#fiscal report

New Post has been published on http://citizensjournal.us/santa-paula-city-council-dissolution-of-redevelopment-agency/

Santa Paula City Council: Dissolution of Redevelopment Agency

By Sheryl Hamlin

Guest Speakers:

A representative from VACE (Ventura Adult Continuing Education) spoke about the services his organization provides. Kevin Genovese, Manager of the Ag Museum, who is also the temporary animal shelter Manager, presented statistics about the no-kill success of SPARC (98.6% placement). Victor Kamhi from VCTC announced a meeting on January 28, 2015 at the City Center, 530 West Main, 6:30 pm to discuss transit issues and comments from citizens which will be relayed to the entire Transportation Commission. Kate English invited the public to the VDAY event on February 14, 2015 starting the Ebel Park and continuing in the Unitarian Church. VDAY was designed to raise awareness about violence against women.

  Status Report: Dissolution of Santa Paula Redevelopment Agency:

Elisabeth Paniagua, Assistant to the City Manager, presented an informative summary about the dissolution of the Santa Paula Redevelopment Agency.

Redevelopment Agencies ceased to exist in California by an act of the state legislature in 2012. A summary of the court case and litigation can be read online. Note the comments in the linked article by Larry Kosmont, a consultant specializing in redevelopment who was referenced both at the current Santa Paula Council Meeting and at the December 15, 2014 meeting by Mayor Procter. Kosmont predicted the decision would lead to cuts in city services across the state due to the loss of the tax increment financing which cities enjoyed since 1945. Often called generational theft, tax increment financing depended on constant increases in property values, which of course came to a halt in 2007 when the real estate bubble burst.

The city chose not to create a Successor Agency to the SP Redevelopment Agency (RDA), so was required to form a ‘Designated Local Authority’ (DLA) charged with the dissolution. When asked by Mayor Procter about the decision not to create a Successor Agency, City Manager Fontes said the small number of properties under the control of the RDA (El Paseo and the theatre) did not justify a new, local RDA.

The DLA consists of 3 people appointed by the governor and 2 members appointed by the city ( Elisabeth Paniagua and Paul Skeels). The DLA contracts with the Kosmont Group whose representative Christopher Jicha attended the council meeting.

Council Member Gherardi asked about maintenance of the two properties, particularly the El Paseo which she observed as filthy. The monies for property maintenance are in a $434,000 balance on the city’s books. This fund also pays bonds and attorney fees.

Council Member Tovias asked if the city would “get the property”. The DLA will have the property appraised and sold. If the city wishes to buy the property, it may do so, but will not acquire the property automatically because it was not the owner. The DLA receives property tax as revenue which is presumably part of the $434,000 fund balance managed by the city as fiduciary. When the property is sold, the city will receive the tax from the re-assessed property.

Council Member Hernandez noted that this report confirms rumors about the properties and that the city could not benefit.

Mayor Procter asked about new tools available to the city in the post-RDA environment. Mr. Jicha responded with: EIFD and Carbon Tax replacing the RDA in urban areas. He said that $12 billion came from the Carbon Tax which was close to prior year’s RDA benefits. Mayor Procter had suggested at a previous meeting that Kosmont present to the council.

No council questions were asked about the RDA bonds, however, the auditor noted that in 2000 the city defeased $2,285,000 of the $6,900,000 RDA bonds sold in 1994; however, the auditor did not state what capital was used to defease these bonds. The undefeased, outstanding RDA bonds include $2,505,000 principal and $1,063,295 interest. There is a Fiduciary Fund on the Audited Financial Statements of $2,939,602 which is close to this total. There were no questions about contingencies in the event the two properties are not sold, particularly because both properties need much work according to City Manager Fontes.

City Owned Rental Property for Non-Profits:

Boys an & Girls Club of Santa Paula

Elisabeth Paniagua, Assistant to the City Manager, presented a proposed below-market rental policy for use in leasing city property to non-profits. Ms. Paniagua pointed out that agreements with non-profits using city property have not been reviewed since the 1990’s. In 2014, the city successfully renegotiated leases which resulted in a net increase of $76,000 to the city. However, still to be renegotiated are three groups: The Boys & Girls Club, Santa Paula Society of the Arts and The Chamber of Commerce.

The legal issue is related to free use of city property which is considered “a gift of public funds” and is not permitted. The goal of the new policy allows the non-profit to declare its public benefit in lieu of rent. Speakers from each organization spoke about his or her respective organization’s contributions to the city. Virginia Gunderson corrected the report about non-payment of rent to the city saying that the SP Society of the Arts pays 5% of its sales at the Depot to the city. Her organization also provides some maintenance and staffing when the Chamber is closed. Fred Robinson, President and CEO of the Chamber, spoke about their association with Santa Paula since 1915 when it began as the Santa Paula Merchants Association which was incorporated as the Chamber of Commerce in 1940. The Depot was to have been demolished by Southern Pacific in the 1970’s and the Chamber was instrumental in preserving it. Jan Margolin, CEO of the Boys and Girls Clubs, said that her organization provides “latch key services” in Piru, Fillmore and Santa Paula and has upgraded the Harvard Street facility by at least $10,000.

Council Member Gherardi stated and moved that the proposed policy was convoluted and needed to be simplified, suggesting that the review for the non-profits be once every ten years and that there was no need for the Public Works Department to review the lease. She also suggested grandfathering the three organizations at $1 per month. Council Member Tovias said the organizations should submit financials once every two years for review. Council Member Hernandez said that ten years is too long, particularly for future potential leasable properties. This motion failed. A new motion to allow a case by case basis of terms and reviews passed.

Review of the 2013-2014 Audited Financials for the Fiscal Year ending 6/30/2014:

Sandra Easley presented the 88 page report with the following statements: “There were no major misstatements” and “there is lots of information”. After these statements, she asked for questions.

Council Member Gherardi indicated she had several questions:

Why was the property tax in 2014 down from 2013? The response from Director Easley and the representative from the auditing firm was twofold: reassessment requests for homes that declined during the housing crisis of 2007-2008 were processed by the county plus 2013 was higher that it should have been. Property tax revenues declined from $6,233,236 in 2013 to $5,981,182 in 2014. According to the auditor, we should see property taxes increasing henceforth assuming normal reassessments upon sale.

The Water and Sewer Funds are taking in more money than spending for about a $4 million profit. How can we reconcile the request for a 1% increase in sales tax with a profit-making enterprise operation? Neither Ms. Easley nor the auditor could answer these questions; however, Ms. Easley noted that $1.7 million was transferred from the Sewer profits to the General Fund. This occurred because the original Water Treatment Facility was purchased with General Funds. Thus when the old facility was sold recently, the sales revenue should not have been posted in the Sewer Fund, so was transferred to the General Fund. The audit shows “Income before Transfers” at $ 3,993,515. Subtracting the sale ($1,726,427) still leaves a profit of $2,267,088 from the Enterprise Funds (now called “Business Type Funds” in the new nomenclature). The obvious, but unanswered question, would have been about the use of the $2,267,088 by the city. Are these monies comingled with General Funds?

Public Works was budgeted $1,585,573 but only spent $436,123. Plus there is a balance of $2,256,959 in unspent gas tax and TDA. With other transportation funds, this could be as high as $8 million unspent. Director Easeley responded by saying they are trying to fix potholes and that 8 streets (or 8th street) was redone. City Manager Fontes responded by saying that a Capital Projects Engineer would be applying these monies but that the reality is that the cost of each project is huge. Harvard alone was $12 million and the Water Tank was $8 million, implying that the balances may seem large but with public works projects much money is needed.

The Auditor’s Letter states that we expended more than we took in by about $1.1 million. Ms. Easley responded that this had to do with the sale of the old water facility which does not appear to be an accurate representation of the situation as the table below shows. The City Government was negative $9,888,086. Adding the revenue from taxes, licenses and investments of $8,640,825 leaves a negative of $1,339,261. The water/sewer enterprise masked that by providing a positive of $3,995,058. So without the water/sewer, there was indeed a negative as the auditors reported.

                General Manager Fontes responded by saying the city was trying to increase revenue as evidenced by the $76,000 lease revenue improvements reported earlier on city owned property and eventually East Area I would bring in sales tax; however he noted that Limoneira was responding to a new “challenge” to the EIR so would not be issuing the final document yet. Recall that Planning Director Minsk reported in the January meeting that the project review would be continued until an ‘unknown date’.

Council Member Hernandez noted the looming CalPERS (employee retirement) increase and OPEB (retirement medical benefits). Director Easley indicated the city’s approach is “pay as you go” which means that the unfunded portion keeps increasing. City Manager Fontes reminded the council that Dr. Gardner advised the council to budget for these expenses in a previous meeting. The auditors also noted the following about this same topic:

 In June of 2012, GASB issued Statement No. 68, Accounting and Financial Reporting for Pensions – an Amendment of GASB Statement No. 27. This statement was issued to improve the financial reporting by state and local governments for pensions. It also improves information provided by state and local governmental employers about financial support for pensions with regard to providing decision-useful information, supporting assessments of accountability and inter-period equity, and creating additional transparency. ……The City has elected not to early implement GASB No. 68 and has not determined its effect on the City’s financial statements.

There were no council questions about this important accounting rule change about which two accounting professionals have advised the city.

There were no questions about the Prior Period Adjustment of $6,994,073 which was highlighted in the notes to the Audited Financial Statements. A project was capitalized that was never completed, so its costs were removed from capital assets and expensed. The obvious questions: Is this money recoverable? Is the project dead? What was the project?

The City Manager indicated that the presentation of the 2015 Budget would include a formal presentation and said that Director Easley’s unpreparedness for the meeting was due to the calendaring of the item in regular discussion rather than consent calendar where no discussion occurs.

Possible Action to Direct the City in a Meeting:

City Manager Fontes provided four names to serve as a facilitator in the proposed citywide planning sessions. Council Member Gherardi said that cost was a factor. Council Member Tovias indicated that one of the candidates was a good fit for the city based on what he did in Fillmore. The council decided to create a scope of work and have each candidate comment.

 Final Actions:

Clarification about reimbursement policies was given to Council Member Gherardi by City Manager Fontes. Mayor Procter asked for future collaboration with Measure F leaders and noted a small error on the Ad Hoc Standing Committees which were announced at a Special Meeting in December 2014, the minutes of which are still unavailable on the city’s website as of this date.

Sheryl Hamlin: With an MS in Industrial Engineering, Sheryl Hamlin spent years in technology with stints at Motorola, Tandem Computers and various startups. She has been on the boards of neighborhood organizations both in San Francisco and Palm Springs where planning issues were her specialty. She now resides in Santa Paula and loves the historic fabric of the city.  Ms. Hamlin’s blog Stealth Fashion  and  technology product ‘ Plug and Play Webmaster’.

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