Next Tuesday’s Board Agenda Package features a “Fiscal Year 2022-23 Audit Progress Report” which begins:
“The County utilizes Munis for budget and financial tracking and reporting purposes. Munis is a powerful tool, but the County has been under‐utilizing Munis, partially due to past practices, but also due to how the system was set‐up. While the system was set up well‐enough for the County to operate, there are areas for improvement and efficiencies to be gained. Making changes to improve efficiency will require resources. Some efficiencies can be gained by means of the following items:
• Utilize modules not currently being used such as bank reconciliation Manager and fixed asset tracking.
• The implementation of multiple upgrades at once has caused extra challenges.
• Modernize the Chart of Accounts (COA) to make full use of the segments available for financial reporting. Currently, the COA utilizes a small fraction of the options available, causing departments to use Excel worksheets to track and report what Munis tracks appropriately. Additionally, the County’s current COA setup is not traditional and can be confusing.”
Comment: Interim Auditor-Controller-Treasurer Tax Collector Sara Pierce wants more money to make the finance software do what it is supposed to do. But calling these things “efficiencies” is just nuts. Also, some of them, like “fixed asset tracking” are probably not worth doing. We agree that “the County’s current Chart of Accounts setup is not traditional and can be confusing.” But we doubt that fixing it will help much.
Moving through the “Progress Report” we find some bad news:
As we suspected, Mendo’ long-ignored Teeter Plan is millions of dollars in the hole.
Pierce: “Teeter Plan Management — As part of the close process staff became aware there is currently $14.2 million of June 30, 2023, in defaulted property taxes, and an additional $8.4 million which defaulted July 1, 2023.”
Comment: “Became aware”? There’s almost $23 million in unpaid taxes and they only now “became aware” of it. We don’t know why the amount jumps from $14.2 million to $22.6 million in one day other than July 1 is the start of the next fiscal year.
Pierce continues: “All agencies [schools and special districts] have been paid their full allotment under the Teeter Plan. The County is carrying this amount as a receivable in the Tax Resources Fund.”
Comment: The County is owed at least $22.6 million in unpaid taxes from property owners who have simply ignored their tax bills. Carrying it as a “receivable” is hopeful to the point of absurd since there’s no analysis of whether these funds will ever be “received.” Carrying it as “receivable” also makes the County’s finances look somewhat less bad than they are.
Pierce: “Additionally, the Tax Resource Fund was operating in a deficit cash balance, therefore a due to General Fund and a due from Tax Resource fund of $5.5 million was required to be booked.”
Comment: We are not sure what the “Tax Resource Fund” is. Apparently “a due” is equivalent to “a receivable,” and thus also blithely assumes that what is due will be paid someday. It would seem that Ms. Pierce has “booked” a $5.5 IOU to the General Fund from the Tax Resource Fund. Since this IOU is being discussed under the Teeter Plan, we assume it’s a slush fund used to pay tax revenues to schools and special districts while the County waits for penalties and interest to come in and replenish the fund. As we have noted before, the Teeter Plan itself is long overdue for an audit. This is probably just the tip of the County’s debt iceberg.
Pierce: “Lastly, there is a requirement to maintain 25% of the total delinquent secured taxes in the tax loss reserve, which required an additional $5.4 million to be transferred from the General Fund to bring the balance to the minimum requirement.”
Comment: Here’s another ill-defined fund they are calling “the tax loss reserve” which sucked up $5.4 million in General Fund dollars so that the County could pay what it owes to schools and special districts, also in the hope that it would be replenished by tax default property sales and penalties and interest.
Pierce: “The County has the potential to recoup the defaulted amounts through the property auction process. The Treasurer/Tax Collector Office anticipates completing a Tax Sale in Fiscal Year 2024/25.”
Comment: Here we’ve jumped from the Teeter Plan to tax collection deficits. Readers may recall that former First District Supervisor candidate Carrie Shattuck asked for a list of tax default properties last year and was told it was months off. It appears Ms. Pierce and her staff are just now starting to catch up, but the tax default sale process won’t be “complete” until sometime before June of 2025, probably later. We suspect that a lot of the tax defaulted properties are abandoned pot grows in the north county, so good luck trying to get delinquent taxes due by selling them at fire sale prices now that the pot market has tanked. That may be why Ms. Pierce says that the County has “the potential” to recoup the defaulted amounts. She did not estimate what the likelihood is, however.
Pierce concludes: “As discussed before, the last Tax Sale was in 2019.”
Comment: 2019 was five years ago. The County could claim that covid had some impact on this process, but five years? We don’t know if this subject was “discussed before.” We certainly did not see it. But if it was, obviously nothing was done to speed things up.
So the good news is that the County may be finally starting to focus on some of its financial reporting obligations and its very large tax delinquencies. The bad news is that any revenues that may “potentially” result are at least a year off. If it’s true that taxes not collected after four years are uncollectable, the amount that may be recovered may be lower than expected. Ms. Pierce could start by producing the list of tax defaulted properties that Ms. Shattuck asked for last year so that we can all see just who these delinquents are.
There’s more good news and bad news about the County’s finances in the May 7 agenda packet. We will delve into them in the next couple of days. If you’re in a hurry you can go to the Board’s agenda webpage and poke around.
In general the good news is that Mendo is finally producing some of the long-overdue reports that we have been calling for for years. The bad news is what’s in them.
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Also on next Tuesday’s agenda is the item withdrawn at the last meeting involving the possible appointment of CEO Darcie Antle’s live-in boyfriend, Dr. Theron Chan, M.D., as Interim County Health Officer for the next few months. When we previously reported this item we thought the $45k was cheaper than previous appointments. But now we see that the $45k is for less than 3 months. So that works out to a nice annual rate of $180k/year or so for Dr. Chan.
Item 4f: “Discussion and Possible Action Including Approval of Agreement with Theron Chan, M.D. in an Amount Not to Exceed $45,000, to Provide Medical Oversight, Direction, and Guidance for the Public Health Department as the Interim County Health Officer, Effective Upon Signature through July 31, 2024
(Sponsor: Supervisor Mulheren)
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More Good News/Bad News
For the first time in recent history, Interim Auditor-Controller/Treasurer-Tax Collector Sara Pierce has provided a budget versus actual report to the Supervisors.
According to a footnote:
“Variance does NOT equate to a carryforward as there are other transactions which hit the fund balance directly. Until all accounts can be reviewed in Munis for proper set up, the variance total should not be thought of as additional funding available for budgeting purposes.”
Okay. Okay. We get it. We can’t assume that any momentary underrun is going to translate to money for next fiscal year because this is only a snapshot. But upon examination, we see that more caveats should have been made.
Nevertheless, this is a step forward. This budget vs. actual report is the first one that the County has produced in years. Will it continue? We’ll see.
Ms. Pierce’s budget v. actual summary is entitled: “Unaudited Year‐to‐Date (YTD) Budget vs Actuals – General Fund Only (Fund 1100)”
Let’s take a look.
According to this report, so far this year the County has received about $238 million in “actual” revenue which is just over $9 million short of budgeted revenue.
Oops. Right there we’re off to a bad start. The General Fund is nowhere near $239 million, closer to $85 million, yet the report is for “General Fund Only.”
Hmm.
Next Ms. Pierce provides the departmental rundown.
Here again, there’s a problem. Actually, lots of them.
The Revised Budget “Grand Total” of all General Fund departments is listed as just over $11 million. But obviously, that’s incorrect. because the column adds up to much more than that. The Sheriff Coroner alone is budgeted at about $17 million. Our rough addition shows that the revised budget for the General Fund adds up to just over $57 million including a few strange negative budget numbers and a couple of oddly precise numbers like $1,000,000 for Animal Care. We know from the 2023-2024 budget book that the General Fund budget is around $85 million.
Hmmm.
Let’s let that go for now since this is a first attempt. There’s a slight chance of some explanations during next Tuesday’s Board morning budget discussion, but the Board hasn’t expressed much interest in budget details before, so… We hesitate to ask the CEO or the Auditor any routine questions about these irregularities ourselves for fear of being accused of being “critical,” and then never seeing another budget versus actual report again.
We expected the Sheriff’s budget to be the biggest overrun. But no. The Sheriff is running about $675k over budget, which, considering that this is near the end of the fiscal year, is lower than his average overrun. In fact, the biggest overrun is for “Cannabis Management,” whatever that is or isn’t. It’s possible that the County has hired some “cannabis managers” that they didn’t expect to hire since they only budgeted about $40k for “cannabis management.” But wouldn’t the “revised budget” have picked that up, especially since it’s such a large number?
We were also surprised to see that the jail is running very close to budget. That’s good, but surprising, and should be explained. We’d like to think that the Jail is properly staffed and running as expected.
The District Attorney is running almost $700k under budget. This could be a reflection of the difficulty of hiring prosecutors and staffers. It might also be that the DA is leery of spending money or applying for reimbursement after his unfortunate run-in with the (former) Auditor-Controller last year that mushroomed into bogus criminal charges and a civil lawsuit.
Planning and Building appears to be running significantly under budget too. We don’t know why that would be other than Planning and Building Director Julia Krog has told the board on multiple occasions that she doesn’t have enough staff to do what the Board would like her to do because they must first attend to state mandates and such. But if she’s under budget, why not hire a person or two to do what the Board has asked?
There should also be an explanation for “Public Health Administration” and “Clerk-Recorder” (Isn’t it “Clerk-Recorder-Assessor”?) which show a year to date actual of MINUS ($279k) and MINUS $87k respectively. Did they somehow spend a negative amount of money? Did they receive some money back from something? Is realignment money offsetting some expenses? (If so why is the “budget” negative?) Is there some kind of shell game going on there? Who knows?
In Home Supportive Services shows that they’ve only spent about 10% of their budget even though the fiscal year is almost over. Could that be right? If it is, why are the In Home Supportive Services staffers and their union reps frequently complaining about their low pay?
We could go on. But you get the idea. While this budget to actual report is at least an attempt to address a long-standing reporting gap, it is far from useful, and generates many more questions than answers.
We had hoped to see annotations and caveats with this report which may have explained some of the more glaring variances. But instead Ms. Pierce only offers only “a few comments about the larger variances”:
“• Public Health Nursing – funds being used to offset expense were applied directly to fund balance
• Cal Works/Foster Care and In Home Support Services – utilized realignment to cover expenses and offset general fund.” (Ok, that last one helps explain the low expense number for IHSS so far.)
Mendo will need substantially more explanation than this if it expects to provide a meaningful budget to actual report to the Board in the future.
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Some Good News, More Bad News
Fortunately, nobody took me up on my 100-1 odds against that next Tuesday’s Supervisors Agenda would include a report on “discoveries” — properties added to the tax rolls by the Assessor’s office going out and finding them.
I would have lost because there is one, albeit brief and underwhelming.
Unfortunately, the numbers are too low to make much difference.
County Clerk-Recorder-Assessor Katrina Bartolomie reports:
“Discoveries – So far, we have sent out 78 Discovery letters. 51 have been forwarded to the appraisers and assessed. The appraisers found that 30 of the 51 sent to them were already being assessed, so no action was taken on those. So far we have been able to add $2.8 million [in assessed value] to the [tax] roll. The discoveries have ranged in assessed value of $1,500 to $294,000. Our Appraiser Techs work on discoveries between projects. The Assessor’s office assesses many unpermitted structures throughout the entire County.”
Put another way, that’s 27 letters not yet assessed, and 21 new assessments representing about $2.8 million for properties ranging from $1,500 to $294,000 in value. We do not know what period of time Ms. Bartolomie is referring to as “so far,” but elsewhere in her report she refers to September of 2023, so that would be maybe two or three new or discovered assessments per month. Nor do we know what “many unpermitted structures” means. If the 21 new assessments add up to $2.8 million, that’s an average of about $130k per assessment. It also means that the properties being discovered are not among the more well-off property owners. And, if these are the proverbial “low-hanging fruit,” then the whatever is left unassessed is going to take longer.
Using Supervisor Gjerde’s estimate that about 30% of property taxes collected go to the County, that’s 30% of the 1% tax rate on $2.8 million of assessed value, or about $8,400 worth of potential new taxes, if the property owner doesn’t dispute the assessed value and if the tax is collected.
At this rate, Mendo’s not likely to close any budget gaps anytime soon.
Ms. Bartolomie also reports that:
“On April 15 we mailed out Notice of Supplementals on 220 completed appraisals, with $18 million in assessed value. Since September 2023 we have completed 1801 appraisals for an assessed value of $228,759,806. These have been reported on a monthly basis since then.”
Using that same 30% Gjerde formula, the $18 million in Supplementals (presumably new structures or property sales transactions with new assessments), that’s 30% of 1% of $18 million of assessed value, or $54,000 in potential new taxes per year. Again, not much, not even coming close to covering the cost of the new appraisers in the Assessor’s office.
As for the 1801 completed appraisals, that translates to an average assessed value of about $127k (which seems suspiciously low). 30% of 1% of about $229 million is about $700k in property tax revenue per year.
What about Supervisor Haschak’s permit amnesty program that was supposed to add some new structures when people come in for permits on unpermitted structures because penalties were waived? Also underwhelming.
Ms. Bartolomie: “Amnesty Program - The appraisers have tracked 41 Amnesty Applications from Planning & Building. So far only 1 Hoophouse was not assessed; we knew about and are watching 4 parcels with new construction and 2 parcels with open transfers, the other structures being reported through the Amnesty Program were already being assessed. We are working with Planning & Building to receive a monthly report on the Amnesty Applications.”
Very weak tea.
Considering that the General Fund where most of the property tax revenue goes is about $85 million, that $700k of assessed value is less than 1% of the County’s total discretionary revenue — i.e., mainly the revenue from property taxes, sales taxes, bed taxes and miscellaneous fees.
According to the County’s latest budget, property taxes were expected to bring in around $43 million to the General Fund. So these new assessments don’t add up to much.
It’s a step forward to finally have this report of a few “discoveries.” And it’s a step forward to have a little potential new revenue in the system for possible collection. But the corresponding potential revenues to be gained from all this are so small that it is not likely that Hans Brinker’s little assessment fingers will keep the dam from breaking.
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Remember that complaint from a Coast resident a month or so ago about the Skunk Train’s new visitor serving facility not being on the tax rolls?
Ms. Bartolomie explains:
“Mendocino Railway. The State assesses all rail property whether the property is publicly or privately owned. The State is assessing the Mendocino Railway properties, including the barn structure (also known as the Glen Blair Bar) that was mentioned a few weeks ago. The State Appraiser will be in our area sometime towards the end of May, we will be meeting with them at that time.”
For reference, the original complaint was from Coast Resident Peter McNamee who said that the Skunk Train had built a large new visitor serving facility near his home outside Fort Bragg apparently without a permit and therefore it has not been assessed or taxed. Supervisor Williams replied that if they built such a facility they would have had to have gone through planning and building and environmental health and therefore it must be on the tax rolls.
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Body Cams For Mendo Corrections Officers
Consent Calendar Item 3y on next Tuesday’s agenda:
“Approval of Agreement with Axon Enterprise, Inc. in the Amount of $413,178.30 Covering a Three-Year Period to Provide Body-Worn Cameras, Related Equipment, and Licensing for Sheriff’s Office Corrections Division Staff. Effective July 1, 2024, through June 30, 2027
source of funding: 2510-862230 (Sheriff’s Budget Unit)
“Budget Clarification: Annual contract costs will be included in the 2510 budget submissions for each fiscal year through FY26/27. Annual costs are $137,726.11 in FY24/25 and FY25/26 and $137,726.08 in FY26/27.”
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County Management Union To Get 1% Pay Raise.
“Effective the first full pay period following ratification and Board of Supervisors approval, all bargaining unit employees shall receive a 1% COLA.”
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SUPERVISOR MAUREEN MULHEREN (facebook): “Took a drive to Leggett Monday morning to attend the American Legion meeting. Even in the pouring down rain I’m always grateful for the beauty of our County. Air Quality is working through a lease with a private property owner and the team at the County and I hope to have a date for the relocation of the Veterans Service Office back to Observatory very soon. Just thought you should know.”
YOU SHOULD ALSO KNOW that the Veterans Service Office staff were unceremoniously evicted from their office cottage on Observatory Avenue in a matter of days back in January and plopped down in the very unsuitable Public Health building nearby the next day. The Board quickly cranked out a press release saying that the move was badly handled, but defended the move if a few minor changes were made. After weeks of sustained outcry from local veterans and their supporters, the Board decided to move the Veterans Service Office back to their Observatory Cottage on February 28. At that meeting Supervisor John Haschak, who had co-written the original press release saying the move was mishandled but that problems were being worked on, belatedly realized that the move was a political liability, first saying that “everyone’s invited to see the progress that’s been made” on making some alleged cosmetic improvements. After having listened to the Vets complain at every meeting since the move, and again on February 28, Haschak suddenly reversed course mid-meeting and said, “If the Veterans want to stay in Observatory then they should. We’ve spent lots of staff time for these moves. But if the vets don’t like it then I’m all for giving them what would best serve their needs.”
A few days later in his Supervisors Report Haschak added:
“The Board decided to move the Veterans Services Office back to the Observatory Ave. location. Kudos to the persistence of the veterans who returned time and again to the Board chambers to voice their disapproval of this move. I worked with staff and veterans to make the move as good as possible but the base issues were unresolved. I appreciate that the veterans said that they would help with the move back to Observatory. When the time comes to move, we will be calling on them and they will show up.”
Now here we are four months later and counting and nothing has changed and Chairperson of the Mendocino County Board of Supervisors thinks you should know that she “hopes” to have “a date” “very soon” for the Air Quality staff to move to a leased building (the cost for the move/lease is not mentioned), but avoids saying how long after that the Vets Office will move back where they belong.
(Mark Scaramella)
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