(January 23)  The Upland Fiscal Task Force Committee has completed its analysis of the financial crisis facing the City of Gracious Living without arriving at a definitive strategy for stanching the hemorrhaging of red ink onto the city’s ledgers, instead giving the city council a smorgasbord of choices on measures to make incremental inroads into Upland’s future deficits.
Four members of the task force will present the committee’s analysis  to the city council at the January 27 city council meeting. Those findings will be based upon a written report, now being authored by task force member Anthony Ghosn.
The decision to form the committee came in October, when Upland City Manager Stephen Dunn told the public and the city council that the city was functioning with a balanced budget but was on a collision course with fiscal reality in coming years. Dunn said the city’s financial circumstance is bleak, as is indicated by a 2012 auditor’s opinion from the certified public accounting firm Mayer Hoffman and McCann as well as the financial rating company Standard and Poor’s intended downgrading of the city’s credit rating. Mayer Hoffman and McCann said there are serious questions with regard to the city’s solvency and Standard and Poor’s had already downgraded the city from an AA credit rating to an A+ and was considering downgrading its credit rating even further. A municipality’s credit rating directly impacts the interest rate it must pay when borrowing money.
The city’s currently balanced $39 million budget is being held together by means of heavy borrowing from rapidly evaporating reserves, while relying on income from two of the city’s enterprise funds which remain in the black, its water and sewer service funds, Dunn said.
Years of deferred maintenance are beginning to catch up with the city, Dunn said, pushing it to a point beyond which it will no longer be able to stave off those problems into the future, as potholes, streets and dilapidating equipment are being neglected, funding for promised post employment benefits is non-existent, and no programs are available for attracting businesses into the city or dealing with the city’s burgeoning homeless population.
The city council chartered the fiscal task force committee with finding solutions to the city’s financial challenges.
With the specter of bankruptcy looming over the city, the task force went to work. Based upon the tenor of the comments made during the course of the group’s meetings on December 5, January 11 and January 18, four of the group’s members appeared to be less sanguine about the prospect of the city’s ability to fashion workable fixes to the city’s gaping financial hole than the other six. Ghosn, who was appointed by councilman Brendan Brandt, attorney Robert Gaudy, who was appointed by Mayor Ray Musser, and certified public accountants Bob Nelson and Steven Spears, both appointed by councilman Glen Bozar, were highly skeptical of proposals to right the city’s listing financial ship by means of a taxing proposal, either in the form of a utility tax or sales tax, on the grounds that it would be regressive if passed and would potentially prove counterproductive by prompting businesses to leave town, residents to shop elsewhere or new businesses to avoid setting up in Upland. They also questioned whether the city’s residents would consent to such a tax if an election to impose it were held.
Nor did the quartet readily embrace a proposal for the city to sell off, lease long term or in any other fashion privatize its water division, a move which would generate a considerable amount of cash immediately and would redress much of the city’s current deficit spending, but would provide only a one-time infusion of funds and would result in saddling the city’s residents with astronomical water and sewer service rates to provide the private company involved in the takeover with a profit for its part of the undertaking.
And collectively, Ghosn, Gaudy, Nelson and Spears appeared to be convinced that the only two viable paths out of interminable fiscal turmoil for the city consisted of either bankruptcy or radical cuts in the number of municipal employees and commensurate reductions in the salaries and benefits to the employees that would remain after the bloodletting.  The main thrust of Ghosn, Gaudy, Nelson and Spears’ assertions was that whatever savings and revenue enhancements could be had from the other considered measures, they simply would not be enough to redress the city’s financial problems, given that 68 percent of the city’s operational and existential costs consist of payroll and the provision of benefits and pensions. Nelson, in particular, propounded the argument that the city needed to get a handle on and reduce its pension commitments at once to head off the further deterioration of the city’s financial picture in the future, when more and more of its current employees will join the ranks of the retired.
Despite the dire projections of what it would cost the city to ignore the hazard of maintaining its current manpower levels and labor cost structure, the committee rejected what Nelson felt was a modest but needed proposal to impose a hiring freeze.
Over its two-month active life, the committee looked at 47 different proposals to help cure Upland’s budget ills. Seventeen of those, such as the hiring freeze, imposing labor concessions on city employees or eliminating benefits for the entire city council and treasurer, were rejected. But thirty of those were deemed to be worth either pursuing or further study. In the end, through a selection process by which the task force members were able to essentially vote on their top ten choices, ten cost cutting or revenue enhancing provisions have been earmarked as recommendations to the city council. Those recommendations are not binding, and the council will be free to consider those options which did not make the top ten cut.
The ten top recommendations are: seeking voter approval of a half-cent sales tax, contracting out or privatizing sewer and water service; reductions in the operation of the fire department, including a brown-out of its least used station and selling its ladder truck; renewing the city’s trash contract to generate revenue  the city is not currently receiving; contracting out fleet maintenance;   updating the city’s business license tax schedules; reopening labor contracts; “regionalizing” the police department; combining police and fire dispatch; and outsourcing the animal shelter.
Other money-saving ploys accorded a lesser priority were outsourcing library management as well as the planning, building and engineering departments and information technology functions.
While Nelson, Spears, Gaudy and Ghosn expressed varying levels of disappointment over the task force’s lack of willingness to embrace a much tougher program of austerity for city operations, with each hinting a belief that the city would not be able to turn a corner in its footrace with financial disaster and the possibility of being confronted with bankruptcy down the road, all appeared to be willing to stay on the reservation by endorsing the overall committee’s final recommendations to the city council. Gaudy, who early on both privately and publicly opined that the city appeared to be on the treadmill to bankruptcy, later in the process considered but ultimately rejected asking the committee to consider a 48th option in the form of considering declaring bankruptcy. Ultimately he elected against that course, not wanting to saddle the council member who had appointed him, Mayor Ray Musser, with the legacy of bankruptcy.
On January 27, the committee’s recommendations will be presented to the council by four of the task force members. Three of those – former Upland Mayor Richard Anderson, former Upland Police Chief Marty Thouvenell and Randall Lewis, Upland’s most successful businessman – will represent the more optimistic and numerous members of the task force who believe the city can cure its ills and stave off bankruptcy by means of the nostrums they are recommending. Only one of the pessimistic wing of the committee – Ghosn – will be among those making the presentation.
Ghosn’s perspective – and that of Gaudy, Nelson and Spears – will thus at some level be insinuated into the information presented to the council. Ghosn, a managing director at Worldbridge LCC where he works on pre-bankruptcy preparations involving multimillion dollar corporations, will make that dissenting perspective available through the written report he is to present. The Sentinel has obtained an early tentative draft of Ghosn’s report, which features subtle language intended to drive home the point that the city of Upland is not out of the woods yet and cannot hope to simply shake off the fiscal doldrums with measures that nibble around the edges of a huge problem.
“The city of Upland currently holds a qualified opinion regarding ’its ability to continue as a going concern’ as stated in the  auditor’s letter for the 2013 consolidated annual financial report,” Ghosn’s draft states. “This is a serious matter in need of comprehensive, thorough and orderly attention from an operational and financial perspective across all departments, funds and related entities within the city of Upland.”
The report then calls for a “remediation plan to correct the city’s current financial condition with sustainable and balanced action, revenue enhancement, cost containment policy and asset reallocation.” Ghosn pulled no punches in declaring “the city of Upland finds itself in this situation for the second time in 12 years and the third time in 20 years. Each time the conditions have worsened, creating the death spiral of an organization and its viability to constituents and others stakeholders. A new workout plan is now required to avoid bankruptcy and reorganization. Quick fixes will put us back in the same boat.”
The only way the city can climb out of its financial abyss, Ghosn suggested, is through “reallocating assets and effectuating a cultural change among municipal staff.”