City Council Meeting June 4, 2019-City Manager and Finance Director say it is all okay.

In November 2018, the independent auditor expressed the going concern statement for the second year in a row. It appears in the CAFR. In the June 4, 2019, meeting the city finance director expressed the view things were improving and the going concern statement would likely go away. This was backed up by Karen. When asked if he felt better, the finance director said something like  “considerably so”.

Below are more verbatim quotes take from the video. The video of that meeting is found here. The budget information starts at 2:59 in the video. The packet is found here. Pages 47-110 are very detailed budget documents. At the very end of the packet (no page numbers are available is Karen Pinkos’s presentation on the budget.

Karen started out with the presentation at around 2:59.

Karen: “We are being cautious and conservative”

3:10 Karen reiterated the effort of Mark and her to be conservative and not spend money that has not been received. “We are trying to be as prudent as possible”.

We are seeking to increase the fund balance reserve.

3:15 Karen: “I would like to thank all of our staff, especially the department directors for being fiscally responsible… I would like to give special thanks to Mark Rasiah.” He has been great in making sure that we have been keeping to our fiscal discipline…. We are wanting to make sure we are as fiscally prudent as possible.

3:22 Paul: “I am wanting to make sure you are liking the two year budget effort”
Karen: “Absolutely”

3:28 Mark Rasiah: “We have proved him wrong (independent auditor). So I think the going concern concept will be removed at the end of fiscal 19.

3:29 “So you feel better?” Mark: “Substantially so.”

3:30 Greg: “It’s nice to see you smiling because that means we should worry less.”

At the next meeting, the council raised the wages of management. Not until January 2020 did staff disclose to council and the public that there was a $2.9 million cost overrun and that the going concern statement appeared for a third year in a row.

The question then becomes whose responsibility is this. The council was being told that everything was okay in June 2019 and just four months later El Cerrito was named the #7 city at risk of bankruptcy in the state of California.

For reference here is a copy of the City Managers contract

She receives a base salary of $19,166.67 a month. She is eligible for whatever COLA un-represented employees make July of every year. If there was satisfactory performance the first pay period of January 2020 she was eligible for up to a 4% increase. The same for January 2021. The contract ends December 31, 2021. She receives the same employee benefits and makes the same contributions (amount not currently known) that all un-represented employees make. She gets vacation and sick time on the same basis. She also gets 75 hours a year of administrative leave. She receives $350 a month as a car allowance. The city pays for her travel and expenses doing professionally related things such as conferences. If she joins local clubs etc the city will pay the membership.

I was unable at the time of this writing to see the contract of the Finance Director. I will be making a public records request for that information. What I did find was this chart of employee salaries. The chart below shows a range of salaries for the Finance Director.

Update on Finance Diirector’s Salary 2/10/2020.

Here is the page that covers that.

Update on resources 2/8/2020

The city manager issued her new report found here. There is no new information on the financial crisis in it. There are links to past and future meetings. There are two firefighter jobs listed. They mentioned one was a replacement position. I wonder if either of those hires will reduce the $1.2 million in overtime we are paying for the fire department.

One of our community members managed to get the audio somewhat fixed on the City’s Town Hall meeting. Not perfect but better than what we got from the city. Thanks Mike.

The slides from that presentation are found here.

I am also adding the slides from Mark Rasiah (Finance Director) presentation here. The video can be found here. Click on the long-term plan study session to see the applicable video.

Here is some information from the 2019 Comprehensive Annual Budget Report (CAFR)

In November 2018 the independent auditor expressed the going concern statement for the second year in a row. It appears in the CAFR. In the June 4, 2019 meeting the city finance director expressed the view things were improving and the going concern statement would likely go away. this was backed up by Karen. When asked if he felt better, the finance director said something like  “considerably so”. At the next meeting, the council raised the wages of management. Not until January 2020 did staff disclose to council and the public that there was a $2.9 million cost overrun and that the going concern statement appeared for a third year in a row.

The video of that meeting is found here. The budget information starts at 2:59 in the video. The packet is found here. Pages 47-110 are very detailed budget documents. At the very end of the packet (no page numbers are available is Karen Pinkos’s presentation on the budget.

In addition, here is the information from the Standard and Poors report downgrading the city’s bond rating to BBB.

El Cerrito, CA COP Rating Lowered Two Notches To ‘BBB’ On Deteriorating Budgetary Flexibility

  • 26-Nov-2019 16:38 EST 

“The lowered rating reflects our view of the continued deterioration of the city’s already weakened budgetary flexibility, driven primarily by continued strain on the city’s revenue, rising fixed costs with projected pension pressures, and one-time costs associated with the state’s wildfires,” said S&P Global Ratings credit analyst Benjamin Geare.

El Cerrito, CA COP Rating Lowered Two Notches To ‘BBB’ On Deteriorating Budgetary Flexibility

  • 26-Nov-2019 16:38 EST 

“The lowered rating reflects our view of the continued deterioration of the city’s already weakened budgetary flexibility, driven primarily by continued strain on the city’s revenue, rising fixed costs with projected pension pressures, and one-time costs associated with the state’s wildfires,” said S&P Global Ratings credit analyst Benjamin Geare.

The negative outlook is supported by our expectation that there is at least a two-in-three chance that we could lower the rating within the one-year outlook horizon.”

City Council Meeting February 4, 2020

Last night there was a council meeting with the budget situation on the agenda. Here is the link to the video and packet.

Here are some observations from two of us who watched the meeting. It did appear to both of us that council is now taking this issue very very seriously which is a win for the community that have been pushing them to do so.

First off we were told that EC usually contracts with Pinole to stream video. The reason for the video fail on Saturday was staff tried to save money and do it themselves. The slides will be going up from the workshop on EC website soon. I will post them here when they are. They also say they will answer the written questions that were not answered on Saturday and post those.

Mark Rasiah the Finance Director had a powerpoint presentation. That powerpoint is found here.

They did budget projections out for 5 years. At this time the baseline estimates 581 k left 19/20 with a surplus also expected 20/21 and 21/22. The following years are all in the red. That is without any action by the council and also does not put anything into the reserve account.

There was a long discussion on Cal-Pers and how a drop in the discount rate would be devastating. Karen is going to a meeting soon and will hopefully know more about whether or not that will happen.

The finance director believes that if we had a 2 million reserve our bond rating would improve from the current terrible rating that doesn’t allow us to borrow money.

Rochelle said and Paul agreed that they did not know that the reserve was not being funded. Gabe also went on about this being hidden at a different point in the meeting. My question is who was suppose to be telling them this?

There are currently 184 positions in city. Mark stated every million dollars in cuts would equal about 10 position cuts.

There is a slide on some suggested potential cuts. See the slide below.

There was discussion on staffing and potential furloughs. Paul did reiterate that all things should be on the table.

Councilperson Quinto brought up high overtime rate for public safety. The budget for overtime (this is overtime we are paying not reimbursed is going to be about 1.2 million this year. He does not want want public safety funds cut. also brought up issue of firefighters doing vegetation management and that is important.

8 speakers spoke on this issue at almost 10pm! Yay for community involvement. Here are some of their thoughts.

Thanked council for the town hall meeting

No new taxes until fiscal responsibility

Consider layoffs

Need more transparency and leadership from council

Tough decisions need to be made

Support for not cutting public safety staff- this was a few people

A 10% reduction across the board

Consultants as a line item cut. why can’t staff do that work?

Parks and Rec potential cuts to anything not supported by its own funding this includes the senior center.

Charge for 911 calls via medical insurance

Create a community task force to work in economic development

We need to diversify tax base and look at expanding revenues

We need for oversight from council to staff

Don’t cut library hours or senior center

Back to the council speaking

The mayor asked the staff to come back with 2 million in cuts. Said they might not make them all but they wanted to see them.

Quinto talked about council doing stuff for economic development and things he has done. He would love to get a car dealership.

They talked about cancelling the 4th of July event. They start planning it now Councilperson Quinto was for Councilperson Pardue-Okimoto was against it. She talked about potential cuts like not having staff paid overtime at the events. and not having it for 2 days. She also said she would rather cut every other event than and keep this one. She wants staff to come back with numbers on all of them and entire council seemed to agree with that. Councilperson Fadelli and Mayor Lyman were open to letting 4th of July go. It was also suggested to maybe get some sponsorships.

Councilperson Quinto talked about bringing in non profits to support seniors rather than the city funding services. He says that is what SF does. He also was pretty angry about lack of economic development and said he had been working on the issue and not been supported by staff and that when he made contacts and they called the city calls were not returned.

A few other issues

Councilperson Quinto stated that the city would do whatever the state auditor recommended though there was not further discussion about this.

There was no talk of the unintended consequences of sharply cutting all of the amenities in the city. Will property values go down? Will businesses want to open up in such a downer environment?

There is a strong aversion to laying off staff and looking at any possible cuts in public safety both from public and council. There was no discussion on ways to perhaps cut the fat without cutting valued services.

The Mayor wants the agenda for next meeting to include possible cuts so that public is aware of them and can come speak out.

Council members challenged some of the Finance Directors assumptions, particularly around RFT and suggested being less optimistic.

This meeting was a study session and next meeting will be real talk of the cuts. People must show up! Everything is on the line here!

Some of Mark’s slides showing no reserve, revenue trends, and the current mid year adjustments to the budget.