Montebello Might Be Out of Money by September, Say Officials
By Elizabeth Hsing-Huei Chou, EGP Staff Writer
Montebello officials think they have enough cash to get them through September before the city goes broke.
On Tuesday, the city released a memo from the finance director stating the city has $3.7 million in its bank account and what revenue they may receive in coming months will dry up by the fall. At that point the city would need to take out a loan to pay its employees and other bills.
Years of deficit spending has caused the city’s rating to go down so finding a loan to get them beyond September will be challenging, Interim City Administrator Peter Cosentini said.
At this time they are still uncertain about certain aspects of the city’s fiscal situation, and are making their best estimates based on limited information, he said.
“I’ve never worked in a city where the fiscal situation was this bad,” Interim City Administrator Peter Cosentini told EGP on Tuesday. Montebello is the only place he has worked that has absolutely no money in its reserves, he said.
Officials were scheduled to meet yesterday after EGP’s deadline to discuss ways to tackle their fiscal crisis. Departments were expected to make recommendations on reducing costs or making cuts, Cosentini said.
Over a week ago, city officials discovered its former finance director had improperly taken money out of its Prop A, Prop C, water, bond debt, transit and drug asset seizure funds, all of which were restricted.
They were obligated to return $10.8 million back to the restricted funds after the discovery, Cosentini said, leaving them even less money to work with.
The news last week that the city is “cash poor” came as a huge blow to city officials. The money they returned to the restricted funds was in fact money they had borrowed from their redevelopment agency, which is now also out of money.
Cosentini said each discovery they make leads to another discovery about the city’s financial mess. “At the root of the problem is people not revealing the full extent of the problem,” he said.
Misleading accounting practices have hidden the fact the city has been living beyond its means for at least three years now. In previous years Michael Chickwan Tam was the finance director while Richard Torres was the city administrator. Randy Narramore was also an interim city administrator during part of the time.
Before Torres retired in 2009, he fielded all questions from the media about city finances, and said Tam had decided he did not want to speak to the press.
At one point several years ago, Tam voluntarily invited an EGP reporter to his office to discuss the budget and offered to help with questions, but he later took back his offer and told the reporter that all finance questions should go through Torres first.
Even though there were “complex” notes left by Tam explaining what he did, Cosentini thinks “there was an attempt to mislead” because the average person would not have caught on to what he was doing, he said.
Even the current finance director Francesca Tucker-Schuyler needed four months to grasp the extent of their fiscal situation, and only after questioning the former finance director.
Talking to the former finance director was “instrumental,” because there was very little documentation to go on, Costentini said.
Tucker-Schuyler recommended the city hire a financial consultant to conduct a cash flow analysis, a practice she says is typical of cities in similar financial distress.
“Given the critical nature of the City’s financial position and indications, I strongly recommend that the City consider hiring an outside financial advisory group to take a closer look at the cash position of the City,” she said.
She added in order to refinance bonds or “seek alternative financing” the city would be needing this “in depth cash analysis.”
Cosentini says he is also recommending the hiring of a cash flow analyst to the city council. While the current staff is qualified to do its job, they have an inexact picture of their cash flow situation, which could lead to surprises, he said.
“You want to know how much time you have to deal with the problem. If time is shorter than we expected, we need to move in a different direction before bad things happen to the city,” he said.
Cosentini stated Tuesday that the solution to the city’s financial problems is “almost simplistic.” The city must spend less than what it takes in, he said.Print This Post
April 7, 2011 Copyright © 2012 Eastern Group Publications, Inc.