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The City of Riverside Grapples with Financial Woes

by admin on 8th-April-2016

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S. E. Williams

The City of Riverside is not the only municipality in the Inland Empire to be confronted with daunting fiscal challenges.

When information begins to seep out about any city’s fiscal vulnerability, rumors of the city’s pending fiscal demise abound. Often limited government transparency makes it difficult to separate facts from fiction; but in the final analysis, the data often speaks for itself.

Some have speculated and even alleged in recent years that the City of Riverside has used a creative approach to budgeting/bookkeeping that may have served to mask looming budget issues—however, to date there is no proof of any intentional misconduct.

Like all municipalities, the Riverside City Council is ultimately responsible for the city’s financial status and yet in most instances, their decisions can only be as good as the data and other information provided by the municipality’s professional staff. And yet, these elected officials are depended upon by the constituents they serve to use judicious discretion in how tax dollars are spent.

Actions of governments are guided and controlled by expansive rules and regulations; however when things go awry fiscally, it is often a difficult challenge to filter out the root cause. For example, the City of Riverside spent $19.4 million between 2010 and 2014 on outside attorneys and yet the council appeared to be caught off guard and unaware of the issue even though the spending was facilitated allegedly in direct violation of the city’s own charter. The charter not only specifies the council’s authority over all legal business for the city, but also clearly describes the council’s responsibility relative to approving money for outside lawyers when appropriate.

In response, the fiscally challenged city has now decided to spend another $75,000 and hired another outside law firm to figure out what actually happened.

The good news is the council is aggressively seeking answers to this fiscal concern; however, reportedly there are already attorney-client privilege concerns being tossed about as possible impediments to the investigation. The initial report is expected sometime in the May to June time frame. It is expected to reveal when and why city procedures were not followed, who was responsible and where the city council failed in its responsibilities.

The outside attorney fiasco may be revealed to be an excusable breakdown or oversight, but it may also be emblematic of other weak-spots in the city’s fiscal administration.

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The bumbling failure of the city to appropriately manage the hiring of outside legal services may help to explain why some city council representatives also expressed surprise and/or dismay when what was considered a balanced budget last June morphed into the city’s current eight million dollar budget deficit.

Allegedly caught off-guard, the council is now in reactive mode and struggling to get the budget back on track and yet there is little clarity regarding when or how the proverbial budget train jumped the tracks.

In addition to the eight million dollar budget gap forecasted for this year there are also reports of other slightly smaller gaps forecasted for the next two years.

Several financial audits of the city are currently in process, including audits of the Finance and Human Resources Departments. In addition there is an audit of the Public Utility Agency—this audit will either blunt or fuel concerns that money may have been shifted from this program to mask shortfalls as a way to balance the city’s budget in recent years. These examinations should be completed in June.

In the meantime, city officials are working to identify and implement a solution to the fiscal dilemma. A March 8th memo from the city’s finance department to the city’s mayor and city council requested they approve $2.5 million in necessary budget reductions as a way to help offset the $7.8 million projected General Fund budget shortfall. It also sought authorization from the council for the City Manager to identify and freeze additional expenditure items in order to “further mitigate the projected General Fund deficit.”

The memo also confirmed that although the first quarter analysis of the city’s general fund revenues and expenditures indicated a general fund deficit of $6.5 million; the mid-year projection reflected an even larger budgetary shortfall of $7.8 million.

The growing deficit according to the memo, began with a shortfall of projected revenues, reduced savings from operating expenditures and supplemental appropriations of $4.5 million as a result of police labor negotiations.

There is no question the magnitude of the deficit called for immediate action. To this end the city is holding the line on spending by first holding $2.5 million for prior year carryover balances and identifying opportunities to hold spending on items considered non essential.

To many observers it appears the mayor and council somehow lost control of the city’s finances. Officials are now working to put the city’s house in order. On March 21st the city named Scott Miller as its Interim Finance Director. Miller, who brings a wealth of financial experience in both the public and private sectors, basically hit the ground running the same day his appointment was announced. Officials are hopeful that during the four to six months Miller is expected to be on board, they will be able to complete a national search for a permanent replacement while he helps guide the development of a two year budget to more effectively address the city’s financial challenges.

In an exclusive exchange with The Voice, Phil Pitchford, Communications Officer for the City of Riverside, was asked about the current deficit as well as rumors that claim the city may be headed for bankruptcy. He replied, “The city is currently facing a budget deficit of about $8 million for fiscal year 2015-16 and there is a very active effort underway to determine how to resolve that.” He continued, “There is a world of difference between that deficit, which is a small percentage of the city’s overall budget and bankruptcy, which is not even close to being a possibility for Riverside.”

Pitchford was also asked about any potential relationship between the city’s budget issues including the current focus related to the costly use of outside lawyers and the city’s recent decision to revise its ethics code. His response was a firm-no. “The proposed changes to the ethics complaint process started last year,” he explained, “Well before any concerns about the budget were apparent yet.”

To date, a number of lingering questions remain unanswered including what austerity measures will be implemented by the city to close the current and forecasted fiscal gaps. Although a number of options are currently under consideration, a final decision is pending.

Also, in regards to the concerning issues related to the city’s use of outside attorneys, observers are hopeful the current audit will reveal who authorized their use; what were the circumstances that led to the attorneys being retained; what were the amounts billed; did it involve more than one attorney/law firm; who on the council was aware of their use; and finally, why there were no ‘red flags’ despite the fact their use without the expressed authorization of the city council was in direct violation of the city charter.

The Voice will continue to follow this story.

Category: Feature Stories.
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