Santa Paula: Creative Use of Enterprise Funds Carries City Finances

By Sheryl Hamlin 

A Rock and a Hard Spot

To understand the Fiscal Year (FY) 17-18 budget, as presented by Finance Director Sandra Easley at the November 6, 2017 Santa Paula City council, one must revisit the October 16, 2017 council meeting.

At this meeting watch video here City Manager Rock explained how the 125 full time employees would share in $1.256 million a year in annual raises (about $10,000 per person). This equates to $3.7689 million over three years.

Rock explained that these raises would be funded using various funds: the General Fund, the new gas tax, Measure T funds, waste water funds, storm water funds and others. Council Member Hernandez thanked Mr. Rock (1:18:17) for the “creative way to use Enterprise Funds for raises”.

FY 2017-2018 Budget

On November 6, 2017, Director Easley presented a PowerPoint presentation, which was not in the public packet. The slides shown below are taken from screen shots. To watch the presentation, click here and jump to 2:14:03.

Director Easley showed slides of Citywide Budget and General Fund Budget, but nothing for any enterprise funds (sewer and water). Note that the Citywide Budget includes the water and sewer enterprises. See below.

The Citywide Budget balances by $4.5 million, but the General Fund balances by only $24,000. It would appear a budget has been created for the Enterprise funds with huge increases in revenues (aka “fees”) which would result in a large surplus. Warrants show the bond consultant firm with expenses, so most likely there have been meetings about the enterprise funds which would require the bond consultant to validate assumptions. No council member asked about the missing enterprise budgets.

Sources of General Fund Revenue

Director Easley presented a pie chart showing the sources of the General Fund Revenue. After taxes, the next largest category is “Transfers”. $2.4 million or 15% of the General Fund budget consists of transfers from other funds as was noted in the October 16, 2017 meeting.

Implications of the Transfers

Mr. Rock explained that employees would keep track of all time spent on work for all funds. This would allow the city to keep track by fund of the employee’s time. He called this “salary splitting”.

Mayor Crosswhite asked the obvious question: has the rate study team evaluating the new rates for water and sewer been apprised of these new expenses? Mr. Rock said he would confirm.

The next obvious question is how much of a rate increase would the rate payers pay for these transfers to the General Fund. Historically, the city has transferred about $1 million a year, but now with the Sedell/Castania cost allocation model, more monies will be transferred to the General Fund as expenses, thus putting revenue pressure on the affected funds.

Revenues Chart

Director Easley showed a revenue chart where yearly revenues were stable, but in actuality revenues to the General Fund have been augmented by transfers from the enterprise funds and for the FY 17-18 period, these transfers will be larger than ever. Revenues per capita are increasing, but considering that the “per capita” includes most ratepayers, this just means that the rate payers are paying more into the General Fund. Other than taxes and fee increases, there is little net new business revenue to the city.

Vice Mayor Gherardi said the packet was “discombobled” and looked forward to monthly updates, while Council Member Hernandez praised the presentation profusely.

No Enterprise Funds Discussed or Presented

Neither the Powerpoint nor the public packet handouts included budgets for the Enterprise Funds. There is the following note in the financial report:

Sustainable Water and Sewer Programs. Staff plans to continue the water/sewer rate study in order to fund additional needed infrastructure projects. The study will be completed in fiscal year 17-18

Translated: this means rates will increase in the water and sewer enterprises.

Other Notable Budget Items

The budgeted $200,000 for a legal settlement (unknown case) was reduced to $50,000.

The General Fund reserves are way too low at $676,000. This represents only about ten days of needed funds. City Manager Rock said they are “hoping” for a legal settlement to augment those reserves.

The following statement from the budget packet reflects the stark realities of municipal government:

This General Fund Budget reflects a 5.36% increase to the budgeted cost of services
from $14.677 million in 2016-17. A significant portion of the increase represents
funding of cost increases in liability insurance and retirement costs.

Fire Annexation Assumed in FY 117-18 Budget

Although LAFCO has not yet heard the annexation presentation and various council members have repeatedly said the annexation is not yet approved, the presented budget represents costs related to the annexation and revenue adjustments.

 

For more information on author click sherylhamlin dot com


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8 Responses to Santa Paula: Creative Use of Enterprise Funds Carries City Finances

  1. rick hunter November 13, 2017 at 9:45 pm

    We the people of SP need to hire a lawyer that gives its citizens a real voice and can read through all the bullshit.

    Reply
  2. Duke R. November 12, 2017 at 3:47 pm

    Mr.Rock…SALARY Splitting…please explain what that means…do you mean salary allocations…does GAAP have a definition for salary splitting or is it a shoot from the hip response…

    Reply
  3. Duke R. November 12, 2017 at 3:33 pm

    If Vice Mayor Gherardi said the packet was “discombobled”, then why would she vote in favor…it appears she’s the one perplexed.

    Reply
  4. Duke R. November 12, 2017 at 3:28 pm

    The finance director and newly hired CM are ostensibly incompetent. Wait until Howard Jarvis gets wind of this violation.

    Reply
  5. Citizen Reporter November 11, 2017 at 2:16 pm

    Hasn’t Aaron Starr sued Oxnard over a similar issue?

    Reply
  6. Eileen Tracy November 11, 2017 at 2:15 pm

    I’m pretty sure this is a violation o Prop 218 clause that money in these funds only be used or water/wastewater expenses.

    Reply
  7. Duke R. November 10, 2017 at 2:37 pm

    I’m not so sure that what they are doing passes the smell test. Plus, Gas Tax monies for salaries…not so sure that’s legal move. What if the employees don’t log hours or don’t do any work relevant to the Enterprise fund…then how does the city pay the salary…seems like the council woman who voted no was the only one who knew right from wrong.

    Reply
  8. Duke R. November 10, 2017 at 2:37 pm

    I’m not so sure that what they are doing passes the smell test. Plus, Gas Tax monies for salaries…not so sure that’s legal move. What if the employees don’t log hours or don’t do any work relevant to the Enterprise fund…then how does the city pay the salary…seems like the council woman who voted no was the only one who knew right from wrong.

    Reply

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