Remedial Funding

It looks like Public Works Director Ruben Martinez is playing pin the tail on the fund list to choose funding sources again. We think he should remove his blindfold and try reading the Fund Summaries for allowed uses, but that is just our opinion. Maybe he needs a remedial budgeting class. We can only speculate about how he is coming up with the funds he has been proposing.

One thing is for sure; whatever method Martinez is using, it’s not working for him, or the taxpayers. Municipal finance rules are there for a reason, and it is clear he does not understand them.

We have already described to you his lack of knowledge of Fund 400 (Capital Projects), as well as his inappropriate use of Fund 850 (Sewer). At the November 19 City Council meeting, I will be pointing out yet another misuse of City funds by Martinez. The fund being negatively impacted this time is Fund 312, the Remediation Fund.

A few days ago, we shared the agenda for this City Council meeting. Item 2.2 of the Consent Agenda is a request for a supplemental appropriation to allocate $25,000 from Fund 312 to remediate a mold problem at Fire Station No. 5. The City is looking into whether or not its insurance policy will cover the cost of the project; but even if it is covered, the $25,000 request is still proposed to pay the City’s current insurance deductible.

(As an aside, our resident insurance expert, Mary, says there is no way this is a covered loss. Mold is a maintenance problem, specifically excluded in standard property insurance policies. She also asks a couple of thought-provoking questions: If the total cost of the project is $25,000, why are they even checking with the insurance company? On the other hand, if the project cost exceeds $25,000, why are they only asking for $25,000 to remediate the problem? If you are interested, you can read more about mold remediation and insurance here.)

I mentioned above that Fund 312 is the Remediation Fund. Does that mean it pays for any and all remediation projects? Nope. It was created to pay for groundwater remediation, primarily at the Chico Municipal Airport.

There is some important history regarding this Fund. (I am about to get highly technical here; please bear with me. I will try to limit it to a paragraph or two!)

Back in the early 1990s, the State of California Department of Toxic Substances Control (DTSC), sued the City of Chico, and more than 15 others who owned properties in the vicinity of Chico Municipal Airport, for groundwater contamination. Previous military and industrial activities that occurred sometime between the 1940s and 1980s resulted in the release of hydrocarbons and volatile organic compounds (VOCs) into the soil, therefore contaminating the groundwater. The primary VOC identified as a concern was trichloroethylene, most commonly referred to as TCE. In case you are interested, TCE is a chlorinated hydrocarbon commonly used as an industrial solvent. (In laymans terms, it was a great degreaser!)

Neither the City of Chico nor most of the property owners included in the lawsuit were directly involved in the release of TCE into the groundwater; however, as they are now the owners of the property where the problem exists, they were named as responsible parties. I am going to skip discussing the many steps of the lawsuit to get to the important part – a Consent Decree was placed on the properties, requiring groundwater remediation, and a Settlement Agreement was established to pay for the expected remediation. All of the parties listed in the lawsuit had to pay into the Settlement Agreement, and because the City of Chico was the local municipality and owner of the Airport, the City was listed as the Responsible Party for the cleanup and was given the Settlement Agreement monies to cover necessary work.

Fund 312 was created using the monies from the Settlement Agreement. While other monies have since been transferred into Fund 312 from Fund 850 (Sewer) to pay for groundwater remediation projects at other locations, the remainder of the money is clearly dedicated to remediation of the properties identified in the Consent Decree whose owners paid into the Settlement Agreement.

The Fund Summary for Fund 312 describes many of these important details; it specifically states that the use of the Fund is restricted, and it states that the authorized uses for this Fund include only capital and operating expenditures related to groundwater remediation. The Fund Summary concludes that “The City contemplates that Chico Municipal Airport remediation will continue for decades, therefore, use of these funds is committed to this purpose.” Can it be more clear?

Also important to note is the sentence directly before what I have quoted above: “…liability of all other parties is limited to monies already provided in the settlement.” To be clear, if the monies in Fund 312 run out, the City will have to find alternative funding sources until the remediation is complete – a decision that DTSC will make. The Consent Decree was issued by a U.S. District Court and is legally binding.  If Fund 312 is depleted, the City cannot just say, “Oops, guess that project is done.”

Let’s go back to Martinez’s funding request for mold remediation at Fire Station No. 5. He is asking the Council to allocate $25,000 from Fund 312. Mold remediation is not an allowed use of Fund 312. Period.

It is curious that the Municipal Buildings Maintenance Fund isn’t being charged for this project. If staff and Council do not want to charge the Municipal Buildings Maintenance Fund, at the very least, would this not be a cost of the Fire Department (100% General Fund)? After all, it is a Fire Station being impacted.

One thing is for sure, use of Fund 312 to pay for mold abatement at a Fire Station is inappropriate. If this funding request is approved without changing the proposed source, it will be just one more indication that this Executive Team and Council cannot be entrusted to make the right decisions regarding our City.

Thank you for your continued readership. As always, your questions and comments are welcome.

Remember: Truth Matters, Chico!



Posted on November 18, 2013, in Budget, Meetings, Miscellany and tagged , , , , , , , . Bookmark the permalink. Leave a comment.

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