Adelanto On The Treadmil To Bankruptcy

(May 22)  ADELANTO—The city of Adelanto appears to be set on an  inevitable course to become the second municipality in San Bernardino County to file for bankruptcy protection.
Two years ago, San Bernardino, the county seat and the largest city in San Bernardino County, filed for Chapter 9 bankruptcy protection.
And while Adelanto’s leaders are casting about for ways to keep the city of 27,139 afloat financially, there have been increasingly poignant indicators that the fiscal battle in the desert city is being lost.
Mayor Cari Thomas, city manager Jim Hart, and finance director Onyx Jones have been seeking for more than a year to formulate a strategy to redress the hemorrhaging of red ink at City Hall, but have so far been unable to do so.
As the economic downturn of 2007 continued into each succeeding year, Adelanto was as hard hit as any of the cities in the county, with the possible exceptions of San Bernardino and Grand Terrace. For five years Adelanto managed to stagger forward, but as the end of fiscal year 2012-13 approached last June, city manager Hart dispensed with any pretense that the city could truly balance its budget.  Projecting the city would end 2012-13 with a $2.6 million general fund deficit, Hart prepared an item calling for the declaration of a fiscal emergency, clearing the way for a citywide vote with regard to creating a taxing mechanism. In the meantime, the city council passed a budget for the 2013-14 fiscal year calling for spending more than what Hart knew would be available in income but provisionally balanced upon the use of reserves.  That budget projected revenue and transfers of $17,488,513 and expenditures of $17,487,446.
City officials pinned their hopes on city residents’ willingness to pass a utility tax.  A phone poll of a cross section of city residents, however, indicated that the prospect of the tax’s passage was marginal, at best. City officials had hoped to put the tax measure on the ballot this June but have since opted for shooting for a vote in November, by which time they hope to carry out an “informational campaign” to convince city residents to approve imposing the tax on themselves.
During her state of the city address in February, Thomas fired the first salvo in that effort, stating that if the tax is not approved, the city will need to consider a bankruptcy filing.
A month later, however, Thomas tempered that alarmist rhetoric, declaring that a scouring of the city’s books and review of its accounts showed that the city would remain solvent, albeit while relying to a degree on the use of reserves, through the end of fiscal year 2014-15 in June 2015.
Simultaneously, city officials are still plugging the utility tax, one that as currently proposed would entail a surcharge of 5.95 percent to 7.95 percent on residential and business utility bills.
In the meantime, the level of city services are diminishing and infrastructure maintenance, repair and construction are being neglected or outsourced. In the arena of wastewater recovery, the city joint ventured with a Costa Mesa-based company, PERC, for a $14 million expansion of its wastewater plant. That arrangement involved the use of Adelanto Public Utility Authority bond funds to finance that undertaking, though carrying the program forward became mired in problems with the shuttering of redevelopment agencies statewide in 2011-12. The city council voted in February 2012 to have PERC, a water infrastructure company that designs, constructs and operates water recycling facilities nationwide, take over the operation and maintenance of the city’s wastewater treatment facility and to design an expansion of that facility. That entailed increases in the sewer service rates paid by city residents and business operators.
Last year, Hart revived talk of outsourcing the city’s water department, again referencing PERC as the logical inheritor of the water system. Hart has calculated that the city could save money by transferring city water division employees to PERC’s payroll. This would avoid layoffs and reduce city costs. The water division employees would very likely stay at the same salary level. The downside would be that benefits to those employees would be reduced and city residents would end up paying higher water rates.
Adelanto, which formerly had its own police department, dissolved that operation in 2002 and began contracting with the sheriff’s department for law enforcement service. In entering into that contract, the city gave up the ability to internally control the cost of providing that essential service. In recent years the city has trimmed staff by  23 percent, or 19 positions, and diminished the coverage provided to city residents and businesses under its public safety service contracts as part of its attempt to remain solvent. More than fifty percent of the city’s budget is eaten up by its current contracts with the  San Bernardino County Sheriff’s Department and the San Bernardino County Fire Department.
Overall in 2012-13, according to Jones, the city reduced its expenditures by $2.5 million and has carried those economies over into the present budget, which expires on July 1.
City officials point out that the city is at an inherent disadvantage with regard to its tax base. The deal the city brokered with the county years ago for distribution of property tax revenue among all of the cities governmental agencies provides the city with just 1.75 percent of the amount of money collected, such that the city sees only about $200,000 per year in property tax revenue. In the mid-1990s, the state of California instituted the so-called Educational Revenue Augmentation Program, which confiscated tax revenue from cities that had redevelopment areas in place.
By its declaration of a fiscal emergency last year, the city triggered a provision in state law that will allow it to place a general tax measure on the ballot that could be approved by a simple majority of voters rather than the otherwise required two-thirds majority.
The ballot measure city officials are proposing would impose roughly a $20 per month per household increase on utility bills. Those residents who did not pay it would run the risk of having their utilities turned off or in the alternative, have liens recorded against their properties, which after three years could result in the tax sale of their homes to satisfy the arrearages.
Last week, Adelanto city officials tried to put on a brave face once again, but moved yet closer to an anticipated bankruptcy filing by hiring Orange-based Urban Futures, Inc. as a consultant to deal with its burgeoning fiscal crisis.
Recently, Urban Futures guided the city of Stockton with regard to its bankruptcy filing. Adelanto city officials sought to suggest that the retention of Urban Futures, at an initial cost of $30,000, was a ploy to avoid bankruptcy.
Councilman Jermaine Wright, however, was skeptical about that claim and he insisted that Hart and Jones could provide the information and direction Urban Futures can offer by merely “reading a spreadsheet. We don’t need consultants to tell us we’re broke,” he said.

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