CLEARLAKE — The Clearlake City Council provided direction recently for evaluating options, including bankruptcy, to deal with the city”s financial problems. City Administrator Dale Neiman”s midyear budget review shows revenues 10.1 percent lower than projected with the General Fund over budget by $29,253.
According to Neiman the General Fund started the year with a cash balance of $424,455. The revenue estimates for the year for the General Fund will be approximately $356,755 less than the amount budgeted if current trends continue. Based on these factors, Neiman said the General Fund will have a very small amount of cash or a negative cash balance at the end of the year.
“What we”re recommending is that you authorize us to do tonight is to take a number of actions. First is to evaluate the process and consequences of filing bankruptcy in the event it is necessary and I don”t think we should run out of money without evaluating that,” Neiman said. “I”ll be the first to tell you right now, I don”t know much if anything about bankruptcy, but we should evaluate it.”
Neiman also suggested evaluating possible detachments, wherein the city would relinquish lands back to the county. “The reason it makes sense to look at that process, you can potentially reduce our service costs,” Neiman said.
Additional suggestions included freezing all vacant positions where possible and delaying payment on a number of bills. Neiman said since the state is delaying its payments to jurisdictions, it would be possible to delay payments for example to Caltrans.
In his report, Neiman said that the city is realizing a monthly savings by assuming duties of animal control. “Our operational expenditures between November 1 and January 31 average $6,085 per month,” he said. “Based on the first three months of assuming animal control, we are saving $10,642 per month by not contracting county services.”
Neiman said that cost saving associated with the re-organization of code enforcement will not be fully realized in the first year. “The savings associated with the decisions made at budget adoption related to code enforcement will amount to $90,057. We won”t realize the full savings this fiscal year because the layoffs were made two months into the fiscal year,” he said. “There are also unemployment insurance costs that will reduce the savings this fiscal year. The changes in code enforcement saved a substantial amount of money and the program is operating as effectively as in prior years.”
Neiman said a primary factor contributing to the city”s financial crisis relates to past mismanagement of Redevelopment Agency funds, which in the past had funded part of the General Fund”s ongoing operational costs. He said this is not sustainable because the agency”s money to carry out programs and projects will end in either 2010 or 2020. “The inappropriate infusion of the agency”s funds allowed salary increases and more costly retirement benefits,” he said. “These ongoing legacy costs are a major cause of the city”s financial problems, which are further exacerbated by the current economy.”
He said another major factor is that the city receives less revenues than cities of similar size and service costs are higher.
According to Neiman the City of Clearlake provides three services not mandated by the state. Those services include code enforcement, parks and city management. “If these services were not provided, the savings in the General Fund would be approximately $34,526 by eliminating code enforcement, $93,758 with no maintenance of parks and $31,000 by changing to a city council form of government. In a city council form of government two council members manage each department,” he said.
According to Neiman if past trends continue the city will face a number of major problems including a decrease in police services, an increase in the crime rate, a decrease in paved streets when 62 percent of the residential streets with some type of pavement revert to dirt over the next five years; an increase in flooding and an increase in complaints from residents for more and better services the city cannot afford to provide.
Contact South County reporter Denise Rockenstein@clearlakeobserver.com or call her directly at 994-6444, ext. 11.
