At the September 17 City Council meeting, the City Manager presented the 4th Quarter General Fund Update, painting a rosy picture of El Cerrito’s financial health. While the report claims fiscal prudence and a surplus in the General Fund, we believe the City Manager’s interpretation of the numbers may be misleading.
Misleading Use of “General Fund Balance”
The City Manager emphasized that the General Fund balance is projected to be $22.95 million. However, this figure is not the same as a reserve nor an indicator of available financial flexibility. Much of this balance is already earmarked for specific purposes, such as $9 million for the Emergency Disaster Relief Fund (EDRF) and $1.37 million for the Pension Trust. Additionally, the General Fund balance is used to pay day-to-day expenses like payroll and services, which fluctuate regularly.
By including these restricted amounts in the total balance, the City Manager misleads the public into thinking that these funds are part of the City’s reserve—when in reality, they are designated for specific uses and cannot be accessed for general operations without formal approval. This misrepresentation blurs the line between the City’s actual reserves and the broader General Fund balance, which is not a reserve account.
Lack of Disclosure on Unrestricted Reserves
Crucially, the report fails to disclose the amount of the unrestricted reserves, the portion of the General Fund that is truly available for emergencies or unforeseen expenses. This lack of transparency leaves the public in the dark about the City’s real financial safety net. The unrestricted reserves represent the City’s true financial health, and without this information, it’s impossible to assess how prepared El Cerrito is to handle unexpected financial shocks.
Inflated Reserve Percentage
The City Manager claims that reserves equal 43% of General Fund expenditures. However, this calculation appears to include restricted funds like the EDRF and Pension Trust, which cannot be used for daily operations. When these designated funds are excluded, the actual unrestricted reserves are much lower, potentially closer to the 17% goal set by the City’s financial policies. The real reserve percentage is a key indicator of fiscal health, and the public deserves clarity about what portion of the General Fund is truly available for emergency use.
Admission of a Structural Deficit
Despite the optimistic tone of the report, the City Manager acknowledges a $1 million structural deficit in the General Fund Forecast. This means that recurring expenses exceed recurring revenues, a significant problem that contradicts the narrative of financial stability. Fiscal prudence should focus on resolving this deficit, not masking it with temporary gains.
Over-Reliance on Temporary Revenue
The report warns that if the 1-cent sales tax is not renewed, the City will face a 10% across-the-board cut in services, programs, and staff. This demonstrates El Cerrito’s dependence on temporary revenue sources, rather than addressing the long-term issue of excessive expenditures. A stable city budget should not rely on voters to approve short-term fixes.
Conclusion
The City Manager’s report offers an overly optimistic view of El Cerrito’s financial health. While some gains have been made, the continued presence of a structural deficit, combined with a reliance on restricted funds and temporary sales tax revenues, paints a much less stable picture. We encourage the City to present a more transparent and accurate assessment of its finances.
Councilmembers must be wary of following the City Manager blindly without asking critical questions or scrutinizing the numbers closely. Blind adherence has led to poor financial decisions in the past, and council members must take independent responsibility for ensuring the City’s financial health.
It’s time for the community to ask tough questions and demand clarity on what constitutes real financial stability for El Cerrito. Let’s ensure a brighter financial future for El Cerrito. Reach out to your City Council members and let them know your concerns!
Contact Information
City Manager: Karen Pinkos
Email: kpinkos@ci.el-cerrito.ca.us
Phone: (510) 215-4300
City Council Members:
- Tessa Rudnick, Mayor
Email: trudnick@ci.el-cerrito.ca.us
Phone: (510) 215-4300 - Carolyn Wysinger, Mayor Pro Tem
Email: cwysinger@ci.el-cerrito.ca.us
Phone: (510) 215-4300 - Gabe Quinto, Councilmember
Email: gquinto@ci.el-cerrito.ca.us
Phone: (510) 215-4300 - Lisa Motoyama, Councilmember
Email: lmotoyama@ci.el-cerrito.ca.us
Phone: (510) 215-4300 - Paul Fadelli, Councilmember
Email: pfadelli@ci.el-cerrito.ca.us
Phone: (510) 215-4300
El Cerrito Committee for Responsible Government (ECCRG) 