[UPDATED: Audit Report Criticized; Budget Passed] Costa Mesa Financial Situation “Better Than Average,” According to OCEA-Funded Audit

OC Weekly - Staff | Posted on

​UPDATE, JUNE 22, 4:55 P.M.: “I think this whole list is a road to bankruptcy,” said Mayor Pro Tem Jim Righeimer early Wednesday morning, responding to the report of the OCEA-funded budget audit. Just minutes after hearing a laundry list of potential alternatives to restructure the budget in order to put more money in the General Fund–ideally enough to convince the city to reconsider its steps toward outsourcing half of its city employees–Righeimer was swift and direct in dismissing the information, seeming annoyed his time had been wasted. 
Maybe he was tired after 6 straight hours behind the dais or maybe the compassion he alluded to hours prior was just politician-speak.
After he and his fellow council members had their time to discredit the audit–aside from Councilwoman Wendy Leece, who felt the suggestions should at least be properly studied–a 4-1 vote was recorded shortly before 1:15 a.m., passing the $115 million budget, as well as the decision to reduce the police budget by 3.5 percent, requiring anywhere from 5 to 10 officer layoffs.

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Most every recent development affecting the city spending and the looming budget was rehashed. Former councilwoman Katrina Foley criticized the city's decision to spend money on an over-priced communications director instead of public safety. 
“I'm a stakeholder in the Costa Mesa Corporation and with what you guys are doing, my portfolio is losing value” one resident said, mocking Righeimer's incessant desire to refer to and run the city as a business.
If you need a way to pass nearly 7 hours, you can watch the video recording of last night's meeting.


ORIGINAL POST, JUNE 21, 5:17 P.M.: ​Between an outspoken former police chief and a controversial budget expected to be adopted, tonight's Costa Mesa City Council meeting already appeared to be rife with potential drama. There's a late addition to the itinerary. The Orange County Employees Association received the final report on an independent, city-supported audit of the budget and is planning to share the findings–and they're somewhat juicy. 
In a conference call this morning, Steve Foti of Harvey M. Rose Associates, called the financial situation in Costa Mesa “better than average,” compared to the city jurisdictions he's familiar with. “The notion that the city is on the brink of insolvency is not accurate.”
Harvey M. Rose Associates is based in San Francisco and has handled audits up and down the state and across the country.
Foti did commend the city for most of the work it had done on the budget, but pointed out that the city's claim that it has just $5 million in its General Fund, which would be low for a city of Costa Mesa's size, is also not entirely accurate. Through some shuffling and consolidating of funds, Foti pointed out that the General Fund could increase to as much as $26 million, which is “not a crisis level for a jurisdiction the size of Costa Mesa,” he wrote in his audit summary to OCEA general manager, Nick Berardino. 
There are no “hidden funds,” as the OCEA has declared, Foti assured. Jennifer Muir, the communications director for OCEA, however, pointed out that OCEA's definition of “hidden” is translated in the way the city has made its budget deficit and pension deficit projections a “moving target,” and in doing so have “manipulated the numbers to advance its political agenda.”
With the findings of the audit, it appears there are resources available and opportunities for lowering costs without having to restructure the financial situation of the city, and OCEA is seeming pleased.
“The audit, in our opinion, confirmed what we believed for a long time, that this notion of the city being on the brink of insolvency and that outsourcing is the only solution, is wrong,” Muir said. “The audit showed there is plenty of money the city can draw upon.”
Foti echoed OCEA's beliefs that outsourcing may not be the best solution, and he drew from experience working with city jurisdictions who have gone that route.
“We have looked at outsourcing exercises in other city jurisdictions to come up with savings, but it's really a mixed bag, with a lot of variables, including whether contractors must pay a prevailing wage,” Foti said. “I dont have a lot of faith in outsourcing as a solution.”
Though the financial situation is not anywhere close to a Bell Scandal situation, as outgoing interim police chief Steve Staveley asserted in his scathing letter sent on Monday, the situation doesn't seem to be exactly what city officials in Costa Mesa have attempted to lead its residents to believe.
In response to the audit, which was presented to City CEO Tom Hatch this morning, the city is in the process of scheduling a study session open to the public. 
We can hear the war drums now. See you tonight.