Will the Community Fight For Fiscal Responsibility?-El Cerrito Budget Update Part 3

This is the final part of a three-part series updating residents on activities related to the El Cerrito fiscal crisis. This is the final part of a three-part series updating residents on activities related to the El Cerrito fiscal crisis. In other big news, the Finance Director has resigned and has left the building. While a new Finance Director with more forecasting experience and experience in addressing fiscal issues could be a great thing for this city we also understand the City Manager makes this hiring decision. This City Manager has been historically non-transparent and not super willing to acknowledge past mistakes or shift the trajectory. This could be an opportunity for her to hire someone who can turn this ship around and make the tough decisions. Or she could hire someone that continues to deny issues and have fights with members of the FAB when they challenge their untruths. I hope Council encourages her to hire wisely.

The response to the State Audit also reported that “the incumbent Finance Supervisor will be retired as of September 30, and the position is proposed to be replaced by a Budget Manager position that will specifically focus on budgeting and financial analysis for the City, allowing City Management to be responsive to the City Council and the public in communicating budget strategies and information. This classification is being developed and is expected to be presented to the City Council for approval in October, and staff will seek to fill this position by the end of the calendar year.”

If we fill both of those positions with these new skill sets it could be transformative for the city. The lack of forecasting has been a great disservice to the city. As of the date of this report, I do not believe this position has yet been presented to the Council. These positions need to both be filled ASAP as the City now does not have a functioning Finance Department. I know an interim Director was going to be put in place soon. The Community needs to stay on this issue as it could be used as an excuse not to produce promised information and reports.

To end this series here are a few things to keep an eye on. 

  1. Does the City Council get regular budget reports? When the Ad-Hoc Committee reported back they detailed what they wanted to see in reports and stated that these would start in November. Given the Finance Director has left I anticipate the City Manager using that as an excuse to not have a comprehensive report. They have already used that as a reason to cancel the Financial Advisory Board meetings. 
  2. Will they fill the open Financial Advisory Board seat? It seems rather convenient that they decided to reassess the Board and Commission rules right at the time the FAB had an opening. Then they added criteria that applicants need to have attended some meetings. At the last council meeting, they said it might be February before the seat was filled. 
  3. Will the Council push the City Manager to hire a competent and experienced Finance Director who has the skill set to do accurate forecasting and present information to the community in a comprehensible manner? 
  4. Will the Council assign a team to do the City Manager’s evaluation that evaluates her performance and brings in the factors of community trust and how she is working on the budget?

As I have said before change will only happen if the community continues to hold the Council responsible for the fiscal state of the city finances

Will the Community Fight For Fiscal Responsibility-El Cerrito Budget Update Part 2

This is part two of three of the Fall update on what has been happening with the city budget. Today we cover the Ad-Hoc Committee report which includes the report sent to the State Auditor (click the link below)

City Council Financial Ad-Hoc Committee Update– Presented by Council Person Rudnick and Motoyama at the Meeting on September 21, 2021. There was an Ad-Hoc Committee formed with these two councilpersons working with city staff on preparing the response to the State Auditor Report. Councilperson Rudnick spoke some about their process and meetings and then Councilperson Motoyama stated that they had provided direction on budget updates moving forward. Updates should include actionable information, be provided quarterly to get fuller pictures, and have 5 and 10-year forecasts, and break down the budget department by department.

During the meeting, Mayor Fadelli asked will we get a response back? Karen Pinkos said yes that is anticipated. She stated that they are still working on the Fiscal Sustainability Plan which the council will need to approve. She believes they will be removed from the list.

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As of the date of this blog post, the State Auditor has made no public online response to the response sent last month. I think it is highly unlikely we would be removed from the list as if you look at the high-risk dashboard above we have addressed only Fund Balance. We now have a few million dollar reserve. There has been no action on any of the pension issues. In fact in that area of the report, it says

“The City Council has directed City staff to establish a Section 115 Trust. Staff is now researching vendors and a recommended funding policy for the City Council’s consideration. Financial policies are also slated to be discussed by the City’s Financial Advisory Board in the coming months.

The action once again is research. They have been cancelling FAB meetings due to staffing issues (covered tomorrow) and are delaying the filling of the open position on FAB.

Frankly, I found a few other responses in that report less than satisfactory. On page 2 they mention there will be a 4 million dollar reserve meeting our 10% goal. This is disingenuous because looking at the true policies we are also required to have an additional emergency reserve and the recommended reserve for a city our size is 17 million. That number was referenced in part one of this article which covered the Fiscal Sustainability Plan.

It is important that the community continue to follow these reports and if the state auditor posts responses to them.

Will the Community Fight For Fiscal Responsibility?-El Cerrito Budget Update Part 1

It has been a long time since I posted. This writer is going to be leaving El Cerrito and it has been hard to motivate myself to continue with the blog. This blog has filled a void by informing residents about the Fiscal Crisis and I feel sad that it may not continue. There is a committed group of residents that have been working behind the scenes for a few years. Please if you care about the city email me at eccfrg@gmail.com and I can get you connected. The group can use people who can do some report backs from the Financial Advisory Board (FAB) and Council Meetings. They can use some people to help get the word out via this blog and social media. If others don’t step up all the work thus far may have been for naught.

I am ending with a three-part update. This can catch people up as to what has been happening or not around fiscal sustainability in El Cerrito. I will post one post each day for the next three days.

Study Session – Fiscal Recovery and Sustainability Plan-Last Meeting on August 31, 2021. 

I will admit I did not attend this meeting. I was so frustrated about the lack of publicity for it and the scheduling at 4 pm on a workday that I thought it a waste of time. Today I reviewed the slide set and saw that the Plan had made some major improvements since the first meeting.

The first thing to be very clear about is that the only reason El Cerrito is doing okay right now is the American Rescue Plan Act (ARPA) funds. Without those funds, our situation would continue to be dire. With those funds, we could be on the path for change IF pension issues are addressed in a meaningful manner.

A few highlights from the report:

This first slide is an accurate statement as to what is needed on the road to sustainability. I am especially pleased that strengthen transparency and community trust is called out. This is something I have been begging for. They also call out monitoring key financial drivers including PERS (pension plan) which is something that has been missing and is a significant piece of the future. The pension issue could bankrupt the city if not addressed.

Below they also state their key assumptions. This is something that we have long asked the Finance Director to do. The two assumptions I am concerned about are the flexible COLA assumption since the represented employees have been reluctant to give back anything. Any COLAS not taken these last few years were deferred and I believe in 2022 they will get COLAS again. It also assumes no recession through FY 32-33 which seems rather improbable. That being said I understand that it would be hard to predict what the next recession will look like. I also hope the Cannabis revenues are not overstated. They are anticipating 300k a year from each of the two of them. One is not open yet.

The next few slides show how bad shape we would be in without the Rescue Funds. This proves my point of how that money is saving this city. It does have us obtaining a real reserve quickly. Which is great. My concern is that this report and the City as a whole are not addressing the Pension Issue which I suspect could change everything. I hope before the Council approves this document they ask for some data on that issue.

The fo

This document is a reasonable start. Before it is approved I suggest the Council ask for more data on how the pension costs factor into each of these scenarios. It appears to be a huge missing piece. I also hope that the Council uses this document to hold the City Manager accountable. She has been historically anti-transparency. Transparency is the only thing that might build community trust again. I hope the Council holds her to it. I believe based on last year her evaluation is coming up in December or January. I hope the Committee assigned to do it includes one or both of the Council Ad-Hoc Committee members as they seem to best understand how the City Manager is navigating the budget. While the public is not permitted to see this document I hope it is an honest reflection of her work. I also hope it sets some quantifiable goals for her progress.

CALL TO ACTION: El Cerrito’s Proposed Responsible Investment Policy – Fossil Fuels and Tobacco

As the October 2nd pipeline rupture off the Huntington Beach shoreline of reminds us, our reliance on fossil fuels is fraught with environmental and economic risk. An estimated 131,000 gallons of crude spewed into the Pacific Ocean, creating a highly-toxic 13-square mile oil slick that is now washing up onto Southern California beaches and into fragile coastal wetlands rich in biodiversity. Of course, damage is not limited to occasional oil spills. Every moment of every day, the burning of fossil fuels release carbon dioxide into the air, creating a greenhouse gas effect that traps heat in Earth’s atmosphere and accelerates global warming.

On September 28th I presented to the City of El Cerrito’s Financial Advisory Board (“FAB”) a proposed socially-responsible investing (“SRI”) clause to the City’s official Investment Policy that would prohibit the direct investment of City funds in fossil fuel and tobacco companies. After discussion and debate, the FAB voted 3-to-1 to recommend that the City Council adopt as policy the “3.6 Responsible Investing” directive below:

Investment Policy Addition – Fossil Fuels and Tobacco

The City of El Cerrito’s Financial Advisory Board (“FAB”) recommends that the City Council adopt an amended Investment Policy with language (1) encouraging socially responsible investing; (2) prohibiting investments in entities that engage in the direct exploration, drilling, production, refining, or marketing of fossil fuels; and (3) prohibiting investments in entities that engage in the direct production or marketing of tobacco products.

To this end, the Financial Advisory Board recommends that the following language be included in the City of El Cerrito Investment Policy:

3.6 Responsible Investing: The City of El Cerrito recognizes that it has a shared responsibility to protect the lives and livelihoods of its inhabitants from the catastrophic threat of climate change and societal costs of harmful tobacco products. The City believes that its financial investments should support a future where all its inhabitants can live healthy lives without the negative environmental, economic and/or health impacts of global warming and addictive tobacco.

      • Investments are encouraged in entities that are involved in the production of renewable energy and sustainable agriculture and have demonstrated a commitment to environmental sustainability and transparent, accountable corporate governance.
      • No investment is to be made directly in publicly-traded companies or private entities that engage in the direct exploration, drilling, production, refining, or marketing of fossil fuels.
      • No investment is to be made directly in publicly-traded companies or private entities that engage in the direct production or marketing of harmful tobacco and tobacco-related products, including but not limited to cigarettes and e-cigarettes.
      • All investments in the Local Agency Investment Fund (“LAIF”) are exempt from section 3.6.

The Financial Advisory Board is a City Council-appointed group of up to five resident volunteers with financial expertise. I am one of four current members; a fifth position has been vacant for several months. To be clear, a FAB “recommendation” is only that—a recommendation, with the City Council under no obligation to adopt it.

At least for now, the proposed SRI clause is largely symbolic as the City’s “rainy day” fund and emergency reserves have been depleted by overspending and mismanagement, leaving almost nothing to invest. El Cerrito’s finances are a mess—and have been so for many years, long before COVID-19. As you may recall, the California State Auditor conducted a thorough review in 2019 and placed the City in the State’s “Local High Risk Program.” Among the more than 400 cities monitored by the State Auditor’s office, El Cerrito ranked from sixth to eighth from the bottom between 2016-2020, consistently among the worst in the state in terms of overall fiscal health and financial risk (https://www.auditor.ca.gov/local_high_risk/at-a-glance-csa). In a letter to the Governor, the State Auditor wrote:

In general, we determined that the city is at high risk of financial instability because of its continual overspending, poor budgeting practices, and lack of a comprehensive plan to address its financial challenges, all of which threaten the future provision of city services.

To pay its bills on time, the City issues Tax Revenue Anticipation Notes (“TRANs”), short-term loans that serve a bit like a payday loan (with “payday” being the October and April property tax collection dates). Until the borrowed money is spent, it is held in the State of California’s Local Agency Investment Fund (“LAIF”), a low-cost, low-risk, investment account managed by the State’s Treasurer’s Office. Although the Treasurer’s Office is committed to socially responsible investing and does not directly invest the LAIF in either fossil fuels or tobacco, FAB members wanted to be absolutely certain that holding funds in the LAIF would not violate the City’s investment policy. That concern is addressed by the fourth bullet of the “Responsible Investing” clause exempting investments in the LAIF.

The City’s Finance Director Mark Rasiah, who attends but is not a voting member of FAB, strongly opposed the recommendation, falsely asserting it would cost the City between $40,000-$50,000 to implement. FAB Chairperson Dick Patterson was the lone “no” vote, expressing his belief that fossil fuel companies are leaders in the pursuit for renewable energy and that El Cerrito’s investment policy would do nothing to alter the behavior of individuals who are the end users of fossil fuels and ultimately responsible. While Finance Director Rasiah acknowledged his responsibility to present FAB’s recommendation to the City Council for review, he also made it clear that he would likely recommend that the responsible investing clause not be approved.

Initially, I was not terribly concerned about the Finance Director’s opposition. The proposed SRI addition is so well-researched, clearly and simply stated, common among municipalities, and unencumbering that it was hard to imagine City Council members voting against it when they met next on October 5th. What I did not anticipate is that FAB’s recommendation would simply be left off the City Council meeting agenda.

I ask for your help now in getting City Council approval of the above “3.6 Responsible Investing” guidelines. Please email El Cerrito’s city clerk, mayor and councilmembers and ask that the FAB-recommended “3.6 Responsible Investing” guidelines be added to the City Council’s agenda and approved as an addition to the City’s investment policy. Importantly, please include “Public Comments” in the subject line of your email (for example, “Public Comments – Responsible Investing”). Following the City’s “no less than 72 hours in advance” public notification policy, the agenda for the Tuesday, October 19th City Council meeting will be set on Thursday, October 14th. Public comment emails received by 4:00 pm Tuesday, October 19th (three hours before the 7:00 pm City Council meeting) will be included in the meeting packet. 

Mayor Paul Fadelli – pfadelli@ci.el-cerrito.ca.us

Mayor Pro Tem Gabe Quinto – gquinto@ci.el-cerrito.ca.us

Councilmember Lisa Motoyama – lmotoyama@ci.el-cerrito.ca.us

Councilmember Tessa Rudnick – trudnick@ci.el-cerrito.ca.us

Councilmember Janet Abelson – jabelson@ci.el-cerrito.ca.us

City Clerk Holly Charléty – cityclerk@ci.el-cerrito.ca.us

Lastly, please join the upcoming Tuesday, October 19th City Council meeting via Zoom and provide public comments in support of the proposed responsible investing guidelines. The Zoom link for City Council meetings changes with each meeting and can be difficult to find, but eventually it will be posted at the top of the meeting agenda and buried among the links at http://www.el-cerrito.org/114/City-Council-Meetings and http://www.el-cerrito.org/482/Council-Meeting-Videos-Materials.

Thank you.

William Ktsanes
(Guest Contributor)

City Council Congratulates themselves for doing nothing

There was a council meeting last night. The finance reports were buried until the end as per usual. The good news is we ended the year with 1.3 million on the books. Some will say we had a surplus of over 2 million but over one million of that had to be written off due to losing a lawsuit. The actual fund balance number is the one that counts and that is 1.3 million. The Council congratulated themselves and the staff.

The transfer tax received was OVER estimates by 1.7 million. The entire surplus was created by an unsustainably strong housing market. If that had not happened we would have been in the red once again. But yes let’s congratulate the staff on that.

The state auditor updated their dashboard. El Cerrito remains the #6 worst city in the state financially but our overall points declined from 36.32 to 35.76 out of 100. 

If you dig deeper into the El Cerrito numbers you will see nothing positive and the pension issues are horrific. We are the worst city in the state for future pension costs.

If you look at the required contributions (above) for 27/28 versus the budget you will see that 20% of the budget would be utilized for that.

If you compare the prior year to this year you will see

2020 Actuarially Determined Pension Contributions $7,194,477

2019 Actuarially Determined Pension Contributions $6,351,717

2020 Accrued Pension Liabilities $214,921,896

2019 Accrued Pension Liabilities $203,153,960

El Cerrito does not acknowledge the fiscal trouble we are still in. Instead the public got to listen to another diatribe from Council Person Quinto who said that those not supportive of the route the city is taking are liars, mean-spirited and partisan. (at 3:40 in the meeting video). He focused on staff costs and insists they are not to high and the public needs to look at Betty Yee’s website for proof. Regardless of whether the city staff is overpaid or not the city is still in terrible financial shape and Council Person Quinto and the Finance Director instead of addressing this use every opportunity to portray those disagreeing as horrible people. It is tone policing at its finest. Say something critical about the Council or Staff and be told you are making personal attacks.

I ask Council Person Quinto if we are liars why do the State Auditor’s reports bear us out?

I ask the other Council Members why they continue to allow Quinto’s attacks to go without comment? He gets to say whatever he wants as his free speech right but is attacking the public the route to take? Silence implies agreement.

Council Person Motoyama joined in the praise but also said there needed to be sustainable changes and we needed to see the 5-10 year projections. Remember the last attempt at that? I do. It showed us with no adequate reserve quickly. Make no mistake without the federal bailout we would be in grave danger right now.

Next week will be another performative meeting where Management Partners makes the suggestions they are told to make by city management. It is a follow-up to the town hall a few months back. It is August 31st at 4 pm. Seems to me not a great time to be accessible to the working public.

Just a reminder 2022 is coming fast. Two seats will be up for election then. That includes Council Person Quinto’s seat. That man who calls the public liars. This is our opportunity to change the membership of the council to gain a third vote for fiscal responsibility. If you are thinking of running I encourage you to do so!

Will El Cerrito ever address the state auditor recommendations?

After passing a budget with no real cuts (except to seniors) in June the City Council will only meet once a month in July, August, and September (as per usual) because there is not hurry when you are on the verge of bankruptcy.

While Albany City Staff are preparing recommendations on how to spend the federal money (ARPA) our city staff continues to prepare budget documents that tell us nothing. Today’s post is going to focus on issues that state auditor brought up. I did a public records request to the state auditors office for the documents supporting their recommendations. Because after the report was released we heard the City Manager and Finance Director say that the auditors were wrong on many things. I wanted to see the source documentation. It is exhausting to continually be gaslighted about these things when the facts support our conclusions.

In no particular order here are issues the State Auditor brought up and the City denied.

  1. Cost of the TRAN Loans

This one actually made me laugh. Because I have heard the Finance Director deny the costs multiple times. When I got the state audit paperwork they based it on the City’s own accounting system reports. So one could speculate either the Finance Director is being deliberately deceptive or he doesn’t know what is going on. I am attaching the document here. Some parts were redacted by the State.

2. The City is not following The Government Finance Officer Association (GFAO) guidelines

The State Auditor stated that the Government Finance Officers Association (GFOA) provides a framework for “Recommended Budget Practices” . This framework states that “A good budget process is characterized by several essential features including:
· Incorporates a long-term perspective,
· Focuses budget decisions on results and outcomes,
· Involves and promotes effective communication with stakeholders”

They added “The GFOA also recommends that budget documents should contain a financial overview (consisting of financial statements and accompanying narrative, charts, and graphics) which includes comparisons of prior period actual results, current period budget and/or estimated actual results and budget period projected figures. The rationale for this recommendation is that stakeholders need to have the financial plan of the government clearly identified in order to make the best budgetary decisions. (p.65)
Even further, the GFOA explicitly recommends that a government should prepare a summary of both the proposed and final budget as most stakeholders do not want to take the time to read and understand the details of a budget. A concise summary of key issues, choices, and financial trends is therefore needed to inform and direct the reader to the appropriate location for additional information. (p.68)”

Take a look at the budget documents. This is not at all the process or product we are seeing. There is no real 5-year plan. Stakeholders are not only not involved but criticized for speaking up. There are no comparisons to prior years.

Here is a document with more of what the state auditor specifically saw.

In addition, you can look at the prior Finance Director’s report for mid-year 2016 below. While not stellar it does break things down. She left a few months later and Mark Rasiah took the job. 2016/2017 after he took over is when the city started its big downslide. Though in fairness to Mr. Rasiah decisions made back as far as 2008 have affected things.

3. The City’s salaries are high in comparison to other cities.

The State Auditor used Richmond, Alameda, Pinole, Hayward, and Albany. They used these cities in our area and as cities that El Cerrito has also used to create comparisons from (though EC likes to throw in cities like Walnut Creek also).

Below is their analysis and a few of their supplemental documents (there were many-they spent some serious time on this issue). The highest discrepancies were with fire battalion chiefs and some police positions.

“The auditor identified 15 key positions in management and public safety which command high salaries and are commonly found in California cities.

Based on the auditor’s analysis of salary data, the auditor identified that El Cerrito’s firefighters have base salaries that are about 6% higher than the average of our comparison cities, respectively Additionally, the city’s fire engineers have a top salary that is about 2.5% higher than the average of our comparison cities. Based on the auditor’s analysis of salary data, the auditor identified that El Cerrito’s battalion chiefs salaries are approximately 1 to 11 percent higher than the average of similar positions at other agencies. Based on the auditor’s analysis of salary data, the auditor identified that the higher amounts that El Cerrito’s firefighters earn total to about $55,000 annually. We determined that most of El Cerrito’s base salaries are comparable to those of the comparison cities.

The auditor analyzed El Cerrito’s 2020-21 personnel budget and identified eight individuals whose salaries currently exceed the city’s control point before factoring in furlough days that two of those employees have. The auditor estimated that the total annual cost of these salaries is approximately $123,000.”

Here are a few of the supplemental documents that were used to support this conclusion.

Control Points shows which city staff are getting paid above the steps designated.

Comparison Data looks at our salaries compared with the cities named above.

So what do we do? We keep on keeping on. We must keep the pressure on. The City Council has not been able to shift the direction of the City Manager and Finance Director. While the newer Council Members ask many tough questions and even voted against the budget it is not enough. In 2022 there will be an election with two seats up. One incumbent Gabe Quinto is expected to run and one Janet Abelson is not. We need to get both of those seats filled with council members that believe in transparency and addressing the budget. However, if/until we can get our change on the City Council we need to keep the pressure on. I firmly believe that if the public did not uprise about the budget we would be in even worse condition.

Things we want to see

  1. An ordinance to FORCE the city to have a reasonable reserve and spend it only in specific circumstances. This is something that has received huge resistance from the City Manager. However, the City Council and City Manager cannot be trusted to do this themselves. If they don’t want to do it we will be organizing a citizen-driven petition to do so. With about 2,500 signatures we can force the City Council to either accept the ordinance we will then write or they will have to call a special election. Obviously, we would prefer that City Council would direct the Financial Advisory Board to do this. But if they won’t we will go the petition/special election route. This is too important. It must be done.
  2. A Five-Year Budget.
  3. A review of everything we spend and the costs. Everything needs to be looked at even our favorites. The Swim Center, Public Safety, City Recycling (we provide our own trucks rather than outsource like other cities). What can we afford and what can we not afford? What are the trade-offs? What does the public think is most important? This discussion needs to start very soon. Put one topic on the agenda every month and do a deeper dive.
  4. Address our pension costs. The City’s own reports show this is quickly getting out of control. We may need to look at different formats for pensions moving forwards (we can’t change past contracts). We also need to follow through on funding the 115 plan to start putting aside money for pension costs. We made some preliminary moves on this but it needs to be funded.
  5. We need to spend the ARPA funds and do it correctly. Look above at what the Albany Staff recommends. We have outdated fire equipment. We are not prepared for an emergency. There are ways to spend that money responsibly rather than just using it to delay making other cuts.

El Cerrito Spends Over Half a Million to Settle Sexual Harassment Case

A few months ago I saw this in the budget document (page 71)

This is in the Human Resources Section of the Budget. You will note the $500,000 for a large legal settlement. If you remember in 2019 Sarah Perez sued the ECPD for sexual harassment and retaliation. She alleged she was sexually harassed by her supervisor David Wentworth. When a complaint was filed by a colleague on her behalf she alleges the retaliation began. The situation ended with her quitting her job.

I did a public records request. Documents provided to me show that Ms. Perez received some back pay and a $544,341 settlement. The settlement agreement has no admission of liability. Three current members (Fadelli, Quinto, and Abelson) were on the council when this was approved. When looking at the size of the settlement it is easy to wonder if the lawsuit had no merit would there have been such a large settlement?

Remember just last month when the City Manager pushed to eliminate $58,000 from the budget by reducing library hours. Well, they are writing a half a million dollar settlement check for a police officer that is still employed by the ECPD. As is the Lieutenant alleged to have retaliated against her. It specifies in the settlement that Sergeant Wentworth will pay none of the settlement. So the taxpayers paid for it. And we’ll pay it again if allegations are made against him again.

This is deeply disturbing on many levels. The allegations are upsetting. The financial implications are horrible especially given El Cerrito continues to teeter on the financial brink. The money was attributed to the Human Resources Budget but perhaps it should have been taken out of the police budget.

My guess is that city staff and council will not talk about a legal issue. Fine. Then let’s start asking what policies and systems were put in place for ECPD to make sure something like this never happens again. Chief Keith should explain how many females currently work as sworn officers (in 2019 it was 4 of 40) and how he is protecting them from sexual harassment. 

One more example of the dysfunction of El Cerrito. 

Budget passes 3-2

So bad news is the budget passed without structural cuts to address our severe financial problems. It appears most of the City Council and the City Manager are content to use the federal bailout money to address some of the reserve issues. This can be fine for the two years we get the money but afterward, we will be even worse than we are now! Pension costs are growing quickly!

On a positive note Councilpersons, Rudnick and Motoyama voted NO! I believe this is the first time a budget vote was not 5-0. Those are the Council members on the AdHoc Finance Committee and the ones we believe understand the budget best. So good for them. I hope it is the beginning of doing things differently in El Cerrito.

There will need to be budget amendments for the federal ARPA funds so we can continue to push for structural cuts.

I also saw on Facebook that Mayor Fadelli is now having office hours at the El Cerrito Natural Foods Annex beginning July 15th from 9-11 am. I encourage those who want to understand more about why Mayor Fadelli voted yes on this budget to attend.

He and Councilperson Rudnick are the only Council members to have such meetings. I would also encourage you to ask Councilperson Quinto to have such meetings. He has repeatedly stated we need cuts and he frequently uses the term austerity but he never suggests concrete cuts and he has voted yes for every budget. He did vote to cut the library hours before changing his mind and voting to keep them. Even though with his vote he again stated cuts needed to be made as he voted to stop a cut. (not that I disagree with saving the library but it seems he says one thing and then did another)

Councilperson Abelson has been on the council since 1999 and therefore has been a part of all the decisions that have lead us to this point. I would also encourage people to request meetings with her.

What would be great moving forward

  1. The Ad-Hoc Committee changes how the budget process runs. Maybe develop a time frame and guideposts for the City Manager. It is typical in many locations for this process to begin in January! This allows ample time to dig deep into the budget without long meetings past half the publics’ bedtime.
  2. There needs to be a comprehensive plan as to how we will meet our reserve goals. The State Auditor recommended a Fiscal Response Plan and from what we have seen no comprehensive plan has been developed.
  3. There needs to be real forecasting using a 5-year budget. Here is an example of San Jose’s budget document. I recognize San Jose has more resources but there are things in this document we can be doing. They forecast for 5 years and do three different forecasts including an optimistic one and a pessimistic one. They are transparent as to their issues and deficit. There is an entire page (page 10) that outlines Budget Balancing Strategy Guidelines. Their budget schedule, starting in January, is on page 20. In one of the Management Partners contracts, one of their stated projects was to develop a forecasting tool. When I have done public records requests as of this point there is no tool that they have developed. Perhaps we need to invest in developing a tool if this is not something that the Finance Director can do.
  4. Cut back the City Managers spending authority. It is currently $45,000. Richmond’s City Manager’s authority is $10,000. In the recent management staff resolution, it was stated that the City Manager had some authority to raise salaries and provide a car for staff as needed. This needs to be evaluated. This is the same City Manager that had almost the entire Management staff getting a substantial car allowance.

City Council Meeting June 15th

I will be honest a bunch of us dedicated budget/council watchers viewed some or all of the meeting. Afterwards, we had a few debates as to what happened. This is how convoluted this process is. Even people well versed in the dysfunction of the El Cerrito government can’t always keep up with the what is going on. A cynical person might believe that is the intent of having these discussions between 10-11pm at night.

I will start with what I know happened.

  1. Library Hours-There was lots of public comment. All in support of keeping the hours. At 8:48 pm Councilperson Rudnick made a motion to save the hours with a second by Mayor Fadelli. At 9 pm Councilperson Motoyama gave an impassioned speech about the library but also saying that the long-term financial picture is more important here. Councilperson Rudnick then gave an impassioned speech on why these hours are critical. At around 9:25 pm they voted 4-1 to keep the hours and move them to a non-departmental line. That was something pushed by Councilperson Abelson. Councilperson Quinto spoke about the need to make cuts in every department but then voted to save the hours. Councilperson Motoyama voted no. While I personally disagree with her vote I do appreciate that she made the vote from a place of integrity. She seems to be the Councilperson most committed to getting cuts made. I don’t agree with that cut but I appreciate her dedication to creating change. I also appreciate Councilperson Rudnick for her part in saving those hours.

2. Pension Fund-Councilperson Motoyama wants to allot money for a Section 115 reserve fund to help address our YUGE unfunded pension liability. She wanted to use the library money to partially fund it. It ended as a motion to begin the process for the Request for Funding to get it set up. There will be further discussion on how to fund it and the costs to establish the fund. This vote was 5-0. While I cannot explain Section 115 well it is a positive outcome. We need to start addressing our pension liabilities and this is a small but good first step. Now we need to get and keep it funded.

What was not clear. 

The Financial Advisory Board sent in a recommendation.

Here is the letter in its entirety

“To the members of the El Cerrito City Council: The FAB continued its review of the 2021-2022 proposed Budget Book at its June 8 meeting, and found that the budget presented to Council at the June 1 City Council meeting will not achieve the objective to put the City on a longer term path of sustainable financial health. As a result, the FAB makes the following recommendation: Prior to the June 30 deadline for adopting a 2021-2022 budget the Council should direct the Administration to prepare and present to Council at an additional budget meeting a proposed budget that includes the following:

A $1 million General Fund surplus that does not rely on the receipt of the ARPA funds;

A menu of options that could generate the $1 million surplus with explanations of impacts on residents;

For programs in the proposed Budget Book that contains material service reductions, an explanation of the impacts on residents.

Thank you.

Dick Patterson Chair – Financial Advisory Board”

Those of us that watched that FAB meeting thought it was clear that the recommendation was to have a 1 million surplus for 21/22. Not a surplus that included a carry-over from 20/21.

At the beginning of the council meeting Councilperson Rudnick suggested we only need to cut around $55,000 to meet the FAB recommendation. (This was before library hours being restored. ) We believe she took that information from the screenshot above. The General Fund Forecast shown above indicates a projected surplus at the end of 20/21 of $525,011 and then projects a surplus of $419,269 for 21/22 which means we would have a surplus of $944,280 at the end of 21/22. With an additional $55,000 we would have a million-dollar reserve as Councilperson Rudnick pointed out.

Given the way the FAB statement is worded, I can see where there might be confusion. I hope FAB clarifies their recommendation because obviously, people heard it to mean different things. Councilperson Rudnick did ask for clarification at the meeting and the Finance Director agreed with her. He attends the FAB meetings and I am confused as to why he did not clarify this point. At the end of the day the Council gets to decide whether or not to follow the FAB recommendation. If they choose not to follow the recommendation I believe they need to explain to the public why they made that choice.

10% of a 40 million budget is 4 million. In addition, we have a policy of having a 6 million Emergency Reserve. Our policies state we should have a total of 10 million in reserve. If we are putting away only $500k a year then it will take us 20 years to get a reserve that follows policy. 

What is not clear is if the City Manager will ever provide a menu of cuts as repeatedly requested by the Council, the public, and now the Financial Advisory Board. This was brought up again by several Councilmembers including that the menu have the impacts as suggested by FAB. The City Manager continues to kick the can and put off making cuts. How will the city ever be financially sound if we do not make cuts? Our pension costs are going to go through the roof in the next few years. Even with cuts we are right on the edge.

The City Manager seems to intend to use the Federal Funds to pull things together for the next few years rather than addressing the larger structural issues. The Council keeps not holding her accountable for this. I get that because of delays in when they began to plan for the budget it is hard to make that level in cuts in 2 weeks. But the City Manager has been asked for this before. Those federal dollars were meant to help mitigate covid impacts on communities not bail out poorly run communities. In other communities, they are using that money to help renters or business owners. In our community, it appears that we will cut services to seniors permanently and not help anyone but highly compensated management staff. With the cuts made to the senior programs the seniors no longer have a place to hang out and socialize. Nor do they have a computer lab. Seniors have been severely impacted by COVID. To cut these services now seems cruel. At a minimum, if we had the menu of cuts option the community could have decided to pick which things got cut. Maybe the community would say cut senior services and save other things. But they should have been asked.

What to expect and what to ask for at the next meeting. 

  1. I expect the City Manager to again not bring a menu of cuts. What we hope is that the City Council will push the issue and DEMAND a list of cuts and put a date on it. I understand it may have to be a budget amendment later but the CUTS need to happen in the 21/22 fiscal year. As early as possible.
  2. I would encourage residents to tell the council and staff to follow the FAB recommendations. I would also encourage them to demand the next budget process start somewhere around January or February of 2022 so that we can get a decent thoughtful budget by the July 1st deadline.
  3. I don’t expect the library cuts to come up again but I would not rule it out.
  4. Budgets now and moving forward need to be linked to a 5-year budget forecast that has the budget at the minimum 10 million reserves each year or include a very specific plan as to how we will arrive at that goal. This is in our financial policies. Follow the policies. This 20 year plan to get there is not okay.
  5. Both City Staff and the Council need to be held accountable for not taking this financial crisis seriously. Cutting small ticket items like library hours or one police car is not going to dig us out of this mess. We may need to invest some money into hiring a City Manager or consultant that is experienced in working with cities on the verge of bankruptcy. I hate to spend more money now but I believe the effects of bankruptcy would be pretty devastating and I am not confident we have the leadership to pull us out of this mess.

Preparing for the June 15th City Council Meeting

A lot went on at the last meeting Council Meeting. We expect that there will be extensive public comment at the next meeting because people are upset about the cuts to the library hours.

We would encourage the following talking points also.

1. Council members should reject the budget because it does not meet the criteria the Financial Advisory Board set for the budget to have a one million dollar surplus. This was set as a way of building our reserves back. In addition, this is a budget that states that senior services are cut back to the basics. However, there has been no disclosure of what those cuts are. How can the council vote on a budget without having specificity on cuts? This has not been a transparent process at all. Cuts are made and then buried in a long document. Or surprise cuts happen like with the library cuts. Council members and the community need to know what cuts are on the table and what they impact these cuts will have on the community.

2. We support the proposal Mayor Fadelli made last meeting for a percentage of the Transfer Tax being dedicated for reserves. This is the type of fiscal responsibility we need to get off the State Auditors list of cities on the brink of bankruptcy. We applaud Mayor Fadelli for making the motion. We would like to see this brought back again and brought to a vote. Last time the City Manager wore them down into a simple agreement.

3. Of course there are also issues with the library hours being cut. While it appears that they legally met the Brown Act requirements they violated the spirit of the law. Which is that deals are not made behind the scenes and that there is public notice to the community of issues that are being voted on. While one cannot prove behind-the-scenes maneuvers it looked like some council members came to the meeting ready to follow the City Managers’ lead on this issue and other council members seemed surprised the vote came up. If council members were surprised how would the community know to attend the meeting?

4. Finally there was a 5-year projection included in the last meetings packet. You can see this in the screenshot below. The green line is the proposed budget for 21/22 and you can see an 11% reserve. This is happening because of the Federal bailout money. Each column afterward is a year further so the reserve is 8.8% in 22/23 and 6.3% in 23/24 3.5% in 24/25 and finally 2.8% in 25/26. So without any structural cuts, we only meet our reserve goal next year. While Councilperson Motoyama brought up the 5-year projection last meeting it was not discussed. As I have said before the City continues to kick the can. This 5-year projection is not allowing for the PERS retirement rate changing which could make these numbers way way worse. We need a budget that addresses this. Another reason this budget should not be voted for.