Hermosa Council Red-Faced Over Being $818,000 in the Black

City Council members, some complaining that their credibility may have been damaged, are trying to determine how the city ended the fiscal year with a surplus nearly 75 times larger than expected.

Two months ago, the City Council unanimously urged voters to raise property taxes $52 a year for four years to pay for safety services. Officials said at the time that the city’s surplus was only $11,000 and the Police Department desperately needed the $482,000 the tax would have generated annually.

Although 57% of the voters approved the tax hike, it fell short of the two-thirds majority needed.

“In retrospect, I’m glad it was defeated because I don’t like to cry wolf,” Mayor Pro Tem John Cioffi said after learning this week that an outside audit of the city’s finances showed the surplus is close to $818,000.

“It’s an embarrassing position to be in,” Cioffi said. “I think we should have known about it in November. . . it’s obvious that we asked for funds we didn’t need.”

The $817,978 surplus is the undesignated balance of the General Fund for the 1985-86 fiscal year, which ended last June 30.

The other four council members also said in interviews that they were surprised to learn this week of the city’s unexpectedly large surplus and were searching for explanations.

“ ‘Why?’ is a real good question,” said Mayor Tony DeBellis. “Why and how and what are we doing to make sure it doesn’t happen again, and whose fault is it? . . . Somebody is keeping our books and maybe not doing it so well . . . that’s a pretty large inaccuracy.”

The audit had been listed among “routine matters” on this week’s council agenda. A backup report provided to the press and City Council said only that the fund balance of $818,000 “is significantly higher than anticipated.” It did not note that the previous estimated surplus was $11,000, and a reporter pointed out that the surplus was nearly 75 times higher than expected.

When several council members questioned the size of the surplus, the report, signed by City Manager Gregory T. Meyer and Finance Administrator Viki Copeland, was taken off the agenda at Meyer’s request. He said that because of an oversight, the council had received only one of two related documents about the audit, and said he will prepare a more detailed report for the council’s Jan. 27 meeting.

Meyer said in an interview that the City Council members should not be too surprised by the surplus because they were given a report in mid-July that indicated the balance would be about $600,000. However, two reports, which total about 44 pages of numbers, were given council members in July. Neither report gives a total dollar figure for the surplus.

Several council members, however, said they did not remember ever being told that the balance would be substantially higher than the $11,000 estimate, but said they may have forgotten.

Nevertheless, Cioffi said, the City Council should have been reminded last fall when the tax measure was being discussed that the city expected a $600,000 fund balance.

Most council members said they urged voters to approve the tax hike based on information from Meyer and the Hermosa Beach Police Assn. The city manager, they said, continually told them the city was in financial trouble.

Meyer told The Times in early November that the undesignated fund balance was expected to be about $11,000. He said this week that, although the end-of-the-year financial report stated the surplus would be about $600,000, he used the $11,000 figure because that was what was in the budget.

Meyer said in an interview that the difference is due to an increase in the general fund revenues--including sales tax and building license fee receipts--and parking revenues by about $300,000 each, along with a decrease in expenditures of about $200,000 less than budgeted.

“This is really a one-time sort of thing,” he said, but “this is good news for the city. I think it indicates the financial tide is turning into one of solvency.”

Finance Administrator Copeland said the council should not be so surprised because the various city departments make monthly financial reports.

“The council gets these reports every month, it’s not like it’s a surprise,” Copeland said. The reports show the anticipated and actual revenues and the council gets quarterly financial reviews, she said.

Council member June Williams said, “They certainly didn’t give us any indication at our last budget review or . . . when we put it on the ballot. That’s why I’m suspicious of it.”

Williams, who said she is paying her own health insurance premiums because she didn’t believe the city could afford the expense, said, “If we’re really rich, I wouldn’t mind if the city paid my health insurance.”

Cioffi said the City Council was told sometime last May that the revenues were 1% to 2% higher than anticipated, but not 75 times as much.

He said the City Council has been pushing the city staff to make accurate projections of the budget. “It’s a nice surprise,” he said, “but I shudder to think that the reverse could have happened.”

Meyer said he had been advised by the City Council to make conservative estimates and he wrote in a statement submitted with his recommended 1985-86 budget: “While the financial side of the budget is bleak, the process of budget preparation and financial monitoring has been improved.”

However, during the first quarter of fiscal 1985-86 the council learned that tickets and other Police Department revenue had been overestimated by more than $500,000 for the year.

The council may discuss whether to spend the $818,000 surplus or use it bolster the city’s reserve funds at its Jan. 27 meeting.