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With the caveat that Finance staff will provide City Council a “high level understanding” of requested budget data, the South Pasadena Finance Commission on March 28 voted 4-0 to recommend Council approval of the Finance Department’s Mid-Year Budget Review.
The seemingly innocuous action culminated weeks of tempestuous activity over the city’s financial viability and quality of financial data it’s been providing, capped by Commission Vice Chair Sheila Rossi’s request for an apology for public comments made by city council members questioning her integrity.
“(Having) my character attacked, my professionalism attacked [was] incredibly hurtful and devastating,” she said, “…especially after having worked so hard to understand the changing numbers provided by staff.”
After the meeting, Deputy City Manager Domenica Megerdichian told the South Pasadenan News the Commission’s recommendation came with a request that current and future budget reports include savings from any unexpected, overestimated or otherwise “encumbered” amounts, and figures for health insurance, professional services and utility costs, as well as for “headcount and salary savings.”
City ,Finance Director John Downs said he would “look at a few things related to savings” but cautioned it won’t be a “comprehensive” list as is normally developed later in the budget cycle.
The Mid-Year Review, prepared as the city ramps up budget development for the fiscal year starting July 1, reports how revenues and spending track budget estimates.
But during its Feb. 29 meeting, the Finance Commission reiterated its dissatisfaction with staff’s financial reporting practices as well as the information Downs presented in support of the Mid-Year Review. It voted unanimously to delay approval until, as Commission Chair Peter Giulioni put it, “we have received the level of clarity we need.”
That vote came after alarm bells went off a week earlier in response to a report the City Council received from city contractor NHA Advisors projecting up to $3.9 million in annual General Fund deficits over the next five years, which would be on top of nagging deficits for the current and previous fiscal years.
The projections led to creation of an “ad hoc” committee to scrutinize municipal finances. The ad hoc, composed of Giulioni, Rossi and two City Council members, met three times and spent hours conferring by phone. When he briefed the City Council March 6, Giulioni reported the data dive alleviated some concern and enabled a better understanding of the NHA deficit projections. But while staff appropriation requests were reasonable, it wanted more time to review data requested from finance. Meantime, it recommended “pausing” non-essential hiring and spending.
At the next Council meeting March 20, Council Member Jon Primuth voted to disband the ad hoc. He accused Rossi of making “two or three statements” containing “wrong, completely false information.” He said the ad hoc overstepped its mandate, made comments with a “political overtone” and decried its delay of Mid-Year Review despite finding the finance staff appropriation requests were reasonable. He also asserted it “sidelined,” “ignored” and held “closed door meetings without staff.”
During the ad hoc’s March 6 presentation, he added, staff were “shaking their heads” and Finance Director Downs “walked out in disgust because there wasn’t a sliver of interest in hearing from” him about the accuracy of statements Rossi made constituting “a major charge against the city and its finances.”
Council Member Michael Cacciotti aligned himself with Primuth’s assessment, citing the ad hoc’s “distortions [and] misrepresentations,” and claiming they undermined staff morale and caused some “to leave for other cities.”
While acknowledging the ad hoc had in fact met with city staff, Primuth later clarified his point was that it should have run its conclusions through staff but Rossi had not. “When staff walks out because they are not allowed the chance to be heard on an important issue before the council,” he wrote in an email to the South Pasadenan News, “it’s a sign of a breakdown in the working relationship.”
Giulioni disputed staff input wasn’t sought for the March 6 presentation. “Not only did they have opportunity to review, I sent them the entire presentation” at noon that day. But “no one called me.” While ad hoc meetings were “closed” in that they weren’t agendized or publicly noticed under the Brown Act, the group did grant staff’s request for a meeting and neither rejected nor received requests from anyone else to attend.
A senior organization development consultant at SCE, Giulioni rejected the assertion that Rossi made any false statements. “She was sounding a clarion bell that there were problems that we were facing and needed to be cleared up. She reviewed documents that were made available for us to use and some of those documents had errors and edits. She pointed out some of those errors. What she said was reasonable based on the analysis she made.” Some information Rossi based her comments on “was proven incorrect later on. But in that moment she was not trying to mislead. She was not accusing anyone of anything nefarious.”
Giulioni said he believes the City Council was reacting to comments from the Commission that “pointed to a lack of rigor in the City Council’s analysis in the past. There was a lot of tension and emotion. What you have is a Finance Commission that is more active than others in the past.”
The public record indicates that incomplete data submitted by staff, along with what City Council and Ad Hoc Committee Member Janet Braun termed “miscommunications” that persisted for months over Finance Commission data requests, created confusion that contributed to friction. Some of the questioned material concerned budget and personnel data at the heart of the statement on which Primuth focused when he accused Rossi of misrepresentation. Some of the most critical errors came to light only due to Rossi’s scrutiny.
After the Commission voted to approve the Mid-Year Review, Rossi said the information she relied on for her statements “at the time” included a figure, the accuracy of which was later cast into doubt and “was still not fully clear. The reality is that mistakes happen.” She spoke of the need to ensure people feel safe both in calling them out and acknowledging their existence.
“I do feel I am owed an apology” for that and for being cast as the reason for the Council’s decision to disband the ad hoc. She called for a “culture shift, and culture change in our community and our City Council specifically.”
Giulioni said he believes the parties are now “back on track and committed to work together to move the city forward. He noted the Commission also recommended using the NHA tool “to pressure-test future budgets.”
The alarm over the NHA deficit projections was driven in part because data plugged into it “was not necessarily carefully reviewed before putting it in.” He’s “a fan of the NHA tool but not the hysteria that came out of it.” Using it, “we can make adjustments to the budget so that we don’t find ourselves in a situation where the city is not financially solid.”
Deputy City Manager Megerdichian said Council will take final action on the Mid-Year Review April 17. Staff will meeting with both the Commission and Council in lieu meetings with subcommittees of both bodies. The city will then kick off the new budget with issues that have been raised including vacancies and staffing levels, short- and long-term considerations, and “revenue opportunities.” Joint Council/Commission meetings will take on topics such as the capital improvement program budget.
The city is taking public input on the budget process through publication of a five-question survey open through May 14. The survey is linked here. It also seeks candidates to fill a vacancy on the Finance Commission that came after Commissioner Stephanie Hernandez’s resignation for personal reasons. It hopes to expedite the process and have a new commissioner appointed April 17 in time for the budget kick off.
