Well, here we go again. At the December 17 meeting, I addressed the Council about its running commentary on the 2nd Floor Staffing/Finance Workout Plan, hoping to put that baby to bed once and for all.
It was going pretty well; in fact, the Mayor was very polite and asked me some clarifying questions — and then allowed me to answer. The Administrative Services Director followed up with positive comments, acknowledging that previous staff had taken action to address the plummeting Fund balances. I was pretty satisfied with that much progress.
But then Mark Sorensen jumped right back into full assault mode — seemingly driven by some sort of clandestine, private-frequency radio transmission (perhaps from a spy drone?) reaffirming his theory that former staff had conspired to harm the Council and destroy the City by secretly driving Fund balances into the red.
You think I’m kidding? I’ll link you to the one-minute video clip so you can see for yourself, but I just want to point out that he actually used the words “top secret operation.” Yes, he really did say those words. Out loud. He did.
Here’s the clip: Sorensen “Top Secret Operation”
After Sorensen made his ill-advised (and ill-informed) remark, I emailed him to let him know he was off base, that it would have been more beneficial if he had simply asked me about it during the discussion, and that I would be happy to speak with him publicly or privately to fill him in on the details of the mini-allocation.
He responded by telling me it was something Quené said during her comments that had triggered the thought, as if that excused it, and so I politely replied and repeated my offer to talk with him openly and honestly about anything he wanted to know.
I received no further response, which has unfortunately earned him a dose of embarrassing public enlightenment in lieu of a pleasant, informative conversation. I swear, I just can’t figure the guy out.
Back in September, we three gals had some pretty lively conversations with the Mayor about believing media reports, after which Alicia finally pinned him down and asked him, if we aren’t to believe the media, can we at least rely on what is said during Council meetings? After a little soft shoe routine and some political double speak, the Mayor finally said, “Everybody holds one another accountable in this chamber.”
Mr. Sorensen, consider yourself on notice that you are going to be held accountable. You don’t get to just say whatever you want from the dais and expect it to be accepted as truth simply because you’re the one who said it. There is a truth to be told, but you have been so preoccupied with your personal mission to ruin the professional reputations of honorable public servants that you refuse to listen and therefore can’t possibly understand it, much less explain it to anyone else. You need to stop. Really.
Now, here is some factual information about the Private Development Allocation (known internally as the “mini-allocation”):
As we explored in a recent post, allocations distribute costs, as opposed to transfers, which distribute dollars. The mini-allocation distributes operating costs from the Private Development Fund (Fund 862) to a handful of other Funds that benefit from work efforts by Planning staff, and to a lesser extent, Building staff. Keep that in mind as you read along.
This particular allocation was first developed in fiscal year 2010-11, as part of the 2nd floor finance plan. It was a tool we used to clean up accounting for the Planning Services Department’s operations, so we could quantify the true cost of processing development applications. For the moment, please just trust me that it resulted in a net reduction in costs to the impacted Funds. There was no additional money being spent.
As you can see in the following document, staff cleverly hid this “top secret operation” from the Council on page 2 of the City Manager’s fiscal year 2010-11 budget message — that would be the second page of the proposed budget — where they would be sure to overlook it.
Ooooooh, and in the next document you will see that former Finance Director Hennessy went to great lengths to bury the mini-allocation in the budget page dedicated to Fund 862 by assigning it a specific department called Private Development Cost Allocation, so no one would recognize it.
That was such a sneaky move that Administrative Services Director Constantin and his new-and-improved budget team mustn’t have even noticed it when they put it in the current fiscal year’s budget! According to Sorensen, it took the City’s super-duper fraud seeking auditors to finally discover it and bring it to everyone’s attention.
(Also notice how Ms. Hennessy mistakenly revealed the uber-classified negative Fund balance at the bottom of the page… Bad form!)
And the final straw: The next document is an example of how the mini-allocation was hidden in the Funds that received the allocation. I’m using the Sewer Fund (Fund 850) budget page, since Sorensen specifically called that out in his “top secret operation,” but if you go to the City’s published budget, you can find the same line item on every single impacted Fund. This is certainly advanced trickery and foul play!
In the documents above, you can see that the allocation appears in the Operating Expenditures section for both Funds. It is a negative number for Fund 862, since it is technically an offset to expenses, and a positive number for Fund 850, since it is a true expense. The numbers aren’t the same for both Funds, because Fund 862 shows the aggregate allocation, whereas Fund 850 only shows its portion of the allocation.
Now that we’ve established there was absolutely nothing “top secret” about the mini-allocation, let’s look into why we created it.
Since at least as far back as 1991, when the Private Development Fund was created, some Planning salaries were budgeted to other Funds, including the Sewer Fund and the Subdivision Fund. Unfortunately, I no longer have access to my paper files (I had to dig through dusty old budget binders to figure out what had originally happened… ack!), so I don’t have the complete list of funding sources to share with you. Suffice it to say that Fund 862 never fully funded Planning’s operations.
Instead of development staff charging their time to what they were actually doing, they charged time based on where they were funded in the budget. To make the funding ratio work out properly, some staff were charging up to 60% of their time directly to other Funds. (Click here if you’d like to see an example of pre-Private Development Allocation funding for Planning staff.) This was specific direction that came from the City Manager’s office, and it was a source of considerable concern for both Finance and development staff.
Don’t get me wrong, I am not being critical of the funding sources; there is a legitimate nexus between development staff work and benefit to other funds. The problem was a lack of accountability and transparency, which translated into the inability to properly quantify costs and develop appropriate User Fees. How can the cost of processing a Use Permit be accurately tracked when the staff person working on it is charging time to Sewer or Transportation or Redevelopment, just to make the budget numbers work?
There is much more to this, and I promise you I will break it all down when I write the dedicated Private Development Fund post, but for now it is enough to say that we unwound that particular problem by allocating costs, eliminating direct staff charges to the benefiting Funds, and then fully accounting for private development costs in Fund 862.
Here’s an oversimplified explanation of how it worked: We added up all of the private development staff charges to Funds other than Fund 862. We applied a 10% discount factor, since we were attempting to cut budgets in all impacted Funds. Then, via the mini-allocation, the costs were distributed as expenses to the benefiting Funds. Here is the official calculation for the original mini-allocation (which, incidentally, is included in the City’s files for anyone to examine — nothing top secret here):
Once the allocation was in place, we tied it to a percentage of staff salaries for development work, rather than allowing it to continue as a fixed cost to the benefiting Funds. The effect of this can be seen in the dollar decrease from fiscal year 2010-11 to fiscal year 2011-12. In other words, the more we reduced Fund 862 salaries, the more the allocation was reduced, for a net savings to the benefiting Funds. (There was also a reduction in the allocation due to the loss of RDA funds, but that is immaterial to this discussion.)
The other effect of allocating the costs and direct charging only Fund 862 was the ability to assign cost centers to specific Planning staff work efforts and other operating expenses. This was critical in our effort to establish solid data for a new User Fee Study. Incorrect underlying data will always result in incorrect fees, no matter how skillful the technical analysis and mathematical calculations used in the study might be.
We cleaned up Fund 862 to enable us to use a formula based on actual costs for processing the various types of applications, divided by the actual volume of applications. Unfortunately, however, once ACM Rucker and BDSD McKinley mysteriously vanished, the authority behind the effort vanished with them. But that’s another story in and of itself. What a waste.
And so, the mini-allocation was a good part of the finance plan. I doubt it is still functioning properly at this point, since there is no one left who understands the mechanism of tying it to salaries or the process we put in place for monitoring the Fund balance on a bi-weekly basis. Fund 862 finished fiscal year 2012-13 in the black (annual revenues exceeded annual expenditures); it was the first time that happened since 2001. It will be interesting to see how the Fund finishes for fiscal year 2013-14.
So much for Sorensen’s “top secret operation” conspiracy theory. Hopefully, someone who loves him will splurge on a tin foil hat for him, to keep those wacky cloak-and-dagger ideas in check. Hey, it could help…
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