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Facing echoes of the procedural trainwreck that derailed adoption of the city budget in summer of 2020, the South Pasadena City Council on June 7 unanimously rejected a staff recommendation to approve the 2023-24 budget, voting instead to send it back for further review by the Finance Commission at a meeting now set for 6 pm on June 12.
The vote came in response to a combination of new information, recommendations and small but last-minute adjustments presented by Interim Finance Director John Down, combined with sharp testimony from Finance Commission members worried that ongoing deficits in a set of special funds create too much uncertainty about the budget’s sustainability.
The mood grew more tense when a dispute emerged over the extent to which city officials had assured Finance Commission members they’d have an opportunity to raise their concerns during the Council meeting, highlighted by a stiff exchange between Mayor Jon Primuth and Finance Commission Vice Chair Sheila Rossi.
When the meeting opened for public comment, City Manager Arminé Chaparyan said Finance Commission Chair Peter Giulioni Jr. had submitted a request to speak on behalf of the Commission, but noted he was not present. She also said Council Member Janet Braun, the Council’s liaison to the Commission, had suggested commissioners be allowed to “come in and speak tonight.”
Mayor Primuth said commissioners could speak, but only under ordinary public comment rules that limit speakers to three minutes.
“This is not the direction we were given,” said Rossi, noting she’d spent hours preparing a presentation, and who’d engaged in considerable back-and-forth with city officials over how Commission members would be able to address the Council–including a nearly two-hour meeting with Primuth earlier that day. She said commissioners were told they’d be allowed answer questions and “speak in a way in which there is a dialogue going back and forth” with the Council.
“I run the meetings,” Primuth replied testily. “I’m the Mayor. None of that was run through me. So we’re going to have it as public comment.” He noted the Commission had a four-and-a-half hour meeting that “was recorded and there’s video.” (The Mayor appeared to be referring to the Commission’s May 16 meeting; by the time of the Council meeting, no recording had been posted of the June 1 Commission meeting during which it voted on the budget.)
Outgoing City Attorney Andrew Jared, in his last public act on the Council, said a joint meeting with the Finance Commission was not publicly noticed, so honoring Rossi’s request would have been a violation of the Brown Act.
Rough Start
After the Council meeting agenda and draft budget were noticed and posted, Downs submitted five separate updates, including a resolution memorializing various budget policies, a description of funds, a correction about the Finance Commission vote, a set of last-minute general fund adjustments, and additional information about the Finance Commission’s June 1 contingent approval of the budget. Most of the memos were dated after the Commission meeting.
More problems emerged after Downs opened his presentation. He began saying everything in the budget “was built from scratch.” He called the Finance Department’s month-long engagement process—during which many substantial changes in revenue projections and fund transfers were made–“very transparent” and collaborative, having involved all departments, a lengthy City Council workshop, two meetings with the Finance Commission, two community meetings and a public survey.
“I think we’ve almost given [an] over-information” of schedules, changes, and documents. But these were needed to describe unique “headwinds” the city faces, such as: $1.5 million for nearly two dozen one-time expenses, including $973,000 for the much-delayed housing element; a set of “unanticipated” invoices, including a bizarre $1.6 million bill from the city’s insurance pool for claims incurred between 1997 and 2014; and the city manager’s $760,602 plan for nine new full-time positions to improve city services and restore others curtailed by the pandemic.
Downs asserted the proposed general fund budget is balanced. He acknowledged some special funds with negative balances remain but said these will be addressed in coming months after additional “clean up,” research, and analysis. The fund deficits don’t mean the city is violating its balanced budget policy, he asserted. The imbalances will be addressed, and the matter of “deficit spending without future projections of how to exist” was on a list he presented of topics for further discussion with the Commission, along with accounting treatment for Insurance Fund projections and deficits; development of a 5-year “rolling” projection; a “walkthrough of creation of position to hiring process”; and working on a long term sustainability plan in conjunction with a financial consultant the city manager has recently hired.
Downs said the city can save 10 percent off the $1.6 million insurance pool bill by accruing it this fiscal year but paying it next year. Council Member Michael Cacciotti joked Downs’ efforts are “almost like” the federal government and the debt ceiling–“trying every which way to avoid it.” But he sought Downs’ acknowledgement that whatever the accounting treatment of the unexpected insurance pool bill, the city’s reserve fund will take the hit and that citizens should know that.
Downs said the budget sets aside additional money for some vague “legacy problems” associated “old invoices” for consulting services. He mentioned the four new but minor adjustments to the general fund and described over $800,000 in savings achieved after an extensive assessment of the actual dates on which some 32 currently vacant positions will be filled–rather than budgeting them for the entire year.
On the last of these, he warned the dates could and likely will slip, especially due to ongoing difficulty recruiting for the police department where there are currently 10 vacancies, half of which the city does not expect to fill until 2024.
Notably, the schedule also listed Aug. 23, 2023 as the city’s latest target for filling the position of permanent city Finance Director, vacant now for nearly three years.
Council Member Braun wanted to know how many of the new budget changes were presented to the Finance Commission.
“That’s why we’re making sure we’re being very transparent tonight,” interjected City Manager Chaparyan. The changes were made in response to “input” received during the Commission’s June 1 meeting, a point she continued to emphasize as the Council session became more heated.
Braun cited 2020, when “we got ourselves into trouble…The budget that was presented to City Council was not the same as the budget presented to Finance Commission.” She did not want the city “to relive those sins.”
Downs again reviewed the changes since the June 1 Commission meeting–four adjustments with a net general fund impact of about $141,000.
He also warned Landscaping and Light Maintenance District revenue is not keeping up with expenses, meaning the Council must decide in the coming year whether to raise revenue or cut services. Meantime he asked it whether to use general funds to balance the LLMD fund. While the matter was broached during a four-hour May 30 Council workshop, Mayor Jon Primuth got Downs’ acknowledgement that tonight was the first time he’d made this request to Council.
Chaparyan interjected again, this time to note that the issue of the LLMD deficit is not new.
Braun wanted to know why Council was being asked to address the LLMD deficit but not other fund deficits. She sought Downs’ acknowledgement that the budget doesn’t address funds for the city’s prospective purchase of Caltrans homes, a major city objective over which it has been negotiating for months, and expressed frustration over the late provision of data that widened uncertainty over the level of current and projected staffing levels.
There are policy decisions to be made, she said, for example with police officers: “It’s not that we don’t, quote, need them. It’s can we afford them?” If the city cannot, then it must find “other alternatives.” Councilmember Cacciotti suggested bringing officers on more gradually, perhaps informed by assistance from the “senior level financial adviser” hired this week by the city manager,
Public Comment
During her comments, Rossi said the Finance Commission had numerous issues at its June 1 meeting but was denied a request for a further meeting to go over them. Stunned by this, she complained “this is not a real process.” She derided the initial staff report that the Commission had voted unanimously to approve the budget when she had voted against it. While she’d been told this was an error, she now believed it was not. “It’s all part of a farcical budget process where you want a rubber stamp commission.”
On the budget itself, Rossi asserted Down’s assertions to the contrary, the unbalanced funds mean the city is violating its budget policy, industry imperatives and state law, pointing to what she said are millions of dollars of deficits in the various special funds.
Ceded another three minutes by another speaker, Rossi added the budget features a 7 percent revenue increase and 9 percent increase in spending from fiscal 2023, but that these figures compared to fiscal 2022 come to 14 percent and 20 percent, respectively. “This is not a sustainable program.” The Finance Department wants the Council to commit to personnel increases now, but won’t provide revenue projections until later. “They are not showing you the numbers or the back-up.”
Fred Findley, also a Finance Commission member, warned of a repeat of the summer 2020 history. “I am asking you to allow the Finance Commission to review this budget and address” all the issues, especially the one about “the risk of having a deficit budget.”
Former Finance Director Josh Betta said the proposed LLMD budget is at least $800,000 out of balance. He said there’d been “great change” to the budget since the June 1 Finance Commission meeting, and asked it be referred back to them.
“You are repeating history right now,” Betta continued. There are problems in balancing, the Insurance Fund and how the public works director can complete $16 million in capital projects next year “when he could only complete $1.2 million this year.” He said “key performance indicators in the budget don’t measure performance,” and that the city manager had not proven the budget can fund the employee head count for which it calls. “Saying there will be a projection of the general fund after this, is absurdity.”
Three other citizens echoed the public comment criticism, including Allan Ehrlich, who demanded the Mayor apologize to Rossi and the other Finance Commissioners for his attitude about their for extended dialogue with the Council.
Although Mayor Primuth supported the motion to return the budget to the Commission, he drew distinctions between what happened this time and in 2020.
“Three years ago, the changes between the Finance Commission and City Council were not disclosed and not the result of any direction from the Finance Commission. It was just a switcheroo without disclosure, without direction. In this case, we have a Finance Commission approved budget–after four and a half hours–that had changes based on their direction, based on concerns that were expressed, and have been disclosed to the Council.”
He also complimented the work staff has done and the depth and openness of the budget process it undertook.
