Questions emerged this week about the integrity of financial oversight, and staff oversight of municipal operations in general, at Upland City Hall. This came after the city’s assistant city manager offered a far more confident assessment of the city’s financial circumstance than was envisioned in the current fiscal year’s budget, than previous recent surveys of the city’s fiscal performance indicated and in defiance of the reasonable expectations of what the drastic downturn in revenue the city is experiencing as a consequence of the COVID-19 pandemic is doing to the municipality’s bottom line.
Several regular observers of Upland city government, who include those with a solid understanding of the shaky financial footing the city has been on for nearly a decade as it struggles to deal with the escalating cost of providing pensions to retired city employees, believe Assistant City Manager Stephen Parker’s presentation of the first quarter budget review for Fiscal Year 2020-21 was shaded for political purposes. Specifically, it was suggested, the sanguine picture Parker painted of how the city’s financials balance may have been altered and calculated to benefit the electoral chances of the two city council incumbents involved in next Tuesday’s election.
Both Mayor Debbie Stone and Councilman Bill Velto are running for mayor, and are attempting to fend off challengers Lois Sicking Dieter and Alexander Novikov, as Sicking Dieter is surging in the polls.
Upon adopting the 2020-21 Fiscal Year budget, which runs from July 1, 2020 until June 30, 2021, the council scheduled utilizing at least $2.1 million in its reserve funds to bridge the gap between the revenues it anticipated it would realize in that 12 month span and the amount of money that it would need to spend on city operations during that same period.
During Parker’s presentation at Monday night’s Upland City Council meeting however, he stated that based upon the city’s overall financial performance in terms of where it had actually ended at the close of Fiscal Year 2019-20 on June 30 and incoming revenue in July, August and September, the city is safely out of the economic doldrums.
The city’s reserve funds have miraculously increased by $5.5 million, such that the city has salted away 37.8 percent of its general fund into accounts that are not being tapped, Parker said. The city’s current reserves exceed what the city had in that regard going back many years, Parker said.
Parker’s presentation had a staged quality to it.
“Despite being in the middle of a pandemic, Upland’s financial picture has become much brighter in the four months since we adopted the Fiscal Year 20-21 budget,” he said, asserting “Revenues ended last year more than $5 million higher than projected. Sales tax came in $950,000 better than the previous estimates by HDL, the city’s sales tax consultants. While that revenue that came in was still $1 million lower than the original 19-20 budget, it was much stronger than anticipated, as many companies found innovative ways to keep their businesses open during the pandemic.”
The city pulled a rabbit out of its hat, Parker said, by means of some sly bookkeeping. One stratagem involved, he said, was “cost allocation,” which boils down to how the city juggles payments to, from and among its internal programs. The city had a city consultant, Willdan Financial Services, write up a cost allocation plan and exploited that to yield a line item in its budget it could call either savings or income, Parker said.
“The cost allocation plan summarizes in writing the methods and procedures the city uses to allocate costs to various programs, grants and funds,” he said. “The results of the cost allocation plan increased reimbursement to the general fund from six special revenue and enterprise funds by almost $800,000 in Fiscal Year 19-20. Staff is recommending a corresponding budget adjustment for the affected funds for 19-20.”
With Fiscal Year 2019-20 ending far less disastrously than it was thought it would, the city had a head start going into 2020-21 it didn’t previously recognize it had, Parker said.
Money has just been pouring into city coffers, he said. Sales tax revenues beat previous estimates by $953,310, he said, and it is now projected that the city will experience sales tax revenue $1.2 million higher than was projected at the outset of the current fiscal year. Property tax revenue went beyond what was anticipated by $942,849, he said.
Parker stated, “Four line items in the licenses and permit area beat budget by large amounts, building permits by $117,000, electrical permits by $167,000, public works construction permits was up $693,000, and other permits was $89,000 higher.”
In addition, according to his report, planning fees increased by $55,360, building plan check fees were up by $85,345, building department fees exceeded expectations by $273,926 and engineering fees were $153,571 greater than was projected.
Additionally, staff vacancies have reduced city outlays by $332,368, and the city has recently received a federal CARES Act grant of $539,412, he maintained.
Accordingly, the city’s unassigned fund balance has jumped to $16.4 million from $11.4 million, Parker insisted.
All this left Stone and Velto gloating about what a great job they are doing managing the city’s finances.
Others dryly observed that much of what Parker was basing his confident assessment on consisted of smoke and mirrors, what was essentially a reframing of the figures already in the budget in their most flattering light. They noted Parker gave himself some leeway in case his credibility is questioned, with a veiled disclosure at the beginning of his report. “I’d like to point out before we begin that the figures provided in this presentation are unaudited and likely to change in the comprehensive annual financial report once the auditors complete their fieldwork,” he said. “I do not anticipate them changing in a material fashion.”
-Mark Gutglueck