Audit: City finances look worse on paper than reality Council told

February 26, 2016
Santa Paula News

It looks worse on paper the City Council was told when the annual financial audit showed the city had deficit spending during last fiscal year.

Finance Director Sandy Easley told the council at the February 16 meeting that the new reporting was more comprehensive showing the pension liability not reflected in past reports.

The budget has 52 different funds that must be reported, including seven that are included in the General Fund alone.

The report by auditing firm Van Lant & Fankhanel LLP found that the city’s general fund expenditures exceeded revenue by $893,645 in the 2014-2015 fiscal year that ended June 30.

Easley said the deficit is actually less than it appears with the audit report reflecting the $529,000 purchase of a new fire engine as a one-year expense, when in fact it was financed for seven years. Easley said that leaves the actual deficit at just under $388,000. 

The “unrestricted balance” in the General Fund, also called the reserve, was about $1.8 million.

The water enterprise lost money while the sewer account saw a $1.7 million boost. The police department was $290,000 over budget primarily due to overtime costs. Public Works was under-budget by $1.3 million due to projects not completed.

Easley said sales tax saw a boost of about $300,000 and overall the General Fund was $22,000 under-budget, 0.001 percent.

“I am really concerned about this audit because we have overspent,” said Councilwoman Ginger Gherardi. “We are definitely headed to deficit spending…and by next year,” when the funds from the million-dollar plus sale of the defunct wastewater plant will be spent, “we won’t be able to do that.”  

Gherardi said the city must “look at some structural changes,” in or “we’ll just perpetuate the problem…”

Councilman Jim Tovias agreed noting “We’re definitely heading down the wrong path and this council is going to have to make some decisions that are tough,” depending on the results of a report on financing the fire department and operational alternatives.

The report is expected in March and Tovias said the city cannot spend reserves allocated for emergencies and “catastrophic disasters” on day-to-day operations. 

“We may have to go over it department by department,” to determine cuts.

“We’re headed down the wrong path,” said Tovias, “but we have time to make corrections.”

“It’s a wakeup call but not an indictment,” of City Manager Jaime Fontes whom Councilman John Procter said has followed council direction.

Vice Mayor Jenny Crosswhite asked Fontes to “explain how we got there” in the budget.

“In plain English three times we covered the SAFER gap for the benefit of fire,” supplementing the federal grant that pays five firefighters.

In addition, Fontes said three firefighters injured in the November 2014 Santa Clara Waste Water-Green Compass chemical explosions are still off duty and another two firefighters are also out on medical leaves. 

“Salaries are picked up,” by an alternate means he noted but the city still must pay the benefits packages.  

Mayor Martin Hernandez said the city is “doing a really good job…when you look across the county,” other cities are in far worse shape than Santa Paula.

He noted that the city has a solid credit rating and for the past three years has passed a balanced budget.

“We’re doing very well here, we’re doing so well we were able to buy bonds and save our ratepayers money,” by purchasing the wastewater treatment plant. 

Hernandez said the council will “continue to sharpen our pencils” and he noted, “We had to trim a little last year,” a move that did not result in any layoffs.

The report was received and filed.

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