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Oakdale Battles $ Woes

POSTED May 1, 2012 9:40 p.m.

Interim City Manager Gregory Wellman has made no secret that the City of Oakdale has money problems and cites a lack of financial oversight and historically poor business habits as the cause.

In a recently released prepared statement, Wellman informed the city council that “reviews have uncovered significant financial missteps, lack of managerial control and accountability, and in some cases a lack of sound business practices.”
Wellman stated he was not trying to place blame or “point fingers” at anyone or any past council but was trying to get the message out of the current and historic city finances.

To assist in his research, Wellman recruited the help of retired Merced County CEO Demetrios “Dee” Tatum and former Atwater Assistant City Manager Stan Feathers at $74 per hour each.

In his address to the city Wellman identified a list of issues he found the “most troublesome.”

$4.3 Million Bond Depleted

In April 2005, the City of Oakdale set a bond for the financing of the South Willowood Drive fire station. As a result of poor financial planning, the city has been borrowing from other city accounts to pay off the more than $4.3 million in debt it issued and does not have in reserves what is required by law.

“Technically we’re in violation of bond covenant due to financial stability,” said Wellman. “We don’t have reserve levels for bond payment.”

The bond payment funds were intended to come from the fire services community facility fee account, however that account is exhausted.

Mayor Pat Paul expressed great concern about the shortage.

“It looks like the money went elsewhere,” said Paul. “We’re now going to have to pay out $180,000 every year out of the General Fund.  That’s not right.”

Sewer Fund Shortfall

To upgrade its Waste Water Treatment Plant, the city borrowed over $12 million in 2009 with intentions of repaying the loan through rate increases. Those increases have not covered the debt, which now requires its first loan payment of $855,000 this July.

Wellman estimated the shortfall of the sewer fund to be between $700,000 and $1 million.

“A multitude of factors are being checked out,” said Wellman. “We’re going to refine that number.”
Wellman revealed that a variety of causes went into the deficit including past city officials ignoring warning signs and questionable finance procedures.

Various sources within the city disclosed that 40 percent of the previous city manager’s salary and 40 percent of the city attorney’s salary were being drawn from the sewer fund despite realistically only devoting 3 to 5 percent of their time on those issues.

“It’s wrong and should never have happened,” said Wellman confirming the allegation. “It’s contrary to good business practices and needs to stop.”

Wellman pointed out that those salary costs can be legitimately spread across various city accounts and would have been in the best interest of the city to follow that pattern.

“I have no explanation for why it was done that way,” said Wellman.

Lack Of An Accurate CAFR Report

A Comprehensive Annual Financial Report, or CAFR, is a set of financial statements by a municipality. The CAFR is a report of the complete overall financial results that appear in the city’s current fiscal year budget and is a thorough presentation of the city’s financial condition documenting the activities and balances for each fiscal year.

According to Wellman, the city’s current CAFR, which would have been due around October 2011 for the 2011-2012 Fiscal Year, was withheld due to it being erroneous and skewered, despite audits being signed off by City Treasurer Mike Murray.

Because of the lack of an audited financial statement, the city missed out on some refinancing opportunities that would have resulted in a $65,000 savings per year and a net present value of over $500,000.

“That cost us,” said Wellman. “We missed out on the sweet part of the market for city re-fi.”

Wellman said he has not had the chance to meet with Murray to discuss the discrepancy with the CAFR.
“Unfortunately the city lacks an infrastructure to quickly assemble credible financial data,” Wellman said.

Unauthorized Payments And Reimbursements

Another issue Wellman identified was a lack of oversight and follow-up of reimbursement agreements that were prepared and arranged in 2008, yet never signed off by the city council or city manager.

The unauthorized payments have resulted in over $325,000 made without city manager knowledge or prior council approval. Oakdale Leader research showed most recently a payment for $113,000 made to Environmental Science Associates was approved by former Community Development & Services Director Danelle Stylos and issued by Finance Director Albert Avila without having the contract being signed off by the council or Wellman.

The city is also trying to collect on an unpaid bill by the Community Development Department to a landowner that used a city consultant’s services for approximately $250,000 without any properly approved contract.

Brink Of Collapse?

According to Wellman, some of Oakdale’s financial issues mirror many other valley communities including debt-ridden Stockton which is on the verge of bankruptcy. He cited raids by the State legislature on city coffers, sales tax revenues not meeting expectations, property values decreasing resulting in lower tax generated revenues, and financial errors and short comings.

“We can’t control the first three,” said Wellman, “but the financial missteps can and should be avoided.”

Wellman said that other concerns consist of unfunded capital liabilities due to no service fund for such costs.

Wellman wanted to stress that regardless of the situation, he wanted to ensure that the “Measure O” funds were still used for their intended purposes to avoid any layoffs to public safety personnel and keeping the senior center open.

“Overall, we’re looking into what’s happened and what’s the alternative,” Wellman said. “Staff can have ideas and make suggestions, but ultimately it’s up to the elected officials to adopt the practices.”

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