds. Despite this $24+ million influx, the city attributes its avoidance of municipal payday loans to fiscal expertise. It’s time for them to acknowledge that paying off the loans was significantly aided by external financial support and the increase in home sales, rather than just great management.
Detailed Financial Assessment
By 2024, El Cerrito’s financial situation remained dire, despite reported reserves of $15.7 million. A closer examination revealed that these reserves were largely restricted funds, masking the true severity of the financial crisis. The city started the fiscal year with $22.14 million in unrestricted reserves, allocating significant portions to emergency reserves and the Section 115 Trust for pension benefits. After accounting for overspending and other allocations, the remaining unrestricted 10% of general fund reserves are dangerously below the Government Finance Officers Association’s (GFOA) minimum recommendation.
Fiscal Mismanagement and Overspending
El Cerrito’s chronic overspending exacerbated its financial woes. In FY24 alone, the city overspent by $5.4 million. This pattern of exceeding budgeted expenditures without corresponding revenue increases indicates a lack of sustainable financial practices, putting the city at continuous risk especially given another federal bailout is unlikely.
State Auditor’s Findings
The State Auditor’s findings underscore ongoing systemic issues within El Cerrito’s financial management. Key concerns include the excessive reliance on reserves, the handling of pension liabilities, revenue projections, and overall financial sustainability. El Cerrito has a significant pension liability of $85 million but has only set aside $1 million+—just 1.6% of the total owed to CalPERS. This underfunding poses a long-term risk to the city’s financial health. Additionally, the city’s fluctuating revenue streams and reliance on unsustainable sources have led to a low rating from the State Auditor for revenue trends.
Compliance with Recommendations
Despite claims from city management that all State Auditor recommendations have been addressed, the continued fiscal mismanagement suggests otherwise. The recommendation to reduce ongoing expenses has not been adequately implemented, as evidenced by the city’s persistent dependence on the general fund to cover over-expenditures.
Conclusion
El Cerrito’s financial trajectory from 2018 to 2024 highlights significant fiscal management and oversight missteps. While city officials have projected confidence and improvement, there has been a cycle of overspending, and inadequate planning for future liabilities. Addressing these deep-seated issues is crucial for ensuring long-term financial sustainability and restoring public trust in the city’s governance. The path forward must involve stringent fiscal discipline, transparent financial reporting, and a commitment to sustainable budgeting practices.
After more than six consecutive years of financial mismanagement, just one Council Member challenged the assumptions and notes the discrepancies in the budget inferring that there’s no room for over spending or less revenue than projected – which of course, hasn’t happened during Karen’s tenure.
Yet the City Council continues to renew the City Manager’s contract. As election year approaches, it’s time to vote for leaders who will be fiscally responsible and committed to delivering the essential services our city needs.
Council members who vote No on a budget destined for the use of reserves are our most courageous members.
Make your vote count for a better future for El Cerrito.
Here’s how you can help.
- Share this post with other residents.
- Comment on the post
- Attend the monthly Financial Advisory Board meetings in person.
- Post on Social Media
- Council meetings are remote and in-person, but public comment is now limited to in-person attendees.
If you want to contact City Council Members or the City Managers, all their emails are below:
- Karen Pinkos-City Manager kpinkos@ci.el-cerrito.ca.us
- Councilperson Gabe Quinto gquinto@ci.el-cerrito.ca.us
- Councilperson Carolyn Wysinger cywysinger@ci.el-cerrito.ca.us
- Councilperson Tessa Rudnick trudnick@ci.el-cerrito.ca.us
- Mayor Lisa Motoyama lmotoyama@ci.el-cerrito.ca.us
- Councilperson Paul Fadelli pfadelli@ci.el-cerrito.ca.us
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El Cerrito Committee for Responsible Government (ECCRG) 