Santa Paula: Audited Financials Later and Later

By Sheryl Hamlin

The FY 17-18 Audited Financial Report of the City of Santa Paula was presented on April 17, 2019, almost ten months after the close of the fiscal year on June 30, 2018. Recall that the FY 16-17 Audited Financial Report was presented on March 5, 2018, approximately nine months after the close of the fiscal year on June 30, 2017.

Presentation Key Points

A short presentation was given by Mr. Van Lant, one of the firm’s principals. He noted that the word “decreased” was incorrect on one slide and the correct word was “increased”.

Source: FY 17-18 Key Presentation Points, Van Lant

The pension liability grew to $25,075,293 from $22,609,596 for the previous fiscal year. When asked by Council Member Crosswhite about this growth, Van Lant explained that there are two factors: 1) the actuarial liabilities which is driven by an investment return CalPERS is slowly decreasing to reflect reality and 2) the percentage of salaries, which is contractually driven.

Note that if the city cannot meet its entire payment, then the balance is added to the long term liability. See chart here by searching for Santa Paula. The OPEB liability increased as well. OPEB is Other Post Employee Benefits which is primarily retiree healthcare. OPEB liability is separate from the overall CalPERS liability. As of June 30, 2018, the OPEB liability is $3,007,490.

Source:League of CA Cities

City Manager Rock inserted that CalPERS once made 11% return. To read a report about CalPERS funding, click here.

The increase (not decrease) in the General Fund was due to Measure T, which for this report is included in the General Fund total.

The unrestricted funds increase was primarily due to the addition of $650,000 from the sale of the property on South Palm.

Enterprise Fund Issues

While not discussed at council, it is important to see the degradation of the Water and Sewer Enterprise Funds. In the first chart, the current fiscal year is shown, while the second chart represents last fiscal year. Note particularly the large operating expenses in the Water Fund. While the sewer’s operating expenses have been relative consistent, the water operating expenses have increased by $2.2 million. In both years, sewer transfers monies to water. The ratio of operating revenues to expenses in FY 17-18 is 1.16, while the ratio for FY 16-17 is 1.71. The bond covenants require a ratio of 1.2 or greater, so this means the upcoming rate study will have to analyze this fund’s degradation.

Source: FY 17-18 Enterprise Funds, Van Lant

 

Source: FY 16-17 Enterprise Funds, Van Lant

Fire Calculation Incorrect

On packet page 154, the following statement is incorrect:

“On December 18, 2017, City Council established an Ad Hoc Committee to develop and negotiate terms of a memorandum of Agreement with the Ventura county Fire Protection District. On January 17, 2018, the Ventura Local Agency Formation Commission adopted resolution LAFCO 17-08 (The Ventura County Fire Protection District, VCFPD, and City of Santa Paula, City, propose to annex the entirety of the City to the VCFPD in order for the VCFPD to provide fire protection services to the territory within the City). This would mean that 16.5% of the 20.12% City’s allocation of property tax revenue, would be transferred to the District for Fire services. The transfer to the Ventura County Fire Protection District was effective July 9, 2018”

The actual number is 79% of the secured property taxes. This has been explained numerous times. Mike Sedell, former Simi Valley City Manager, explained this here. See second line of the chart with and without fire annexation. Pie charts are shown here. Note the slice showing Santa Paula’s share of the whole at .2088. If we give .165 to VCFPD, the remainder is .0438, which is shown in the second pie chart. The ratio of .1650 to .2088 is about 79% (.1650/.2088).

Not An Operational Document

The Audited Financial Report is designed to show that the city is meeting the governmental reporting compliance as defined by the GASB (Government Accounting Standards Board). There are no opinions as to how the operation could be improved. These are calculations which could be used for metrics.

To watch the video, click here.

For more information on author click sherylhamlin dot com


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One Response to Santa Paula: Audited Financials Later and Later

  1. Sheryl Hamlin April 21, 2019 at 9:16 am

    “The City’s required contribution for the unfunded liability was $1,310,710 in fiscal year 2018. The City’s contributions to the Plan for the year ended June 30, 2018 were $2,068,104” An example of vague language in report . How much of unfunded was in $2 million payment to CalPERS?

    Reply

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