By Lawrence Grossman, Dennis Lowry and Lee Wines

THE PRESENTATION TO THE CITY COUNCIL BY THE NEW CHAIR of the Finance Committee on April 8 may have unofficially marked the return of the committee to its previous and practically irrelevant status characterized by city staff’s dominance of its activities.

The new chair, Michael Clark, is a man we know, have worked with for years, and respect. We believe he is sincerely trying to positively “reset” relations with city staff, and we hope he succeeds. That said, we believe his presentation and Council’s responses indicate clearly staff’s renewed ascendancy.

We understand that the Finance Committee is advisory by nature. Yet we do not believe that city staff control of the Finance Committee, to the point of undermining the committee’s ability to do its job, is in the best interests of Benicia. And we believe this to be true particularly in light of our experiences over the past four years on the Finance Committee as we tried, with little success, to make city finances more transparent, accurate and understandable by citizens.

City Council appears pleased with the transition away from the recent period of having the Finance Committee headed by an independent-minded chair. The previous chair resigned in February 2014 out of a sense of futility, and his predecessor was not reappointed to the committee by Mayor Elizabeth Patterson last year in what seemed a deliberate effort to muzzle the Finance Committee.

On April 8, the Finance Committee’s 2014 Work Plan was presented to and approved by City Council, which lauded the chair’s presentation. It seemed a charade, since most of the work plan, including all the key projects, had been on previous work plans and little progress had been made. If the past is any guide, this new work plan will be largely unimplemented, but its existence will be used by city staff and City Council as evidence that the Finance Committee is fulfilling its role as the citizens’ eye on city finances.

We believe the reason the Finance Committee’s projects have not been implemented is two-fold.

First, city staff, led by City Manager Brad Kilger, has the authority to ignore Finance Committee projects and recommendations. In fact, they have chosen to ignore almost all the priorities of the Finance Committee.

Second, City Council, though they have endorsed Finance Committee work plans, neither monitors the progress of the Finance Committee nor provides resources sufficient for the committee to do its job. We say this notwithstanding the fact that two Council members are ex-officio members of the Finance Committee.

It was typical, but disappointing, that the Council approved yet another work plan without asking why projects never get done.

There are many examples of such uncompleted projects, but only a few are needed to make the point.

Nonexistent Long-range Financial Plan

The lack of a long-range financial plan for Benicia is emblematic — it has been a project for at least four years and nothing substantive has been accomplished. Without a long-range plan, the city has no idea if our financial condition is sustainable. In recent years many cities have gotten into serious trouble because of failing to financially plan for the future, including the bankrupt California cities of Vallejo, Stockton, Mammoth Lakes and San Bernardino.

While we have no expectation of Benicia going bankrupt, poor planning can result in painful outcomes. Our next example is on point.

Water and Wastewater Rate Hike

Only recently Benicia had a water and wastewater (WWW for short) facilities and financing crisis that resulted in our scheduled utility rates going up by about 50 percent over a five-year period. This “crisis” did not have to happen — it was the result of poor financial planning by Benicia.

Prior to the crisis, the financials of WWW, though roughly one-third of city finances, were not reported to the Finance Committee. When the Finance Committee requested information about WWW, city staff stonewalled.

Yet staff had the information and recognized that Benicia had a WWW crisis. The WWW facility needed a major and expensive upgrade. The financial state of WWW had deteriorated to the point that the city’s credit rating could be impaired. So staff drafted a proposal without public input — no citizens, not the City Council, nor the Finance Committee – to both refurbish the WWW facilities and a financing plan to pay for it.

Only then was the Finance Committee asked to get involved. After many hours of meetings, the committee realized that the project needed to be reviewed more closely. With WWW rates going up by about 50 percent, the key question we had was whether the proposal was the best option for Benicia. From staff’s presentation, we could not answer the question because the proposal did not offer any options other than how fast rates would climb.

Only then did City Manager Kilger tell the Finance Committee that he just wanted input on how to present the rate increases that citizens would pay. The issues that the Finance Committee was concerned about were dismissed as being beyond our purview.

City staff subsequently publicized the fact that they had reviewed the WWW proposal with the Finance Committee and in so doing gave the impression that the Finance Committee had endorsed the project, though it had not.

Lack of a Comprehensive Financial Computer System

Consider the financial computer system project that was initiated about three years ago in response to the Finance Committee’s request for better financial information with which to monitor city finances. The committee raised the issue of an antiquated financial computer system that was not able to provide timely and useful reports. This was a top priority of the committee because of the centrality of financial information to its activities.

A proper financial reporting system is essential to financial management, for example to monitor budgets, analyze costs and revenues, and prepare longer-term financial plans based on reliable numbers. Moreover, it is necessary to prepare financial reports that citizens can understand. It is essential so that city leaders can manage the city and staff.

Since the project to upgrade the financial computer system began, city staff regularly reported to the Finance Committee that the project was on track for completion by late 2013. This January, in light of a consultant’s report that has not been released to the public, they announced that the project was fatally flawed — thereby rendering the last three years’ work virtually useless.

At the same time, city staff announced that they were starting over with a new design for the project that was about six times more expensive. The timeline of the new project is now another unknown number of years.

We feel that staff’s behavior was at best disingenuous and did not provide appropriate accountability for the delays and failure to execute.

The previous chair of the Finance Committee addressed City Council on Feb. 4 about that project and Mayor Patterson responded by simply saying that the Council could not speak about the project because of legal issues. That statement was the first the public heard that there were any legal issues at play. Since then, neither city staff nor City Council has publicly addressed this issue. Meanwhile, city staff has refused multiple requests to release the consultant’s report.

At this point, it looks like something is being hidden by city staff and City Council.

Lack of Training of Finance Committee Members

One truly egregious example of a critical project not done that seriously hinders the ability of the Finance Committee to do its work concerns “CAFR” training. CAFR, the Comprehensive Annual Financial Report, is the city’s annual financial report. Working with and understanding clearly the CAFR is absolutely central to the mandate of the Finance Committee. It is complex but not overly so, different from private sector corporate financial annual reports, and therefore committee members need to be trained to do this job. Staff, however, does not offer training but seems to prefer lecturing committee members about their failure to understand public finance. In reality, the failure is staff’s inability to explain city finances clearly.

To address this issue, the Finance Committee put CAFR training on our work plan. The committee had two training sessions and committee members were enthusiastic about deepening their knowledge of city finances. Committee members expressed the need for more training and were volunteering their time to do it. But City Manager Kilger then stepped in and said he did not have the resources to continue the training, thus ensuring that the committee could not work effectively.

Recommendation

These are just four examples of how city staff, with the implicit support of City Council, has dominated the activities of the Finance Committee and impeded its ability to do its work.

The purpose of the Finance Committee is to “review financial issues that can be reasonably addressed by the city of Benicia,” and to “help promote citizens’ participation and understanding regarding the financial condition of the city.”

Yet the committee has no authority or resources at its control to fulfill its mission. It must rely upon staff to act, though in situations where city staff and the committee disagree, staff always prevails.

Regrettably, we have concluded that the Finance Committee as it currently operates is worse than ineffectual. It needs either a major overhaul so it can fulfill its mission with integrity or it should be disbanded so that its existence does not continue to create the false impression that the committee effectively monitors city finances.

Lawrence Grossman is a certified financial planner and former chair of the Benicia Finance Committee. Dennis Lowry, also that committee’s former chair, is a retired telecommunications executive. Lee Wines is a current member of the Finance Committee.