What you need to know about the State Auditor’s report before the Town Hall Meeting

As we all know there will a concurrent Budget Town Hall and Special City Council Meeting on April 10th at 10am.

At this point we are told that the CM and Mayor will give a short presentation and then will take comments and questions from the community.

Here are a list of questions that we think are important.


Thanks to the ECCFRG IO group forum and email list for putting this all together. To join the IO group click here. It is open to all residents of El Cerrito.

Short Fact Sheet (Summary) March 2021

High Risk Issues

High risk issues such as

  • Expenditures exceeded revenue in nearly every year from fiscal years 2009–10 through 2019–20.
  • Exhausted its general fund reserves in fiscal year 2016–17.
  • Relies extensively on short-term loans to provide services to its community and avoid insolvency.
  • Faces rapidly increasing pension costs., etc.

The Auditor’s Report Index

The Long Awaited March 2021 Full State Auditor’s Report on El Cerrito

El Cerrito’s City Manager’s Reaction to the State Auditor’s Report (Dated March 16, 2021)

The State Auditor’s Rebuttal to the City Manager’s Response

An excellent analysis by El Cerrito Committee for Responsible Government

Analysis of the State Auditor’s Report in The East Bay Times March 19 article

February 1, 2020 Townhall data:

City Manager’s Report 01/23/2020 (pp 1- 8)regarding the financial crisis while announcing the Town Hall Meeting).

Town Hall Feb.1, Slideshow (PowerPoint Presentation

Feb 1 Town Hall Budget Meeting Video with improved audio

Do You Trust El Cerrito to Make the Right Choices?

I began to watch the El Cerrito City Council meeting on 3/16/21. I was focused on the presentation on the 5-year forecast. The one where City Staff seem to recommend 2 million dollars in permanent cuts starting in July. But then I saw one Council Member give the same speech they have given pretty much every meeting for a year. Another Council Member had not even read the packet. Some Council Members asked for things like FAB looking at our financial policies or an ordinance but it was not clear to me that any action was going to be taken. And I was shocked that with this forecast that no Council Members asked the City Staff to come back with a list of cuts. If those cuts are going to be applied that starts in July. They have been saying we will have a community meeting in April and what the community needs is to know what is on the table so they can express their opinions.

I was also truly disappointed in how the Finance Director and City Manager framed the CA State Audit report. There was no accountability. The City Manager appeared to blame the past City Manager and councils. And while she is correct that they do bear responsibility she was the Assistant City Manager while many of these decisions were made. Councilperson Rudnick asked her during the meeting if she had written any of the memos that were given to the City Council during that time about the budget. Her answer was yes. The Finance Director was made a lot of statements about what the state auditor got wrong. This raises the question do City staff and the Council think we will believe them or the State Auditor? Because the answer for many of us is the State Auditor. The Finance Director might be right about the Tran expenses being figured out incorrectly. But because he refuses to give information to the Council and the public I have absolutely no trust in any of his answers. He is motivated to keep his job. The State Auditor is an unbiased reporter. I trust her not him.

I don’t want to be stuck in an endless blame game with staff and the Council. What I would like to see is a statement that mistakes were made and ownership from staff and the Council Members that were on the council before January of this year that they bear responsibility for those mistakes. How do we trust we are on the right track when there is no acknowledgment we were ever on the wrong track?

If you read the City’s formal response to the audit and then the auditor’s response back you can see a lack of accountability. The auditor says things like El Cerrito’s response is misleading, El Cerrito overstates the actual amount of financial resources available for the city’s use, and our audit identified that El Cerrito does not adhere to many GFOA best budgeting practices. I believe them and I believe that many in the community also believe them.

Other Important Notes

We have a petition to support a fiscal reserve ordinance. The City Manager has said we have not followed the financial policies we have so why would we expect them to be followed now? An ordinance puts some teeth into the policies and allows for consequences if it is not followed. Other municipalities including San Francisco have such an ordinance. Please sign here.

El Cerrito Progressives is having a community budget meeting on Thursday, March 25th, from 6:30-7:30pm. Join by registering for the Community Budget Forum on Zoom. This is a good way to learn about what is happening and how to advocate for what you believe in at City Meetings.

The State Auditor Report is OUT!

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.

  1. 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.


Full report

Brief Fact Sheet


El Cerrito response to report with the auditors response back

Even with a massive Federal bailout El Cerrito is in dire straits

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.

FAB Meeting March 9, 2021

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

FAB documents discussed are found here .

Other items of note:

  1. 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.
  2. Councilperson Quinto, the Council liaison, did not stay for the meeting.
  3. 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.
  4. 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.
  5. 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.
  6. 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.
  7. 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.

The City Council Caves to the City Manager…again

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.

Here is Mark’s numbers from the last council meeting. Note the fund balance for 6/30/20 is -110,022

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.

City Manager goes scorched earth with cuts

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:

  1. An acknowledgment that cuts should have been made sooner
  2. 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.
  3. 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.
  4. 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 CAFR is out and it ain’t pretty

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.

The Do Nothing Council is Trying to Do Something!

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.

City Council Meeting February 2, 2021 The Mid-Year Budget Amendment

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.

  1. 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.
  2. 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.
  3. 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.
  4. The recreation department deficit has gotten worse even with the late cuts that were made.
  5. 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.
  6. 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.
  7. 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

  1. Are the furloughs beyond January? Because initially many of them were through Jan. They need to be through the calendar year at minimum.
  2. 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?
  3. 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.
  4. 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.
  5. 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?