Is Mendocino County capable of financial management?
In a recent info-free exchange, former Fifth District Supervisor Candidate John Redding complained that Mendocino County was “imploding,” and “in a death spiral toward bankruptcy.” He implied that the Supervisors will raise taxes because it’s “harder to do business here,” and said the supervisors are “in over their heads.”
In an equally vacuous response, Supervisor Ted Williams said Redding’s remarks were “ridiculous.” Williams claimed that the Supervisors are “ripping off bandaids,” and they are trying to recover from a “long legacy of questionable financial reporting.” Williams apparently thinks the County should do a forensic audit. (Never mind that such audits are themselves expensive and that Williams has been a Supervisor for three years now, rubberstamping three budgets, yet he only recently discovered that Mendo’s financial reporting is “questionable.”
We were not surprised that their windy exchange lacked even the slightest nuance, much less any actual information.
For possible clarification and context, let’s review some relevant financial observations and factoids from 2022, both positive and negative.
On the positive side…
Last fall, Employees Union rep Patrick Hickey told the Board that Mendo is “swimming in money.”
In a February interview with former CEO Carmel Angelo, Mike Geniella reported, “As she prepares to step down, Angelo said she is especially satisfied that the county, facing near bankruptcy in 2010, is today on firm financial footing with $20 million in reserves in the face of an annual operating budget of $340 million. ‘I leave knowing the situation today is much healthier than when I was appointed CEO in 2010,’ said Angelo.”
Mendo has enough money to pay hundreds of thousands of dollars in unaccountable, unquestioned outside legal costs every year, including for doing their own job of negotiating with their employees. They also had enough money to give every employee (including themselves) an across the board 2% raise. (Each percent amounts to about $1 million per year.) Plus $2k for each employee from federal covid funds. They also had enough money to hand out a few hundred thou for a water agency with minimal staffing in out-years.
CEO Darcie Antle’s financial staff estimated a $500k carryover (underrun) for this fiscal year (although the exact numbers are not in yet). That $500k was applied to Mendo’s $6.1 mil deficit.
They (including Williams) had enough money to hand over about $600k for tourism promotion (although Supervisor Gjerde voted no, citing funding shortfalls).
They had enough money to spend hundreds of thousands for a new parking lot at County admin HQ,
They had enough money to give their County Counsel a big raise, making him the highest paid public attorney in the County (although County Counsel Curtis botched his raise process by violating the Brown Act he claims to be an expert in).
They casually re-allocated millions of previously allocated PG&E dollars to help close the budget gap. (And Gjerde said they could increase that by reallocating about $2.6 previously earmarked for Coastal Valley EMS (emergency services admin) for an “elusive” Joint Powers Agency. (Note: Gjerde had previously voted to give the $2.6 mil to Coastal Valley EMS.)
They have enough money to pay themselves and their CEO (i.e., just six people) a total of about $1 million a year for salaries and benefits.
(Note: In the last budget crunch in 2009 the Supervisors (with the notable exceptions of “liberals” David Colfax and Kendall Smith) took a (voluntary) 10% pay cut. At that time, the three Supervisors who took the cut noted that it would look bad if they imposed cuts on employees but not on themselves. Even CEO Angelo deferred her raises until 2018 after the budget was finally re-balanced.
A check with outside financial analysts a few months ago showed that despite all the financial handwringing and finger-pointing, as recently as August, the county’s credit rating remained “in the top tier” at a solid A+, with Williams bragging about it at the time.
A couple of long term debt instruments from decades ago will finally be paid off in the next couple of years and that money will be available for the general fund.
On the negative side…
They have never had basic monthly department-by-department financial reporting showing budget versus actual, although having promised such reports in the past, and they’re again promising (in the December CEO report) that they will have improvements in 2023. There’s no evidence that that will occur or that they even know what decent financial reporting is.
They do not know if the $3.6 million health plan deficit will continue nor how much additional that they, and their employees, will have to pay to keep from going further into health plan budget deficit.
They have several pending employee lawsuits that not only continue to cost hundreds of thousands in legal costs, but could cost hundreds of thousands if not millions more in settlements or court judgments.
They have a CEO who was a staunch Carmel Angelo loyalist and Angelo’s Chief Budget Officer for years, yet who has yet to explain where Angelo got the $20 million reserve estimate Angelo claimed when she retired.
They have hundreds of chronic vacancies, many of them in general fund departments. Even if some of those vacancies must remain funded because they are categorized as “revenue generating” or for “public safety,” they remain vacant. Where are those savings?
White shoe Sacto architect Nacht & Lewis has a blank draw on Jail expansion administration and Measure B money with their unchecked, unquestioned, hundreds of dollars per hour construction management and overhead rates, for excessive planning and paperwork that they know they can pad without question from the County. Instead of looking for more cost effective local architects, they recently borrowed about $10 million to cover the jail expansion overrun instead of asking the state to cover it since it is the state’s project. That debt will cost the County at least $500k per year for the next 20 years.
For more than a year, everybody has known that the budget was padded with pot tax revenues which were dropping as the pot the market tanked and pot permit applications dried up. Yet no adjustments were proposed, much less made.
CEO Antle gets the equivalent of CEO Angelo’s pay even though several department heads no longer work for the CEO, but now report directly to the Board.
Even though the Employees Union reps follow budget matters very closely, they never registered a complaint about the $2.6 million “Colossal Waste of Dollars” (per Supervisor Gjerde) for Coastal Valley EMS, nor have they pushed for the Dispatch consolidation suggested by former Sheriff Allman, nor have they argued against the $600k promotional handout, a huge annual handout that no other private industry in the County gets.
There’s about $4 million per year of new money expected to start coming in from Measure P, the “essential services” measure the voters recently approved by an underwhelming majority. Local fire services supported the measure because even though there’s no legal restriction, the Board passed a resolution that they will hand the proceeds over to local fire departments as hoped for. If the budget deficit is as bad as they say, will Mendo keep any of those Measure P revenues to balance their budget as many suspected before the vote, a vote where about 45% of voters voted no even though it was for a popular purpose (firefighters) — clearly an indication of distrust of the Board?
In a subsequent interview with Mike Geniella, former CEO Angelo said, “If there is a lack of fiscal leadership at the county level, it lies with the board itself.” Angelo told Geniella that “when she left office earlier this year county reserves totaled $20 million, and board members had been briefed about what was needed as the new fiscal year unfolded including the county’s ability to cover increased costs of new labor agreements.”
And finally, longtime (former) Treasurer-Tax Collector Shari Schapmire, a well-respected veteran of county finances, was blunt in her assessment: “The majority of this board is ill-equipped to comprehend the financial complexities that are inherent in the operation of the county.”
Our prediction? Official inertia and entropy will continue and the Board will stumble forward, bleeding money, pissing off their employees who will continue to look for work elsewhere, rubberstamping every stop gap measure the staff can dig up, with no significant improvement in budget tracking or reporting.
Presumably sometime in January the Board will receive the results of last year’s books being closed, after having been delayed for more than six months. Their response to whatever that number turns out to be will be an opportunity to prove that Schapmire’s assessment is wrong.