Ah, glorious redemption. The State Auditors report on El Cerrito is out and it says everything we have been saying for over a year plus some! All links are below and I encourage people to read it. It is scathing in its criticism.
Since I recognize that not all of you are as enthusiastic as I to read a 64-page report here are some highlights in no particular order.
Summary statement
Highlights are overspending, poor budgeting and monitoring, poor information flow to City Council, no formal financial recovery plan, insufficient reductions, missed opportunities to generate revenue, above-average salaries, and high salaries for fire and police staff.
2. Failure to meet reserve goals. This is why we are pushing for the city to develop an ordinance so that they are required to follow their written policies. Please sign our petition in support of this.
3. Our reliance on borrowing is not okay and is costing us quite a lot of money. Remember the library hours we fought over? That was around 125K. See how much we are paying for loans below? That funds those hours.
4. Our pension costs are out of control. Even in a state where that is common. We are also only making minimum payments. Below is the chart of how those minimum payments have grown.
5. Salaries are too high and staff can raise them above the top step without council approval.
6. The way the Finance Department is set up it can manually approve invoices when they go over budget. So there is no motivation for departments to stay on budget.
If you read nothing else I would read the one-pager and the city’s response which includes the auditor’s response back to them. The City had an expected response blaming past councils and city managers, stating they were following accounting rules, everything is Covid related, etc. There was once again no responsibility taken for getting us in this mess. And the public has been pushing for many of the things in this report for over a year. And they haven’t happened. Now we will see if this city is ready to make the structural changes needed. The State Auditors’ response back was pretty harsh. El Cerrito now has 60 days to submit back a corrective plan.
I think the City Council needs to look at real consequences. The Finance Director is not able to do what needs to be done. The City Manager (whose contract was just renewed) continues to make excuses. How about holding these staff accountable?
We are currently developing a list of questions we will send to all council members in regards to this report. If/When they respond we will post the responses here. In their own words and allow for them to make a statement beyond the questions. Maybe now instead of gaslighting those of us that have been yelling about this for a year and a half they can listen to us. Because this report proves we were correct.
I had been hoping my next post would be on the State Auditor Report which is due on March 16, 2021. However, I just reviewed the budget materials (start on page 110 of the packet) for the Tuesday the 16th meeting and it is very very bad.
The good news is that El Cerrito is going to receive 4.8 million dollars in a federal bailout. The prediction is that it will come half this year and half next year. And as of this time, it appears the only restriction on spending is you cannot pay down pensions. I have heard several council members intimate that this bailout was going to save us. And on some level, I suspect it will. But staff did a five-year projection. And it appears that they are recommending two million in structural cuts for next year. Remember when I posted about the City Manager’s suggestions for scorched earth cuts? The ones the Council immediately said no way to. That is the level of cuts we are talking about.
It seems to this writer that there is no way that those cuts don’t include public safety. At this time it appears that City Manager is looking to the Council to provide direction as to what level of cuts are needed. Then she is going to have to come back with suggestions. Again it looks to me like the staff and Council read the state auditor report at their closed meeting a few weeks ago because they now appear to be taking this more seriously than I have ever seen.
Even with the suggested 2 million cuts we get to 9.4% of a reserve by 25/26. The city’s financial policy is to have a 10% reserve PLUS an additional 6 million for emergency funding. So this gets part of the first part but nothing beyond it. It also says in the staff report additional revenue would still be needed beyond 2024. And with these cuts we will still need TRAN loans of around 5 million to stay afloat.
Another thing that happened that is worth noting is that El Cerrito has been (some of us would say deceitfully) keeping a 1.3 million dollar receivable on the books. Long story short it was money the state demanded back when the Redevelopment Agencies were folded. We paid it back but sued the state and they have been keeping it on the books as money we had. So at the end of last year when they say the general fund balance was just -$110,000 it was really -1.4 million. They lost the lawsuit this week and are going to write that money off. The recent audit had not included it in their report it was just city staff including it.
So the good news is that staff seem to finally be accepting reality. The bad news is that massive cuts need to be made. I would also predict some movement towards a tax increase. Because I am not sure other than the new pot dispensary where additional income is going to come from.
The next meeting is March 16th and there is suppose to be a public meeting in April. Stay tuned here for more information. I hope to post something as soon as possible after I read the state auditors report also.
So the FAB meeting happened and there was a lot to be disappointed in.
Both the Chair Dick Patterson and the Finance Director were pretty clear that the purpose of the FAB is to rubber-stamp what comes from staff. FAB Member William Ktsanes has been requesting additional information from the Finance Director and not getting the level of information he wished for. The Finance Director said that the staff did not have the time to prepare them and the Chair Dick Patterson said that many on the board did not have time to dig in deeper. It was very disappointing.
When I asked a question on the documents being presented I was told that questions were not appropriate for this forum. This was an issue that the Chair repeated several times during the meeting. I brought up the point that if questions were not answered by any other means such as email there is not an opportunity to ever get questions answered. The last meeting I attended there was a responsive demeanor towards questions. This meeting it seemed more important to get the meeting done as quickly as possible
Staff is hoping for 4.8 million in stimulus money. Councilperson Quinto said that money will all go into reserve. Which if it is not restricted is great. However, those decisions should be made by the council with feedback from FAB. And it appears that there is no real way for that to happen unless the City Council specifically requests that of FAB. I hope at the next Council meeting there is a motion to do so. There should also be direction to FAB to make recommendations regarding the state audit report which is due out March 16, 2021.
Councilperson Quinto, the Council liaison, did not stay for the meeting.
FAB member Ktsanes again brought up the purpose of FAB and what they are supposed to do as far as these reports. To this viewer, it looked like Chair Patterson got upset at those questions. Mr. Ktsanes is challenging the status quo and it is not going well.
The five-year forecast was given. There is a line on it for permanent reductions of three million for starting in fiscal year 21/22. The Finance Director stated that they needed to make these reductions to meet their reserve goals. William Ktsanes pushed to understand why this was there if there was no corresponding list of potential cuts.
At this point, the City Manager broke in and said that because of negotiations with unions and personnel that they cannot speak about specific cuts. She said it was up to City Council to make that decision. What was confusing to me is that the City Council just said we could not make 1 million in cuts this year (4 months) due to the devastating effects of those cuts. Cuts the City Manager recommended against. But they are now looking at 3 million in structural cuts in one full year. It seems to me these are an equivalent level of cuts. The City Manager states she will make the cuts that the Council suggests. She will also protect whatever the City Council wants i.e. the fire department. She then blamed the Council for decisions made in the past for leading us here. I found that interesting since she and her former boss made recommendations to the council at the time. She also suggested that some open positions could be removed from the budget. She also said there MIGHT be more cuts to management because that is an unrepresented group so it is easier to make cuts. The City Manager appeared to have heard the council say they wanted FAB to be more involved and stated an intention for that to happen.
The issue came up about the use of Web-Ex and the City Manager said that they would be transitioning to Zoom for all meetings soon. At 8:56 the Finance Director made it apparent that it was time to end the meeting. Then the Chair asked the Finance Director what action he wanted FAB to take. The Finance Director said that in the past motions were made to just pass the reports on to Council or make another motion. He then said he thought that the Council would like to hear from FAB as to whether or not they thought this report was adequate. This was put to discussion. New member Ruth Caqzden said that no recommendation should be made because the document was going to change due to the potential for federal stimulus. There was no real discussion on this issue. A few other members said they would agree to no recommendation.
The last item was to determine the agenda for the next month. The Chair and Finance Diretor has earlier suggested training on the Brown Act and the FAB charter. My interpretation of that is they want William Ktsanes shut down. Chair Patterson wanted to add the work plan and asked the Finance Director to set the work-plan. During agenda public comment I once again brought up the state auditors report and William Ktsanes said it should be on the agenda and it got added for next time with the caveat that it could be moved to the following month if time does not allow for it. It must be on the agenda for any discussion to occur. Another member Farhad Farahmand said that he thought the most important item was a discussion of the role of FAB.
The next council meeting is Tuesday the 16th. The 5-year forecast will be on the agenda as yet another study session. Which means lots of talk no action. It will be interesting to hear the council’s thoughts about those 3 million in structural cuts. I hope they direct the City Manager to come back with a menu of options to make those. But that level of cuts will be painful. At the same time if we get federal bailout money we have to make sure that the priority is the reserve and if for some reason the money has to be spent we use it for one-time capital expenditures. We cannot use it to fill this hole and then have the hole open up again next year.
After being a bit optimistic after the last meeting when the council directed staff to come back with 1 million dollars in cuts the meeting on February 16, 2021, was a disappointment. The City Manager came back with a scorched earth level of cuts including cuts that would devastate recreation and fire which we all know are two things this city will protect at any cost. Over 80 letters were received opposing those cuts most around the fire department. The community was needless panicked over a fire station cut that was never going to happen.
So the City Council voted to just go with the City Managers approximately 300k in cuts even though at the last meeting documents were presented showing there is a 1.3 million gap in the financial predictions.
The most disappointing piece is that not one council person pushed back. While Councilperson Rudnick did quote a member of the public that these cuts were cheese nibbling and say her vote for the amendment was reluctant not one councilperson directed the City Manager to come back with some level of cuts that could be implemented in this fiscal year. So the city has wasted an entire year. Their optimistic year end projection is that we will have a 1.4% reserve which is nothing. What if the fires this year are really bad and ECFD has to go fight them again? The State does reimburse this but it is months later. They currently owe around 800k to El Cerrito right now. Can we keep paying city expenses if we have to put out the money for that level of fire overtime? Or what if any other emergency occurs in a time when we are full of emergencies. I would personally be shocked if we ended with any surplus at all.
I understand that the council was not going to vote for the scorched earth proposal. No one wanted that. But there was plenty of middle ground between that and what the City Manager proposed and no one asked for that.
At this point, I am confused as to why we even have a City Council since they just do what the City Manager requests without little to no question or comment. Many of them said that more cuts need to be made and next year things would be different. For those of us who have been following this since 2018 trust me we have heard this before. If we are ever to get out of this mess real structural cuts need to be made. And at this point, they will be painful. Someone will be upset for sure. The City Council needs to show courage.
Other items of note at the meeting.
Councilperson Rudnick made an impassioned plea to move to Zoom. Webex is awful. I had my hand up for public comment and was not called on. Councilperson Abelson had terrible issues with the tech and it was a cringe-worthy section of the meeting. Finally, they helped her get in via a call but that should have been done much sooner. As Councilperson Rudnick made her plea for Zoom (something many in the public have been pushing for) the City Manager cut her off and announced that it would be happening in the next few months. For this viewer, it felt like the City Manager was trying to one-up Councilperson Rudnick.
The police were well organized. Chief Keith was on the agenda giving awards and a police union representative spoke during public comment. He said that they waived their COLA to avoid lay-offs. This year they only waived their COLA for 6 months saving 100k which is not at all equal to the cost of a layoff of one officer.
There was a large push by all departments to say that any cuts would affect minorities more. This felt manipulative. They brought this up as an equity issue but it felt really manipulative. We were told we needed more police because of the recent nationwide uptick in violence towards the Asian population. And while of course, that is an issue nationally it has not been an issue in El Cerrito. Of course, the police would say that is because they are here and preventing it. Reasonable people might disagree with that.
On page 134 of the supplement packet there is a chart of the give-backs from the unions. Please note what the firefighters and police gave back compared to SEIU. SEUI represents our lower-paid staff which includes many staff of color. Since they are the lowest-paid these cuts have substantially affected their paychecks. So although the number is more for city management the impact is much greater for SEIU employees. So the city is providing lip service to equity while cutting our lowest paid staff many of whom are minorities.
The City Manager made a statement saying how grateful she was that the auditor Baldwai and Associates has pushed them to get on the right track. This was extremely disingenuous as she is on the record numerous times saying that the going concern was an overreaction. This writer was part of a meeting with her and the Finance Director in early 2019 after the first time this was mentioned and she said at the time it was an overreaction by the auditor. Imagine what a difference it would have made if Council and staff had reacted back then.
For those that enjoy a deeper dig into the numbers, we have been told that last FY ended with a $110k deficit. But if you watched the presentation by the auditor the number is $1.7 million. The reason for the discrepancy is that the city is suing the state for $1.3 million. This has been going on for years since the dissolution of the Redevelopment Agency. The City has been showing this $1.3 million on their books as a receivable even though it is very likely we will lose that lawsuit. It is deceptive to tell the public our deficit is a minimal $110k when it is closer to 2 million. And if we are to win that case then it could be found money and added to the reserve. It is another bookkeeping maneuver by the city to create an illusion that we are better off than we are.
Below is from the auditor’s report. Note the negative $1,777,532 unassigned fund balance. Notice the lack of reserves from last year and the recommendation of 2-4 months of cash on hand.
At this point, I feel like nothing will happen until the State Auditors report comes out. It will be too late to make much in the way of changes for this fiscal year but perhaps with unbiased outsider information, the council will act. I do hope that those that became aware of the city’s financial crisis due to the scare tactics used in this meeting will stay involved. Feel free to email me at eccfrg@gmail.com if you would like to be more involved in encouraging the city to be fiscally responsible.
I will be honest. This is a very hard post to write. While I expected the City Manager to do exactly what she did with her proposed cuts reading her memo raised my blood pressure through the roof.
This blog, along with many members of the public, have been asking for more cuts since September 2020. We were repeatedly told they were studying things and they needed until the end of the year to figure things out. Then in January 2021 the Mayor and City Manager decided to not update the budget at the one meeting. So six months of potential cuts were lost. Now the City Manager dares to put in her staff report the following
“Further, it is difficult to prepare various scenarios in such a short timeframe, and it does not allow for engagement with the community. Staff is concerned that making drastic changes in this short timeframe does not allow the public to provide meaningful feedback and help the City Council prioritize.”
So after ignoring the public for six months suddenly the City Manager wants to engage the public.
She also says
“Instead of implementing this level of reductions during this fiscal year, City staff strongly recommends that the City Council seek to consider long-term, structural reductions that would take effect in the next fiscal year budget. The City Council will be provided with additional information at the upcoming City Council meetings that will better inform the Council and the public, including a presentation on the City’s CalPERS pension liability and discussion of the five-year budget forecast in March. City staff further recommends that a community meeting be held following these presentations so that the public can provide feedback to the City Council on the budget. While it is true that additional reductions result in achieving our General Fund Balance goals more quickly, the results of a reduction in the amount of $1 million in the final four months of this fiscal year will have severe impacts. Staff recommends a strategic approach that continues the progress that has been attained thus far, maintains the Fiscal Response Plan, and allows the City to achieve our goals in a way that still provides an adequate level of services to our residents and businesses.”
It is indeed true that 1 million in cuts (at least the ones she recommended) would be devastating to services. She put it off for six months and then presented a scorched earth proposal to motivate the city council to agree with her recommendation to only cut around $300k. And the goal of the cuts she said she proposed was to reestablish an end balance of $664K which was what the original budget had. She did not even do that. The ending projected budget balance is $524k. Now over the first seven months, we are running a deficit of $1.04 million which is about $142k a month. We have five months left in the Fiscal Year. If we continue to run a deficit on that level it would be another $714k which would wipe out the balance and end the year with a negative balance of $190K.
What I would like to see happen at the next city council meeting:
An acknowledgment that cuts should have been made sooner
A questioning of the City manager as to why the proposed FY budget surplus is now $100k less than the original budget. The last meeting she said she would be making recommendations of cuts to match the original projected budget surplus.
A new request for cuts to be made this FY and that can be carried into next FY to at least get us to 1 million in proposed surplus. So if police positions were cut they would be cut throughout the next fiscal year also. An additional $500k in cuts now would reflect in a 2 million set of cuts for next year which would put us on a real track to pay off the TRAN and build the reserve.
These cuts look at other things to cut like management salaries also.
Working with the City Manager’s cuts of 1 million dollars and reducing the total by half you could do the following:
$60K in city management 1 FTE
$63,800 in Community Development 1FTE
$30,000 in Finance 1 FTE
$50,400 Public Works 1 FTE
$315 for 6 FTE in police department. Reduce this in half to 3 FTE so $157,500. This would be a cut through next FY also.
$441,500 for FD 9 FTE- leave the staff positions alone and ask the FD Captain to make cuts of $75,000. He has stated in his report that a 5% reduction in pay over 4 months would be $178k so a 2.5% cuts would be an $89K savings. And perhaps that could be even more played out with the very well paid battalion chefs and above taking a 3% cut and the lower paid staff a 2% cut.
Add a 3% Higher Management Salary Cut Value Approximate value of $29,250. This is a back of the napkin figure.
Leave recreation alone as that department has already taken severe cuts and it is generally a revenue generator.
This series of cuts would create $465K in additional cuts and could bring the surplus at the end of the year to $989,950.
It would also create almost two million in cuts through the next fiscal year.
It is worth mentioning that the police union had been negotiated with and made only a very minimal concession. If they had made a larger concession the impact to the department would be lessened.
And of course, you can play with those numbers and priorities. I left fire pretty well alone since that is a holy grail in El Cerrito. Additional recreation cuts would devastate services to the community that needs services the most, plus hopefully in the next six months Recreation Department will be revenue-generating again. I know there are two sides of the police debate so I split the difference keeping half the staff but still making a significant cut. I think looking at the currently very low crime rate numbers and the amount of calls the police actually go on is relevant here. When I get the blotter there is often one call a day.
We all knew that at this point in cuts that the pain would be serious. As Councilperson Motoyama said at the last meeting if everyone is upset we probably did the right thing. No one will be happy about these cuts. But the delay in action has cost us and we need serious action to right this ship. For the council to just accept what the City Manager has presented is in my opinion negligent to the city. Please council members make the tough decisions!
The city’s Comprehensive Annual Financial Report was posted today. I am going to report on what stood out to me in no particular order.
1. On page 10 (all page numbers correspond to the pdf page number) it states that city management began to tackle financial issues in 2020. This made me laugh since 2017 the auditors have told the city there has been an issue with the concept of the city continuing as a going concern. So they are admitting it took three years to address that.
2. The city lost 1 million in revenue during COVID. Considering the huge loss of revenue to the Recreation Department this is pretty good. It is also worth pointing out that if the city had an actual reserve a million dollar loss would have been easily manageable. On page 99 the city themselves states “Although these losses are not significant thus far, the ultimate impact is uncertain at this time and the City management continues to monitor the situation.”
3. The City of El Cerrito’s Organizational Chart shows the residents on the city on top. Just a reminder of that fact.
4. On the chart for El Cerrito Full-Time Equivalent City Government Employees by Function Last Ten Fiscal Years on-page 160, it shows only 3 fewer staff people in the last two years. I do know that some additional layoffs happened in January 2021 but 3 is not a lot of people. Not sure why the totals are xx’d out but I added and it was 154.7 for 2019 and 2020.
4. It appears that even with all the cuts that were made expenses were not reduced. From the report page 12 “At $54.8 million, total expenses across all funds in FY20 were almost identical to that in FY19. This was partly due to cost controls put in place in the latter half of FY20 and partly due to reduced expenditures in the wake of the Countywide shelter in place order in response to the Covid-19 pandemic.”
5. Our overall net position dropped by over 4 million dollars as indicated in Table A-2 found on page 25.
6. Police calls were way down as indicated in the chart El Cerrito Operating Indicators by Function/ Program Information as available – Last Ten Fiscal Years found on page 162.
7. The same chart shows demand for senior services was way up. This past year there were 3173 enrollments as opposed to 2214 the prior year. Points 6-7 above may give us an idea where there is room to cut while reducing the impact on our most vulnerable citizens.
8. And most importantly the auditor again raises the question of whether El Cerrito can remain as a going concern i.e. not go bankrupt. He uses his toughest language yet. He first mentions on page 18
“Emphasis of Matter Regarding Going Concern The accompanying financial statements have been prepared assuming that the City will continue as a going concern. As discussed in Note 21 to the financial statements, the City’s General Fund has a very limited fund balance that indicates that the City may not be able to continue as a going concern. These conditions raise substantial doubt about its ability to continue as a going concern. Management’s plans regarding those matters also are described in Note 21. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.”
He also brings it up in Note 21 found on page 99.
“The accompanying financial statements have been prepared assuming the City will continue as a going concern. The City’s unassigned fund balance in the General Fund was a deficit of $1,777,532. The ability of the City to continue as a going concern and meet required operating obligations is dependent on the City’s ability to develop and implement a plan that will successfully increase cash flows. The financial statements do not include any adjustments that might be necessary to continue as a going concern.”
Some next steps are:
Tomorrow night is the Financial Advisory Board Meeting. The agenda and information on attending is found here. The preliminary 5-year general fund forecast is on the agenda but as of the evening before had not been posted on the website.
Next Tuesday is the next council meeting and both the CAFR and 1 million dollars in proposed cuts will be on the agenda. This is a must-attend meeting!
Also, we have begun to research a city ordinance to dictate how much reserve the city needs to have and how it is accessed. We would like to see new protections put in so that this situation we are in never happens again. Stay tuned.
This meeting was a study session on the budget. The packet can be found here. The Finance Director presented all the worksheets and then stated that the city needed to make cuts between the $664,000 end of the year predicted earlier versus the $303,000 currently predicted.
First Councilperson Rudnick brought up the idea of cutting more than that. She suggested a list of a million dollars of cuts be brought to the next meeting. The Mayor then did a great job of echoing that and also stating that everything, including public safety, needed to be on the table. He stated several times all these cuts cannot be just from Recreation. Councilperson Motoyoma also stated that the current cushion of 300k is not enough and that further cuts needed to be made.
This interaction was very different from past interactions around the budget which I was pleased to see.
Councilperson Quinto brought up the issue of Cal-Pers and staff stated that there would be a presentation on that issue in March. He said that cuts were not aggressive enough and that we needed to improve things for the next Tran application.
When public comment ended the Mayor said that the staff needed to come back with cuts more than the 300k the City Manager wanted to cut. Councilperson Motoyama made a motion directing the City Manager to bring back two options in cuts for the next meeting. The first option would be the 300k in cuts that the City Manager recommended. The second option would be 1 million in cuts, covering every department and she added that she wants the city to address the equity impact in the recommendation for those cuts.
I am vey pleased that the council directed the City Manager to come back with cuts that fit the level of crisis. I love that Councilperson Motoyama agreed with a public comment about equity and requested that equity impact be part of the report. This is the most active and engaged I have seen the council be on this issue. It is also one of the few times I have seen the council not just rubber-stamp a recommendation from the city manager but instead challenge her to do more.
I have to say that this is the most optimistic I have been about this council since this crisis began. It finally feels like they are engaged and also listening to the community. It is a great first step. I hope that they can then have the courage to make the necessary cuts. We all fully recognize that they will be painful.
The next city council meeting is next Tuesday at 7 pm (2/2/21). On the agenda (item 7A) is a mid-year budget review. The packet is found here and the budget information starts on page 12.
It is my understanding that this meeting will be a study session and any actions will be at the following meeting.
Here are the things that came up for me (in no particular order) as I reviewed the budget documents.
There is a huge budget variance on page 16 (1.04 million). This means that the Finance Director’s projections have been way off. It also means that is how much we are behind in the first six months. It is both important that we assess as to why the Finance projections are so off and address this new 1+ million dollar hole. In addition, how do we know that this is not going to get worse.
We have gone from ending the FY with over 600K in “surplus” to now just 303K in surplus. Which means no building of a reserve or hope of a lower TRAN loan next year. And that small of a surplus amount can be lost with any little crisis.
Page 19 is a disgrace. It tells us absolutely nothing. What it appears to say is that there have been no real cuts in the Police and Fire Departments which are the biggest pieces of our budget. Keeping vacant positions open (that have been open for a long time) IS NOT saving real money. If we have open PD positions they need to be removed from the budget. And PD and FD need to take their fair share of the cuts. The recently negotiated contract with PD is awful. They refuse (or weren’t asked) to take the same cuts the rest of the staff has taken.
The recreation department deficit has gotten worse even with the late cuts that were made.
Staff is not advising any new cuts and they have not even pulled together any information about the potential for new cuts. They are putting it on council without giving them options. This current budget amendment is just restating the same things that have been said and done before. It adds nothing now.
Why is Council letting staff continue to do this? It is patently apparent more cuts need to be made. At a minimum, another 300k to get us to the projected budget, and in actuality, a better number would be 1.04 million to match the current deficit in the budget.
What we need is a menu of what 1.04 million in cuts would look like so that community can express feedback on what they would rather see cut. We also need a council ready to make some tough choices. No matter what cuts are made people will be unhappy.
Some examples of 1.04 million in cuts might be
4 Police Officers OR
4 Fire Department Staff OR
Cut most recreation services-we would need specifics on this
Of course, it would make more sense if cuts were broken down into smaller increments. We believe each police officer and fire department staff (line staff) is about 350K in total compensation. So there could be mixing and matching. We don’t necessarily have good data on what cuts in recreation would look like and that department has already made a lot of cuts while FD and PD have remained untouched.
Things I am not clear on
Are the furloughs beyond January? Because initially many of them were through Jan. They need to be through the calendar year at minimum.
Why on page 18, which is the December Cash Projections, are some of the actual numbers for earlier in the year going down. Isn’t actual supposed to be actual?
What amount is the city projecting they will need for a TRAN for the next year? I heard that the Finance Director said at the last FAB meeting that it might be substantially less and if so I am curious as to where the money to pay it down is coming from.
Why do we not have an updated 5-year projection? At a recent FAB meeting, Mark shared one from February 2020 but as we all know none of that is valid anymore.
How is the council going to better utilize the Financial Advisory Board? Are they going to be allowed to be something more than rubber-stamping a budget? Why would we have their expertise if we will not use it?
The agenda is out for the next city council meeting. THERE IS NOTHING ON THE AGENDA ABOUT FINANCES!!!!!! I want to keep the blog family-friendly but WTF!!!!!!
Seriously! They take a month off during a massive financial crisis plus pandemic and they can’t even have a new financial forecast. The last one was 12/15/2020 and we were promised one every month. We were also told numerous times that we would know more after December. Well here we are in January and finances are not even on the agenda. Not an auspicious start for the new Mayor. It is the Mayor and the City Manager who decide on the agenda. To not have financial statements and suggested cuts on there is negligent in this writer’s opinion.
There are a few other things of interest on the agenda and in the packet found here.
Item 7A is a letter signed with the Police Union after negotiations. This is found on page 101 of the packet.
Here are some of the main points
“The agreement will be effective January 1, 2020 through June 20, 2024.
Effective January 2021, there shall not be a salary increase for any classification in PEA.
Effective the first full pay period in July 2021, the base monthly salary ranges will be increased by 3.0% for all represented classifications.
The parties agreed to eliminate the 3.0% salary increase effective the first full pay period in January 2022.
Effective the first full pay period in January 2022, the base monthly salary ranges will be increased by 2.0% for all represented classifications.
Effective the first full pay period in July 2022, the base monthly salary ranges will be increased by 1.5% for all represented classifications.
Effective the first full pay period in January 2023, the base monthly salary ranges will be increased by 1.5% for all represented classifications.
Effective the first full pay period in July 2023, the base monthly salary ranges will be increased by 3.0% for all represented classifications.”
So essentially the police are putting off their COLA for 6 months for a whopping savings of $110,000. The police also get bonuses for education. the financial assessment is as follows
“FINANCIAL CONSIDERATIONS
The cost of a 3% COLA for this bargaining unit for 12 months is approximately $220,000. With the deferral of the COLA to July 2021, this represents savings to the City of $110,000 for FY 2020-21. Based on the timing of the increases in the proposed MOU in FY 2021-22, there will also be a small savings in FY 2021-22 from the previous MOU. The savings to the City through FY 2021-22 with the deferral of the COLA for FY 2020-21 and the 2% COLA in January 2022 are as follows:
Extending the MOU through FY 2023-24 has the following costs in future fiscal years, including the education incentives, that will be included in the upcoming 5-year projections for future fiscal year budgets:
FY 2022-23: $124,933
FY 2023-24: $296,768″
I seriously cannot believe that in this financial crisis the best the city could negotiate is a 6-month deferment of the COLA. I cannot believe the police refuse to do anything more to help our city. I mean actually, I can believe it but……it is pretty bad optics IMO.
Also, there is an interesting item 4-C. this item authorizes $60,000 to study whether the city’s recycling should be privatized. It seems like a huge waste of money. It appears they justify the 60k because they raised consumer rates to cover it. Page states
“Funding for consulting services to conduct this evaluation has been incorporated into the IWM Fee setting effective January 1, 2021, as authorized by the City Council in December 2020 through Resolution 2020-58”
I understand that this is part of the fiscal response plan but it seems to me 60K is a huge waste of money to make this decision. And the public should be given a chance to discuss the POTENTIAL loss of the beloved recycling center.
Again please write in comments and if you are interested in a Zoom meeting to further organize email me at eccfrg@gmail.com and I will set something up. I understand everyone is overwhelmed with what is going on in the US and that is so important. But this negligence by the city council can very likely lead to bankruptcy and EC residents need to do our best to get our council to ACT.
Public Comment can be sent
Via email to cityclerk@ci.el-cerrito.ca.us. Email must contain in the subject line Public Comments – Not on the Agenda or Public Comments – agenda item #.
If you are commenting on the lack of finances on the agenda that would read Public Comment-Not on the Agenda.
It is a new year and we have a new city council. Paul Fadelli is our new Mayor. Council-People Lisa Motoyama and Tessa Rudnick have been sworn in replacing Greg Lyman and Rochelle-Pardue-Okimoto. Janet Abelson and Gabe Quinto remain on the council and will be up for election in 2022.
I have been highly critical of the council and what I have seen as their inaction as the financial crisis has worsened. I do want to allow the new Mayor and council members an opportunity to do things differently. Tessa Rudnick both Zoom met with representatives from this group and answered our questions. Lisa Motoyama never responded to either request. We hope as a councilperson she decides to represent all of the residents, including the ones who differ in opinion from her. Mayor (then Councilperson Fadelli) has always been fairly accessible though many of us have been disappointed that he has not pushed more on the issues. He has had only one meeting as Mayor and part of what he is implementing is more involvement from the Financial Advisory Board (FAB) which is a great development. The people on FAB are finance experts and they should be utilized as a resource, not as a rubber stamp. I attended and wrote about the last FAB meeting and it was a good opportunity to be heard in public comment and to also have some things explained. I will be adding the FAB meetings to the take action page and hope others attend. As of now, there is an opening on FAB so I encourage people to apply for that position.
What I would like most to see with the new council is a shift in the dynamic between staff/council and the community. While some attempts were made to improve this (Town Meeting Feb 2020) for the most part those of us who have been actively following and advocating on the financial issues have been ignored or told we don’t know anything. It has been exceedingly difficult to get accurate data from the city. Often we are told to dig through hundreds of pages of documents. That is not transparency. Some simple things that could happen to shift this.
Give us the dedicated budget page we were promised at the Town Hall meeting. Albany is a great example. They have the information easily accessible on their website AND they do quarterly breakdowns and detailed reports. Now right now the council has been getting a monthly report (even better) but those need to be posted on the website on their own and not as part of a 200-page packet. Some of this is now being posted on the FAB page but it should all be on one designated budget page. This is just a matter of uploading the monthly reports and is a simple task.
The City Manager’s reports need to have information on economic development and the budget crisis. She writes a very thorough report accented all that is good in EC which is great but the public needs to know the crisis also. Many in El Cerrito still are not aware that we are on the brink of bankruptcy. We have no real local newspaper so the information gets out there only through places like this or Next Door or Facebook. We need the city to be accountable to be reporting on the crisis. We need all the residents to understand what the stakes are here. And once shelter in place is lifted there needs to be another Town Hall meeting where it is not just a show run by the Mayor but the interactive Town Hall we asked for the first time.
I would encourage the Mayor to also create a monthly report or have a written report from the council. Or start having some online Town Hall meetings. I have, in the past, found council members open to a coffee meeting but since that is not plausible we need other ways for the community to interact with the council.
There needs to be a public process when the state auditor report comes out. This is now shown with a March 2021 estimated completion date. Based on the report I read from Compton (who were ranked slightly better than us) I expect a scathing report. In the past, when the state auditor brought up concerns there appeared to be a lot of minimizing or saying things were not as bad as the state said. I know we cannot go back in time and undo mistakes but I would love to see the city say mistakes were made and have a written plan to make sure such mistakes never happen again. There again should be a Town Hall (online if needed) to discuss the report.
There needs to be a 5 year budget available on the same page as mentioned above. This needs to be updated (the longer-term years) at least twice a year.
There needs to be a written plan as to how the city can pay off our 8.5 million dollar loan. We are not building any reserve until that is paid off. How long will it take? If we end the year at the number projected (which I doubt) we would have a 600k surplus. So if we are paying off the TRAN at that rate it would take 16 years to get rid of it.
There needs to be greater transparency on city salaries. Transparent CA is a great resource for looking at salaries and comparing them to other cities. However, what we have seen is that city staff are always saying they are underpaid or paid at the median. However, there has never been information shared on what cities they compare to. What we suspect is that they throw the entire county in there so it includes much larger cities like Richmond and much richer ones like Walnut Creek. I believe in reasonable compensation for staff but it needs to be centered on the reality of our financial crisis and the size and resources of our city.
On the budget page we also should be able to see our city’s current bond rating. This is something that has dropped in the last few years and we are now at a huge disadvantage as far as being able to borrow money as a city. Either it will cost more or it will not happen as we are considered high-risk.
I found this report online. This talks about what transparency in a city looks like. Our neighbor San Francisco is doing an excellent job. Here are three guidelines for Transparency 2.0. You can see how our city is under the first category for most things and not the second. I understand many of these changes could take a while to make since it appears the city’s website is antiquated and would need work. However, if the city started with the basics as discussed above it would go a long way.
As many of us have seen with the Federal Government a lack of transparency leads to residents not trusting the government. I know many of my fellow advocates don’t trust our local government at all due to these issues. I hope the new Mayor and council will take steps to right the ship and change the embedded culture of we know all and the residents do not understand things.
This are the questions I had coming into this meeting,
The comments are based on both on the November cash flow and the reports available for Aug/Sept/Oct
Comments
I am deeply concerned about the revenue for other services and the ever-deepening gap. We will be under restrictions at a minimum through the first quarter of next year. Why was this not caught sooner? It appears to me that it has worsened another 200k in the last month while the action was not taken.
Questions
What made November’s sales tax so high?
Why was there a large number on the Financing costs line this month that had not been there before? Shouldn’t finance costs be predictable?
Why is payroll being predicted at 2242 when the actuals have been 2593, 2462, 2389 all of which are higher?
Do the payroll predictions for Jan include the police cola that as of now is issued beginning of January?
Will there be payouts of any type for the two retired police and one retired fire person? I know often they get paid out accrued vacation etc.
Does FAB think the ending balance is ok given the Tran payment that will have to come out of it?
What is the line for transfers out and why is there now a number in it?
Can FAB ask the Finance Director for written assumptions for predictions?
Are the sales tax predictions accurate since we have not met them except for this month (and we did exceed them this month)?
The starting number in August project was 8471 and then it went to 9278. Can it be explained as to why that happened?
There are two new members William Ktsanes and Debra Saunders. Debra attended as a member of the public since her employer had not yet approved her membership.
Mayor Pro-Tem Fadelli attended the meeting which was appreciated. He stated that he wants more feedback from FAB to the council. Dick Patterson, the chair, stated they would be happy to take more direction from the council.
Utility Taxes are a guesstimate per Mark. He has looked at the past three years in making this guesstimate.
The transfer tax predictions seem to have been done conservatively, which is good. This is also one month behind. This line item has been doing very well.
Regarding recreation, most of the money earned is made in the few months before summer and then that flattens. The Recreation Director will be making a presentation to Council next week in regards to this. Typically they bring in 5-6 million a year in revenue. The line item for Fees for Services are not just for Recreation but also for Community Development.
Sales Taxes– The state has allowed some businesses to delay paying the taxes so the payments have been delayed. The large number in November indicated some of these late taxes catching up. These sales taxes are often two months behind this year. The Finance Director subtracted 10% from the projections. The County pool (which collects sales on online items) has increased by 30% which has mitigated some of the damage in regards to sales tax. This is a change due to a Supreme Court decision (Wayfair) which allows us to collect online sales taxes for out of state purchases. This is a change for this fiscal year.
Personnel line-This includes payroll, benefits, workers comp insurance payments, payments when someone left. One of the issues with the personnel is that the State Fire Department owes the city over 800K in reimbursement. This should be made in Spring and it has inflated the payroll numbers as the city has to pay the firefighters and then later get reimbursed. The Finance Director stated that any COLA’s are in the budget.
Regarding the starting number for July Mark said it is not finalized yet and will not be until the CAFR is done. He thinks it might even improve due to late monies coming in this year that will be credited to last year.
Debra Saunders asked questions about the pension liability. Mark referred her to a 5 year plan. I created a pdf of that section of the February 2, 2020 meeting.
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.
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.
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.
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.
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.
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.
The State Auditor is currently auditing the city. The audit results are due in February.
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.
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.
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.
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.
So the City Council, which has been unable to move quickly on an financial issue, is moving rapidly to extend the City Managers contract until December of 2023. Her current contract expires December 2021.
The negotiators Councilperson Quinto and Mayor Lyman have not asked the City Manager to make any real concessions as the city falls into bankruptcy. Her contract is revised to keep her increased contribution of 3% to Cal-Pers which was implemented this year. It continues to not offer the car allowance, which is something that Councilperson Fadelli has stated numerous times he would fight ever returning. It does not give her a COLA UNLESS other non-represented management staff receive a COLA. It does roll back the 3% COLA she got in 2019 when the city was already in financial dire straits.
So the only real concession here is that she has a salary reduction of 3% (the rollback of the 2019 COLA). The council meeting packet (page 114) states that she would be in the bottom quartile of Contra Costa City Manager salaries. Which sounds good until you realize that they use every city to compare rather than equivalentLy sized ones. Her base salary will be 230K a year after the reduction.
If we look at cities close by that are similarly size (20-30K populations) and using 2018 figures you will see the following
San Pablo-Population 30,990-City Manager Salary $244,391
If you take the average salary of those cities you get $216,939.
I question the rapidity of this contract. The City Manager was asked at the last meeting to bring back recommendations for cuts to the Recreation Department with council members stressing the need to act quickly. Are there any recommendations in this packet? No there are not. In fact, there is no financial update on the agenda at all this meeting.
We also have two new council members being sworn in during January. Should they not get an opportunity to vote on this contract since they are going to have to be part of the fiscal management of this city? This contract that was negotiated in part by Mayor Lyman who is not going to be on the council after January.
I would love to see this contract negotiated with the reality of a nearly bankrupt city which means some real concessions. If other employees are going to be hurt by upcoming financial cuts the City Manager should also take a salary hit. She has been in the City Management for many years and has been part of the culture that has created this mess. The Recreation Department cuts that are likely to happen may very well impact the most vulnerable of our city’s residents including our seniors. If we are going to cut senior services should not the City Managers salary also be cut? How many senior meals would be paid for if her salary was cut to the average City Manager salary of $216,000? Instead they are keeping those items separate and renewing her contract quickly while delaying Recreation cuts. There are also no consequences in the contract if the city goes bankrupt. Should that not be reason for dismissal?
I think residents deserve to see the results of the city’s independent audit and the results of the State Audit before we renew the contact of our city manager. The CAFR is due out in January and the state auditor’s report is tentatively coming April/May.
If you would like to make a public comment on this for the December 1, 2020 meeting it is agenda item 7B. Send public comment to cityclerk@ci.el-cerrito.ca.us. If there is no public feedback on this item it will be passed probably 5-0 without questions even asked. Continue to challenge our council to do better. This contract needs more negotiation and needs to be not finalize until at minimum the new council gets sworn in, the cuts to the Recreation Department are decided finalize, and the new independent audit is released. Why not wait until at least February for all of those things?
Do Something Vs Nothing Two Way Road Signs Take Action 3d Illustration
Today the State Auditor released their annual list of cities at high risk of financial difficulties. This list is based on FY 18/19 figures which was a better year for many municipalities. However, El Cerrito dropped from #7 to #6 largely based on lack of reserves (El Cerrito not only has no reserve but owes an 8.5 million dollar loan due at the end of the fiscal year.
At the meeting on November 17, 2020, the City Council again DID NOTHING!!! Okay, Councilperson Fadelli did say that he hoped the restructuring of the police saved money. City Council did direct the City Manager to come back with more information on what Rec programs are no longer supporting themselves and what cuts are suggested. However, they did not pin the timing of that recommendation down. Both Councilpersons Fadelli and Pardue-Okimoto did say that they believed it should be ASAP and the Mayor stated the cuts should be done before the third quarter as the city manager had suggested in the recommendations with the fiscal report.
Councilperson Rochelle Pardue-Okimoto brought up the issue of the projections for sales tax and why the estimate was what it was. (see this blog post for issues with projections) She asked to compare the current sales tax with the beginning of the shut down in March. The Finance Director gave another hard to understand answer (2:49 in the video). He did say that El Cerrito gets some sales tax revenue as part of a county pool for taxes paid for online purchases which has mitigated some of the other sales tax revenue decreases. The Finance Director insists his figures are good. He also said that Honda of El Cerrito sales tax is down 49%. That is a huge financial loss of revenue for the city.
Councilperson Pardue-Okimoto also asked about Franchise Taxes. The Finance Director said it is the lowest in 4 years but he still wants to watch it until the end of the year. Because why act now! (okay I added that last part). She also questioned the business tax numbers and reflected on how that might affect sales taxes.
Councilperson Fadelli did ask about when actions would be taken. The City Manager then said any reductions would be staff reductions and thusly service reductions. She said that they have been in negotiations with unions which is necessary for staff layoffs or salary cuts. She also said she wanted to wait until the end of December. Both to have more information on city finances and because she did not want to do layoffs before the holidays. Councilperson Fadelli also asked about staff revenue projections (Thank you!) and brought up the issues raised in our last blog post. The City Manager was very dismissive of those numbers and stated no one knows how people are doing projections. I would like to very clearly state that those numbers were BASED ON ACTUAL NUMBERS for the first 4 months of the year rather than the Finance Director’s fantasies. I hope that next meeting the council members push further and specifically ask “Why are the payroll numbers being projected for the rest of the fiscal year at 200k a month less than what the actual costs have been for the first 4 months of the year.” If you send a comment to the council or a council member please ask that question. If you get an answer forward it to me at eccrfg@mgail.com.
The Finance Director dug in on his projections and the council seems unwilling or unable to really challenge him. Councilperson Pardue-Okimoto did say that his idea that things would be better in 3-6 months may not be realistic due to many reasons. (Remember she is a nurse). The vaccine could take a long time for distribution, many people will not get the vaccine, and many people have made lifestyle changes such as a parent leaving work to take care of children that means they will need recreation services less.
Everyone needs to be warned because of the slowness of staff and council to respond (was I the only one who predicted a Rec financial issue at the beginning of COVID?) the next round of cuts is going to hurt. Popular recreation programs will be cut. Beloved staff will be laid off. This is going to be painful. People are going to suffer from either losing their job or losing a needed services. And also know that if we had run a more economically efficient city and had an actual reserve this would not have been as bad as it is going to be. If staff and council had taken it seriously when the auditor first brought up that the city might not be able to continue as a going concern this would not have been so bad. No one could have predicted a pandemic but we could have had reserves.
The City Council and staff and the community are also going to have to recognize that Public Safety (Fire and Police) are over half the budget and that if we are going to dig out of this some cuts need to happen there. The county grand jury reported on police staffing in the county this year and found that El Cerrito had the second-highest ratio of police officers per 1,000 residents at 1.8 with (San Pablo was #1). The state average is 1.48 and the county average is 1.09.
Our Fire Department had 4 Battalion Chiefs to Albany’s 0 and is known to be top-heavy. (At this meeting one Battalion Chief retired-can we replace that position with an firefighter rather than a manager?) Almost no one wants to cut fire services in our city but surely there is a way to level down management and run more efficiently.
Links to articles are below as are the email addresses of our current council members.
After my last post lamenting the lack of information from the city I tried one more time to get information from the Mayor and he too said just look at the budget book. It’s all there.
But it’s not. There is not a clear spelling out of the cuts made as shown here. Check out the budget book for yourselves. It is 250 pages I had to review again to try and flesh out the details of the below cuts. And why the City Clerk and Mayor both think that referring people to a 250-page document is transparent and accessible government is beyond me. But I can only fight city hall so much.
So what else should you know about the budget? (in no particular order)
There were no substantive cuts in the police budget. It says above there is a 595K savings. But if you look at the budget book it says the jobs cut are the two school resource officers cut by the Board of ED (and they paid for one of them) and a vacant admin position. And any further savings is by keeping unfilled positions unfilled. (page 99).
Here is the current expenditures (page 10) Notice the police at 24.3% of the budget
Here is the prior year break down of expenditures with the police at 24.7% of the total budget. Not much difference.
2. The Finance Department considers getting a pay-day loan to keep the city afloat as one of their top achievements. (page 86)
3. The residents of El Cerrito were greatly deceived about the revenue for Measure D. At the time this was coming up I was telling anyone who would listen (and it was not many and before this blog) that Measure D was promising a lot of wonderful things but the measure did not include the same language as the tax it extended and allows a great deal of money to go to maintenance. And below we see half a million dollars going from construction to maintenance. So we can look at it as half full-at least the parks will be maintained or half empty as we were promised so many things and will get none of them from this tax. (page 56). I need to investigate more but it seems like everything from Measure H is going to maintenance now.
4. The revenue projections for the year seem really broken. Here is what was adopted. (page 27)
Here is the July-September Revenue report given at an October meeting. (page 45). So we would expect to be at about 25% of revenue expectations thru the first quarter of the year. Except for property taxes because of the timing of the receipt of those. You will notice in this chart below that the 20/21 budget has a projected INCREASE in sales taxes from 19/20. Did someone not tell the Finance Director we are in a recession and still mostly sheltering in place?
This one is revenue projections for the year. They have not made realistic projections at all. Especially in regards to sales tax which is one of our top revenue sources after property taxes. And you can see all the red at the bottom as far as what our cash flow looks like during the year even with these unrealistic expectations.
I am sure there is much more wrong in there but these are the things that came to me immediately when reviewing the budget book. Feel free to email me at eccfrg@gmail.com if you have other things you think I should take a look at.
I follow the budget pretty closely. I read the materials put online and try to translate them for the average resident who is interested but not able to dig through all the documents. I have been trying for months to get a detailed answer as to the budget cuts that have been made thus far. Not the chart below which has been repeatedly put into the packets but an exact description of what positions were cut and when and what that savings was. I know in the last packet there were many letters trying to save the job of a swim center staff person. I want to know what his job was and when it was cut and how much it saved the city. Same with the Assistant to the City Manager because I believe that job is not cut until January 1, 2021.
What restructuring was done at the Fire Department? Same with the police because we are not seeing any real drop in the police budget. It appears it might be unfilled positions cut. If the position was never filled is it really a budget cut? The funding for the landscape services-what was cut and what was moved to Measure H. This should be readily available information. I have requested it numerous times both through some council members and more recently through the city clerk. The city clerk referred me to the budget book with no citations of pages and I was unable to find anything with any more specificity than the below chart.
Mayor Lyman recently responded to a resident question by saying there were still cuts proposed in June on the table. Cuts on the table that haven’t been made?? I requested more information on that and was directed to this presentation by Management Partners. This presentation had many cuts in it but as far as I could tell they were never discussed in depth. One of the cuts was the elimination of Fire Station 72 and I know if that was ever discussed there would have been a big public outcry.
I went back and reviewed these strategies. Some of them have happened like the elimination of passport services and the library hours were decided not to be cut. Most of them are unclear as to whether they have happened or not. What was very interesting is this nice slide on the assumptions used for their forecast. This is something we have been begging the council to ask for from the Finance Director for his projections. These forecast assumptions seem reasonable given circumstances (and they were made several months ago). There was also an additional slide talking about the need to take action NOW!
What was the point of hiring these consultants and getting their recommendations and projections and then ignoring them?
I also requested records to see what cuts were being put into the future budget projections. I was told that there were no records in regards to that. So we continue to not know things like if the furloughs were carried over into future budget years?
The city’s refusal to be transparent has been an issue since long before this crisis. The only way they will be transparent is if we the residents push them to do so. These questions are not brain surgery. The information is readily available from the City Manager. So why are they refusing to give that information out?
Again, please write your council members and tell them to get this information out there. Please remember that the longer it takes for an action to happen the more severe the actions are taken will be.
But they refuse to take action! Councilperson Pardue-Okimoto was once again the lone voice saying make cuts now. As you can see from the below statement included in the packet we are at 11% of revenues with 25% of the year completed. Now there is an issue with the city getting our Transfer Tax money from the county due to logistical issues so that will make up some of this deficit. However, what we are seeing month after month is overly optimistic revenue projections that have no basis in reality. During the meeting, the Finance Director said we had 9 months to make up 4 million in revenue from the Recreation Department. Does anyone think we will be able to make up some of the lost revenue losses in this fiscal year? He also stated he would amend if he heard from the Recreation Department that their revenue was down. Is that not a number that should be being passed on to the Finance Director monthly? The Recreation Department was formerly referred to by Councilperson Fadelli as El Cerrito’s cash cow. And this cow is no longer producing. We need massive adjustments to be made.
Apparently an over $844,000 revenue shortfall in one quarter is not enough to inspire the council to act. Mayor Lyman was alarmed. Councilperson Quinto was alarmed but both said lets keep on watching for another month or two. Because not acting on bad budget news is exactly how we got to this crisis in the first place.
I am at a loss here. Except for a few dogged individuals the public comment is quiet unless they try to cut something people love like the library or a swim center staff person. While the council has at least improved to the point that they are looking at monthly statements their refusal to act is a stunning betrayal of public trust.
I get the public numbing out. We want to live our lives and not be constantly worried about government on all of its levels. However, if the city goes bankrupt it will be a disaster. Every service that people love will be decimated. Services that are needed like Fire will also be cut. Look at what happened to Vallejo. They paid over 20 million in legal and other fees on their bankruptcy. They are struggling to this day, 8 years after emerging from bankruptcy, because of their pension debt which was not resolved in the bankruptcy. At the time they cut the library and senior services and 40% of the police budget. This is what El Cerrito faces without better fiscal management. The consultants hired by the city already have proposed closing Station 72 of the Fire Department something that is widely not supported. But at the end of the day we need both more revenue and expenditure cuts. We need a City Manager and Council willing to make substantive changes. All the changes thus far have not even touched the pension debt issue which is rarely even discussed.
If the City declares bankrupcty (which will happen if we cannot pay back our 8.6 million dollar loan in June 2021 we can anticipate all services to be cut or eliminated. We can perhaps even predict falling housing values like what happened in Vallejo.
What I can say is if you are concerned please write to your council memebers and also submit public comments at the meetings. Council members need to hear from residents. Every voice does matter. If it had not been for a bunch of people sending emails and pushing I doubt we would have seen much action at all. And if you have not voted for council yet please vote for the people you think will best be able to address this budget crisis.
The Election News page has been updated with the 2nd campaign filings for the candidates. The candidates will be meeting with Daniel Borenstein of the East Bay Times and I will post that when it comes out. It is a shame since many of us have voted already.
Most significant findings form the campaign finance reports.
Matt Burnham is heavily support by the police union for $3,000. He also has a large donation from a person called Paul Ought a software developer. No information was found on this person with a superficial google search.
Tessa Rudnick, Paul Fadelli, and Lisa Motoyama each have some substantial union donations many of them overlapping especially with Fadelli and Motoyama.
Tessa Rudnick got heavy support from two different firefighter unions the Berkeley Union and the Local 1230 Union.
Isis continues to self fund. William Ktanses and Art Yee do not have campaign committees so thus they do not have to file reports.
Jennifer Greel has a small amount of donations that are all small.
A quote from the section on Revenues. Bold is mine.
“The expectations for Charges for Services is based on historical first quarter collections during 2017-2019 that have ranged from $1.3to $1.5million. The expectation for the current period was tied to the lower end of that scale due to the Covid-19 pandemic. Even with this lowered expectation it appears that revenues are $624,000 under budget at this point in time.”
Remember two posts ago when I said that the end of the year projection was a surplus of just $663,032. So no action here and we end with zero surplus. And surplus is a misleading word since we have an 8.5 million loan that any “surplus” would be used to pay off. The initial reports from the un-audited budget from 19/20 are that we ended that year with a 2.3 million deficit.
The summary quote states-bold is mine
“The Amended Budget anticipates a General Fund surplus of $662,000. The expenditure side of the budget is relatively certain, but there is uncertainty surrounding revenues, especially Charges for Services which is predominantly Recreation Department Revenues. The projected $2.3 million General Fund deficit from the last fiscal year will be partially mitigated by the projected surplus. It must be noted that one time revenues, government grants, or unforeseen increases in revenues will help reduce the deficit further. Staff will continue to monitor the deficit and report to City Council through the monthly reports.”
So even with a reports saying projections are off the city staff are insisting that all is well. We may still see some “unforeseen increase in revenue.”
How about we recognize we are
Almost bankrupt
In a recession
Making projections based on years that are not 2020 with all of its complications.
If you look at the budget figures provided in the packet it seems that the projections for revenue are higher than 19/20. I would like to know why that is? How is the Finance Director making these projections and can we trust them given the history of El Cerrito financial projections?
So actions-please again write the council and send it an email for comment to the City Clerk for public comment at the meeting cityclerk@ci.el-cerrito.ca.us-the budget is item 7A on the agenda
When will the council take action and make cuts commensurate with the seriousness of the situation?
Please require the Finance Director to report on how he is making revenue assumptions with all the assumptions he is using listed.
When does the council intend to deal with rising Cal-Pers costs and how?
Please require that the Finance Director follow up on the questions the Mayor asked last time about financing charges being down so substantially.
Please have council members state on the record why they are refusing to ask for more cuts (exception is Councilperson Pardue-Okimoto who has been asking)
Please state clearly any revenue that is expected but has not been reported on. It seems that we keep hearing about one-time revenue sources but have not seen any specifics.
The El Cerrito City Council continues to refuse to take real action on the budget.
I will start this post by stating that Councilperson Rochelle Pardue-Okimoto was a superstar during the meeting and she would have taken action. I will also be honest and say that I did not watch the entire meeting. I did watch every section where I share quotes here. I tried to make quotes as close to verbatim as possible but that was not always possible and some statements were not included. I do not believe that changes the context but encourage you to go to the the video link and verify for yourselves. I have indicated the time of the quotes so that people can watch for themselves.
I am going to outline several big issues.
Minimization of the bond rating drop.
At 3:22 Karen minimized the bond drop because S&P stated the outlook was stable from negative. She stated that the TRAN rating is different and acted as if this rating would not affect our interest costs for the next TRAN. This is our credit rating. Karen said that S&P had been monitoring council meetings and she stated because the council made cuts we got a stable outlook. Then Karen said if the city borrowed more money it would cost the city more money. So, it is confusing that she says the TRAN rating is different because this does mean we will pay more interest. It was stated that it will impact any financing for any capital improvements.
2. Why is the city ignoring the massively rising costs of Cal-Pers?
You will see in the above chart Cal-Pers costs are broken out into normal cost which is the current costs and the unfunded liability, which is what is unfunded from years the city did not pay into the system (that is a long story and something many cities chose to do)
In the meeting at 2:33, Karen says that the projected amount of the unfunded liabilities is 4.8 million.
At 2:45 in the video Councilperson, Pardue-Okimoto brought up that the city’s liability increased from $61.8 million to $88.2 million per year. That represents approximately $2 million per year in additional costs. She reminded people that it is something that we should be preparing for now.
Karen responded with a statement about advocating with the state and monitoring costs but nothing about how this giant increase in costs would be paid for. Remember it has taken us almost a year to get to the current 4 million in cuts done during this process.
3. Mark Rasiah’s incompetence.
At 3:28 Mayor Lyman started questioning the Finance Director about financing costs. The Mayor was pointing out that the documents showed a savings of almost a million dollars in that line item and asked the Finance Director several times in several different ways if it was a real savings. Mark insisted that there was a real savings but that some of it was a cut in professional services costs. It is a very painful piece to listen to. The Mayor pointed out that if there was a 1 million dollar savings it should have been heralded and it should have also shown up in the bottom line neither of whichhappened.
4. Councilperson Rochelle Pardue-Okimoto was a superstar
3:48 Councilperson Rochelle Pardue-Okimoto starts talking-this is not her complete statement but most highlights.
I do not think we are building our reserves as quickly as possible. It is up to the city council to make the hard decisions.
She brought up police department positions-bringing up the two positions were eliminated by the school board but not the council and the other position was already vacant
We stated we should show our values by our funding. She wants to protect the library and suggested putting it under the police department budget. She asked what will be the trigger for change? What if retirements do not happen?
Another thing I brought up but did not get much support for is looking at our salaries…. Clearly shooting for the median is not working for us. I couldn’t help but think who hires and pays our consultants? Of course, the consultants are not going to say to the people who hire us and pay us, we think you should cut your own salaries. I personally do not like how we are comparing our salaries to big cities. I think we should compare our salaries to small cities. If we do not cut salaries, then we need to extend the furloughs in order to stay afloat. We need to do something now, and I do not think this budget does that.
We need to budget for disaster. We need to prepare for that now. We need to prepare today for the disaster that can happen tomorrow.
The weight of the Financial Advisory Board does not carry the weight with me anymore because they approved the previous budget that helped us land in this position. I was listening in at FAB and someone asked the city manager why the city is waiting until January to do these layoffs and the city manager replied because the city council thought that would be best. I remember thinking I don’t remember being asked about that. It is all semantics. They present us with something and we vote YES and then it comes back that it was our decision. Where does it really come from?
3:55 If I had to make these cuts, I would have made them a lot sooner. At the end of the day, the residents are looking to the city council to make these cuts. I depended on the advice of the FAB in the past at the end of the day it is us that the residents expect to make these decisions. I don’t want to look back on this and have more regrets. I will be voting NO on this budget.
#5 More of the same from other council members
Councilperson Quinto keeps saying he was deceived and that big austerity cuts need to happen but says he will vote yes on the budget. Councilperson Paul Fadelli says let’s pass this to show we are doing something (4:03). Let’s pass the buck to the state auditor.
Councilperson Quinto at 3:57
I am going to support this budget. It changes every day and will continue to do so. We need to look at it monthly and we will have to make more cuts and it is all about austerity. The independent auditor was telling the truth. We need checks and balances. We have not been getting this for the last 15 years, we have had the same progressive council that agrees on everything. We cannot do that anymore. We have a city manager now that tells it like it is and doesn’t give a rosy picture. We’ve done three taxes since I’ve been an elected official in six years. We are still spending, spending, spending, and we need more cuts. I look forward to the new council that will help me make these cuts. This is going to be a painful next three years. We just did the wrong thing, and it is nobody’s fault. What I learned is to not listen to your colleagues. They have their own agendas and are lying.
Councilperson Quinto attacks his colleagues for lying to him and stated that the newspapers were right years ago when they said the city was not prepared but he chose not to believe them.
It is very confusing to this writer that he talks about the need to not have unanimous votes and how he wants a NEW council to help him make cuts since this council won’t do it. But he is going to vote for the terrible budget anyway instead of showing the courage of Councilperson Pardue-Okimoto
Councilperson Abelson moved at 4:16 to pass the budget and Councilperson Quinto seconded it and it was passed 4-1 with Councilperson Pardue-Okimoto being the one no vote.
El Cerrito Committee for Responsible Government (ECCRG) 