Oxnard failing to close large budget deficit; Bond ratings lowered; More lawyer $; Navy base land usage;

By George Miller

Contention was high over the $12 million General Fund deficit and proposed budget cuts status at the 11-17-15 Oxnard City Council meeting.

Oxnard was facing the 12 million dollar budget deficit going into the current fiscal year. The city borrowed $16 million from its own “Measure ‘O”” public safety fund, which obtains its cash from a self-imposed 1/2% sales tax. While this alleviates the current liquidity problem, it does nothing to eliminate the deficit and still leaves Oxnard far below what reasonable reserves should be (targeted at 18% of the general Fund) , potentially jeopardizing its credit rating and making emergency measures much more likely. City Manager Greg Nyhoff proposed several items to do this, with only partial success to date:

1. Obtain $4 million in concessions from labor bargaining units, chiefly police and fire depts.
2. Gain $.6 million in “efficiency” savings.
3. Save $4 million via reducing fire department overtime by nearly $1 million and other dept. reductions.
4. Eliminate $4.2 million in  unfilled, funded positions.
5. Massive increases in utility rates, for water, wastewater and solid waste (Enterprise Funds, not General Fund).

The least successful part of the attempt to tame the deficit is in failure to obtain any of the targeted $4 million in employee concessions. Now that we are well into the fiscal tear without realizing any of these savings, it would be virtually impossible to make that number.  We were told that they are on track to meet the efficiency savings target, but the description of what was actually done was vague. Unless there are fewer employees, lower compensation, less overtime or fewer checks written for outside goods services, there are no savings. We’ll look into this further.  The unfilled, funded positions were eliminated. $7.2 million in Measure “O” projects have been put on hold.

Revenues will be pretty much on track, except for some timing problems. The budget assumes straight-line revenue receiving rates, but there are cyclical and seasonal factors not allowed for. For example, property tax revenues were far below forecast, but it is known that they don’t arrive until December or January so why not model the budget that way, too?

There are some potential budget expense wild cards, such as PERS contributions, legal expenses and mushrooming consulting/attorneys fees, interest rate swap call ($4.2 million) due to violation of bond covenants, etc.  This is almost no reserve cushion to deal with these.

Utility Rate increases

At a past meeting, new utility rates and a rationale for them were proposed, which you can read about on our web site. Much of the reasons this consists of deferred increases, deferred maintenance and deferred capital projects, as well as long-unfilled positions, some of which are now being filled. Some residents have disputed the calculations. Some want a vote on the increases, since a majority of ratepayers objecting can stop it.  This was attempted in Simi Valley recently, but only 8% of ratepayers reportedly rejected it, resulting is a large scheduled increase.

Assistant City Manager Scott Whitney researched the vote idea and came up with a suggested ballot form and verbiage to explain it. At 18 pages each in English and Spanish, it would be  an unwieldy and expensive document to publish and mail. Meeting attendees- officials and public- agreed it would be unlikely to be read in its entirety. So a briefer, more digestible summary would be good, with easy access to the long version for detail geeks and to meet full disclosure requirements.

Meeting materials directly below:

1.

SUBJECT: Proposition 218 Protest Form and Establishing a Regular Meeting for January 19, 2016. (053) RECOMMENDATION: 1) Provide direction to staff on including a Protest Form in the Notice of Public Hearing regarding proposed increase in Water, Wastewater, and Solid Waste Service Rates; and 2) establish Tuesday, January 19, 2016 as regular City Council meeting. Legislative Body: CC Contact: Daniel Rydberg Phone: 385-7880

Document: L-1 Proposition 218 (pdf 82.3 KB)

Document: L-1 Utility Rate Notice Final (pdf  498KB)

It was pointed out and Mayor Flynn agreed that the ballot choice would be basically- yes, do the increases, or no- the world ends, no increases, bankruptcy, bond ratings cut, finance costs rise, external authority will take over the utilities and raise the rates sky high. In other words, no other alternatives were specified. We were told that wastewater and water reserve funds would be totally depleted next year if the rate increases weren’t made, which would trigger bond covenants and cut bond ratings to “junk” grade, greatly raising finance costs and ratepayer costs.

As it is, without a majority ratepayer refusal of proposed rates, the rates will increase by default, as this is how applicable state law works.

Budget Contingency Measures

The City Manager stated that in January, staff will meet to review additional cuts, especially if a memorandum of agreement with labor bargaining units cannot be reached. It is likely that these would include significant personnel cuts, affecting city services and even public safety. The Council voted more funds for labor negotiations attorneys recently and is spending a great deal on human resources, financial, public works and other consulting expenses. Public Works consultants are not in the general fund.

Some employee associations, such as Police and Fire, are strongly resisting making concessions. The Peace Officers Association President Mike Johnson spoke at the meeting, criticizing the city for poor management, not making cuts elsewhere and even personally attacked Mayor Flynn. The Firefighters Association has insisted that the city has a large amount of hidden excess funds and even hired a forensic auditor to find them, which he hasn’t so far. They might have been a misunderstanding about which funds are actually committed to future expenditures.  The Fire Dept. must also endure  a $1 million cut in overtime, which had been used to make up for lack of manpower coverage. A Station 66 (Harbor area) “brownout” of one rescue engine was made already. Manning the new Station 8 (South Oxnard) has been quite costly. At just over 100 staff,  Oxnard FD has one of the lowest coverage ratios vs. population in the state. Some have said that a different approach should be used for medical calls, which are about 80% of all dept. responses.

Some of Oxnard’s regular citizen-activists with financial experience- Jim Lavery and Phil Molina, for example, have a lot to say about this:

Jim Lavery, a former Finance Director at two South Bay cities wrote:

Based on last night’s budget presentation, Oxnard faces a hole of $7.8 million dollars this fiscal year on the expenditure side of the adopted budget alone.

Besides the unrealized MOU savings of $4 million discussed last night, the 10 year fiscal forecast detailed $3.8 million of general fund subsidies this fiscal year to other funds that have yet to be corrected.

– Assessment Districts 0.6
– Impact Fees 0.3
– PACC 1.2
– Golf Course 1.2
– Internal Service 0.5

Total 3.8

Yet the tone of last night’s presentation was that the City is sort of doing OK, when the message should have been one of sober realization that the City is not even close to meeting its expenditures savings targets.

The City needs to pound the message home at every opportunity that it is in serious financial difficulty. Nothing else is acceptable at this point.

This assessment does not include the City’s liabilities for its over collection of property taxes for public safety pensions and for its non payment of social security/PERS costs for part-time employees, as these amounts have yet to be publicly quantified.

Jim Lavery

Today, he added this:

I made a mistake in the (above) E-mail. I apologize. Most if not all of the $ 3.8 million general fund subsidies ARE budgeted.

So the expenditure savings shortfall consists of the $4 million MOU (ed note: employee concessions) savings and whatever shortfall may exist from the combination of the $2.5 million vacancy savings amount and the $621,000 efficiency savings amount. I think the FD meant salary savings when he talked about efficiency savings so one could not get a sense if the City was on track to reach the combined $3.1 million vacancy and efficiency savings amount.

——-

From former Oxnard Finance Director Phil Molina:

Friends,

Rumors are that some elected officials are saying the city is either bankrupt or on the edge of bankruptcy. Don’t use Joseph’s most recent quarterly general fund numbers to make such a decision. He is not consistent in his presentation. He is mixing cash and accruals into his general fund report.

If he wanted to make his report a full accrual report, as he claims, he MUST INCLUDE 1/4 OF THE PROPERTY TAX REVENUEs. To do otherwise while claiming all other general fund revenues are on the accrual basis is just intentionally misleading council, staff and the public.

If you adjust Joseph’s general fund power point page to include the accrual of one quarter of the property taxes the financial number change dramatically. The reason to include the accrual of property taxes, assuming you want to present accrued data on a quarterly basis, is that except for an end-of-world scenario the amount of property tax budgeted for the entire year is not likely to change much and is virtually guaranteed. See three sets of financial data below: the first is exactly as the city presented them; the second adds the accrual of property taxes(*); the third shows accruals minus the one time successor agency payment.

First:

Third:

The method used by the city of presenting the fiscal data ​ is bothersome because using the first set of numbers could scare ​the ​ council into doing something drastic that really isn’t necessary. But on the second set of numbers note that for the current year there is a “one time” payment for the “successor agency” that is not ​likely to happen again.

​ In the second scenario the <LOSSES> turn into PROFITS. But if you subtract that ​one time revenue ​number out, for purposes of planning future​  financial conditions the results​ for the current year become a much smaller and more manageable​ loss of <$148,702.>.

The bankruptcy of the city is dependent on the financial condition of the city’s general fund. The first quarter report, given the data provided by Mr. Lillio doesn’t show ​enough information to make a decision on the financial condition of the city given the fund balance is increasing by about $3,300,000.

(*) Included in the city’s “property tax” revenue in the VLF, which amounts to over $14,000,000 and is usually NOT included as part of the property tax revenues. I suggest that VLF be shown separately for a better understanding the consistence in the property tax revenue.

Larry Stein had previously objected to a $60,000 expenditure by Interim City  attorney to ward off potential litigation by departed Fre Chief Williams and brought it up again at this meeting. Fischer told him that he has a $75,000 discretionary limit for such matters.  No one argued with him.

————

Meeting materials on the budget:

2.	SUBJECT: Review of the City’s Budget for the 1st Quarter Fiscal Year 2015-16. (117) RECOMMENDATION: Receive the first quarter Budget Status Report as of September 30, 2015. Legislative Body: CC Contact: Joseph Lillio Phone: 385-7475

Document: Q-2 1st Quarter (pdf 1.39 MB)

Document: Q-2 Budget Update 1st Quarter (Revised from fiscal policy task force handout) (pdf  1,835KB)

ACTION: 0 moved to Approved Receive the first quarter Budget Status Report as of September 30, 2015.

 

Still more money for lawyers

The Human Resources department does not have the skills for the wide ranging and exacting negotiations with a half  dozen labor bargaining units underway. So,the city has little choice but to engage outside legal services to do this, meeting attendees were told.  In addition to regular agreement issues, HR is tasked with obtaining $4 million in employee concessions to help erase the $12 million city deficit. If this isn’t successful  there will be little alternative but to make severe cuts. Reserves are nearly exhausted, so there is no cushion to fall back on at this point.

Meeting materials:

Document: L-3 Attorney Services (pdf 456 KB)

 

Naval Base Ventura County Joint Land Use Study

The purpose of this project is to reduce conflicts between base and community regarding military operations. The idea is to keep each other apprised of requirements and developments and try not to get into each others’s ways. By looking ahead, potential conflicts can be avoided.

Meeting materials:

Document: K-1 Naval (pdf 9.89 MB)

Document: K-1 Attach 3 (pdf 46.8 MB)

Document: K-1 Joint Land Use Study (pdf  2,263KB)

 

Other

Once again, the Whistleblower protection policy was NOT presented, but it appears, by looking at the meeting materials (links below), that Interim City Attorney Stephen Fischer has done his homework.

1.	SUBJECT: Review and Discuss Whistleblower Policy Guidelines. (085) RECOMMENDATION: Discuss a Whistleblower Policy and provide staff direction to return to Council with a recommended Whistleblower Policy for adoption. Legislative Body: CC Contact: Stephen Fischer Phone: 385-7483

Document: Q-1 Whisleblower (pdf 2.72 MB)

Document: Q-1 Whistleblower Policy Study Session (pdf 267KB)

 

FYI:

Oxnard Bond ratings released

By George Miller The Oxnard City Manager’s office sent the latest wastewater and water bond ratings to us.   Download Wastewater Water   Bond ratings are closely watched by lenders. While there was a slight reduction in creditworthiness, it won’t have a large impact on ratepayers, rates or the city’s ability to borrow for large upcoming […]

November 17, 2015

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George Miller is Publisher of CitizensJournal.us, “retired,” residing in Oxnard

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