Michael J. Sorba, Staff Writer
Posted: 03/19/2010 07:36:00 PM PDT
COLTON – Pricey pension packages, budget breakdowns and deep deficits have reduced or jeopardized the reserves some cities have amassed over recent years.
Both Colton and San Bernardino are struggling with dwindling incomes that have burned cash reserves to dangerously low levels.
Rialto is struggling with higher pension costs set to start July 1, which a top official has said will deplete a sizeable $31 million reserve within three years if employees don’t agree to concessions.
“I’m very sympathetic to cities right now,” said Jessica A. Levinson, director of political reform for Los Angeles-based Center for Governmental Studies. “Some are in very difficult situations.”
The lack of substantial reserves means that any significant, unexpected expenditure, like a lawsuit judgement or natural disaster, could leave the cities with a financial catastrophe.
No local city is in as bad a shape as Colton.
With a population of roughly 52,000, Colton expects to finish the fiscal year ending June 30 with a dangerously paltry General Fund balance of $55,504, which City Manager Rod Foster said will be used to establish a reserve.
In upcoming meetings, the council will decide on a new reserve policy, Foster said. He believes a responsible benchmark is a reserve that’s equal to 10 to 15 percent of a given year’s General Fund expenditures.
“That is a very auspicious goal to set for staff and, conservatively, I believe that it will probably take five to eight years to meet,” Foster said.
Colton’s reserves have been a source of scrutiny since former Finance Director Dilu De Alwis announced in August the city had no reserve.
De Alwis left the city in September to be Covina’s finance director. In December, management services director and chief financial officer Bonnie Johnson, who was hired in October, delivered a report stating about $800,000 in expenditures were left out of the 2009-10 budget the council approved in July.
De Alwis prepared that budget and has conceded he made mistakes. A recent mid-year fiscal report stated approximately $600,000 in additional spending omissions have been discovered since then.
Former Colton City Manager Daryl Parrish, who left the city in May to be Covina’s City Manager, said the city carried an IOU from the Electric Utility on its books as a reserve for several years, but it wasn’t cash. Parrish said the last time he remembers the city having a cash reserve during his tenure was 2006, but he couldn’t recall the amount.
The December report also stated the city spent about $4 million more than it took in during the 2008-09 fiscal year. Parrish said several businesses closed during the year, causing revenues to drop faster than administrators could react with staff reductions and cost-saving measures. That resulted in deficit spending.
“The sales tax was dropping quickly and the budget was based on projections that were made before that,” Parrish said. “I just can’t lay people off and cut services. It takes time to get (a plan) to council.”
San Bernardino, with a population of over 200,000, has about $1.8 million in reserves, said spokeswoman Heather Gray. San Bernardino Councilman Tobin Brinker said the city had $10 million in reserves a few years ago. Since then, deficits forced the city to draw upon it.
In the 2008-09 fiscal year, the San Bernardino council learned it would have to cut $9 million with four to five months before year’s end.
“Because of the short amount of time, that becomes an almost impossible number to cut,” Brinker said.
The city used about $4.5 million in reserves, along with layoffs and other changes to fill the hole, Brinker said.
“The danger with the reserve that we have right now is all it would take is a significant lawsuit and the reserve is gone,” Brinker said. “For us to have the level of reserve we have is not healthy.”
Brinker said the city borrowed from Development Impact Fee funds to close a $1.6 million deficit for the 2009-10 fiscal year, which ends June 30. That money will have to be paid back over the next two years, he said. That decision was made because the council didn’t want to wipe out its reserves entirely, Brinker said.
To read entire story, click here.