Spending for Management Not Cut as City Goes in Hole
DESERT HOT SPRINGS, CA – As the city struggles to make financial ends meet, a proposal was put forward to cut $1 million from the police department. That proposal floated last Thursday was scaled back to a $500,000 reduction a few days later.
In a city where public safety is considered priority one, even a revised reduction in public safety spending of $500,000 speaks volumes to the concern over what is a universally accepted budget crisis facing the city next year.
The proposed reductions in public safety appeared in budget presentations to the city council on Tuesday, March 12 and were the culmination of five months work by a finance sub-committee of Mayor Yvonne Parks and Councilwoman Jan Pye.
Books Not Balanced
The challenge is how to balance the city’s books. A reduction in the police department budget was just one of several adjustments projected between now and June 30, 2013 when the city’s fiscal year ends and as the city talks about cutting expenses. So far, the largest cut focused on the public safety budget.
In attendance at the meeting was an unusually large turn-out by several members of the Police Officers Association, including POA president Mike Valentich. Valentich along with other officers listened in with its obvious interest in the potential impact for the POA and public safety in the city.
No details were provided on how the proposed budget reduction would affect public safety or whether it means fewer officers on the street. Those details were not provided at the meeting.
Also presented at the meeting was a representative of the city’s audit firm to provide the council with its findings on city’s financial reporting.
“Our job is to come in and perform tests, look at documents and records sufficient enough to be able to state an opinion on whether the management’s financial statements are fairly presented in accordance with all the standards,” said Greg Fankhanel of Teaman, Ramirez & Smith, the city’s auditors.
The audit, said Fankhanel, showed that a operating deficit of $500,000 for 2011/12 reported to the council last June was actually much larger. The city, according to the auditors adjusted financial statements, ended the 2011/12 fiscal year over $1 million in the red.
The auditors explained it is not their job to tell the city how to spend money, just to validate that the amounts are accurately reported and accounting practices properly performed.
Auditors Reveal Fiscal Accounting Mistakes
The auditors findings directly contradict statements by Mayor Yvonne Parks and Councilwoman Jan Pye that they city is not spending reserves to make ends meet. As the auditors explained, the only way the city made it through 2011/2012 fiscal year was by grabbing over $1 million dollars of city reserves.
City Manager Rick Daniels who has primary responsibility for preparing the city financial statements also had repeatedly stated the city has not used reserves.
At a December 2012 meeting of the finance sub-committee and in response to questions about use of reserves, Rick Daniels said, “We are not spending one dime of city reserves.”
With the auditors report, the conclusion is that either the city manager was knowingly misleading the sub-committee members or he was unaware of city overspending at the time he made the statement.
City manager Rick Daniels is paid a total compensation package of $300,000 year to manage the city.
The auditors report shows the city headed into the 2012/2013 fiscal year over $1 million in the red, rather than the $500,000 deficit that had been reported to the council when it adopted the city budget for the current fiscal year.
Concern Over the Numbers
The wide swing in the information caused concern among council members.
“These kinds of wide variations do not give much confidence in the numbers,” said Councilman Russell Betts during the meeting. “I can understand if the numbers are off by a half percent when reconciled, but these are very wide swings.”
Looking ahead to next year and in face of the auditors report, City Manager Rick Daniels finally acknowledged a serious budget problem needs to be addressed.
“If we don’t reduce expenditures and revenues come in at about what they were last year, then through fiscal year 2013/2014 we will have to use reserves,” said City Manager Rick Daniels.
Fees and Taxes Going UP
Daniels admitted the city will be digging into reserves by a factor of more than 50 percent. City reserves were $5 million dollars. Daniels projects a $3 million deficit heading into the 2013/2014 fiscal year if no spending reductions are made. He said the city could end up using $3 million of the reserves to make it through the coming fiscal year.
“The serious problem doesn’t hit us until 2014/2015,” said Daniels. “But we need to be taking actions now to make sure that’s a soft landing, that we don’t continue spending without new revenue.”
To deal with the budget shortfall, the city manager plans to make it more expensive to do business in the city.
“One of the things we are looking at and we see a major area to improve is to revise the fee study, that we are fully recovering those costs,” he said.
Daniels was referencing the cost for city business licenses, processing permits for city events and other fees.
And he raised the prospect of new taxes.
“We are going to be looking at every new revenue source and we may be asking for tax options later on.”
With a looming and serious budget crisis that everyone agrees is coming in 2014, “later on” for new taxes may be sooner rather than later.