Council Strains to Make Sense of City’s Books

The city must tidy up its accounting procedures. The auditor who conducted an annual review of San Marino’s books issued that unmistakable message at last week’s City Council meeting.
Members of the council and some budget hawks in the community aren’t likely to disagree with him; they’ve been scratching their heads over the city’s bookkeeping for the past few months.
The audit didn’t turn up any shenanigans, according to Rich Kikuchi, managing partner of LSL CPAs and Advisors, who conducted it. But the firm’s letter to the council cited seven issues that were determined to be “material weaknesses.”
“In summary, the audit went well,” Kikuchi told the council. “We did have some findings. A lot of those were related to just cleanup of entries. I think a lot of that is because we came out earlier [in 2015].”
Finance Director Lisa Bailey told the council that she has a history of clean audits over her 13 years with the city, and that the items cited could be attributed to a stepped-up timetable for the audit. Although the fiscal year ended on June 30, the city accrued expenditures through the middle of August, she said. Accounting for those in the shift from one fiscal year resulted in some of the auditor’s issues.
Kikiuchi said, “The books weren’t quite ready when we came out.”
That was easy enough to explain, but council members who have been poring over the city’s finances repeatedly express exasperation over the murkiness of the material they are given. Notable examples, just since the start of this calendar year, include:
• In the City Council meeting of Jan. 13, the council was apprised of a 35% cost overrun for the inner loop reconstruction project at Lacy Park. A total of $235,000 was authorized, and the project came in at $318,163. And yet, in a study session just two weeks later, this wasn’t reflected in a mid-year budget review presented to the council. In the category of capital projects, the figure of $246,290 was listed as both the budget for the project and the estimated cost. In the next column, titled “over/under budget,” was a “0.” Where did the cost overrun go?
• In last week’s agenda documents, the city’s financial report showed that the 2014-15 operating budget was $23.12 million, and that for 2015-16 it dropped to $21.37 million. Yet the document referred to the $1.75 million difference as an “increase.”
• Even the $21.37 million figure for the 2015-16 fiscal year was a mystery. The city budget for that period, posted to the city website, reveals total revenues to be $28.31 million (a combination of the city’s unrestricted and restricted funds). In the budget’s four-page executive summary, the figure of $21.37 million is nowhere to be found, and the subject of an operating budget is not directly addressed.
• A table in the financial report showing sources of revenue broke out the city’s utility user’s tax as a line item, but it did not do the same for the public safety tax. Councilman Richard Ward wondered why. Bailey first said that it fell under property taxes, then said she believed it fell under charges for services and special taxes. She acknowledged that the document doesn’t explain it one way or the other.
Vice Mayor Dr. Richard Sun and new Councilman Steve Talt also expressed frustration over the fact that the auditor’s report was dated Nov. 30 but they did not receive it until just before they met with the auditor this month.
“Please, in the future, do not hold onto that information,” Talt told Bailey, “because then you put pressure on Dr. Sun and myself or whoever’s on the Finance Committee to rush through this material. When we get a report like this from our auditor, it should be transmitted to the City Council almost immediately so that we can review it.”
Mayor Dr. Allan Yung agreed, saying, “We need time to digest these numbers before we can discuss them intelligently.”
DONATIONS FOR SCHOOLS
There’s nothing like cherubic young faces to soften hearts and loosen purse strings.
Representatives for Carver Elementary School’s upcoming parent party made sure this was part of their strategy at the City Council meeting, and it paid handsomely.
The agenda issue dealt with just how much the city should pony up for the event’s silent auction fundraiser.
Carver PTA President Sylvia Koh and parent Hal Suetsugu brought half a dozen children into the council chambers, presented a certificate of recognition to the mayor and the council for their past generosity to the cause, and then asked if the council members could pose for a picture with the kids. Someone said maybe they should wait until the council voted on the matter.
Ultimately, the council agreed to authorize City Manager John Schaefer to allocate up to $1,500 for donations to a public educational institution or the Chinese School PTA. Anything above that figure would have to go before the City Council.
The item made it to the agenda because Carver parents had boosted their donation requests from past years, asking for such auction items as a week of summer registration for Camp Lacy for two kids, a month of after- or before-school care for two kids, and an hour on the police shooting range for an adult, among other things.
“Actually, there is a cost for all of these things,” said Schaefer, who estimated the value of the various Recreation Department programs on the list at $1,388. He sought the council’s direction on the matter because of the potential for similar requests from other groups in the future.
Sun raised the issue of whether it’s actual cost to the city or just lost revenue. Talt said he felt the goodwill of the gesture would more than offset the dollar outlay.
Yung looked over the scene before him and said, “Who can say no to a group of children? But I have to do what I’m elected to do. When it comes to the city using up city funds for this group of people, we have to use city funds for other groups of people. If you want me to take kids to dinner, get a hamburger, I will do it out of my pocket. But I’m not in favor of these programs [being given away]. Can we come up with programs that do not cost the city money?”
But Sun, Talt and Dr. Steven Huang seemed comfortable with the $1,500 ceiling. Yung joined them in the 4-1 affirmative vote. Ward, without explanation, abstained.
DEVELOPMENT FEES
Faced with a trend of homes being built that were outsized for their neighborhoods, San Marino increased the layers of design review in recent months. But that comes at a cost, and to cover that, city staff has proposed higher fees for building permits.
“They require more staff time,” Planning and Building Director Aldo Cervantes told the council. “Applicants have a preliminary meeting with staff. We’re now doing staff reports for Design Review Committee projects. We’re presenting to the DRC, with a recommendation. That correlates to what we’re requesting for an increase.”
City staff is asking that the fee for a project requiring major design review climb from $715 to $865, and that the fee for a minor review project increase from $575 to $725.
The council balked at the second figure. Talt asked that staff survey other cities to see what they charge for minor review cases, to determine “why $725 is valid for someone trying to build a fence.”
On a separate point, Sun asked that San Marino’s tree-removal permit, currently priced at $245, also be weighed against those of other communities.
DESIGN REVIEW
The council further refined a prospective ordinance related to providing notice to neighbors about new building projects. Sun objected to language that stipulated a homeowner had to provide a detailed landscaping plan before adding a second story to a one-story building.
For such a project, the council would prefer that the applicant be required to provide a limited landscaping plan that addresses the issue of the neighbors’ privacy. A full landscaping plan should only be required for a new home, the council said.

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