Red ink bleeds to black

Dave Brooks

Huntington Beach had almost $11 million more than city officials

believed during its difficult 2003-04 budget year, a recent financial

report shows.

Several city officials now say miscalculations may have led budget

officials to put aside much more money for expenditures than

necessary. On the advice of then-City Administrator Ray Silver, the

City Council made $11.1 million in cuts that year in anticipation of

lower revenues and funding losses from the state. Thirty-seven

employees were given layoff notices.

Now, the annual budget analysis for 2003-04 from the city’s

finance office indicates that $10.7 million itemized as “unreserved

and undesignated” has shown up in city coffers. The city usually

maintains a 7% reserve of its general fund in case of economic

uncertainties, but the report shows that the city had 76% more

unspent money than it did in the previous year.

City Councilwoman Cathy Green said she and others were alarmed

that the miscalculations took place, but she added they were believed

to be made by employees that no longer work for the city.

The entire city suffered from the cuts, she said.

“A lot of people got hurt by this,” she said.

Besides the layoffs, funding was pulled from many beloved programs

such as the city’s cable TV station and Sister City program. City

services such as fire safety education classes, engineering services,

street repairs, graffiti removal and building maintenance all went

unfunded.

The good news, Green said, is that the city still has the money

and can spend it on infrastructure needs.

“We’re not talking about embezzlement. Usually when something like

this happens, people take off with money, not leave you more than you

thought,” she said.

Increases in revenues from tourism and property taxes allowed the

city to pay for salary increases and refill vacant positions. In

February, City Administrator Penny Culbreth-Graft introduced a

$2.5-million proposal to hire back 27 employees, including nine

police officers and two sergeants.

Finance officer Dan Villella said the city will also look at

putting $5 million into an infrastructure fund.

Villella discovered the budget discrepancies when he realized that

much of the money that had been set aside into various funds was not

spent. He said he alerted several staff members at the time about the

discrepancies, but said his warnings were mostly ignored.

“I figured they were privy to information that I didn’t have,” he

said.

Although she wasn’t employed with the city at the time,

Culbreth-Graft said she thought city leaders were concerned that the

state was going to raid local coffers.

“The city didn’t know what was going to happen with state

take-aways,” she said.

The biggest miscalculations centered on how much the city planned

to allocate for healthcare costs, Villella said.

There were also miscalculations about the cost of capital projects

and city expenses, as well as misunderstandings about how long it

would take to fill vacant positions, he added.

“There were a lot of things going on that they felt were going to

cost a lot more money than they expected,” Villella said.