Has the City Really Made the cuts they have said they have made?

Something doesn’t add up. If you look at the Finance Director’s report for April 6th council meeting it says in item #2 “Total expenditure was $25.2 million or 67% of budget, compared with a three year average of $25.8 million.” That means our total expenditures were down $600k from the three year average. We have been told that millions in cuts have been made. What is the truth?

The state auditor said in her report (page 24/64 highlights are mine)

“Another deficiency in El Cerrito’s fiscal year 2020–21 budget is the amount of inconsistent information provided. The budget makes reference to multiple cost reductions, yet none of them reconcile to the expenditure amounts budgeted. In addition to the reductions of $1.5 million proposed in the consultant’s fiscal response plan, the approved budget includes a narrative describing another set of cost reductions developed by the city totaling $2.7 million in ongoing costs and $1 million in one-time savings. And even though the budget projected total expenditures that are $1.7 million less than the fiscal year 2019–20 actual expenditures reported by the city, that total does not reconcile to specific actions described in either set of budget reductions. Moreover, the city’s budget does not clearly demonstrate that any of the proposed reductions actually resulted in decreases to budgeted expenditures. For example, the proposed reductions from the fiscal response plan specified that the police department’s budget would be reduced by $595,000 because of the restructuring of police operations, yet the budget presented an increase of $34,000 from prior-year actual costs. When we inquired about this apparent contradiction, the city manager stated that the $595,000 reduction was incorporated in the budget and that the police department’s costs would be higher if the reduction had not been included. However, El Cerrito’s budget document does not present information about amounts that the city initially intended to spend and how the stated reductions affected those amounts. Consequently, the budget document in its current format does not provide city council members with the necessary information to evaluate whether city management’s proposed reductions are reasonable and attainable. Moreover, the absence of a detailed description of the $1.7 million in budget reductions raises concerns as to whether the city actually adjusted its budgeted spending to align with the reductions it claims it will make, and if so, by how much. To provide clarity, the city could have prepared a summary identifying the total budget reductions for fiscal year 2020–21 compared to actual expenditures incurred in fiscal year 2019–20.”

Even though the City Staff keep telling us that they have made 2.7 million in cuts this is NOT reflected in the actual numbers. Many of those cuts seemed to be cuts of positions that were open. (See the state auditor example above). While a position may have been cut there was not a cut in actual expenditures since the position was open and no salary was being paid.

We have no idea what level of cuts have been made. As I stated in the beginning the current budget report states we have saved about 600k in expenditures this year. So something doesn’t work here. Either cuts were not made or other expenditure lines were increasing so much that they were negated. I tend to believe it is a combination of both. Higher pension costs and imaginary position cuts. But this is why the city has to make 2 million in additional cuts because they did not make real cuts before.

I would like to hear a Councilperson challenge this at the next meeting and require that staff show what cuts were made at the Town Hall meeting. Not the imaginary cuts the real cuts. Many of us have been asking for this information for months. Maybe a Councilperson can ask and get it.

On a final note they did not put the State Audit on the Agenda. The agenda is set by the City Manager and the Mayor. Maybe my readers can send Mayor Fadelli an email and let him know what you think of that decision. pfadelli@ci.el-cerrito.ca.us

Mayor Paul Fadelli responds to our questions….sort of

As promised here is his response unedited and without comment (except for the title of the post!). I do appreciate he took the time to respond. As of today he is the only person to respond.

“Thank you for the opportunity to respond to your survey on El Cerrito’s fiscal situation.  And thanks also for your continuing interest in our city’s wellbeing.

As the recently released State Audit on our financial condition attests, insufficient efforts to address our economic problems in the past will challenge our ongoing fiscal viability. The options we review and the choices we make in the next few months will be critical to our fiscal standing and the ability to provide important services going forward.

It is because of these decisions — yet to be made — that I believe my participating in your survey at this time would be inappropriate and could compromise my actions as Mayor. The questions listed in the survey would require me to take public positions on policy, city staff and specific actions that could undercut tough and collaborative discussions and negotiations going forward.  I also think making certain positions of mine public — that Council might vote on — could be in violation of the Brown Act, if other councilmembers likewise make their positions known.

El Cerrito is in need of a short term and long-term financial fix.  In the past, I worked on local ballot measures (V and H) to generate revenue for our city with voter approval.  Now we are on the take away side by necessity.

I have said that I think the State Auditor’s report should be a tool for us to correct past actions.  I ran for re-election saying every expenditure has to be on the table, where every city department contributes.  Unfortunately, every service or program cut also means the likelihood of personnel cuts — which troubles me greatly, so we must also require respect in our public debate.

So, with many critical issues and options before the City Council, I look forward to our public forum in April, our Council debate, staff options and comments from residents as we reconfigure our city budget.

I hope you understand that my participation in this survey as Mayor at this time could make difficult decisions going forward even more difficult.

Paul

Paul Fadelli

El Cerrito Mayor”

Questions we have for the City Council

Given the scathing state auditor’s report many of us had questions for council members. We compiled a list of questions and sent them to each council member asking for a response by April 1st. Thus far no responses. We are allowing them to answer with no limitations and they are allowed to add an addition comment. We will publish whatever they send us.

Here are the questions. We hope community members may use these as a a basis of questions at the Town Hall Meeting April 10th.

1. How are we going to absorb the growing expense related to pensions? Do you think further cuts will be needed to accommodate this rising expense?

2. What are the current operational objectives in regards to financial management? How are they measured i.e. what are the Key Performance Indicators in place?

3. Are you willing to tie the City Manager’s ongoing contract to how this report and the budget are addressed? What are the performance metrics used for her performance evaluation?

4. What role do you see FAB playing in this process? What information do you think they need to have in order to support them?

5. Do you still have confidence in the City Manager and Finance Director and concur with their response to the auditor’s report?

6. Do you believe that the city is on top of its fiscal situation? What (if any) changes in course do you believe are indicated as a result of the State Auditor report?

7. What do you suggest be done in regards to staff compensation (overpayment of senior managers, excessive overtime, excessive benefit costs, excessive fire department costs)? Do you think something can be done before a detailed compensation study?

8. Do you think that the auditor was correct in advising the city to analyze potential savings from contracting with other agencies for public safety services?

9. How do you envision the city making a permanent, ongoing $2 million reduction beginning with next year’s budget?

10. Do you think if those cuts are made that it will yield a budget that is sustainable in even the mid-term, much less the long-term, and since the city is already talking about needing another tax increase in several years?

11. What would you like the city to do that will restore residents’ confidence in the competence, accountability, and responsiveness of the city?

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.

Background/Context:

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.

Links

Full report

Brief Fact Sheet

Summary

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.