In the April 20, 2007 issue of The Carmel Pine Cone, reporter Mary Brownfield wrote, as follows:
“Job cuts in 2004 and 2005 helped the city bring its reserve fund balances up to an above-average $8.4 million from a 2003 low of $4 million. Some of the savings could be used for capital projects in the coming years, though city policy required reserves to be at least 10 percent of its annual revenues, expected to exceed $12 million in 2006/07.”
(Source: Wall Street gives Carmel good grades, Mary Brownfield, The Carmel Pine Cone, April 20, 2007, page 13A.)
Review the following “Fund Balances” from the CITY OF CARMEL-BY-THE-SEA California, Annual Financial Reports, completed by Nicholson & Olson, Certified Public Accountants.
CITY OF CARMEL-BY-THE-SEA
California
Annual Financial Report
June 30, 2006
BALANCE SHEET
Government Funds
June 30, 2006
FUND BALANCES
Reserved for debt service: $627,309
Unreserved:
Designated: $5,359,692
Reserved: $552,884 (Parking)
Undesignated: $3,053,341
Total Fund Balances: $9,040,342 $552,884
TOTAL: $9,593,226.00
Note: $9,593,226 represents an increase of $694,804 over the previous fiscal year.
(Source: Financial Statements, CITY OF CARMEL-BY-THE-SEA, BALANCE SHEET, Government Funds, June 30, 2006, CITY OF CARMEL-BY-THE-SEA, California, Annual Financial Report, June 30, 2006.)
COMMENTS:
Apparently, according to reporter Mary Brownfield, the City of Carmel-by-the-Sea has a policy requiring reserves to be at least 10% of its annual revenues. Annual revenues of $12 million in fiscal year 2006/07 translate into a reserve minimum of $1.2 million, compared to an audited amount of $9.6 million.
Note: For a related post, see the Carmel-by-the-Sea WATCHDOG!, Sunday, March 25, 2007, ATTENTION CARMELITES: Now is the Time for an Honest & Informed Debate over City Reserve Policy by clicking on the post title above.
3 comments:
Many cities would consider 10% reserves to be unnecessarily conservative but we can't really complain if in the past Carmel's city fathers and mothers were being cautious. Reserves of 80% or higher are carrying caution to a ridiculous extreme however. We know that current city council members are on the extreme right end of the political spectrum but conservativism carried to the extremes that this city council has done has gone way beyond practicality. Its members seem to be driven by a philosophic viewpoint with little if any grounding in the real world.
Even that doesn't seem to explain why, in a time that Carmel needs massive infusions of cash to rectify its many physical, cultural, staff and other problems, excessive funds are being squirreled away in reserves. Reserves exist to deal with problems that current revenue doesn't cover. This is exactly the situation Carmel has been in for a number of years because the city council has been unwilling to develop significant new revenue streams. This is exactly the time that reserves should be drawn upon rather than built up. Carmel's city councilors are unwilling to explain why this isn't happening. It's very confusing. What can be motivating such behavior?
This financial scenario is beyond incompetent. At the end of fiscal year 2003, the city had $4 million in reserves, then the city cut jobs in 2004 and 2005 and reserves have been increasing ever since to $8.4 million by the end of 2006. Only if the city had all of its cultural assets in sparkling grandeur and ADA compliant and the streets paved could the city alibi reserve increases over time of this magnitude.
So let me get this straight. The city has over the average reserve amounts in 2003. The city then cuts jobs in 2004 and 05. Meanwhile, reserves keep increasing, and no money is budgeted for residential concerns, particularly all of the deferred maintenance. And the city keeps crying penury.
Financial geniuses these city council members and city administrator are not. And the city has a finance manager. What for? This whole situation is beyond crazy. Throw them all out of office...ASAP!
To respond to the comment, "Carmel's city councilors are unwilling to explain why this isn't happening. It's very confusing. What can be motivating such behavior?"
Mayor McCloud has misled Carmelites since she became mayor in 2000 by misrepresenting the fiscal state of the city. While she has been mayor, reserves have increased and "job cuts" have occurred. Obviously, then, the lack of sufficient revenue was not the reason for the job cuts. Rather, the reason for the job cuts was principally to centralize authority, power and the management of the city with the mayor.
In a normal, well-functioning city, the city administrator or manager manages the city; not in Carmel-by-the-Sea, however. And unfortunately, with the mayor running everything, and being obsessed with maximizing the commercialization of the city, the results are not to the benefit of the residents and taxpayers who live here permanently.
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