With Budget Panel Failing To Reach Accord, Upland Lurches Toward Bankruptcy

(December 26)  Steadily and methodically, the city of Upland appears headed toward bankruptcy, as management in the City of Gracious Living and its newly commissioned panel of advisers appear unable to resolve differences among them with regard to less dramatic options to address the municipality’s budget crisis.
While Upland City Manager Stephen Dunn had hopes of persuading the city council to okay asking city residents to approve a sales tax to generate revenue, support for the taxing alternative is not even tepid among the members of the city’s recently-formed budget advisory task force. Going back for more than a decade, city residents have rejected every taxing proposal previous city councils in Upland placed before the voters.
Dunn appears to be unwilling or perhaps unable to make substantive cuts from this point forward with regard to staff and its accompanying payroll and benefit liability. And a host of other cost-cutting or revenue producing measures Dunn has proposed appear to be insufficient to move the city into the black.
In October, Dunn said his city was on the verge of bankruptcy and after having engaged in a series of fiscal gymnastics to balance the current 2013-14 budget, the city will require at least $3.5 million in additional revenue annually for the next five years to continue to provide city residents and businesses with the same level of service the city is currently providing.
As of October, Dunn said, the city’s general fund is hard-stretched to cover Upland’s bare operating expenses. Funding for street repairs, equipment and vehicle maintenance, post-employment benefits, equipment replacement, economic development and solutions to the city’s growing homeless problem has been entirely depleted.
Its fiscal condition is a blow to Upland’s prestige, which is the second-most affluent of San Bernardino County’s 24 cities, measured by median household income.
The general fund accounts for most of the city’s services. It funds 73 activities related to the basic function of municipal government.  Dunn said.
In October, Dunn said that the only alternative to drastic service cutbacks consisted of revenue enhancement, most specifically a tax that would need to be approved by a majority of the city’s voters. To emphasize his point and support his case, Dunn referenced a 2012 auditor’s opinion from the certified public accounting firm Mayer Hoffman and McCann and 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 to the point that in a short while “it will be unable to continue as a going concern.” According to Standard and Poor’s, the city, which has already been downgraded from an AA credit rating to an A+, is in danger of seeing its credit rating eroding even further. A municipality’s credit rating directly impacts the interest rate it must pay when borrowing money.
To balance the city’s current $39 million budget, Dunn said Upland’s entire municipal operation is borrowing heavily 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.
The upshot of Dunn’s presentation was to convince the council to consent to placing a tax measure before city voters next year, either on the June primary ballot or during the November general election.  The council, however, shied from embracing on its own authority the taxing solution and instead created a budget balancing task force committee, consisting of two members appointed by each council member. The stated intent of the ten-member committee is to examine the full range of means by which the city is to come to terms with its fiscal crisis and then provide recommendations.
Only reluctantly did Dunn accept the formation of the committee and there have already been indications that some of the committee members are strongly in favor in moving in a direction Dunn did not want to go, namely wholesale layoff of staff.
The disagreement over which path the city should take out of the financial abyss is a fundamental one.
One contingent is calling for the city to embark on cost cutting efforts including streamlining and making more efficient its processes and functions and eliminating services and redundant or nonproductive personnel. Another school of thought advocates the city generating revenue to sustain the current level of service, its current payroll and preparing for future retirement obligation costs.
Those seeking firings, layoffs and streamlining maintain City Hall is bloated and manned by a number of employees who have been disloyal to the community and its taxpayers. This is an outgrowth of the expansion of city staff during the first decade of the millennium, as well as concessions made to the city’s employees’ bargaining units during the tenure of former mayor John Pomierski, who was heavily supported by all of the city’s employee unions. Under Pomierski and his hand-picked city manager, Robb Quincey, the city increased salary and benefit packages for employees markedly. Subsequently, Pomierski was indicted by a federal grand jury for his involvement in a political corruption scheme that involved his taking bribes in exchange for using his influence as an elected official to forge backroom deals and arrange favorable outcomes for individuals and businesses with projects or applications being processed at City Hall. Pomierski pleaded guilty and is now serving a sentence in a federal penitentiary. Quincey has been indicted and charged with three felony corruption charges, including unlawful misappropriation of public money, gaining personal benefit from an official contract, and giving false testimony under oath. He has pleaded not guilty and is maintaining his innocence.
This complex of circumstances has led to open expression by some Upland residents that the runaway labor and pension costs that are plaguing Upland are vestiges of the ethos of public trust violations that occurred under Pomierski and Quincey. The implication is that employee contract terms favorable to Upland’s city employees were given to bind those employees to the mayor as part of an understanding and arrangement which allowed Pomierski’s depredations to take place. In plain terms, many believe the generous salary and benefit packages city employees are now getting were provided to those workers because they were willing to look the other way while Pomierski and his cronies enriched themselves. For that reason there is a reluctance on the part of a sizeable contingent of Upland’s residents to impose on themselves any municipal tax that will be used to pay for the perpetuation of generous pensions for retired city employees.
A manifestation of this attitude came in the form of two recommendations by budget task force committee member Robert Nelson, a certified public accountant appointed by councilman Glen Bozar, who suggested that the city impose a hiring freeze and that it freeze wage increases.
Dunn opposed both moves, stating that “The appearance of going to the employees to correct the city’s fiscal position will affect morale, cause better employees to leave, and make it difficult to recruit quality candidates” and “A further reduction in the city workforce will slow response times to our citizens.”
Dunn has also rejected several other recommendations made so far by the task force, including: ending acceptance of stray animals from surrounding communities into Upland’s animal shelter; combining the police and fire department’s dispatch services; selling the city’s cell towers, which currently generate annual revenue of roughly $200,000, for $2.775 million; increasing the rate the city charges to lease its cell towers; selling the fire department’s ladder truck, which is valued at roughly $600,000, for the approximately $50,000 the market will bear; selling Old St. Mark’s Church and the surrounding property it occupies on 18th Street for between $804,000 and $1.263 million; selling Upland’s interest in the Whispering Lakes Golf course for approximately $1 million; asking voters to approve a lighting and landscape maintenance district to generate as much as $2.5 million per year; asking the city’s voters to approve a special parcel tax for public safety, the library or street maintenance; creating new fees for existing city services now rendered for free, generating as much as $380,000 annually; imposing labor concessions on employees; eliminating the city’s quarterly newsletter to provide a savings of $3,000 or simply turning it into a web-based publication; outsourcing the fire department; closing a fire station; eliminating the fire department’s paramedic program; outsourcing the police department; regionalizing the police department by merging with the Ontario or Montclair departments; eliminating the city’s recreation division; eliminating the city library; reducing library hours; and eliminating the city council members’ benefits.
Dunn did, however, recommend considering outsourcing the management of the library; regionalizing fire service through a merger with the Montclair Fire Department;  “browning out“ a fire station during times of lesser risk; outsourcing development services;  outsourcing fleet maintenance; outsourcing street maintenance; outsourcing engineering services; eliminating the position of the facilities maintenance superintendent; seeking, during labor negotiations, concessions from the city’s employee unions; reworking the city’s contract with Burrtec for trash service; privatizing the management and operation of the city’s water and sewer assets; asking voters to up business license fees; asking voters to approve a half cent sales tax; selling the city-owned parking lot at the southwest corner of C Street and 3rd Avenue; raising water rates; and negotiating the conversion of pension plans with the city’s employee unions.
With little or no prospect that the options Dunn is recommending will make up the $3.5 million in additional annual revenue or operational cost reductions he is seeking, the city appears to be inexorably moving toward exploring, if not outright embracing, a municipal bankruptcy option.
Committee member find daunting the consideration that the state’s public employees’ retirement system will require Upland in the upcoming 2014-15 fiscal year  to increase by $1.5 million the $6.5 million it is already currently paying annually into its employees’ pension fund.  Actuarial tables show that virtually any increase in revenue the city is likely to experience in the future will not go to increasing or even sustaining services but to covering increases in pension payments. .
The Sentinel has learned that at least four of the budget task force members are entertaining the concept of a city bankruptcy filing. Three others did not appear to flinch when the idea was broached.
One committee member stated that such a filing seemed inevitable, given city management’s inability to rein in current personnel and future retirement costs, which account for nearly 80 percent of the city budget. Another member said a bankruptcy filing would prove “cleansing,” allowing the city to dispense with impediments it has accumulated over the past decade-and-a-half, including commitments made during the Pomierski regime to city labor unions which were the heaviest donors, collectively, to the political campaigns of the city’s council members.
Current municipal bankruptcies, including those in Detroit and San Bernardino, have explored heretofore uncharted fiscal territory, including reducing pension payments to retired employees.

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