In March 2021, the California State Auditor released a report warning that El Cerrito was the 6th most likely among 400+ cities in California to face bankruptcy. This report outlined serious concerns about the city’s overspending, poor budgeting practices, and insufficient efforts to address financial challenges. Under City Manager Karen Pinkos, who took office in 2018, the city’s financial health has only “missed opportunities”.

Despite the urgency of these issues, they have not been resolved—and El Cerrito is now ranked as the 13th most likely city in California to go bankrupt.

Key Findings from the State Auditor’s Report

The auditor’s report, “Excessive Spending and Insufficient Efforts to Address Its Perilous Financial Condition Jeopardize the City’s Ongoing Fiscal Viability”, highlighted the following major concerns:

1. Continual Overspending: For years, El Cerrito has spent more than it brought in, causing deficits in the general fund. The city relies heavily on short-term loans to cover budget gaps, and the costs continue to mount. Despite this, no significant reforms have been introduced to rein in expenses:“Because It Consistently Overspends, El Cerrito Is in a Weak Financial Position, as Demonstrated by a Deficit in Its General Fund, Reliance on Costly Short-Term Loans, and Rising Pension Costs.”
2. Pension Liabilities: El Cerrito’s massive pension liabilities continue to grow. The administration under Pinkos has made no effort to pay more than the minimum contribution required, despite the increasing burden these pensions place on the city’s budget. The city has yet to develop a viable plan to reduce this long-term liability:“According to El Cerrito’s finance director, the city does not plan to pay more than the minimum required employer contribution each year.”
3. Inadequate Infrastructure and Capital Funding: The city’s infrastructure remains neglected, and capital projects have been delayed for years. At the current pace of spending, it would take more than 50 years to address even the most basic infrastructure needs:“Because of its financial condition, El Cerrito has delayed efforts to address the maintenance and repair of its facilities and the development of needed capital projects.”

Declining Bond Ratings: A Red Flag

During Karen Pinkos’ tenure, El Cerrito’s bond ratings have steadily declined, further evidence of the city’s deteriorating financial health. A downgrade by both S&P and Moody’s reflected concerns about the city’s ability to manage its finances and pay its obligations. Declining bond ratings are a direct reflection of how poorly the city’s finances have been handled under Pinkos’ leadership. This impacts the city’s ability to borrow money for essential projects and increases the cost of existing debt.

The bond rating agencies have cited El Cerrito’s structural deficit, reliance on reserves, and rising pension costs as reasons for the downgrade. Yet, despite these warnings, no effective measures have been taken to improve the city’s financial standing.

Sexual Harassment Settlement: Another Burden

Adding to the city’s financial woes is the $544,000 settlement El Cerrito paid in 2021 to resolve a sexual harassment lawsuit. The settlement stemmed from a complaint against a city official, further straining the already precarious city budget. This settlement is not only a financial burden, but it also underscores a lack of dedication to employee well-being under Karen Pinkos’ leadership. The mishandling of such a serious issue indicates broader concerns about the work environment and employee protections, reflecting poorly on the city’s overall commitment to supporting its staff.

Problems Persist: No Real Solutions

Despite the glaring warning signs from the State Auditor six years ago, declining bond ratings, and costly legal settlements, these critical issues have not been resolved. Nearly three years after the State Auditor’s report, El Cerrito’s financial situation remains precarious. No comprehensive plan has been introduced to address the city’s long-term budget crisis, overspending continues, and pension liabilities loom larger than ever. Meanwhile, the city’s infrastructure remains underfunded, and residents are still left in the dark about the true state of the city’s finances.

Prior to the 2021 report, the state auditor sent TWO letters of concern to El Cerrito. After 6 years she should be years well into the strategic plan implementation. The concept of a plan is woefully inadequate.

Lack of Transparency and Misleading the Public

Karen Pinkos has continuously demonstrated a lack of transparency in how the city communicates its financial situation. The city manager has misled residents on multiple occasions, particularly regarding the true extent of El Cerrito’s debts. In public presentations, Pinkos downplayed the city’s $90 million in unfunded pension liabilities, falsely claiming that the city has “very little debt.” This misrepresentation has allowed her administration to deflect scrutiny while asking residents to pay higher taxes without explaining where their money is going. she maintains that all of the state auditors concerns have been addressed. Nothing could be further from the truth.

The lack of open communication has left El Cerrito residents in the dark about the real state of the city’s finances. As a result, citizens are making decisions based on incomplete and often misleading information.

Misaligned Priorities and Strategic Failures

Pinkos has continuously demonstrated an inability to align city priorities with fiscal realities. Instead of focusing on long-term financial stability, she has pursued non-strategic priorities that only exacerbate the city’s fiscal problems. For instance, while infrastructure continues to crumble and pension liabilities grow, Pinkos purchased a $1.5million building while more important capital needs remain unmet. She has expanded administrative ranks and hired costly consultants. These decisions have added further strain on the city’s budget, offering little in return to the community.

Misleading Residents to Secure Tax Increases

Perhaps the most troubling aspect of Karen Pinkos’ leadership is her administration’s use of misleading tactics to secure public support for higher taxes. Residents have been asked to approve tax increases under the premise that essential services will be cut without them. However, despite these taxes, financial mismanagement continues, with little accountability for how those funds are being spent.

Residents have a right to ask: Is this tax really necessary, or is it just another Band-Aid solution to cover up ongoing fiscal mismanagement?

Why Karen Pinkos is Not Fit to Run El Cerrito

Karen Pinkos has had years to address these issues, yet the evidence shows that under her leadership, El Cerrito continues to spiral deeper into financial trouble. Her administration has shown no real commitment to fixing the underlying problems:

• Overspending has not been controlled.
• Pension liabilities of $90 million remain unfunded, with no strategy to address them.
• Essential infrastructure continues to deteriorate.
• Residents have been misled, and transparency remains a serious issue.
• Declining bond ratings – BBB reflects the growing concern of external agencies over the city’s financial health.
• A $544,000 sexual harassment settlement has further burdened the city’s finances and highlights a lack of dedication to employee well-being.
• El Cerrito is now ranked 13th most likely to go bankrupt in California. This is among approximately 400 cities, which means approximately 390 CA cities are better managed than El Cerrito

Pinkos has demonstrated time and again that she lacks the strategic vision, financial discipline, and leadership skills necessary to turn El Cerrito around. The same issues identified in the March 2021 State Auditor’s report persist today, with no indication that the city is on a path toward fiscal stability.

The Path Forward

El Cerrito cannot afford another year of Karen Pinkos’ leadership. The city needs a leader who values transparency, fiscal responsibility, and strategic planning. Without these qualities, the future of El Cerrito remains at risk, with financial mismanagement continuing to jeopardize essential services and the quality of life for its residents.

The time has come for a change—El Cerrito deserves leadership that is committed to real solutions, not more Band-Aids, misdirection, and inaction. Our city’s future depends on it.

State Auditor’s Report on El Cerrito – March 2021

#ElCerrito #CityManagement #FiscalResponsibility #TransparencyMatters #LeadershipChange #KarenPinkos #CaliforniaCities #BankruptcyRisk #ElCerritoBudget #PensionLiabilities #BondRatings #SexualHarassmentSettlement #EmployeeWellBeing #CommunityFirst #TimeForChange

---