By Journalisto Mysterioso
Upland is a general law city. Government Code Section 36501 authorizes general law cities to be governed by a city council of five members, a city clerk, a city treasurer, a police chief, a fire chief and any subordinate officers or employees as deemed appropriate.
In 1949 the function, duties responsibilities and authority of a city treasurer were codified by the California Legislature passing into law Government Code Sections 41001 to 41007.
Under Section 41002 the city treasurer is required to “receive and safely keep all money coming into his hands as treasurer.”
Section 41003 requires that the treasurer must “comply with all laws governing the deposit and securing of public funds and the handling of trust funds in his possession.”
Under California Government Code Section 41004, the treasurer is restricted from paying out a municipality’s money to any entity other than those for warrants “signed by legally designated persons.”
Government Code Section 41005 mandates that “Regularly, at least once each month, the city treasurer shall submit to the city clerk a written report and accounting of all receipts, disbursements and fund balances” and that “He shall file a copy with the legislative body.”
Government Code Section 41006 specifies that a treasurer is to “perform such duties relative to the collection of city taxes and license fees.”
California Government Code Section 41007 states that “The city treasurer may appoint deputies for whose acts he and his bondsmen are responsible” for and that “The deputies shall hold office at the pleasure of the city treasurer and receive such compensation as is provided by the legislative body.”
It is clear from the contents and context of the California Government Code that a treasurer is intended and required to provide the city in which he serves with financial oversight, provide fiscal controls with regard to the city’s purchasing activities, carry out the necessary accounting function of government and protect the city’s treasury and the investment residents have made in their city in the form of the taxes they have paid.
In this way, the wisdom a trained financial professional can bring to bear in the role of elected treasurer is intended to benefit the city and its citizens. The quality and thoroughness of any given treasurer’s performance in his elected function comes down to the energy and intensity he is personally willing to devote to the task. Under the law, a treasurer could bring some effort to the task if he so chose, in so doing being a stern taskmaster to and exacting a check upon his city’s financial affairs. Going back more than a generation in Upland’s history, those who took on the mantle of city treasurer were accomplished and competent men in whom it was easy for the city’s residence to place their faith.
Bob Thrall was a pilot and board member of San Antonio Regional Hospital and the founding partner of the certified public accounting firm Thrall, Lavanty & Baseel. He was succeeded by Walt Reardon, a principal in the accounting firm of Mellon, Johnson & Reardon. Following Reardon was Dan Morgan, a Drucker School of Management graduate and former councilman with the City of El Monte. Though they were generally guided by the California Government Code, Thrall, Reardon and Morgan were not aggressive at all in asserting themselves as part of the governmental function in Upland. In Thrall’s case, he began in the position when Upland was a far more agrarian community, what was basically a citrus farm village. Only toward the end of his tenure did the development in earnest of Upland begin to take place. During Reardon’s tenure, heavy development in the city had begun and transformed it into less of an expanse of orange and lemon groves than into a so-called bedroom community, what had come to be regarded as “The City of Gracious Living.” By the time Morgan had become treasurer in 2008, the city was no longer a bedroom community but one that was intent on cultivating not citrus but commercial and industrial businesses that would generate tax revenue to allow City Hall to expand in keeping with the city’s population growth. Throughout this transition of Upland, Thrall, Reardon and Morgan – straight shooters, all – were content to largely entrust the city’s financial affairs to city management and the city manager’s designees in the finance department. At no time did they seek to test the envelope of their authority as Upland treasurers. They were content to allow the city treasurer’s role to remain a primarily ceremonial one. They did not use their authority under California’s law to appoint deputies, nor did they insist on going over city finances with a fine tooth comb. They would simply sign the monthly treasurer’s reports prepared by city staff. They deferred to the city manager and the city council what the best way was for the taxpayers’ money to be spent, collecting their $200 per month stipend and choosing not to make life difficult for anyone at City Hall. Such was deemed appropriate and pertinent, as the safeguards in the California Government Code seemed superfluous and plainly unnecessary in a city the size and character of Upland. At no time was funding approved and provided by the city council for the operation of the treasurer’s office.
It was during Morgan’s tenure as city treasurer that the public corruption scandal centered around Upland Mayor John Pomierski erupted.
In 2016, when Morgan opted out of seeking reelection as treasurer to instead run for city council, Larry Kinley, a retired vice president with the Bank of America, one whose function entailed overseeing for fifteen years the bank’s problem loan division, ran for treasurer. Also competing for the seat was Stephen Dunn, Upland’s former city manager, who had previously served as the city’s finance director.
Kinley handily won the 2016 election for treasurer, capturing 16,625 votes or 62.46 percent to Dunn’s 9,992 votes or 37.54 percent. Kinley’s performance in that election made him the top vote-getter among all of the city’s elected officials, including the council members and the mayor.
There was reason to believe that Kinley’s victory was a reflection of the Upland citizenry’s recognition of the seriousness of the city’s financial position, which was threatened by the growing pension debt it had accumulated as a consequence of Pomierski’s commitments to city employees in terms of increased salaries and benefits. Pomierski used his position of power to show this generosity toward the city’s employees to make sure that everyone at City Hall looked the other way while he was engaged in his violations of the public trust.
Kinley interpreted the mandate he was given by the voters as an indication that the public was anticipating that he would use the authority of the treasurer’s office to address the growing concerns about the city’s solvency.
There were multiple bases for the concern about Upland’s financial health. As early as 2012, an auditor’s opinion from the certified public accounting firm Mayer Hoffman and McCann stated that there were 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.” In 2013, Standard and Poor’s Financial Services downgraded the City of Upland’s credit rating.
Heartened by his victory, Kinley somewhat confidently took office, assuming he was going to be provided with the accommodations and authority befitting the city’s elected treasurer, and would receive the benefit of cooperation and access to the information, data and personnel assigned to the city’s finance department. In running for the treasurer’s position, Kinley’s believed a treasurer would be given license to address any issues the city is involved in financially, and that the city would naturally accommodate him by assigning one of the city’s finance division employees to him as his on-site City Hall deputy to work with the city manager. Kinley naturally assumed that he would be given a free hand to ascertain the city’s financial position and develop his calculations on how the city could meet its financial challenges. He was reinforced in this belief when he first examined the city’s organizational chart, which showed the city treasurer as answerable only to the city’s taxpayers, such that among the remainder of city officials he was the peer of the city council and city manager and the top financial authority in the city. His assumption was that all of those individuals would be receptive to his advice.
What he learned very early was that though the city manager, the city’s finance division and the city’s accounting staff were supposed, indeed were mandated by law, to support the treasurer in his function, they did not.
Perhaps Kinley had gotten on the wrong side of the city manager, Martin Thouvenell, who had formerly been the city’s police chief, and who was the recipient of the second-highest annual pension – $170,000 – provided to the city’s several hundred retirees. Prior to Kinley being elected treasurer, the City of Upland’s overall pension debt was calculated at $87 million. During the more than three years he was in office, that debt has grown to an approximate figure of $122 million. The interest accumulating on the city’s pension debt is currently calculated at $7 million per year.
Later in Kinley’s term, a new city manager, Bill Manis, was put into place. Manis continued to block Kinley’s efforts to bring up the subject of the pension debt. Less than a year later, Manis was replaced with another city manager, Jeannette Vagnozzi. Vagnozzi, like Thouevenell and Manis before her, was not willing to allow Kinley to exercise his authority as treasurer under Government Code Section 41005 and Section 41007 to appoint deputies and report on the city’s financial situation as he saw fit.
Last year, Vagnozzi was replaced by another city manager. Her replacement, Rosemary Hoerning, balked when Kinley sought to include in the monthly treasurer’s report a running tally of the city’s pension debt. Kinley was no longer willing to accept responsibility for a report he did not generate and which failed, in his view, in a critical respect with regard to the full inclusion of data relevant to the city’s actual financial condition. When Kinley insisted that the pension debt calculation be included in the monthly report, stating that he would not sign the document in the future as he had done routinely in the past unless the information about the pension debt was included, Hoerning changed the title of the treasurer’s report to the treasury report and had it signed by the city’s senior financial officer instead.
Previous to Kinley’s term in office, the city had a finance committee which counted as its members two members of the city council, the city’s finance director and the treasurer. That committee met publicly every couple of months. After Kinley acceded to the treasurer’s position, the finance committee was dissolved. Thereafter, it has remained unclear how the city’s decision-making process with regard to financial issues is carried out, as the members of the city council now hold internal and informal meetings with the city manager to discuss the city’s fiscal picture, from which Kinley and all members of the public are excluded. The city’s current mayor, Debbie Stone, who was elected to the mayoral post for the first time in 2016 with 588 fewer votes for that position than Kinley received in his race for treasurer, never consented to meet with Kinley in the more than three years and seven months that they have held their respective offices. Neither the mayor nor any of the four city managers who have held that position while Kinley was treasurer were amenable to discussing the city’s financial circumstance with Kinley.
Kinley’s pension reform concerns ran dead on into the personal interests of Thouvenell, Manis, Vagnozzi and Hoerning, who did not want to see their lucrative pensions reduced. Upon their retirements, Manis and Hoerning will be eligible for annual pensions in excess of $200,000 per year for the remainder of their lives. Had Vagnozzi remained employed with the city until the end of her contract to serve as city manager, she too would have been eligible for a lifelong annual pension exceeding $200,000. Kinley was never permitted to advocate to the city council that it create separate pension plans for the city’s management and the rest of the city’s employees. He believed such an arrangement would allow management to be objective with regard to the ballooning pension crisis.
What Kinley was seeking was a treasurer’s division that would function in accordance with Government Code Sections 41001 through 41007, which would provide him with the ability to oversee the city’s accounting function and provide his input with regard to the city’s disbursements and financial planning. That never came to pass. The treasurer’s office in the sense provided for under Government Code Section 41007 allowing the treasurer to hire and maintain an independent treasurer’s staff has not been organizationally instituted nor funded beyond the treasurer’s $200 per month stipend.
Kinley, to remain as treasurer, must stand for reelection in November.
Convinced that Hoerning, who has a three-year contract to remain as city manager, will not supply him with the support and required data for him to function under Government Code Section 41001 through Section 41007 guidelines, Kinley is not going to seek reelection. Kinley has made a last gesture aimed at forcing an examination of the city’s books and its financial picture that in three years in office he was not allowed to do. He has approached higher officials, seeking not just guidance but direct intervention that will result in a public examination of the city’s deteriorating financial circumstance. Whether the authorities he has consulted will follow through with his request and, if so, on what timetable is unknown. Nor is it known who will step forward to run for treasurer in Upland at this point, whether that candidate or those candidates will have the credentials that Kinley possessed as a former vice president with Bank of America, whether the successful candidate will content himself with serving in a ceremonial treasurer’s role, and whether Hoerning, with the backing of the mayor and the council, will accord him the same treatment that Kinley endured if he does not.
What is known is that for the last generation right up to the present, Upland has been without the benefit of the treasurer’s oversight as is provided for in the California Government Code, and the treasurer’s office remains an Abandoned Stepchild of Upland’s Municipal Government.
By Journalisto Mysterioso