Guadalupe City Administrator Andrew Carter doesn’t mince words when describing the current state of the city’s money situation.
“We are in severe financial distress, if you want to use that term,” he said.
This is no surprise to anyone in city leadership. Mayor Frances Romero indicated at the Aug. 12 council meeting that she would ask for a grand jury investigation into Guadalupe’s finances. Before that, in late May, the City Council declared a state of fiscal emergency. Leaders have also put several tax measures on the November ballot in an effort to tip the ailing coffers from the red and into the black.
As it stands now, Carter said, the 2014-2015 fiscal year’s approved budget has a $335,000 deficit, but if the tax measures pass, navigate any necessary legal delays, and ultimately get put into effect, the city should have a $35,000 surplus.
“The council is taking steps to address the deficit,” he said, “but it needs taxpayer approval.”
Carter attributed the city’s money troubles to what he called “improper prior accounting practices by the city of Guadalupe,” some of which may have been an issue, he estimated, for 15 years.
The administrator, who took the job in February of 2013 after leaving his seat on the nearby San Luis Obispo City Council, said he discovered discrepancies when he was going through the budgeting process for this year—the first fiscal year in which he crunched the numbers solely on his own. What he found raised flags for him.
“They all were various ways to use special fund money to balance the general fund, and that is not allowed, either by governmental accounting practices or actually by the rules that follow some of the money that we get from other entities,” he said.
In other words, certain dollars have strings attached and have to be spent on specific services. Electricity to power City Hall and the city-owned legion hall and senior center, for instance, was being billed to the street lighting fund, he explained.
“Obviously, building electricity does not light our streets,” he said.
In looking at the budgets for years past, Carter said he found a range of special fund money that he determined was improperly transferred to the general fund: At its lowest allocation, it was 99 percent; it peaked at 193 percent.
“It’s impossible for it to be that high,” he said.
The mayor said in an email to the Sun that her request for a grand jury investigation comes as a result of what they discovered about the city’s historic budget practices at the end of April.
“As soon as Andrew discovered this past practice while preparing the 2014-2015 budget, the practice was immediately stopped for our 2014-2015 budget year and the correction was made for our 2013-2014 budget,” she wrote. “This resulted in ending the 2013-2014 budget year in a negative balance. As a result of correcting this practice, the city has a significant shortfall in the general fund.”
Correcting for these issues is what took a balanced budget into the deficit range the city is facing today, Carter said, adding that the way money was shifted did keep the general fund afloat, preserving police and fire services for the city.
He noted that Guadalupe has hired Bill Statler, the former San Luis Obispo city treasurer who now provides financial management advice and training to local government agencies, to look at the city’s interfund transfers. Statler is expected to make a report at the City Council’s next meeting, set for Aug. 26.
Carolyn Galloway-Cooper—Guadalupe’s former city administrator and current finance director of Buellton—said she had no comment when the Sun asked about Carter’s findings and assertions.
Statler didn’t respond to a request for comment as of press time.
This article appears in Aug 21-28, 2014.