Or is it $16 million? Or $11 million? Nobody knows.
A chart buried deep in the CEO’s “Q1-Budget Presentation for FY25-26” prompted a very surprised reaction from Mendo’s historically in the dark Supervisors on Tuesday.
Turns out, according to the chart, innocuously labeled “FY 2025-25 Close Out,” that Mendo has an “unaudited General Fund carryforward” from last year of over $12 million dollars.
The chart provided a brief breakdown of the newfound carryforward (unspent revenues from the previous fiscal year):
Property Taxes – increase of $4.15 million
Property Tax in lieu of VLF revenues - $815,000
Cost Plan – increase of $1.36 million
Transient Occupancy Tax – increase of $805,000
Interest — increase of $2.5 million.
The chart says there’s about $99 million in “year-end non-departmental revenue,” (known colloquially as the “General Fund”) but the components listed on the chart (above) add up to only about $9.6 million. Actual general fund expenses totaled about $83.6 million, for a carryforward of about $12.2 million. A footnote says that the $12.2 million “Includes unavailable Fair Market Value in the amount of $1,024,187 for a total of $11,133,578.” But $99 million minus $83.6 million is almost $16 million, almost $4 million more than the chart’s claim of $12.2 million in “unaudited carryforward.”
First some county finance lingo.
VLF is the County’s share of vehicle license fees. Nobody knows why it was higher than budgeted.
The “cost plan” is where the County can include qualified overhead costs when they bill the state and the feds for local (mostly) social services. So that $1.36 million probably means they got more overhead cost reimbursements than they thought they’d get for the prior fiscal year.
The “Unavailable Fair Market Value” simply means that the County’s investment pool of stocks and bonds has gone up in value but isn’t real cash on hand.
Nobody is quite sure why the property tax revenues were more than $4.1 million over what was budgeted, although a couple of the County’s financial officials suspected that it had to do with “escapes” (i.e., the County finally getting around to identifying and collecting delinquent taxes from as many as four years ago).
Nevertheless, whatever the amount is — nobody at Tuesday’s meeting expressed the slightest interest in why the carryover chart’s numbers didn’t add up — it is being eyed very closely by the County’s general fund department heads, especially the Sheriff/Jail, the DA and the Probation Department which make up most of it. Like other General Fund departments, they have had to cut their budgets by 6%, only to find out now that there’s millions of dollars in carryover/surplus.
County CEO Darcie Antle and her staff as well as Auditor-Controller Treasurer-Tax Collector Chamise Cubbison said that the surplus is mostly one-time money and should not be expected to be realized in the future as ongoing revenue. One-time money is historically allocated to reserves and facility repairs and upgrades, not to department operations. Therefore, what the Board will do with the surprise surplus remains to be seen.
Leave it alone. A rainy day fund is a good idea.
I both love and hate reading these county budget articles. As go the Mendo Co bureaucrats, so go the world’s bureaucrats. Microcosm of what happens at the highest levels. Both hilarious and scary.
To the Editor:
The unrealized capital gain on investments in the County’s “Treasury Pool” — a portfolio of tax receipts held by the County Treasurer — was created when the Federal Reserve Bank dropped interest rates. Bond prices and interest rates move in opposite directions — meaning when interest rates drop, bond prices go up. They have an “inverse” relationship. But these unrealized gains cannot be easily (or legally) realized.
The underlying securities of those investments would have to be liquidated for the gain to be realized., and the Board of Supervisors (BOS) couldn’t do it. Why? Because the County has hired Chandler Asset Management to manage that portfolio held by County Treasurer, and Chandler was hired for good reason. I’ll explain.
The portfolio is highly “structured” and empirically “structured”– meaning that the portfolio is structured not just to collect and hold taxes but to pay off liabilities with as liabilities come due. Remember that the County collects taxes not just for the County itself but also on behalf of Mendocino College, MCOE, and a host of other agencies and districts.
As of the close of last year, the portfolio had the following characteristics:
Average Modified Duration 1.44
Average Coupon 2.59%
Average Purchase YTM 3.12%
Average Market YTM 3.88%
Average Quality AA+
Average Final Maturity 1.55
Average Life 1.47
This structure is not easily toyed with. I know all this because I served as a public trustee at MCERA from 2012-2017. It was the timeframe when the County got into a lot of trouble with its so-called Teeter Plan — another name for “kicking the can down the road” with the County’s debts. The Teeter Plan was such an abuse of the County Treasury Pool it was almost criminal. It was an abuse of the public trust. It was former County Treasurer Tim Knutsen’s little secret until it wasn’t, and it took years for the BOS to fix.
Knutsen was also responsible for a little fiction at MCERA known as “excess earnings”. MCERA got into a lot of trouble with the IRS as a result and almost lost its tax-exempt status.
The County Grand Jury investigated the mess. Also, a guy by the name of John Dickerson investigated the mess. Mr. Dickerson published his findings in his blog, “Your Public Money”.
Let’s just say it was an era of creative accounting — always a bad idea with public money.
My advice? Leave the County’s Treasury Pool alone. The maturity distribution of the portfolio is designed to match when liabilities come due. It’s all about managing cashflow.
John Sakowicz
Ukiah