Santa Paula: A City on the Dole?

By Sheryl Hamlin

Financial Discussion by Council

Item 9B on the agenda of the February 16, 2016 Santa Paula City Council meeting was a review of the fiscal year 2014/2015 Audited Financial Statements (AFS). The detailed report was included in the public packet and can be downloaded here. Due to a technical issue, there was no recording of the meeting.

The city’s Financial Director highlighted a few of the items in her report which is given in the link above:

  • New accounting rules require cities to report all pension liabilities. Santa Paula complied with this rule.
  • There are 52 governmental funds: 7 associated with the General Fund and 47 with other governmental activities.
  • The Prior Period Adjustments (PPA) were large because last year they recorded adjustments due to the sale of the Waste Water Plant and this year are pension liabilities
  • There are two Enterprise Funds: Water and Sewer. Water revenue was down; sewer was up.
  • Expenses came in close to budget.
  • The increase in debt was due to the recent Waste Water buyout.

What was not in the director’s report:

  • Summaries showing overall health of the city
  • Trends
  • Pie charts showing expenses and/or revenues
  • Significant commentary from the auditors

There were two significant comments from the auditors. First, the auditors said this about cash flow: The General Fund expenses exceeded revenue by $893,645.

Secondly, because the above stated condition required using money from funds to support the deficit spending, the auditors said this:

notes_solvency

Council Member Gherardi said that the city must look at “structural changes”. Council Member Tovias said “we can’t continue deficit spending”. He added that the city is heading down the wrong path. Council Member said that this is a wake up call, although it is not an indictment of staff who take directions from council. Council Member Crosswhite asked for an explanation of the approximate $900,000 in extra expenditures.

City Manager Fontes responded to Council Member Crosswhite as follows:

  • The city funded the Safer gap three times.
  • There were unanticipated, catastrophic payments to five (5) firefighters out for one year with the debt increasing.
  • The carryover of the sale of the old Waste Water Plant is exhausted so this cannot continue next year.
  • Pension reporting now requires coverage.

Council Member Crosswhite then noted that the Pension Fiduciary Report indicates that Santa Paula is 78% funded, which still needs monitoring. She said, “78 cents on the dollar is not covering the pension”.

Mayor Hernandez said that council will continue this discussion during the fiscal year budgeting process. He said Santa Paula is “doing well” compared with other cities in the county (no names given) and he is proud of the state of the city. The budget was balanced the last three years with no layoffs.

It was voted to receive the report.

Santa Paula on the Dole

The AFS is over one hundred pages. There are several significant reports. First let’s consider the ‘Revenue Report’. The report below is only for the General Funds (no water or sewer funds).

SP_revenue

The category ‘Intergovernmental’ should be explored so that citizens can understand how much revenue the city receives from other governmental sources. It must be noted that these other sources are also funded by taxes at different levels: state, county and federal. At $493,668, the General Fund receives 3.8% from other government sources. The total $2,637,268 represents 16.7% of all governmental revenue.

The breakdown of governmental is shown below:

  • $493,668 Revenue from the State, County and the School District for the General Fund (7 sub-funds)
  • $2,143,600
    • $500 Service charges
    • $869,441 State Gas tax
    • $651,692 Local TDA
    • $170,266 CDBG (Community Development Block Grant, Federal)
    • $97,897 SLEFS-COPS
    • $8,132 Beverage Container Recycling
    • $25,394 Area Agency on Aging
    • $50,608 State Holand Security Grant
    • $6,595 Local TDA (Transportation Development Act, Caltrans)
    • $81,185 Safer Grant (Federal)
    • $8,593 California Used Oil
    • $160,659 Stormwater Program
    • $12,718 Bureau of Justice Assistance
    • $20 Miscellaneous

Is municipal sustainability a myth? Do all cities live on grants? These would be questions for the myriad of consultants Santa Paula hires. It is essential to remember that the above grant revenue is also supplemented by monies raised in the bond market, thus increasing the city’s long term debt, and a grant from the Limoneira Corporation for public safety. Coupled with the Pension debt, municipalities are fighting an uphill battle.

In March, the consults hired by the city will present their first cut at Public Safety sustainability.

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For more information about the author, visit sheryhamlin.com

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