An interesting development happened right before the holiday began.  Councilmember John McCann made this statement to Voice of San Diego’s Scott Lewis about the former City Manager “Cooking the books.”  Our local weekly paper followed up with this story to get some clarification on the statement.  The Star News also felt compelled to get Former City Manager Dave Rowland’s reaction on this and how his colleagues reacted to the statement with this follow-up article.  The story seems to have some traction because Voice of San Diego did another follow-up piece, which you can read here.  Councilmember McCann clarified what he meant to Star News reporter Tanya McCray on 1/18/08. He said that he questioned the 2007 budget's rosy income projections (video of 6/19/07 council meeting, click on item #7) and was upset when after it was adopted as balanced he found out about a 7 million dollar deficit.

            Personally I am inclined to think that they were all just oblivious (see comment 6 by Councilman Jerry Rindone). The Finance Department according to the City Charter must give the council "a quarterly statement of all receipts and disbursements in sufficient detail to show the exact financial condition of the City." (Section 503 (f)) I am told that this has been done, but it apparently has not been fully understood by the decision makers. Apparently the influx of fees related to development, the fact that maintenance was being deferred and therefore not shown as an expense, and a lack of understanding that much of the income was not sustainable and should not be being used for on-going expenses was not made clear to the elected officials or they chose to ignore what they were told.

But a year ago, local political consultant Scott Barnett issued an analysis of Chula Vista's spending, concluding it had used too much of the one-time building fees and property tax bursts to fund ongoing expenses and had increased its debt while it had healthy growth. The city would soon feel the pain, he warned.
"It doesn't look like any of this has been heeded in any way," Barnett said. "You can't cry poverty when they just spent what they had and then some. It's a perfect, self-created storm."... Barnett, president of TaxpayersAdvocate.org, issued a grim assessment of Chula Vista's future financial health.
"I'd say they've been extremely cavalier in ignoring the warning signs in San Diego and they've been spending like drunken sailors," he said. "They could become San Diego South here."

They unfortunately did not realize that all those new houses would soon be requiring services way beyond what their property taxes would pay and chose to avoid allowing the public to vote on a mammoth Civic Center and Police Station project, but instead started building them with a combination of 88.87% Public Facilities Development Impact Fee (PFDIF) money and 11.13% General Fund money. (See agenda packet for 1/8/08 (note a lot of the money for phase one and two was borrowed, making debt service a large on-going future expense)

PFDIF (see page 11) is paid by developers to mitigate the effects of their specific projects upon the city's facilities. They are one-time funds, which funds can be spent to build (but not maintain) the Civic Center, Fire Stations, Public Buildings, Libraries, and Recreation Centers.

The same contractor and architect built the Civic Center, Public Works Building, and Police station/Jail with no bid contracts. This construction has required considerable borrowing. They are on phase 3 of the Civic Center project and have a cost over-run caused by an unexpected amount of asbestos and changes the city decided were needed. In the video (click on #9 in the agenda along the right to go directly to this item) and the packet it is stated that phase 3 would be paid for with cash, but the cash apparently comes from bonds issued previously and a proposed General Fund loan from the PDIF fund. The Council voted on 1/8/08 to appropriate the entire amount needed from PFDIF now and then borrow the General Fund's share from the PDIF account in the spring at 5% for 20 years.

On 12/18/07 this item was also #9 on the council agenda, but at that time staff's opinion was that this extra cost would draw down the PDIF fund to the point that it would not be able to service its considerable debt. Staff was asking the council to amend an ordinance to allow it to borrow $4,166,570 from the PAD fund (Park Acquisition and Development) for the PDIF fund to be paid back at 5% interest over 20 years. Possibly the story by the Turko files about the park the city could not afford to build in Eastlake caused this change of heart? (Follow up story)1/16/08 Turko. The current solution for the Civic Center does not provide furniture needed for occupancy. This is not exactly "cooking the books", but ???? It is also interesting to read our City Manager's Christmas update to Scott Lewis about the budget situation since it again has a rather confusing and dubious premise.

        The council plans to try to refinance some bonds in order to get more cash. Item 2 on Public Finance Authority Agenda for 1/22/08: 2. CONSIDERATION OF VARIOUS DEBT REFUNDING OPTIONS TO GENERATE CASH FLOW AND BUDGETARY SAVINGS TO THE GENERAL FUND AS WELL AS ANNUAL DEBT SERVICE SAVINGS TO THE REDEVELOPMENT AGENCY

As part of the Fiscal Year 2007/2008 budget balancing process, the Finance Department

has been exploring various debt-refunding options, which would generate cash flow and

budgetary savings to the General Fund. With the assistance of Harrell & Co. and E. J. De

La Rosa, the following debt refunding/restructuring options were identified as providing

cash flow relief to the General Fund and at the same time generating annual debt service

savings to the Redevelopment Agency. (Finance Director) The agenda packet for this item is not on line for some reason? Here is a copy of the agenda packet. (Scroll down to 2 under Public Finance Authority to see the video of this presentation.) Reading this packet it appears it will cost nearly one million dollars in fees to refund the bond debt of Redevelopment, General Fund and PFDIF. They hope to get a lower interest rate, but they are extending the length of the loan and increasing the amount. This certainly is a way to avoid bankruptcy, prepare for State cuts and get the cash needed for the civic center, but isn't this mortgaging the future by increasing overall debt?

 Item 8 on the agenda for 1/22/08 is a request to transfer money to hire two new employees with grant funds, which are not a dependable source of income, but it is being made clear the positions are temporary and based totally on continued grant funding.

            The Charter says that the Director of Finance will "as of the end of each fiscal year and within one hundred and twenty days thereafter, submit to the City Council a summary statement of receipts and disbursements by departments and funds, including opening and closing fund balances in the treasury, and cause said statement to be published once in the official newspaper;" (section 503 (f)) The council may have received this statement regularly, but when it has been published in the Star News it has been buried in legal notices in fine print and as a table which really says nothing.

Spending so much on a Police Station with a jail that costs the taxpayers over $700,000 over budget per year (which can't be paid for with development fees) and a huge Civic Center decimated the city's reserve fund. It also is probably the reason the Rancho Del Rey Library has not been built and probably will not be built for some time.