CLEARLAKE — Options for dealing the city”s financial woes were discussed before the Clearlake City Council Thursday. No action was taken and the item was carried over to next regular meeting, scheduled for 6 p.m. May 13 at City Hall.
According to City Administrator Dale Neiman, bankruptcy does not appear to be a viable option for city. He said a city cannot eliminate its debt or dissolve under Chapter 9 bankruptcy. In addition, Neiman said there would be a substantial amount of legal fees associated with the process.
Neiman said that during review of the 2010 fiscal budget the possibility of solving some of the city”s serious financial problems by using tax exempt bond proceeds of the Redevelopment Agency to pay part of his and City Engineer Bob Galusha”s salaries to work on the engineering design work associated with the Lowe”s project was examined.
“This is no longer an option due to the lawsuit filed against the city by the Sierra Club on the Lowe”s project,” Neiman said. “We believed it would be possible to avoid the most damaging reductions in expenditures by borrowing bond proceeds for a year until Lowe”s opened. The bond proceeds would be paid off using the sales tax revenues from Lowe”s.”
Neiman said if the city was capturing its fair share of the sales tax revenues in the county there would be about $1.8 million more in the city”s General Fund.
“There are no feasible alternatives that would allow us to generate the revenue we need to besides the Lowe”s project,” Neiman said.
Neiman said that he doesn”t think the city can stay financially solvent without modifying retirement benefits. He the most significant liability is the retirement program for police officers. He said when the city changed from a two percent at 50 to a three percent at 50 retirement plan it resulted in a 50 percent increase in retirement income. He said police officers can retire at 90 percent of their maximum salary with 30 years of employment with an annual cost of living increase. He said the contract for existing employees cannot be modified but new employees can come on under a different plan. “In the future the city should negotiate a 2 percent at 50 retirement plan for new police officers,” he said.
Neiman said another constraint facing the city is in association with the Clearlake Housing Now settlement, which has established the maximum amount of money the RDA Project Fund can spend until the Housing Fund is repaid. He said starting July 1 there will be a reduction of $122,060 in the project fund.
“This fiscal year the amount allowed was much higher than it will be until the Housing Fund is paid in full,” Neiman said. “The money allowed this fiscal year was to cover the cost of my salary to complete the work associated with the proposed amendment of the Redevelopment Plan.”
According to Neiman, if the RDA plan is amended the amount of expenditure reductions the city will have to make to stay in compliance with state law is $747,820. If the plan is not amended, he said expenditure reduction needs will be $914,080.
Several recommendations for reduction in expenditures were presented. Staff recommends the following: transferring police grant funds originally intended for computer upgrades into the police fund for salaries; closing Redbud and Austin parks and laying off one employee; reducing the finance director position to half-time; eliminating the planning and code enforcement departments, which would result in two lay-offs and two reassignments; eliminating five police officer positions; replacing a full-time sergeant with a half-time police officer, reducing the city administrator position to half-time and eliminating one police officer position. Neiman also presented a recommendation for reducing expenditures in the engineering department via a reduction in clerical services.
Neiman recommended the council take no action Thursday as staff is continuing to research options for solving the city”s financial crisis.
Estell Creel criticized Neiman for use of “city funds” in recent road rehabilitation projects; Jeri Spittler criticized Neiman for “slandering” the Sierra Club; Alice Reece also voiced criticizing remarks.
Neiman and the council did find support among the audience, however. Jim Scholz, a member of the Clearlake Vision Task Force, said that he thinks most of the problems facing the city now are inherited and that he thinks the council and Neiman are doing a fine job.
Frank Taylor, publisher of The Outlook also commended Neiman, based on his 10 years of attendance at council meetings. “We”ve never had a city administrator work so hard and do so good with so little to work with than the one we have now,” Taylor said. “The real problem is there is no money. You can only go so far with an empty pocket book.”
District 2 Supervisor Jeff Smith said his commendations were based on 20 years experience with city”s government. He said a lot of blame was being placed in areas it shouldn”t be and that citizens should take into consideration who was in charge when these inherited problems presented themselves.
Contact South County reporter Denise Rockenstein at drockenstein@clearlakeobserver.com or call her directly at 994-6444, ext. 11.
