Rancho P.V. Cuts Budget, Transfers Funds in Bid to Stave Off Deficit

Rancho Palos Verdes City Council members have approved a plan to correct a projected $2.8-million budget deficit caused by poor accounting procedures and a shortfall in projected revenues.

The council, which was clearly disturbed last month when the projected deficit was disclosed, voted to cut nearly $1 million from the city’s 1990-91 operating budget.

It also transferred $1.3 million from the city’s capital improvement fund to the operating budget, and took an additional $1.2 million from various accounts with surplus funds.

The changes, adopted at a special council meeting held over the weekend, mean that two administrative analysts will be fired, and three or four city jobs now vacant will not be filled, City Manager Paul Bussey said.

Additionally, six public works projects, primarily street improvement jobs, will be postponed indefinitely.

“We are tightening the belt, but we’re doing it in a way that we hope won’t directly impact the public,” Bussey said. He said that the steps taken also will provide the city a reserve.

Extra money was available in the state-administered retirement fund for former city employees and a fund that developers pay into for parks and other environmental projects, Bussey said. Under law, surplus funds from these accounts can be transferred to the city’s general fund.

The transfer of money from the city’s capital improvement fund poses a special dilemma. Money accumulated in the fund came from a utility users’ tax that expired last year.

The city is seeking government grants to restore the fund, city officials said.

Councilwoman Jacki Bacharach said in an interview that there is no identifiable revenue that can be used to replenish the money “so we are going to have to be very watchful” for grant money.

The projected deficit, at first estimated to be $3 million or more, was discovered by Bussey during a recent inspection of the city’s financial records. Bussey joined the city in June, after the $8-million budget had been drawn up and approved by the City Council.

The current budget, which covers the 12-month period beginning in July of this year, was prepared at a time when the city was experiencing a turnover in its executive ranks, including the positions of city manager and finance director.

The 1990-91 budget was prepared under the direction of interim City Manager William Cornett. In a recent interview, Cornett said he had been stymied in preparing the budget by incomplete financial records. Also, funds had been transferred from one account to another and were difficult to trace, he said.

Bussey said that besides a shortfall in anticipated tax revenues, a major portion of the projected deficit resulted from a $2-million loan the city made in 1987 to its redevelopment agency.

The loan was never repaid, although the money was calculated as cash on hand for the 1990-91 general fund budget. The city covered $1.2 million of the loan with funds it had in its reserve account, Bussey said.

Bacharach said the personnel turnover and the turmoil it created at City Hall undoubtedly led to an inaccurate budget being prepared by city workers.

“I think it was very hard for people to function in their jobs for a while,” she said.

Bacharach said she was concerned that audit reports prepared by outside accountants and given to council members did not indicate the city’s finances were in disarray. Coincidentally, the city changed accountants shortly before the deficit was detected.

“We had audit reports that consistently showed there was nothing wrong,” Bacharach said. “It is not like we weren’t watching the store. We were watching the store.”

To avoid budget preparation problems in the future, Bacharach said she has asked that midyear budget reports be prepared for council members. Also, Bussey has recommended to council members that a council subcommittee regularly meet with city executives to stay informed on budget matters.