Richmond's budget says: 2+2+2=9!??
Financially inept city may cut council seats
Chip Johnson
Monday, February 2, 2004
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Most California cities have fine-tuned their budgets for more than a year to keep up with the state's budget crisis, doing things like closing city offices a few days a year, shutting fire stations on a rotating basis or laying off employees to keep their ledgers balanced.

In Richmond, city officials wish they could say the same.

Nobody in City Hall seems to know how much money the city has or what to do next, and the city seems to be unable to act at a time when action is the order of the day.

"We've had an inept finance department for years, and every time we've been audited, the reports show all kinds of deficiencies,'' said City Councilman Tom Butt. "Our budget is so screwy that not even people who are trained to read financial documents can understand it.''

Last month, a bomb dropped when a local newspaper bannered a front-page headline "Richmond verges on bankruptcy."

City officials bristled, saying that the article was inaccurate and that the city would be able to pay $12 million in bonds and other financial obligations. But when pressed for details about the city's financial position, acting City Manager Jay Corey had no answer.

Last week, Corey released a statement saying city officials won't know the size of Richmond's budget deficit until a midyear financial report is completed on Feb. 17. Included in the statement was an admission that city budget statements dating back to 2001 may have to be amended to receive an accurate snapshot of the city's fiscal situation.

About the only thing that is clear about Richmond's finances is that they are a jumble of calculations that don't add up, and it's not the first time it has happened.

For successive years, accounting firms hired to audit the city's bookkeeping practices found glaring problems in its fiscal controls -- or the lack of such controls.

In November 2002, Caporicci & Larson, an independent auditing firm hired by the city, found that the city had failed to maintain controls on cash, budgets, payroll and capital assets. There were no hard-and-fast policies to follow, the report said.

As a result, city department heads regularly signed contracts valued at just below $10,000, the amount that requires council approval, the report said.

Since then, the city has hired a new finance director to sort out the mess, but the city's budget is still a mysterious document to the people who work on it.

Last February, City Councilwoman Maria Viramontes, who chairs the Finance Committee, was directed to slice $5 million to close the budget gap for the current fiscal year, which ends on June 30. The council dismissed 60 city employees and reduced programs to meet the challenge. But that wasn't enough.

"July came around, and in the first few weeks, I was told we had a projected $5 million deficit,'' Viramontes said.

The city's finance department told Viramontes that part of the deficit was the projected loss of state revenue, but that did not account for all of the shortfall, she said. "It was extremely upsetting,'' she said.

In addition to the lack of a consistent fiscal policy, the city has a labor agreement with its firefighter unions that consumes enormous chunks of its general fund revenues.

At age 50, Richmond firefighters are eligible to retire and receive 3 percent of their salary for each year of service. They also receive cash benefits for remaining physically fit, but every firefighter receives the payment.

In late December, the council decided to dismiss 18 firefighters Jan. 1 and close five stations on a rotating basis to help close a $9.5 million budget shortfall. That brought to 100 the number of city workers laid off in the past three years -- 10 percent of the workforce.

The Richmond Firefighters Association, perhaps the most powerful political entity in the city, tried last week to persuade the City Council to reconsider the dismissals. Also, union officials brought a woman who was badly burned and had lost a child in a fire, Butt said.

The financial troubles are not that surprising to former Richmond Mayor Rosemary Corbin, who has watched the council delegate to staff duties that it had previously carried out.

And the council in the late 1990s had abandoned one of the main responsibilities of a city council, any city council -- to go over the city's budget line by line.

"The council decided it didn't want to approve a line-item budget anymore, because it took far too much time," Corbin said. "Now they complain they don't know what's going on, but they used to.''

With the city in such a tight spot now, you'd expect the council to be working overtime to right the listing ship.

But not so. Richmond Mayor Irma Anderson canceled last week's council meeting for lack of an agenda.

There is a meeting this week. And one of the items on the agenda, courtesy of Butt, is a proposal to slim down city government -- by reducing the City Council from nine to seven members.