City to Explore Spending Reserve Funds

Looking at the bank accounts and debt service for San Marino, the problem apparently isn’t one of where to find money to spend, but rather, what to spend the money on.
As Josh Betta, the interim administrative services director, explained at last week’s City Council meeting, the city is sitting on essentially a year’s worth of operating expenses in its fund reserves, a feat he says no other city in the county and few, if any, statewide can claim.
“Now we’re like the school district: We’re No. 1,” he said as he presented this information.
Betta was presenting financial data from the last three fiscal years’ audits in the form of a weather forecast for the city, touching on a variety of positive developments on the horizon as well as some potential issues that could present themselves.
One of those highlights, Betta pointed out, was the lack of real debt on the city aside from the funded pension liability through California Public Employees Retirement System (which he referred to as the “800-pound gorilla in the room”).
“Ask people in Alhambra or South Pasadena about what problems are,” Betta said. “They have them. Pension debt is the only piece of debt in this community. We’re debt free, people.”
On the other side of the coin, Betta highlighted a handful of areas that could have snowballed into major issues, most of which had been itemized as material weaknesses or significant deficiencies on prior audit reports. Most of the errors, Betta said, were a result of poor accounting practices on the part of the city.
The silver lining to this, Betta added, was that there was a grand total of one deficiency listed on the 2016-17 audit: failure to update authorized bank account signers, which had a lot to do with the rapid turnover and restructuring within City Hall at the time.
“It’s not a good problem, but it’s a lot better problem than we’ve had,” he said. “I don’t have confidence in the basic accounting of this operation. I have confidence in the more colloquial sense in what we are doing to change it.
“We could have had a major scandal in this community in the last couple of years,” Betta added.
Betta’s presentation also was meant to preview the work that the long-term financial planning ad hoc committee will be handling, specifically on how to spend the city’s fund reserves effectively. In addition to the pension liability issue, the city also faces the looming issue of bringing its utility infrastructure up to snuff.
Betta said he also wanted to combat the narrative that the city’s finances were in dire straits and that doom lay on the horizon.
“I think San Marino’s been incredibly lucky,” said Councilman Ken Ude, whose business background helped propel him to election in November. “It seems like all our mistakes have gone in our favor instead of the other way. I think wealth gives you the opportunity to make choices, and we’ll have chances, with the work of the committees, to decide where to invest in the needs of the community. I don’t want anybody to think that because we have money in the bank that it’s a blank check. From where I’ve been, the highest quality has the lowest cost.”
Not everyone agreed. Hal Harrigan, who was one of the advisers to a prior ad hoc committee that analyzed and made recommendations for City Hall operations (many of which have been or are being implemented), claimed San Marino’s expenditures were too high for what it was buying, especially compared to those of neighboring cities.
Harrigan also preferred a third-party estimate that the city’s pension liability was closer to $90 million to the CalPERS report of $25 million, and stressed the importance of the deferred infrastructure maintenance.
“We are running this city very inefficiently,” he said. “Yes, we have a strong balance sheet if we don’t book the $75 million of additional liabilities we have. We’ve got to do a better job. We’ve got to take each task of these departments and think about the best way to do this.”

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