Begin forwarded message:

> From: Henry Riggs <hlriggs@comcast.net>
> Date: January 30, 2007 2:34:23 PM PST
> To: "Boesch, David S" <DSBoesch@menlopark.org>
> Cc: "Boyle, John C" <JCBoyle@menlopark.org>, "Augustine, Carol T"
> <CTAugustine@menlopark.org>, "Robinson, Heyward G"
> <HGRobinson@menlopark.org>, "Fergusson, Kelly J"
> <KJFergusson@menlopark.org>, "Cohen, Andrew M" <AMCohen@menlopark.org>,
> "Seymour, Audrey" <ASeymour@menlopark.org>, "Cline, Richard A"
> <RACline@menlopark.org>
> Subject: Re: late budgets and the UUT
>
> David,
>
> Thank-you for the in depth review of the process. This information
> assists my understanding; it also confirms that timely, useful information
> is not available to council. Regarding the UUT, it confirms that accurate
> information has not been available to the public, we who were lobbied to
> support a new tax.
>
> I take issue with the claim that we were told there was a 400K shortfall
> (05-06) as the basis of YC/YD, or that it was a generalized problem. Let
> me quote from the BAC mailer dated September 2005: in the front page
> summary bar (and I here duplicate the graphics) it says:
>
> Your City/Your Decision
> in Brief
>
> The Problem
> The City of Menlo Park faces a $2.9
> million budget shortfall in 2006-07.
>
> The solution sought was to be a permanent answer, but this wording is
> quite clear that the gap is for the fiscal year.
>
> David, I participated in the YC/YD, preparing myself before the meeting,
> attending the full session and working with my table to make a
> recommendation, as requested. We together located $1.9M in savings, and
> very reluctantly concluded that some form of tax was needed to fund the
> last $1.0M annually. This it turned out was a typical conclusion at YC/YD
> tables.
> It would seem that our typical conclusion for a tax was reached on
> incorrect information.
>
> As for the accounting process, the council deserves information that is
> more current than six months after closing. Every department is
> responsible for its budget, and with asterisks for receivables outstanding
> can give a trial balance within weeks of June 30 closings, which could
> then be collected and given to council as a hedged range, e.g. "we expect
> FY revenues to exceed costs by 0%-10%". Evaluating a fiscal status should
> not be simply deferred to a consulting auditor's schedule. That we
> corrected from the negative $2.9 told the public to 800K in December, then
> a surplus of $1.6M clarified as one-time windfall is too wide a window.
> That the 1.6M at the last minute gains another $2 million-plus is very
> hard for a citizen and voter to accept. Again, we voted in November to
> solve an advertised shortfall that didn't exist as of June 30. (This
> misfortune is now in the hands of Council.)
>
> In the big picture, the budget summaries we see need to be timely, but
> also to be stated against constants. There should be a line item for all
> city responsibilities, and where the item is unfunded - as our roadways
> were for all those years - the shortfall should be more evident than a
> comparison to the last ill-funded year. Where money is borrowed from the
> reserves, ditto. Any budget can "balance" by failing to honor
> commitments, borrowing, etc. - sometimes this is necessary, but we need to
> see that. I don't believe the process worked this year.
>
> Henry L. Riggs
>
>
>
> On Jan 22, 2007, at 4:23 PM, Boesch, David S wrote:
>
>
> Mr. Riggs-
>
>
>
> I apologize at the outset for the length of my reply, but feel that
> it is important to provide a reasonably comprehensive answer to your
> recent email.
>
>
>
>
> The City of Menlo Park has long been recognized for its prudent and
> progressive financial management practices. In fact, the City's
> extraordinary credit rating and receipt of numerous awards is testimony to
> this fact.
>
>
>
>
> The budget that is adopted by the City Council to start the fiscal
> year is recognized as a set of estimates, particularly with respect to
> revenues that are estimated far in advance and are influenced by a variety
> of factors. Expenditures are forecasts based on planned services and
> projects along with assumptions about staffing levels, utility and other
> variable costs. The 2005-6 Adopted Budget was essentially a carryover of
> the previous year, since the Council was in the midst of the Your
> City/Your Decision (YC/YD) community engagement process. As decisions
> were made about service reductions and fee increases, some were
> implemented immediately and positively impacted the year-end closing, and
> others were incorporated into the current fiscal year budget for 2006-7.
>
>
>
>
> I need to clarify that the deficit for 2005-06 was never projected
> to be $2.9 million. We always acknowledged that there are ways to avoid
> deficit spending in a single fiscal year - some of which were employed in
> 2005-06, like not funding infrastructure or certain liabilities we know to
> be outstanding. $2.9 million was the long-term structural imbalance that
> was identified if the City did not implement some more deficit-reduction
> budget strategies. YC/YD budget strategies were made more difficult in
> light of the fact that we had been cutting the General Fund budget the
> previous 5 years. The need for a UUT was not be tied to one year of
> operating results, but was instead one of the alternatives identified for
> solving the long-term challenge of balancing expenditures with revenues.
> Going forward, it will be necessary and important for us to identify what
> portion of the 2005-6 surplus is on-going, and what portion is the result
> of departmental vacancies and other one-time savings.
>
>
>
>
> The last couple years, we implemented a mid-year review at which
> time staff updates both revenues and expenditures year-to-date, and
> projects those through to the end of the fiscal year. In fiscal year
> 2005-2006, the adopted budget originally anticipated a deficit of $800K,
> but the mid-year adjustment revised this downward to $400K. When we
> presented the FY2006-2007 Budget for adoption, we were explicit about our
> assumptions, the fact that the budget is built on best estimates, and that
> we knew that our fiscal year end would reflect that the deficit had
> further shrunk to the point where little or no drawdown from the general
> fund reserve would be required. This was due to savings resulting from
> staff turnover and other belt-tightening measures, including certain YC/YD
> strategies, as well as some revenues exceeding earlier estimates.
>
>
>
>
> In October 2006, we received the preliminary results of the auditors
> field work. Even though the fiscal year ends on June 30th each year, it
> typically takes us until mid-August to close out accounts payable and to
> update balances for all of our different funds. The auditors begin their
> review in September and present their initial findings in early to
> mid-October. Even though their letter to the City is dated October and
> reads as if their work is done at that point, the City's Finance Director
> takes that information and begins her process of reviewing and discussing
> their findings, which lasts until early December. At that point, she
> drafts the Management's Discussion and Analysis, reviews that with the
> independent auditor and I work with her on the transmittal letter. The
> final CAFR is put together and transmitted to Council by the end of
> December, in accordance with government accounting practices.
>
>
>
>
> This year, we added a step, in light of the preliminary information
> received from the auditors in October, while the audit was still in
> process, and in response to the Council's expressed concern regarding the
> accrued Other Post Employment Benefits (OPEB; essentially, the City's
> obligation to pay retiree health insurance) liability. Staff presented a
> report seeking Council approval to allow an adjustment in closing the
> fiscal year 2005-2006 financial report with an $800K designation for the
> actual cost of the City's OPEB expense and prorated liability for that
> year. In addition, staff recommended that the Council amend the current
> year budget by transferring an additional $800K to cover this year's OPEB
> expense and liability. The combined $1.6 million was to come from the
> identified FY2006 year-end surplus. At that point in time, based on the
> audit information available, we were confident that there would be at
> least that much as a surplus. We did not know, however, until after the
> audit review process was completed that that figure would be as large as
> was finally reported in the CAFR as $3.7 million.
>
>
>
>
> Staff has met with Council Member John Boyle on several occasions to
> answer his questions and provide clarification about what was known when,
> and how the City's practices compare to the private sector. Like we did
> several years ago when we added the mid-year review and budget revision
> step, there may be opportunities in the future to provide periodic updates
> to the City Council to keep it regularly informed. Staff has planned an
> extensive update for the City Council on February 6th, at which time we
> will present specific revisions to the current fiscal year budget. This
> step is part of our ongoing commitment to provide to Council the best,
> most current financial information that is available.
>
>
>
>
> -----Original Message-----
>
>
>
> From: Henry Riggs [mailto:hlriggs@comcast.net]
>
>
>
> Sent: Friday, January 19, 2007 12:11 AM
>
>
>
> To: city.council@menlopark.org
>
>
>
> Subject: January Surprise
>
>
>
>
>
> Council members,
>
>
>
>
> The timing of last week's revelation that our projected, serious
> budget
>
>
>
> shortfall is instead a significant surplus is most disturbing. Two
>
>
>
> months ago, citizens just barely passed a new utilities tax based on
>
>
>
>
> the city's dire warnings of another round of service cuts; in the
> first
>
>
>
> meeting of the current council the tax was set at its maximum
>
>
>
> percentage rate on staff recommendation.
>
>
>
>
> Most of us are keenly aware of the degrading of our play areas, city
>
>
>
>
> landscaping, paving, etc. as money was withheld all year from the
>
>
>
> maintenance of our facilities, indicating a serious need for funds.
>
>
>
>
> That a quarter of the surplus was "unanticipated" real estate and
> sales
>
>
>
> tax is hard to believe - our local economics are not secret and real
>
>
>
>
> estate values are available monthly on the web. To go from a $2.9M
>
>
>
> deficit to $3.7M surplus is a swing of 20% of the whole budget.
>
>
>
>
> Please plan to address this at the next council meeting. This is
> not a
>
>
>
> minor issue, and as much as any issue in our city deserves a full
>
>
>
> public airing in the name of open, responsible government.
>
>
>
>
> Henry Riggs
>
>
>
> Callie Lane
>
>
>
>
Received on Tue Jan 30 23:37:41 2007