Payroll Will Be Met, Auditor Assures Workers

Amid fears by county employees that they might not get paid, Auditor Tom Mahon backed off Thursday from a statement that meeting county government’s pre-Christmas payroll “presents a particular challenge.”

He said the statement, contained in a draft letter Wednesday to the Board of Supervisors, was a “poor choice of words” that did not reflect the point he intended to make.

“What I was trying to convey is that there is a serious problem, but we are going to meet payroll,” Mahon said. “It was a poor choice of words on my part. So I chose to change it.”

Mahon’s three-page letter was given to supervisors as a plea for quick action to solve the county’s short-term cash-flow problems and begin reducing a deficit that could mount to $5 million by June without action.

But the final version of the letter distributed Thursday deleted this sentence: “Meeting the Dec. 16, 1999, payroll presents a particular challenge.” The draft never states that the county would not meet its $10.6-million payroll, only that it had to scrape to do so, the auditor said Thursday.

Some of the county’s 7,500 employees were so concerned after reading Mahon’s comments in The Times that they called him to find out if they were going to get a paycheck in two weeks. Mahon said Thursday that he was preparing a letter to calm their fears.

Acting Chief Administrative Officer Bert Bigler also told Mahon that the sentence could lead employees to inaccurately believe that they might not be paid.

“I think it was appropriate to take it out,” Bigler said. “The point he was trying to make is our cash flow has been declining over several years in the general fund. That’s an indicator to be concerned with. But there is cash to make payroll.”

Supervisor John K. Flynn took to the radio to debunk Mahon’s statement. In a later interview, he said: “I don’t want to get into an argument with Tom, but on that particular issue, he was wrong.”

In the final briefing paper, however, it is clear that the county has struggled in recent months to pay its bills. The financial woes stem in part from a mental health billing scandal that required the county to write off $7.2 million in lost revenues and penalties this year.

Mahon has hoarded $11.3 million by putting off payments to other county agencies and taking out advances on revenues intended to be spent next year.

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Moreover, the auditor continues to maintain that after the county meets its Dec. 16 payroll, it will only have $2 million to $3 million left in its general fund--and that is too close for comfort.

“I don’t want to unnecessarily frighten people,” Mahon said. “But it has just come down to where we have been rolling downhill faster and faster.”

Mahon’s letter recommends that the supervisors direct Bigler to draw up a prioritized list of program cuts at their Tuesday board meeting. He also recommends that the board consider eliminating a number of vacant positions to make up the $5-million shortfall.

The county auditor, meanwhile, got a bit of good news on two other fronts.

The county’s financial woes have not affected its top-notch reputation with New York credit-rating firms--but they are keeping a close eye on the still-unfolding financial crisis.

Analysts at the two major agencies that size up the county’s fiscal health, Standard & Poor’s Corp. and Moody’s Investors Service, said Thursday that they had no plans to downgrade county government’s high marks for credit worthiness.

“Ventura County is one of biggest and wealthiest counties in the state. It’s in the highest echelon of ratings for counties other than Marin,” said Kevork Khrimian of Moody’s. “As far as we can tell, there is nothing to be concerned about. But we’re watching.”

David Hitchcock, an analyst at Standard & Poor’s, said the A credit rating the county received in June still stands. However, the Wall Street firm is reviewing the current cash-flow problems to make sure that nothing has changed.

“We are following the situation,” he said.

Mahon said Standard & Poor’s asked him to send a report on the county’s cash flow for December.

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Sustaining a high credit rating is important because it allows the county to borrow money at lower interest rates, saving taxpayers money, Mahon said.

That is essential for the short-term notes the county borrows each year to pay bills until it receives property tax and other revenues.

If the county had to pay even two-tenths of a percentage point higher interest on the $75 million it borrowed this year, it would cost an additional $150,000, Mahon said.

Mahon also learned that the state has agreed to reimburse the county $2.2 million for Medi-Cal payments it had previously disallowed. The state refused to pay the mental health billings, saying they were submitted too late.

But the county appealed, saying it had no choice but to hold the payment requests because of a federal investigation into its billing system. On Thursday, the state agreed with the county’s appeal and authorized release of the money.

“It’s good news,” Mahon said. “And I can use every bit we can get.”

Also Thursday, supervisors continued to search for a strong executive to replace David L. Baker, who resigned as chief administrative officer after four days on the job.

Retired Navy Capt. Stephen Beal, who stepped down as commander of the Point Mugu naval base in July, told Supervisor Frank Schillo that he has the qualifications to fill in as a temporary chief executive.

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Beal was also a candidate in the county’s earlier CAO search, but did not make the final cut.

Supervisor Kathy Long also received leads on two retired government managers at a conference she is attending in Monterey.

Long has said she expects to return to Ventura County today with a list of potential candidates who can help lead the county back to financial health.

Times staff writer Daryl Kelley contributed to this report.