City Council Report | Finance Clarity Still a Serious Concern

From the questions about goats to multimillion dollar finance problems along with a cornucopia of public comments across a variety of issues; the South Pasadena City Council meeting drove on to 5-1/2 hours, yet left many wanting for answers about city finances.

PHOTO: Screenshot of the South Pasadena Virtual Council Meeting June 10, 2020.

During the course of what was easily its longest public meeting this year, the South Pasadena City Council on Wednesday acted to allow its Finance Commission to take another look at the city’s proposed 2020-2021 budget and make any recommendation on how to respond to concerns citizens have raised.

PHOTO: Screenshot of South Pasadena Councilmember Richard Schneider commenting on the dissatisfaction of city residents on how city finances are being managed (VIDEO HERE – Fast Forward to 3:26:55)

“There is tremendous discontent in the community about the way the budget is being handled,” said Councilmember Richard Schneider. Audits have been delayed since 2018 so the city has been using estimated starting figures for the past three years. Hundreds of South Pasadenans signed citizen William Kelly’s petition to adopt a “resolution of continuing appropriations” until the delinquent 2018-19 audit is completed.  Schneider moved to do so and received a second from Councilmember Michael Cacciotti.

Councilmember Marina Khubesrian said she was concerned how the resolution would affect the city’s efforts to make cuts in response to projected revenue declines and said any changes could be handled with quarterly budget amendments. Councilmember Diana Mahmud said the decision could be made at the next City Council meeting after the recently scheduled special meeting of the Finance Commission has had a chance to review the budget and its recently unannounced updates. She was also concerned how a continuing appropriation might affect ongoing negotiations with the city’s unions. The City Attorney opined the Council could not adopt Schneider’s motion because it was the kind of issue that requires public notice.

The Council ultimately elected to seek and await recommendations about how to proceed from the Finance Commission and city staff. Staff will make its recommendation at a June 18 special meeting of the Commission, which will in turn formulate a recommendation to the City Council.

The action came during a meeting in which the Council also foreswore any interest in a very unpopular suggestion the city floated to restructure its community services department, and pulled back from a controversial plan to add additional issues to a public opinion poll such as a hotel tax, for example ‘AirBnB‘ type property use, as well as  increasing the building height limit.

FILE PHOTO: Eric Fabbro | SouthPasadenan.com News |  Councilmember Marina Khubesrian gave commentary about how she knows that at least 50 South Pasadena residents are ‘AirBnB’ hosts: “…absolutely no benefit to the city whatsoever because we can’t regulate it and tax it…” (VIDEO HERE – Fast Forward to 5:23:40)

During two other key moments, the city provided its first public statement reacting to the  scathing assessment issued by former South Pasadena Finance Director Josh Betta questioning the accuracy of the city budget set to be adopted June 24 and the financial processes and disclosures that preceded it, as well as to unexplained changes in the public version of the draft budget approved by the Finance Commission May 26 and the one attached to the agenda item for the City Council’s initial review several days later.

On the latter question, Finance Director Karen Aceves said staff introduced “an additional document” with the aim of “reflecting the most accurate data as possible” along with updated information on the impacts of the constantly changing provisions of the County’s Safer at Home order. “I apologize if this created any confusion regarding the city’s fund and we will ensure that changes are properly identified in the future.” She also noted that “historically, the budget has either gone to the Finance Commission after Council presentation or not at all.”

The response to Betta came from City Manager Stephanie DeWolfe, who began by saying the community “has every right to expect full disclosure and transparency regarding our financial operations, our reserves and other aspects of city management,” She said she welcomes “any opportunity to discuss our finances in greater detail.”

DeWolfe, who made her first presentation to the City Council as City Manager on Nov. 15, 2017, said that “in late 2017, we discovered a pattern of inappropriate accounting practices and internal control deficiencies dating back several years and spanning several previous finance directors. Among other things, these actions inflated the size of the unrestricted general fund.” She said Council was informed of and took action to address the problem, while staff continued an investigation to determine the full extent of the problem.

Upon further investigation, “we found that the amount of the funds in various categories were over and understated, resulting in an unrestricted general fund balance that appeared larger than it really is.” But the investigation concluded that no funds were missing. She then summarized the steps taken in response to the findings but said the effort to recover has been “and continues to be time consuming and labor intensive,” undertaken by a “small team of employees” even as they attempt to administer the Finance Department’s ongoing daily duties. “As a result, these cleanup efforts will require additional time to complete.”

DeWolfe said the updated budget, along with a “discussion of the enhanced fiscal controls now in place” will be presented to the Finance Commission June 18 at 10 am, in time for the Council to vote on whether to adopt the budget at its June 24 meeting. She warned the economic environment remains “very fluid” and therefore anticipates providing quarterly or even more frequent budget updates to City Council going forward.

“That said, I want to be clear we are confident that the accounting and allocation of the general fund money, including the general fund reserve, is more accurate today than it was in 2017 or in the 2017-18 Comprehensive Annual Financial Report, and I look forward to ongoing discussion of this issue in the future.”

 

 

 

Ben Tansey is a journalist and author. He grew up in the South Bay and is a graduate of Evergreen State College. He worked in Washington State as a reporter in a rural timber community and for many years as an editor for a Western electric energy policy publication based in Seattle. He and his wife Karin, an arts administrator from El Sereno, live in South Pasadena.

7 COMMENTS

  1. Let’s count some of the many ways in which Stephanie DeWolfe is exactly like Donald Trump:

    * Use of police force to intimidate residents and violate their civil rights (see: Alison Smith).

    * Gutted City Hall and replaced Department Heads with sycophants whose main qualification is subservience (see: Karen Aceves and others).

    * Retaliated against and pushed out whistleblowers (see: Lauren Ruben).

    * When called out for her disastrous mismanagement, blames past administrations, even 3 years after the fact (see: this week’s city council meeting).

    * Relies on morally compromised overseers to maintain her grip on power (Marina Khubesrian + Diana Mahmud = Lindsey Graham + Mitch McConnell; Theresa Highsmith = Bill Barr).

    * Does not have a single moral or ethical bone in her body, hence has no qualms whatsoever about putting residents’ lives and livelihoods at risk (see: the chaos she has sowed throughout our City; her inability to send simple community updates during a global pandemic).

    Khubesrian and Mahmud have been exposed and we can see now what kind of human beings they are, but if the other 3 on our City Council had any sort of moral fiber they would band together and fire DeWolfe effective immediately.

    It’s a simple matter of principle, and of moral character. It’s a matter of taking a stand for the greater good of our City and its residents.

    If you care about this place, please spread the word.

    • Max: Whoever you are, please PM me on Facebook. I’ve noted the comparisons between the current administration and the Trump administration many times, and every time I turn around there’s another one. A minor point: Who is responsible for removing the photos of 100 years of mayors from city hall and will they ever be put back? What was the motivation for that? Too many men in the photos? Yes we need to get Khubesrian off the Council and anyone she is supporting so she can control the Council. Once that happens, we’re really in trouble.

  2. Thanks to T. Cho who put what I was thinking and put it into words.
    Another neighbor said,
    “It says a lot about a community that will tolerate this level of incompetence, or whatever it is, that is coming out of City Hall from the Council to police.
    If the public doesn’t care, why should the council?”
    If you care about South Pasadena, it’s time to speak out and demand a forensic audit.

  3. “Councilmember Marina Khubesrian said she was concerned how the resolution would affect the city’s efforts to make cuts in response to projected revenue declines and said any changes could be handled with quarterly budget amendments. ”

    Which budget does she want the Council to approve? The May 25 budget of the June 6 budget? Does she know the difference?

    Why are our elected officials willing to turn a blind eye to bad
    management?

    Bonkers!