City of Lindsay Page 1
LINDSAY CITY COUNCIL
REGULAR MEETING AGENDA
February 25, 2025, 6:00 P.M.
City Hall, 251 E. Honolulu St., Lindsay, CA 93247
Notice is hereby given that the Lindsay City Council will hold a Regular Meeting on Tuesday, February 25, 2025 at 6:00 p.m. in person and live via YouTube.
City of Lindsay YouTube Channel: https://www.youtube.com/@CityofLindsay Se anima a los hispanohablantes a asistir a las próximas reuniones del Concejo Municipal de Lindsay. Para traducción al español, comuníquese con la oficina de la Secretaria Municipal por teléfono, (559) 562-7102 ext. 8034, o regístrese unos minutos antes en el momento de la reunión del Consejo.
Rules for Addressing the City Council:
• Members of the public may address the City Council on matters within the jurisdiction of the City of Lindsay.
• Persons wishing to address Council concerning an item on the agenda will be invited to address the Council during the time that Council is considering that agenda item. Persons wishing to address Council concerning issues not on the agenda will be invited to address Council during the Public Comment portion of the meeting.
• When invited by the Mayor to speak, please step up to the lectern, state your name and city of residence, and make your comments. Comments are limited to three minutes per speaker.
Americans with Disabilities Act
Pursuant to the Americans with Disabilities Act, persons with disabilities who may need assistance should contact the City Clerk prior to the meeting at (559) 562-7102 ext. 8034 or via email at [email protected].
1. CALL TO ORDER
2. INVOCATION – Led by Minister Frances Bower.
3. PLEDGE OF ALLEGIANCE – Led by Councilmember Soria.
4. ROLL CALL
5. APPROVAL OF AGENDA
6. PUBLIC COMMENT – The public is invited to comment on any subject under the jurisdiction of the Lindsay City Council. Please note that speakers that wish to comment on a Regular Item or Public Hearing on tonight’s agenda will have an opportunity to speak when public comment for that item is requested by the Mayor. Comments shall be limited to three (3) minutes per person, with thirty (30) minutes for the total comment period, unless otherwise indicated by the Mayor. The public may also choose to submit a comment before the meeting via email. Public comments received via email will be distributed to the Council prior to the start of the meeting and incorporated into the official minutes; however, they will not be read aloud. Under state law, matters presented under public comment cannot be acted upon by the Council at this time.
7. COUNCIL REPORT
8. STAFF UPDATES – City Services, Finance, Human Resources, Public Safety, Recreation Services
9. CITY MANAGER REPORT
Mayor
Misty Villarreal
Mayor Pro Tem
Yolanda Flores
Councilmembers
Adriana Nave
Rosaena Sanchez
Joe Soria
City of Lindsay Page 2
10. CONSENT CALENDAR – Routine items approved in one motion unless an item is pulled for discussion. There will be no separate discussion of these matters unless a request is made, in which event the item will be removed from the Consent Calendar to be discussed and voted upon by a separate motion.
10.1 Waive the Reading of Ordinance and Approve by Title Only.
Action & Recommendation: Approve the reading by title only of all ordinances and that further reading of such ordinances be waived.
Submitted by: Maegan Peton, City Clerk
10.2 Minutes of the Regular and/or Special Meeting of February 11, 2025.
Action & Recommendation: Approve as submitted.
Submitted by: Maegan Peton, City Clerk
10.3 Warrant List for February 3, 2025 Through February 16, 2025.
Action & Recommendation: Accept the Warrant List for transactions dated February 3, 2025, through February 16, 2025.
Submitted by: Lacy Meneses, Director of Finance
10.4 Letter of Support for Tulare County’s RTAP Application for the Orange Belt Corridor Safety Study.
Action & Recommendation: Authorize the City Manager to sign a letter of support for the Tulare County Resource Management Agency’s (RMA) application for the “Orange Belt Corridor Safety Feasibility Study” project to the U.S. Department of Transportation’s Rural and Tribal Assistance Program (RTAP).
Submitted by: Daymon Qualls, City Manager
10.5 Agency Agreement with C21 Commercial (Jared Ennis / Kevin Land) for the Sale and/or Lease of City-Owned Properties.
Action & Recommendation: Authorize the City Manager to sign the attached agency agreement with C21 Commercial (Jared Ennis / Kevin Land) for the sale and/or lease of City-owned properties located at 116 / 190 S Elmwood Ave, 100 / 112 E Honolulu St, Lindsay, CA 93247.
Submitted by: Daymon Qualls, City Manager
11. ACTION ITEMS
11.1 Corrective Action Plan in Response to State Auditor Report 2024-801.
Action & Recommendation: Approve Resolution 25-05, adopting the City of Lindsay Corrective Action Plan in response to State Auditor Report 2024-801.
Submitted by: Lacy Meneses, Director of Finance
11.2 Lindsay Economic Development Committee Member Selection.
Action & Recommendation: Select two applicants to serve as Committee Members for the immediate vacancies on the Lindsay Economic Development Committee.
Submitted by: Maegan Peton, City Clerk and Assistant to the City Manager
12. DISCUSSION ITEMS
12.1 Update on Development Projects and Water Infrastructure.
Action & Recommendation: Receive updates on current City development projects and water infrastructure projects.
Submitted by: Daymon Qualls, City Manager
13. REQUEST FOR FUTURE ITEMS
City of Lindsay Page 3
14. EXECUTIVE (CLOSED) SESSION
14.1 Conference with Legal Counsel – Existing Litigation (§ 54956.9) Name of Case: Carrillo v. City of Lindsay, Case No. VCU306195
14.2 Conference with Labor Negotiators (§ 54957.6)
Agency Designated Representative: Daymon Qualls, City Manager Employee Organization(s): LPOA; SEIU
15. ADJOURNMENT – Lindsay City Council meetings are held in the City Council Chambers at 251 E.
Honolulu Street in Lindsay, California beginning at 6:00 P.M. on the second and fourth Tuesday of every month unless otherwise noticed. Materials related to an Agenda item submitted to the legislative body after distribution of the Agenda Packet are available for public inspection in the office of the City Clerk during normal business hours. A complete agenda is available at www.lindsay.ca.us. In compliance with the Americans with Disabilities Act & Ralph M. Brown Act, if you need special assistance to participate in this meeting, or to be able to access this agenda and documents in the agenda packet, please contact the office of the City Clerk at (559) 562-7102 x 8034. Notification prior to the meeting will enable the City to ensure accessibility to this meeting and/or provision of an alternative format of the agenda and documents in the agenda packet.
AFFIDAVIT OF POSTING AGENDA
I hereby certify, in conformance with Government Code Sections 54954.2 and 54956, this agenda was posted in the bulletin board at the front of City Hall, 251 E Honolulu St., as well as on the City of Linday’s website (www.lindsay.ca.us).
DATE & TIME POSTED: Thursday, February 20, 2025 at 2:00 p.m.
Maegan Peton, City Clerk
LINDSAY CITY COUNCIL
REGULAR MEETING MINUTES
Lindsay Council Chambers Tuesday, February 11, 2025
251 E Honolulu St., Lindsay CA 93247 6:00 p.m. – Regular Meeting Proper notice of this meeting was given pursuant to Government Code Section 54954.2 and 54956.
STAFF PRESENT: City Manager Daymon Qualls, City Attorney Megan Crouch, City Clerk Maegan Peton, Director of Public Safety Rob Moore, Acting Human Resources Manager Lance Rowell, Director of Finance Lacy Meneses, Director of Recreation Services Armando da Silva, Acting City Services Director Ryan Heinks, Administrative Supervisor Marshall Chairez 6:00 p.m. – REGULAR MEETING
1. CALL TO ORDER
Mayor Villarreal called to order the regular meeting of the Lindsay City Council at 6:00 p.m. in the Council Chamber located at 251 E. Honolulu St.
2. INVOCATION
Council chose to skip this portion of the agenda.
3. PLEDGE OF ALLEGIANCE
The Pledge of Allegiance was led by Mayor Pro Tem Flores.
4. ROLL CALL
Council Present: Mayor Villarreal
Mayor Pro Tem Flores
Councilmember Nave
Councilmember Soria
Council Absent: Councilmember Sanchez (with notice)
5. APPROVAL OF AGENDA
It was motioned by Councilmember Soria, seconded by Councilmember Nave, and carried 4 to 0 (Councilmember Sanchez absent) to approve the agenda.
6. PUBLIC COMMENT
Lindsay High School Student Jessica Lemus provided updates for the Council on recent school activities and events.
Josh Flowers with the Blessings of Liberty, provided comment related to his concern of the City’s financials and requested the City declare an Economic State of Emergency. He provided an example Resolution for Council and staff review.
7. COUNCIL REPORT
Councilmember Soria reported he attended a ride-along with Corporal Adam Romero, the Chamber Awards, the Delores Huerta meeting, First Friday Coffee, and he visited the Skatepark.
Mayor Pro Tem Flores reported that she attended the Chamber Awards. She also commended Lieutenant Nave for being awarded Man of the Year at the Chamber Awards.
Councilmember Nave reported that she attended the Chamber awards, the Lindsay High School Football Banquet, the First Friday Coffee Talk, and Tacos on the lawn. She also encouraged the public to support the local girl scouts.
Mayor Villarreal reported that she attended the Healthy Kids, Healthy Lindsay meeting, the Lindsay High School Football Banquet, the Chamber Awards, the First Friday Coffee Talk, and the Taco Luncheon. She also encouraged the public to attend the basketball game for Lindsay Alt. Ed. versus Citrus High School.
8. STAFF UPDATES
City staff provided departmental updates to Council.
9. CITY MANAGER REPORT
The City Manager reported on recent events and items of interest.
10. PRESENTATIONS
10.1 Ono Sister City Committee Overview
Lorena Leon and Laura Cortez, Committee Members, provided a presentation for Council review.
11. CONSENT CALENDAR
It was motioned by Councilmember Nave, seconded by Councilmember Soria and carried 4 to 0 (Councilmember Sanchez absent) to approve the items on the Consent Calendar as presented.
11.1 Waive the Reading of Ordinance and Approve by Title Only.
Action & Recommendation: Approve the reading by title only of all ordinances and that further reading of such ordinances be waived.
11.2 Minutes of the regular and/or special Meeting of January 28, 2025.
Action & Recommendation: Approve as submitted.
Submitted by: Maegan Peton, City Clerk
11.3 Warrant List for January 20, 2025 through February 2, 2025.
Action & Recommendation: Accept the Warrant List for transaction dates of January 20, 2025 through February 2, 2025.
Submitted by: Lacy Meneses, Director of Finance
11.4 January 2025 Treasurer’s Report.
Action & Recommendation: Accept the January 2025 Monthly Treasurer’s Report.
Submitted by: Lacy Meneses, Director of Finance
11.5 Fee Waiver Request – Lindsay Ono Sister City Program.
Action & Recommendation: Approve the request from the Lindsy Ono Sister City Committee to waive the facility rental fees for their monthly planning meetings at the Lindsay Wellness Center and for their annual fundraiser on April 5th, 2025.
Submitted by: Daymon Qualls, City Manager
12. ACTION ITEMS
12.1 Amendment of the Lindsay Economic Development Committee Bylaws.
Action & Recommendation: Approve Resolution 25-04 amending the bylaws for the Lindsay Economic Development Committee.
Submitted by: Maegan Peton, City Clerk and Assistant to the City Manager Public Comment: There were no public comments.
Council Action: It was motioned by Councilmember Soria , seconded by Mayor Villarreal, and carried 4 to 0 (Councilmember Sanchez absent) to approve Resolution 25-04 amending the bylaws for the Lindsay Economic Development Committee.
13. DISCUSSION ITEMS
13.1 City Contributions to Community Events.
Action & Recommendation: Discuss potential direct monetary contributions to community events and consider establishing a formal policy whereby each Council member is allocated an annual amount of $1,200 from existing Community Events funds.
Staff recommends that the City Council:
• Engage in a discussion regarding the merits and feasibility of direct contributions to community events.
• Consider adopting the proposed policy that allocates $1,200 per Council member, per fiscal year, to be used solely for community events that provide a clearly defined public benefit.
Provide guidance to staff on implementing a transparent process for documenting, approving, and reporting each expenditure, ensuring adherence to California law governing gifts of public funds.
Submitted by: Daymon Qualls, City Manager
Public Comment: There were no public comments.
Council Action: Council directed staff to table this discussion to a later date.
14. EXECUTIVE (CLOSED) SESSION
Council recessed to closed session at 6:58 p.m.
14.1 Conference with Real Property Negotiators (§ 54956.8) Property: 205-236-013; 205-236-014; 205-236-022; 205-236-020 Agency Negotiation: Daymon Qualls, City Manager
Negotiating Parties: Kristar Development, LLC
Under Negotiation: Price, terms of payment
14.2 Conference with Labor Negotiators (§ 54957.6)
Agency Designated Representative: Daymon Qualls, City Manager Employee Organization(s): LPOA; SEIU
Council reconvened from closed session at 7:24 p.m.
EXECUTIVE (CLOSED) SESSION REPORT
Mayor Villarreal advised there was no reportable action.
15. REQUEST FOR FUTURE ITEMS
Mayor Pro Tem Flores requested an update from local developers.
Mayor Villarreal inquired about the roosters and chickens in City limits and Acting City Services Director Ryan Heinks advised he would send over the municipal code.
Councilmember Soria requested an update on animal control services for the City.
16. ADJOURNMENT
The regular meeting was adjourned at 7:28 p.m.
Approved by Council: February 25, 2025.
_________________________
Misty Villarreal, Mayor
ATTEST:
_________________________
Maegan Peton, City Clerk
The next Regular Meeting of the Lindsay City Council is scheduled to be held on February 25, 2025.
STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: Finance
FROM: Lacy Meneses, Director of Finance
AGENDA TITLE: Warrant List for February 3, 2025, through February 16, 2025
ACTION & RECOMMENDATION
Accept the Warrant List for transactions dated February 3, 2025, through February 16, 2025.
BACKGROUND | ANALYSIS
The Warrant List for February 3, 2025, through February 16, 2025, is submitted for Council review and acceptance.
FISCAL IMPACT
There is no fiscal impact associated with this action.
ATTACHMENTS
1. Warrant List
Reviewed/Approved: _____
Item #: 10.3
Consent
CITY OF LINDSAY | WARRANT LIST
TRANSACTION DATES: THROUGH 2/16/2025
Check# Fund Date Vendor # Vendor Name Description Amount 27384 $491.00
779 - 00-HOME-0487 02/03/25 5644 AMERICAN BANKERS IN L97-14 491 27385 $799.00
779 - 00-HOME-0487 02/03/25 7303 AMERICAN MODERN PRO POL 104835798 799 27386 $5,619.67
552 - WATER 02/03/25 6630 AQUA-METRIC SALES, WATER METERS 5619.67 27387 $20.00
781 - CAL HOME RLF 02/03/25 2623 COUNTY CLERK TULARE LIEN RELEASES 20 27388 $40.00
702 - CHFA-HELP LHBP 02/03/25 2623 COUNTY CLERK TULARE LIEN RELEASES L98-1 40 27389 $463.63
101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249 HR 11.30.24 18.5 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249-HR 10.31.24 18.25 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL DEC2024 18.75 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL JAN2024 26 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249 CM 11.30.24 17.5 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249-CM 10.31.24 18.25 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL DEC2024 17.75 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL JAN2024 26 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249 FD 11.30.24 19.5 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249-F.D 10.31.24 49 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL DEC2024 12 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL JAN2024 35.25 101 - GENERAL FUND 02/03/25 102 CULLIGAN 53249 FCHARGE 11302 1.12 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL DEC2024 1.97 101 - GENERAL FUND 02/03/25 102 CULLIGAN CITY HALL JAN2024 2.72 101 - GENERAL FUND 02/03/25 102 CULLIGAN DEC2024 P.S 55962 161.57 101 - GENERAL FUND 02/03/25 102 CULLIGAN CS DEC WATER 11 553 - SEWER 02/03/25 102 CULLIGAN CS DEC WATER 8.5
27390 $2,233.00
779 - 00-HOME-0487 02/03/25 6084 FARMERS INSURANCE E POL L9798-23 / 9197 2233 27391 $1,258.84
261 - GAS TAX FUND 02/03/25 6550 MARIO SAGREDO ELECT INV 3671 1258.84 27392 $6,500.00
552 - WATER 02/03/25 6095 RALPH GUTIERREZ WAT CPO WATER TRMT WSTE 3250 553 - SEWER 02/03/25 6095 RALPH GUTIERREZ WAT CPO WATER TRMT WSTE 3250 27393 $6,500.00
552 - WATER 02/03/25 6095 RALPH GUTIERREZ WAT CPO WATER-JAN 2025 3250 553 - SEWER 02/03/25 6095 RALPH GUTIERREZ WAT CPO WASTEWATER JAN2 3250 27394 $12,210.54
552 - WATER 02/03/25 4555 THATCHER COMPANY IN INV 2024250107028 12210.54 27395 $1,231.50
779 - 00-HOME-0487 02/03/25 1400 STATE FARM POL L204-02 1231.5 27396 $4,800.00
300 - MCDERMONT SALE PROCEEDS 02/03/25 7244 TIERRA CONSTRUCTION INV 2023-571 4800 27398 $52.22
552 - WATER 02/07/25 007 AG IRRIGATION SALES INV 18967 52.22 27399 $250.00
400 - WELLNESS CENTER 02/07/25 5819 ANITA GUTIERREZ DEC ZUMBA LWC 250 27400 $446.00
400 - WELLNESS CENTER 02/07/25 4796 BROADCAST MUSIC, IN BILL#57129311 446 27401 $1,838.84
101 - GENERAL FUND 02/07/25 1195 CARROT TOP INDUSTRI FLAGS 1838.84 27402 $454.30
101 - GENERAL FUND 02/07/25 076 CENTRAL VALLEY BUSI SORIA, NAVE BUSINES 454.3 27403 $2,772.00
101 - GENERAL FUND 02/07/25 6963 CIVICPLUS LLC MUNICODE 2772 27404 $91.93
101 - GENERAL FUND 02/07/25 102 CULLIGAN CS NOV WATER 10.5 400 - WELLNESS CENTER 02/07/25 102 CULLIGAN LWC DEC WATER 24.42 400 - WELLNESS CENTER 02/07/25 102 CULLIGAN LWC JAN WATER 8.88 400 - WELLNESS CENTER 02/07/25 102 CULLIGAN LWC NOV WATER 39.5 553 - SEWER 02/07/25 102 CULLIGAN CS NOV WATER 8.63
27405 $143.27
101 - GENERAL FUND 02/07/25 102 CULLIGAN PS NOV WATER 143.27 27406 $867.41
101 - GENERAL FUND 02/07/25 119 DOUG DELEO WELDING INV 24-1539 867.41 27407 $76.14
101 - GENERAL FUND 02/07/25 3218 FARMERS TRACTOR & E 60" KUBOTA BLADES 76.14 27408 $73.18
101 - GENERAL FUND 02/07/25 1450 FRESNO OXYGEN & WEL DOXMED 73.18 27409 $1,514.41
101 - GENERAL FUND 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 376.54 101 - GENERAL FUND 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 27.07 101 - GENERAL FUND 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 2.99 552 - WATER 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 425.46 2/3/2025
553 - SEWER 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 639.12 553 - SEWER 02/07/25 6010 FRONTIER COMMUNICAT NOV SERVICE 43.23 27410 $100.00
400 - WELLNESS CENTER 02/07/25 7312 GUIZAR JORGE LWC RENTAL DEP REF 100 27411 $100.00
400 - WELLNESS CENTER 02/07/25 7311 JONES ANDREA LWN RENTAL DEP REF 100 27412 $4,536.00
101 - GENERAL FUND 02/07/25 4076 LIEBERT CASSIDY WHI INV 282387 1215 101 - GENERAL FUND 02/07/25 4076 LIEBERT CASSIDY WHI INV 282388 180 101 - GENERAL FUND 02/07/25 4076 LIEBERT CASSIDY WHI INV 283726 3141 27413 $3,534.87
101 - GENERAL FUND 02/07/25 6550 MARIO SAGREDO ELECT INV 3673 1006.43 101 - GENERAL FUND 02/07/25 6550 MARIO SAGREDO ELECT INV 3674 946.88 261 - GAS TAX FUND 02/07/25 6550 MARIO SAGREDO ELECT LED WELL REPAIRS 1581.56 27414 $120.00
400 - WELLNESS CENTER 02/07/25 4323 OASIS MONITORING JAN 25 120 27415 $87.64
400 - WELLNESS CENTER 02/07/25 7242 ODP BUSINESS SOLUTI LWC SUPPLIES 71.52 552 - WATER 02/07/25 7242 ODP BUSINESS SOLUTI CALENDATR 8.06 553 - SEWER 02/07/25 7242 ODP BUSINESS SOLUTI CALENDATR 8.06 27416 $1,066.73
553 - SEWER 02/07/25 4618 PROVOST & PRITCHARD PROJ 03257-24-101 1066.73 27417 $18,503.40
101 - GENERAL FUND 02/07/25 399 QUAD KNOPF,INC. PROJ180454 13695 101 - GENERAL FUND 02/07/25 399 QUAD KNOPF,INC. PROJECT 220009 1386.7 101 - GENERAL FUND 02/07/25 399 QUAD KNOPF,INC. PROJECT 230009 ENGI 3421.7 27418 $100.76
400 - WELLNESS CENTER 02/07/25 7310 RAMIREZ LAURA LWC RENTAL DEP REF 100.76 27419 $1,543.25
554 - REFUSE 02/07/25 7308 RESOURCES RECYCLING INV 0000001610626 1543.25 27420 $100.00
400 - WELLNESS CENTER 02/07/25 7309 REYES VINCENT LWN RENTAL DEP REF 100 27421 $44,252.09
101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 89.17 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 2512.04 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 3213.92 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 47.46 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 1262.53 261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 6460.63 552 - WATER 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 28411.74 553 - SEWER 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 891.98 556 - VITA-PAKT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 180.39 883 - SIERRA VIEW ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 288.04 884 - HERITAGE ASSESSMENT DIST 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 96.48 886 - SAMOA 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 32.47 887 - SWEETBRIER TOWNHOUSES 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 28.86 888 - PARKSIDE 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 96.23 889 - SIERRA VISTA ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 209.95 890 - MAPLE VALLEY ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT -76.2 891 - PELOUS RANCH 02/07/25 310 SOUTHERN CA. EDISON 600001505934 OCT 506.4 27422 $70.82
261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 700477296224 70.82 27423 $76.69
261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 700477296224 76.69 27424 $56.04
261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 700150343172 56.04 27425 $3,406.90
400 - WELLNESS CENTER 02/07/25 310 SOUTHERN CA. EDISON 700470455603 3406.9 27426 $4,443.46
400 - WELLNESS CENTER 02/07/25 310 SOUTHERN CA. EDISON 700470455603 4443.46 27427 $32,942.44
101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 33.13 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 1280.54 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 1407.81 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV -125.3 101 - GENERAL FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 444.45 261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 6360.92 552 - WATER 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 22569.27 553 - SEWER 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV -14.98 556 - VITA-PAKT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 65.19 883 - SIERRA VIEW ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 113.36 884 - HERITAGE ASSESSMENT DIST 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 9.03 886 - SAMOA 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV -58.2 887 - SWEETBRIER TOWNHOUSES 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 30.57 888 - PARKSIDE 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 8.81 889 - SIERRA VISTA ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 209.62 890 - MAPLE VALLEY ASSESSMENT 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 102.57 891 - PELOUS RANCH 02/07/25 310 SOUTHERN CA. EDISON 600001505934 NOV 505.65 27428 $70.33
261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 700439853113 70.33 27429 $67.58
261 - GAS TAX FUND 02/07/25 310 SOUTHERN CA. EDISON 700439853113 67.58 27430 $169.00
553 - SEWER 02/07/25 5691 STATE WATER RESOURC OP IN TRAIN CERT 169 27431 $4,663.52
101 - GENERAL FUND 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 68.49 101 - GENERAL FUND 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 561.72 101 - GENERAL FUND 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 801.69 101 - GENERAL FUND 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 1211.69 101 - GENERAL FUND 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 754.6 400 - WELLNESS CENTER 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 749.43 552 - WATER 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 131.51 553 - SEWER 02/07/25 5755 TELEPACIFIC COMMUNI FIN OPO Q3 FY25 384.39 27432 $792.50
400 - WELLNESS CENTER 02/07/25 144 THE GAS COMPANY 092-375-2718-0 DEC2 792.5 27433 $809.02
101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 684.42 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 400 - WELLNESS CENTER 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 27434 $807.37
101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 682.77 101 - GENERAL FUND 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 400 - WELLNESS CENTER 02/07/25 3132 T-MOBILE OPEN PO NTE 3000 Q3 31.15 27435 $807.37
101 - GENERAL FUND 02/07/25 7273 T-MOBILE USA INC DEC SVC 31.15 101 - GENERAL FUND 02/07/25 7273 T-MOBILE USA INC DEC SVC 31.15 101 - GENERAL FUND 02/07/25 7273 T-MOBILE USA INC DEC SVC 682.77 101 - GENERAL FUND 02/07/25 7273 T-MOBILE USA INC DEC SVC 31.15 400 - WELLNESS CENTER 02/07/25 7273 T-MOBILE USA INC DEC SVC 31.15 27436 $56.20
552 - WATER 02/07/25 7273 T-MOBILE USA INC PHONE SERVICES 28.1 553 - SEWER 02/07/25 7273 T-MOBILE USA INC PHONE SERVICES 28.1 27437 $250.00
101 - GENERAL FUND 02/07/25 1243 TU CO CHIEFS ASSOCI 2025 TCCA ANN DUES 250 27438 $150.48
101 - GENERAL FUND 02/07/25 5747 USA STAFFING INC. GONZALEZ, ANITA 150.48 27439 $419.07
552 - WATER 02/07/25 356 USA BLUEBOOK INV 00574346 419.07 27440 $150.00
400 - WELLNESS CENTER 02/07/25 5912 YVETTE DURAN JAN 2025 POUND LWC 150 27441 $829.27
101 - GENERAL FUND 02/13/25 4660 CITY OF LINDSAY DED:052 WELLNESS 39.7 101 - GENERAL FUND 02/13/25 4660 CITY OF LINDSAY DED:CDBG CDBG PMT 350 101 - GENERAL FUND 02/13/25 4660 CITY OF LINDSAY DED:L203 CDBG LOAN 439.57 27442 $368.83
101 - GENERAL FUND 02/13/25 3192 SEIU LOCAL 521 DED:COPE COPE SEIU2 101 - GENERAL FUND 02/13/25 3192 SEIU LOCAL 521 DED:DUES UNION DUES 366.83 27443 $6,360.03
101 - GENERAL FUND 02/13/25 6452 GREAT-WEST TRUST DED:0500 DEF COMP 1945.08 101 - GENERAL FUND 02/13/25 6452 GREAT-WEST TRUST DED:0555 DC LOANPAY 1255.96 101 - GENERAL FUND 02/13/25 6452 GREAT-WEST TRUST DED:151 DEFERCOMP 2737.96 101 - GENERAL FUND 02/13/25 6452 GREAT-WEST TRUST DED:ROTH ROTH 421.03 27444 $224.62
101 - GENERAL FUND 02/13/25 7301 LINDSAY POLICE OFFI DED:LPOA LPOA DUES 224.62 27445 $73.82
101 - GENERAL FUND 02/13/25 6246 MCDERMONT VENTURE I DED:051 MCDERMONT 73.82 27446 $62.76
101 - GENERAL FUND 02/13/25 3042 STATE DISBURSEMENT DED:0512 CHILD SUPT 62.76 27447 $439.65
101 - GENERAL FUND 02/13/25 1498 STATE OF CALIF FRAN DED:0511 FTB - DEBT 439.65 27448 $195.12
400 - WELLNESS CENTER 02/14/25 3023 AAA SECURITY, INC. GUARD SERVICE 195.12 27449 $45.35
101 - GENERAL FUND 02/14/25 4877 ADAM ROMERO FUEL REIMBURSEMENT 45.35 27450 $394.81
101 - GENERAL FUND 02/14/25 2873 ADVANTAGE ANSWERING DEC ANSWERING 78.96 101 - GENERAL FUND 02/14/25 2873 ADVANTAGE ANSWERING DEC ANSWERING 78.96 552 - WATER 02/14/25 2873 ADVANTAGE ANSWERING DEC ANSWERING 78.96 553 - SEWER 02/14/25 2873 ADVANTAGE ANSWERING DEC ANSWERING 78.96 554 - REFUSE 02/14/25 2873 ADVANTAGE ANSWERING DEC ANSWERING 78.97 27451 $17,128.12
553 - SEWER 02/14/25 7316 B & K VALVES & EQUI INV 3900.1-1 17128.12 27452 $9,691.57
460 - CA STATE PARKS 02/14/25 051 BSK OLIVE BOWL LIGHT PO 1200 552 - WATER 02/14/25 051 BSK BACTI 3921.25
552 - WATER 02/14/25 051 BSK EXT-EPA 1623.1 3030
553 - SEWER 02/14/25 051 BSK WASTE WATER 1014.69
556 - VITA-PAKT 02/14/25 051 BSK VITA PAKT 525.63
27453 $604.00
101 - GENERAL FUND 02/14/25 5013 BUZZ KILL PEST CONT PEST CONTROL 604 27454 $10,474.53
553 - SEWER 02/14/25 7313 CARDINAL BLUE SOLAR INVOICE 34531967 4553.11 553 - SEWER 02/14/25 7313 CARDINAL BLUE SOLAR INVOICE 34780005 3436.16 553 - SEWER 02/14/25 7313 CARDINAL BLUE SOLAR INVOICE 35115472 2485.26 27455 $661.50
101 - GENERAL FUND 02/14/25 076 CENTRAL VALLEY BUSI WINDOW ENVELOPS 79.82 101 - GENERAL FUND 02/14/25 076 CENTRAL VALLEY BUSI WINDOW ENVELOPS 79.81 552 - WATER 02/14/25 076 CENTRAL VALLEY BUSI INV 256174 262.44 552 - WATER 02/14/25 076 CENTRAL VALLEY BUSI WINDOW ENVELOPS 79.81 553 - SEWER 02/14/25 076 CENTRAL VALLEY BUSI WINDOW ENVELOPS 79.81 554 - REFUSE 02/14/25 076 CENTRAL VALLEY BUSI WINDOW ENVELOPS 79.81 27461 $3,500.08
101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.81 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.67 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.8 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.67 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.8 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 101 - GENERAL FUND 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 552 - WATER 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.68 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.8 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 552 - WATER 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 553 - SEWER 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.68 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.81 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 553 - SEWER 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.68 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.29 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.29 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.81 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.04 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.71 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32.02 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.08 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.71 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.71 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32.02 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32.02 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.71 554 - REFUSE 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.29 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION CINTAS ORDER 23.68 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 1905248683 30.31 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 1905250025 16.34 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4204115651 43.81 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4209972650 202.05 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4209972672 3.62 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4210637758 3.72 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4210637831 32 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4211364890 39.1 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4211364895 3.72 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4212211422 3.72 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4212211514 32 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4213058859 32 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 4213058882 3.72 556 - VITA-PAKT 02/14/25 5832 CINTAS CORPORATION INV 9297050849 30.31 27462 $8.50
101 - GENERAL FUND 02/14/25 102 CULLIGAN CS OPO NTE 183 Q3 F 1.53 553 - SEWER 02/14/25 102 CULLIGAN CS OPO NTE 183 Q3 F 6.97 27463 $2.33
553 - SEWER 02/14/25 1235 DELTA VECTOR CONTRO DV10020 2.33 27464 $1,649.00
779 - 00-HOME-0487 02/14/25 6084 FARMERS INSURANCE E POLICY 93930-49-09 1649 27465 $2,512.00
552 - WATER 02/14/25 137 FRIANT WATER AUTHOR CS OPO Q3 FY 25 2512 27466 $276.50
553 - SEWER 02/14/25 6010 FRONTIER COMMUNICAT BILL DATE 1-19-25 136.53 553 - SEWER 02/14/25 6010 FRONTIER COMMUNICAT BILL DATE 12-19-24 139.97 27467 $332.62
553 - SEWER 02/14/25 1925 FRUIT GROWERS SUPPL INV 92505867 332.62 27468 $247.07
101 - GENERAL FUND 02/14/25 1391 HOME DEPOT LAW CARE 54.38 101 - GENERAL FUND 02/14/25 1391 HOME DEPOT LAW CARE 192.69 27469 $750.00
553 - SEWER 02/14/25 180 INGRAM EQUIPMENT CO INV 2703 750 27470 $861.30
552 - WATER 02/14/25 201 KENS STAKES & SUPPL EST 145 PAAINT 430.65 553 - SEWER 02/14/25 201 KENS STAKES & SUPPL EST 145 PAAINT 430.65 27471 $48.55
101 - GENERAL FUND 02/14/25 2591 KIMBALL MIDWEST INV 102991879 48.55 27472 $162.66
552 - WATER 02/14/25 7091 MARQUEZ HEATING & C INV 1419 162.66 27473 $392,065.38
101 - GENERAL FUND 02/14/25 5852 MID VALLEY DISPOSAL 3136199 200 554 - REFUSE 02/14/25 5852 MID VALLEY DISPOSAL ANNUAL REFUSE 391865.38 27474 $1,723.08
556 - VITA-PAKT 02/14/25 4618 PROVOST & PRITCHARD 115690 1723.08 27475 $97.86
400 - WELLNESS CENTER 02/14/25 285 QUILL CORPORATION ORDR 182202396 97.86 27476 $175.00
400 - WELLNESS CENTER 02/14/25 3208 SHANNON PATTERSON AEROBICS 175 27477 $79.44
261 - GAS TAX FUND 02/14/25 310 SOUTHERN CA. EDISON 700477296224 79.44 27478 $57.00
261 - GAS TAX FUND 02/14/25 310 SOUTHERN CA. EDISON 8000756978 42.36 891 - PELOUS RANCH 02/14/25 310 SOUTHERN CA. EDISON 8003347709 14.64 27479 $68.27
261 - GAS TAX FUND 02/14/25 310 SOUTHERN CA. EDISON CS OPEN PO JAN NAR 68.27 27480 $56.31
552 - WATER 02/14/25 7273 T-MOBILE USA INC CS OPO Q3 FY25 28.15 553 - SEWER 02/14/25 7273 T-MOBILE USA INC CS OPO Q3 FY25 28.16 27481 $60.00
101 - GENERAL FUND 02/14/25 6413 TRANS UNION LLC 10/26/2024-11/25/20 60 27482 $25.00
554 - REFUSE 02/14/25 793 TULARE COUNTY AUDIT 004000021325 25 27483 $121,428.50
300 - MCDERMONT SALE PROCEEDS 02/14/25 6517 WARREN & BAERG MANU BARSCREEN 121428.5 27484 $49,861.00
200 - STREET IMPROVEMENT FUND 02/14/25 113 DEPT OF TRANSPORTAT DEBT SERVICE 49861 SUMMARY BY FUNDING SOURCE $798,601.84
101 - GENERAL FUND 59,767.83
200 - STREET IMPROVEMENT FUND 49,861.00
261 - GAS TAX FUND 16,193.48
263 - TRANSPORTATION -
266 - LTF-ART 8 STREETS & ROADS -
300 - MCDERMONT SALE PROCEEDS 126,228.50
306 - COVID-19 ARPA FUND -
400 - WELLNESS CENTER 11,464.80
460 - CA STATE PARKS 1,200.00
471 - PARK IMPROVEMENTS -
552 - WATER 87,381.55
553 - SEWER 40,836.10
554 - REFUSE 394,092.41
556 - VITA-PAKT 2,994.39
600 - CAPITAL IMPROVEMENT -
660 - RDA OBLIGATION RETIREMENT -
700 - CDBG REVOLVING LN FUND -
702 - CHFA-HELP LHBP 40.00
720 - HOME REVOLVING LN FUND -
779 - 00-HOME-0487 6,403.50
781 - CAL HOME RLF 20.00
883 - SIERRA VIEW ASSESSMENT 401.40
884 - HERITAGE ASSESSMENT DIST 105.51
886 - SAMOA (25.73)
887 - SWEETBRIER TOWNHOUSES 59.43
888 - PARKSIDE 105.04
889 - SIERRA VISTA ASSESSMENT 419.57
890 - MAPLE VALLEY ASSESSMENT 26.37
891 - PELOUS RANCH 1,026.69
TOTAL 798,601.84
STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: City Manager
FROM: Daymon Qualls, City Manager
AGENDA TITLE: Letter of Support for Tulare County’s RTAP Application for the Orange Belt Corridor Safety Study
ACTION & RECOMMENDATION
Authorize the City Manager to sign a letter of support for the Tulare County Resource Management Agency’s (RMA) application for the “Orange Belt Corridor Safety Feasibility Study” project to the U.S. Department of Transportation’s Rural and Tribal Assistance Program (RTAP).
BACKGROUND | ANALYSIS
The Tulare County Resource Management Agency (RMA) is applying for grant funding under the Rural and Tribal Assistance Program (RTAP) for a planning study titled the “Orange Belt Corridor Safety Feasibility Study.” The project will focus on the Orange Belt Drive corridor, which is a critical transportation route for the City of Lindsay, the community of Strathmore, and the City of Porterville. This corridor is essential for residents accessing important services, educational opportunities, and key locations within the region.
The City of Lindsay has a longstanding partnership with Tulare County RMA, and this proposed study will build upon that relationship. The project includes the analysis and identification of operational improvements to address safety concerns and alleviate congestion, specifically focusing on the Lindmore St/Orange Belt intersection, which falls within the City’s purview.
The Orange Belt Corridor Safety Feasibility Study is vital for ensuring the long-term safety and accessibility of this key transportation corridor. The study will evaluate the current infrastructure and identify potential improvements that will benefit the region for decades to come. This project is particularly important to the City of Lindsay and the surrounding rural communities, which have historically faced challenges related to infrastructure development in areas of persistent poverty and disadvantage.
Tulare County RMA is applying for funding under the “Multi-Community” subcategory, as the project will have an impact across several communities, including Lindsay, Porterville, and Strathmore. The project will also include community engagement activities to ensure the proposed improvements meet the needs of the affected populations.
The City’s support of this grant application will help ensure that Lindsay is represented in the planning phase, which could lead to improved transportation safety, congestion mitigation, and economic development opportunities in the region.
Authorizing the City Manager to sign a letter of support for the Tulare County RMA’s application to the RTAP program will strengthen the City’s partnership with Tulare County and demonstrate the City’s commitment to improving transportation safety and accessibility in the region. This collaborative project will have long-term benefits for the City of Lindsay, as well as for the surrounding communities.
Item #: 10.4
Consent
FISCAL IMPACT
There is no direct fiscal impact to the City of Lindsay at this time. The support letter is part of a grant application process for which funding would be provided by the U.S. Department of Transportation if awarded.
The City will collaborate with Tulare County RMA at no cost during the planning phase.
ATTACHMENTS
1. Draft Letter of Support for the application of Tulare County Resource Management Agency (RMA) to the U.S. Department of Transportation’s Rural and Tribal Assistance Program (RTAP) for the “Orange Belt Corridor Safety Feasibility Study” Project.
Reviewed/Approved: ______
March 4, 2025
The Honorable Sean Duffy
Secretary of the United States Department of Transportation 1200 New Jersey Avenue, SE
Washington, DC 20590
Dear Secretary Duffy:
On behalf of the City of Lindsay, I support the application of Tulare County Resource Management Agency (RMA) to the U.S. Department of Transportation’s Rural and Tribal Assistance Program (RTAP) for the “Orange Belt Corridor Safety Feasibility Study” Project. Tulare County RMA is the Lead Applicant, and is applying for grant funding under the subcategory of Multi-Community, as the project boundaries include portions of the Orange Belt Corridor that are in the rural Cities of Lindsay and Porterville, as well as the unincorporated community of Strathmore.
Orange Belt Drive is a critical corridor in the region, providing direct access to downtown Lindsay, the community of Strathmore and downtown Porterville. Residents utilize the corridor to access essential goods, services, educational opportunities and events located in the adjacent cities. The Lindmore St/Orange Belt intersection is within the City’s purview, and is in need of operational improvements to address safety concerns and congestion issues. If the aforementioned planning project is awarded, the City of Lindsay will expeditiously enter into a partnership agreement with Tulare County RMA to ensure efficient execution of program activities. The City and the County have a long history of successful collaboration on both planning and implementation projects, with both Agencies committed to the vision of working together in order to improve the quality of life for our constituents.
This project is an ideal candidate for receiving funding from the RTAP program, as it is an essential first step in the planning and design phase to identify appropriate operational improvements to a corridor within a rural area of persistent poverty and historically disadvantaged communities. The extensive analysis combined with proposed community engagement activities will ensure that the proposed design will have the most beneficial impact to the region not only in the present, but in the decades to come.
I thank you for your consideration of the County of Tulare’s “Orange Belt Corridor Safety Feasibility Study” Project. Please feel free to contact me with any additional questions you may have.
Sincerely,
STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: City Manager
FROM: Daymon Qualls
AGENDA TITLE: Agency Agreement with C21 Commercial (Jared Ennis / Kevin Land) for the Sale and/or Lease of City-Owned Properties
ACTION & RECOMMENDATION
Authorize the City Manager to sign the attached agency agreement with C21 Commercial (Jared Ennis / Kevin Land) for the sale and/or lease of City-owned properties located at 116 / 190 S Elmwood Ave, 100 / 112 E Honolulu St, Lindsay, CA 93247.
BACKGROUND | ANALYSIS
The City of Lindsay owns four parcels of commercially zoned land totaling ±46,132 SF, identified by APNs:
205-236-013-000, 205-236-014-000, 205-236-020-000, 205-236-022-000, commonly known as 116 / 190 S Elmwood Ave and 100 / 112 E Honolulu St in Lindsay, California. In order to effectively manage the sale and/or lease of these properties, the staff desires to enter into an agency agreement with C21 Commercial (Jared Ennis / Kevin Land).
Details of the agency agreement:
The Agency Agreement outlines the terms and conditions under which C21 Commercial will represent the City in marketing and negotiating transactions for the sale or lease of the aforementioned properties. Key provisions of the agreement include:
1. Parties Involved:
The City of Lindsay (Owner) and C21 Commercial (Agent).
2. Property Description:
The agreement pertains to four commercially zoned parcels in Lindsay, with a total land area of approximately 46,132 square feet.
3. Term:
The agreement is effective through February 28, 2026, with an option for month-to-month continuation thereafter.
4. Commission:
C21 Commercial is entitled to a commission of six percent (6%) of the sale price or lease consideration for any transactions successfully executed, with additional commission provisions in the event of alternative transactions.
5. Responsibilities of the Agent:
The agent is tasked with finding buyers or lessees for the property, conducting negotiations, and handling marketing efforts, including the placement of advertising, lock boxes, and listings on commercial real estate platforms.
6. Property Maintenance and Repair:
The City remains responsible for all maintenance, repair, and security of the property.
7. Owner's Representations and Warranties:
The City has provided assurances that it owns the property and has the authority to enter into this agreement.
Item #: 10.5
Consent
This agreement provides the City with professional real estate services to facilitate the sale and/or lease of City-owned properties. Approval of the agreement will ensure that the City Manager has the necessary authorization to execute the agreement and proceed with the transaction process.
FISCAL IMPACT
The City will be obligated to pay a commission of six percent (6%) of the sale price or lease consideration upon the successful closing of any transactions for the property. The fiscal impact will be dependent on the final sale or lease price.
ATTACHMENTS
1. Agency agreement with C21 Commercial
Reviewed/Approved: ______
Central CA Commercial
INITIALS INITIALS
EXCLUSIVE RIGHT TO REPRESENT OWNER FOR SALE OR LEASE OF
REAL PROPERTY
(Non-Residential)
Central CA Commercial
1. BASIC PROVISIONS ("BASIC PROVISIONS").
1.1 Parties: This agency Agreement ("Agreement"), dated for reference purposes only, 2/20/2025 is made by and between City of Lindsay, a California municipal corporation , whose address is 251 E Honolulu St, Lindsay, CA 93247, telephone number (559) 562-7102 Ext. 8010, Fax No. , Email address [email protected] ("Owner"), and C21 Commercial (Jared Ennis / Kevin Land), whose address is 7520 N Palm #102 Fresno, CA 93711 telephone number 559-705-1000 / 559-302-8698 / 559-359-4035, Fax No. 559-432-1250, email address [email protected] / [email protected], ("Agent").
1.2 Property/Premises: The real property, or a portion thereof, which is the subject of this Agreement is commonly known by the street address of 116 / 190 S Elmwood Ave, 100 / 112 E Honolulu St, Lindsay, CA 93247, located in the City of Lindsay, County of Tulare, State of California, and generally described as: Four (4) parcels of commercially zoned land totalling ±46,132 SF of useable land area commonly known as APNs: 205- 236-013-000, 205-236-014-000, 205-236-020-000, 205-236-022000 ("Property"). (See also Paragraph 3)
1.3 Term of Agreement: The term of this Agreement shall commence on 2/20/2025 and expire at midnight on 2/28/2026, except as it may be extended ("Term"). (See also paragraph 4). Upon expiration of this agreement, the “Agreement” will become a month-to-month contract that may be cancelled by either party with ten (10) days written notice.
1.4 Transaction: The nature of the transaction concerning the Property for which Agent is employed ("Transaction") is (place x next to the appropriate box(es)):
(a) X A sale for the following sale price and terms: $420,000 all cash at the close of escrow or terms and conditions acceptable to seller and other additional standard terms reasonably similar to those contained in the "STANDARD OFFER, AGREEMENT AND ESCROW INSTRUCTIONS FOR THE PURCHASE OF REAL ESTATE" published by the AIR Commercial Real Estate Association (“AIR”), or for such other price and terms agreeable to Owner;
(b) X A lease or other tenancy for the following rent and terms: terms and conditions acceptable to landlord Lease and other additional standard terms reasonably similar to those contained in the appropriate AIR lease form or for such other rent and terms agreeable to Owner.
2. EXCLUSIVE EMPLOYMENT AND RIGHTS.
2.1 Owner hereby employs and grants Agent as Owner's sole, exclusive, and irrevocable right to agent to represent Owner in the Transaction and to find buyers or lessees/tenants ("lessees"), as the case may be, for the Property. Agent shall use reasonably diligent efforts to find such buyers or lessees. All negotiations and discussions for a Transaction shall be conducted by Agent on behalf of Owner. Owner shall promptly disclose and refer to Agent all written or oral inquiries or contacts received by Owner from any source regarding a possible Transaction.
2.2 Owner authorizes Agent to:
(a) Place advertising signs on the Property;
(b) Place a lock box on the Property if vacant;
(c) Accept deposits from potential buyers or lessees; and (d) Distribute information regarding the Property to participants in THE MULTIPLE ("MULTIPLE") of the Fresno, Madera, Kings, and/or Tulare County Multiple Listing Service (“Commercial MLS”) and/or any other appropriate local commercial multiple listing service, to other brokers, and to potential buyers or lessees of the Property. Owner shall identify as "confidential" any information provided to Agent that Owner considers confidential and does not want disclosed. All other information provided by Owner may be disclosed as Agent may deem appropriate or necessary. After consummation of a Transaction, Agent may publicize the terms of such Transaction.
2.3 Agent shall comply with the Rules of Professional Conduct of the AIR, if a member or if not, the Rules of Professional Conduct of the Society of Industrial and Office Realtors, and shall submit the Property to the MULTIPLE. Agent shall cooperate with participants in the MULTIPLE and may, at Agent's election, cooperate with other real estate brokers (collectively "Cooperating Broker").
2.4 If the Transaction is a sale and Agent finds a prospective buyer for the Property, or if the Transaction is a lease and Agent finds a prospective lessee for the Property, Owner hereby authorizes Agent also to represent and act as the agent for such buyer or lessee, and Owner consents to such dual agency. If a Cooperating Broker finds such a buyer or lessee, then Agent shall act as agent for Owner only, the Cooperating Broker shall act as agent for the buyer or lessee only, and the Cooperating Broker shall not be Owner's agent, even though the Cooperating Broker may share in the commission paid by Owner to Agent. A Cooperating Broker shall not be an agent or subagent of Owner or Agent.
2.5 Owner agrees that Agent may, during the ordinary and normal course of marketing the Property, respond to inquiries on the Property by showing and providing information on the Property, as well as on other competing properties, to prospective buyers and lessees and that such activities may result in the payment of a commission to Agent by a third party.
3. PROPERTY.
3.1 The term "Property" shall include all of the following which are currently located on the Property and owned by Owner:
permanent improvements, electrical distribution systems (power panels, buss ducting, conduits, disconnects, lighting fixtures, etc.), telephone distribution systems (lines, jacks and connections), space heaters, air conditioning equipment, air lines, carpets, window coverings, wall coverings, partitions, doors, suspended ceilings, built-ins such as cabinets, and none (if there are no additional items write "NONE"). If the Transaction is a sale, the term "Property" shall additionally include, to the extent owned by Owner, oil and mineral rights, leases and other agreements which will continue in effect after Owner's transfer of title to the Property.
3.2 Within five business days after the commencement of the Term hereof, Owner shall provide Agent with the following:
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(a) A duly completed and fully executed Property Information Sheet on the most current form published by the AIR; (b) Copies of all leases, subleases, rental agreements, option rights, rights of first refusal, rights of first offer, or other documents containing any other limitations on Owner's right, ability and capacity to consummate a Transaction, and (c) If available to Owner, copies of building plans, and if the Transaction is a sale, title reports, boundary surveys, and existing notes and trust deeds which will continue to affect the Property after consummation of a sale.
3.3 Agent shall have no responsibility for maintenance, repair, replacement, operation, or security of the Property, all of which shall be Owner's sole responsibility. Unless caused by Agent's gross negligence, Agent shall not be liable for any loss, damage, or injury to the person or property of Owner, any lessees of the Property, any buyer, prospective buyer, lessee, or prospective lessee, including, but not limited to, those which may occur as a result of Agent's use of a lock box.
4. EXTENSION OF TERM. If the Transaction is a sale, and a sale is not consummated for any reason after Owner accepts an offer to purchase the Property ("Sale Agreement"), then the expiration date of the Term of this Agreement shall be extended by the number of days that elapsed between the date Owner entered into the Sale Agreement and the later of the date on which the Sale Agreement is terminated or the date Owner is able to convey title to a new buyer free and clear of any claims by the prior buyer of the Property.
5. COMMISSION.
5.1 Owner shall pay Agent a commission in the amount of six percent (6%) of the total sale price or total lease consideration ("Agreed Commission"), for a Transaction, whether such Transaction is consummated as a result of the efforts of Agent, Owner, or some other person or entity.
Agent shall also be entitled to the Agreed Commission if any of the Owner's representations and warranties described in paragraph 8 are shown to be false. In the event of a lease transaction the commission shall be no less than the highest months rent consideration. Such Agreed Commission is payable:
(a) If the Transaction is a sale, (i) the Property is sold; (ii) Owner breaches or repudiates any Sale Agreement, escrow instructions or other documents executed by Owner regarding the sale of the Property; (iii) the Property or any interest therein is voluntarily or involuntarily sold, conveyed, contributed or transferred; (iv) the Property or any interest therein is taken under the power of Eminent Domain or sold under threat of condemnation, or (b) if Owner is a partnership, joint venture, limited liability company, corporation, trust or other entity, and any interest in Owner is voluntarily or involuntarily sold, contributed, conveyed or transferred to another person or entity that, as of the date hereof, does not have any ownership interest in Owner;
(c) If the Transaction is a lease, (i) a lease of the Property, or a portion thereof is executed; or (ii) a lessee is procured who is ready, willing and able to lease the Property on the terms stated herein, or on any other rent and/or terms agreeable to Owner; or (d) If Owner (i) removes or withdraws the Property from a Transaction or the market; (ii) acts as if the Property is not available for a Transaction; (iii) treats the Property as not available for a Transaction; (iv) breaches, terminates, cancels or repudiates this Agreement; (v) renders the Property unmarketable; or (vi) changes the status of the Property's title, leases, agreements, physical condition or other aspects thereof, which such change adversely impacts the value, use, desirability or marketability of the Property.
5.2 If the Transaction is a sale, the purchase agreement and/or escrow instructions to be entered into by and between Owner and a buyer of the Property shall provide that:
(a) Owner irrevocably instructs the escrow holder to pay from Owner's proceeds accruing to the account of Owner at the close of escrow the Agreed Commission to Agent;
(b) A contingency to the consummation of the sale shall be the payment of the Agreed Commission to Agent at or prior to close of the escrow; and
(c) No change shall be made by Owner or buyer with respect to the time of, amount of, or the conditions to payment of the Agreed Commission, without Agent's written consent.
6. ALTERNATIVE TRANSACTION. If the Transaction changes to any other transaction, including, but not limited to, a sale, exchange, option to buy, right of first refusal, ground lease, lease, sublease or assignment of lease (collectively "Alternative Transaction"), then Agent shall automatically be Owner's sole and exclusive Agent for such Alternative Transaction and represent Owner in such Alternative Transaction, under the terms and conditions of this Agreement. If, during the Term hereof, an Alternative Transaction is entered into, then Owner shall pay Agent the Agreed Commission.
7. EXCLUDED AND REGISTERED PERSONS.
7.1 Owner shall, within 5 business days after the date hereof, provide Agent, in writing, with the names of those persons or entities registered with Owner by any other broker under any prior agreement concerning the Property ("Excluded Persons", see paragraph 7.5). Owner shall also specify for each Excluded Person the type of transaction the consummation of which during the Term of this Agreement entitles such other broker to any compensation ("Excluded Transaction"). Agent may within 10 days of receiving such written list, either (a) accept the Excluded Persons and Excluded Transactions, (b) cancel this Agreement, or (c) attempt to renegotiate this portion of the Agreement with Owner. Once accepted by Agent, the written list shall automatically become an exhibit to this Agreement. If Owner timely provides Agent with the names of the Excluded Persons and specifies the Excluded Transaction for each Excluded Person, then the Agreed Commission paid to Agent with respect to consummation of such an Excluded Transaction with an Excluded Person shall be limited as follows: if such Excluded Transaction is concluded within the first 30 days of the commencement of the Term hereof, then Agent shall be paid a commission equal to the reasonable out-of-pocket expenses incurred by Agent in the marketing of the Property during said 30 days; or if such Excluded Transaction is concluded during the remainder of the Term hereof, then Agent shall be entitled to a commission equal to one-half of the Agreed Commission. If the specified information concerning Excluded Persons and Transactions is not provided as set forth herein, then it shall be conclusively deemed that there are no Excluded Persons.
7.2 Agent shall, within 5 business days after the expiration of the Term hereof, provide Owner, in writing, with the name of those persons or entities with whom Agent either directly or through another broker had negotiated during the Term hereof ("Registered Persons", see paragraph 7.5), and specify the type of transaction of the Property for which such negotiations were conducted ("Registered Transaction"). Those persons or entities who submitted written offers or letters of intent shall, however, automatically be deemed to be Registered Persons for the type of transaction which was the subject of such offer or letter of intent. If Agent fails to timely notify Owner of the existence of any other Registered Persons, then it shall be conclusively deemed that there are no other Registered Persons. A person or entity shall not be a Registered Person if Agent fails to timely specify a Central CA Commercial
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Registered Transaction for such person or entity. The parties are aware that the registration of certain individuals and/or entities might create a Dual Agency, and Owner hereby consents to any such Dual Agency.
7.3 If, within 180 days after the expiration of the Term hereof, Owner enters into a contract with a Registered Person for consummation of a Registered Transaction, then Owner shall, upon consummation of such Registered Transaction, pay Agent the Agreed Commission for the Registered Transaction.
7.4 If, within 180 days after the expiration of the Term hereof, Owner enters into another owner-agency or listing agreement with a broker other than Agent for any transaction concerning the Property, then Owner shall provide to Owner's new broker the names of the Registered Persons and the Registered Transaction for each Registered Person, and provide in such new agreement that the new broker shall not be entitled to receive any of the compensation payable to Agent hereunder for consummation of a Registered Transaction with a Registered Person.
7.5 In order to qualify to be an Excluded Person or a Registered Person the individual or entity must have: toured the Property, submitted a letter of interest or intent, and/or made an offer to buy or lease the Property. In addition, Excluded Persons may only be registered by a broker who previously had a valid listing agreement covering the Property, and such broker may only register individuals and entities actually procured by such listing broker.
8. OWNER'S REPRESENTATIONS.
Owner represents and warrants that:
(a) Each person executing this Agreement on behalf of Owner has the full right, power and authority to execute this Agreement as or on behalf of Owner;
(b) Owner owns the Property and/or has the full right, power and authority to execute this Agreement and to consummate a Transaction as provided herein, and to perform Owner's obligations hereunder; (c) Neither Owner nor the Property is the subject of a bankruptcy, insolvency, probate or conservatorship proceeding; (d) Owner has no notice or knowledge that any lessee or sublessee of the Property, if any, is the subject of a bankruptcy or insolvency proceeding;
(e) There are no effective, valid or enforceable option rights, rights of first refusal, rights of first offer or any other restrictions, impediments or limitations on Owner's right, ability and capacity to consummate a Transaction, except as disclosed in writing pursuant to Paragraph 3.2(b). (f) That as of the date of this Agreement the asking sales price is not less than the total of all monetary encumbrances on the Property.
9. OWNER'S ACKNOWLEDGMENTS. Owner acknowledges that it has been advised by Agent to consult and retain experts to advise and represent it concerning the legal and tax effects of this Agreement and consummation of a Transaction or Alternative Transaction, as well as the condition and/or legality of the Property, including, but not limited to, the Property's improvements, equipment, soil, tenancies, title and environmental aspects. Agent shall have no obligation to investigate any such matters unless expressly otherwise agreed to in writing by Owner and Agent. Owner further acknowledges that in determining the financial soundness of any prospective buyer, lessee or security offered, Owner will rely solely upon Owner's own investigation, notwithstanding Agent's assistance in gathering such information.
10. MISCELLANEOUS.
10.1 This Agreement shall not be construed either for or against Owner or Agent, but shall be interpreted, construed and enforced in accordance with the mutual intent of the parties ascertainable from the language of this Agreement.
10.2 All payments by Owner to Agent shall be made in lawful United States currency. If Owner fails to pay to Agent any amount when due under this Agreement, then such amount shall bear interest at the rate of 15% per annum or the maximum rate allowed by law, whichever is less.
10.3 In the event of litigation or arbitration between Owner and Agent arising under or relating to this Agreement or the Property, the prevailing party shall be paid its attorney's fees and costs by the losing party. The term, "Prevailing Party" shall include, without limitation, one who substantially obtains or defeats the relief sought, as the case may be, whether by compromise, settlement, judgment, or the abandonment by the other party of its claim or defense. The attorney's fees award shall not be computed in accordance with any court fee schedule, but shall be in an amount to fully reimburse all attorney's fees reasonably incurred in good faith.
10.4 Owner agrees to indemnify, defend (with counsel reasonably acceptable to Agent), and hold Agent harmless from and against any claim or liability asserted against Agent as a result of the failure of Owner to make a full and complete disclosure pursuant to law and paragraph 3.2(a) or as a result of the fact that any of the representations made by Owner (see paragraph 8) were not true at the time that this Agreement was signed.
10.5 Owner hereby releases and relieves Agent, and waives Owner's entire right of recovery against Agent, for direct or consequential loss or damage arising out of or incident to the perils covered by insurance carried by Owner, whether or not due to the negligence of Agent.
10.6 In the event that the Transaction is not an outright sale, Owner agrees that if Agent is not paid the Agreed Commission provided for herein within thirty days of the date due, that Agent shall have a lien in the amount of such commission, and may record a notice of such lien, against the Property.
10.7 Owner agrees that no lawsuit or other legal proceeding involving any breach of duty, error or omission relating to the services to be performed by Agent pursuant to this Agreement may be brought against Agent more than one year after the expiration of the Term of this Agreement (see paragraph 1.3) and that the liability (including court costs and attorney's fees) of Agent with respect to any such lawsuit and/or legal proceeding shall not exceed any fee received by Agent pursuant to this Agreement; provided, however, that the foregoing limitation on liability shall not be applicable to any gross negligence or willful misconduct of Agent.
11. ARBITRATION OF DISPUTES.
11.1 ANY CONTROVERSY ARISING UNDER OR RELATING TO THIS AGREEMENT SHALL BE DETERMINED BY BINDING ARBITRATION TO BE CONDUCTED BY: X THE AMERICAN ARBITRATION ASSOCIATION OR USING THE COMMERCIAL RULES ESTABLISHED BY SUCH ORGANIZATION OR IF NONE THE AMERICAN ARBITRATION ASSOCIATION'S COMMERCIAL RULES. ARBITRATION HEARINGS SHALL BE HELD IN THE COUNTY WHERE THE PROPERTY IS LOCATED.
11.2 Notice: BY SUCH ORGANIZATION OR IF NONE THE AMERICAN ARBITRATION ASSOCIATION'S COMMERCIAL RULES.
ARBITRATION HEARINGS SHALL BE HELD IN THE COUNTY WHERE THE PROPERTY IS LOCATED.
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11.3 NOTICE: BY INITIALING IN THE SPACE BELOW YOU ARE AGREEING TO HAVE ANY DISPUTE ARISING OUT OF THE
MATTERS
INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION DECIDED BY NEUTRAL ARBITRATION AS PROVIDED BY CALIFORNIA
LAW AND YOU ARE GIVING UP ANY RIGHTS YOU MIGHT POSSESS TO HAVE THE DISPUTE LITIGATED IN A COURT OR JURY TRIAL. BY INITIALING IN THE SPACE BELOW YOU ARE GIVING UP YOUR JUDICIAL RIGHTS TO DISCOVERY AND APPEAL, UNLESS THOSE RIGHTS ARE SPECIFICALLY INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION. IF YOU REFUSE TO SUBMIT TO
ARBITRATION AFTER AGREEING TO THIS PROVISION, YOU MAY BE COMPELLED TO ARBITRATE UNDER THE AUTHORITY OF THE CALIFORNIA CODE OF CIVIL PROCEDURE. YOUR AGREEMENT TO THIS ARBITRATION PROVISION IS VOLUNTARY.
11.4 WE HAVE READ AND UNDERSTAND THE FOREGOING AND AGREE TO SUBMIT DISPUTES ARISING OUT OF THE MATTERS INCLUDED IN THE "ARBITRATION OF DISPUTES" PROVISION TO NEUTRAL ARBITRATION.
Owner's Initials Agent's Initials
11.5 THE PROVISIONS OF THE ABOVE ARBITRATION CLAUSE SHALL NOT BE BINDING ON EITHER PARTY UNLESS BOTH PARTIES HAVE PLACED THEIR INITIALS UNDER PARAGRAPH 11.3.
11.6 Additional Provisions: Additional provisions of this Agreement are set forth in the following blank lines or in an addendum attached hereto and made a part hereof consisting of paragraphs none through none (if there are no additional provisions write "NONE"):
12. Disclosures Regarding The Nature of a Real Estate Agency Relationship. When entering into an agreement with a real estate agent an Owner should from the outset understand what type of agency relationship or representation it has with the agent or agents in the transaction. (i) Owner's Agent. An Owner's agent may act as an agent for the Owner only. An Owner's agent or subagent has the following affirmative obligations: To the Owner: A fiduciary duty of utmost care, integrity, honesty, and loyalty in dealings. To a potential buyer/lessee and the Owner: a. Diligent exercise of reasonable skills and care in performance of the agent's duties. b. A duty of honest and fair dealing and good faith. c. A duty to disclose all facts known to the agent materially affecting the value or desirability of the property that are not known to, or within the diligent attention and observation of, the Parties. An agent is not obligated to reveal to either Party any confidential information obtained from the other Party which does not involve the affirmative duties set forth above. (ii) Agent Representing Both Parties. A real estate agent, either acting directly or through one or more associate licenses, can legally be the agent of both Parties in a transaction, but only with the knowledge and consent of the Parties. In a dual agency situation, the agent has the following affirmative obligations to both Parties: a. A fiduciary duty of utmost care, integrity, honesty and loyalty in the dealings with either Party. b. Other duties to the Owner as stated above in subparagraph (i). When representing both Parties, an agent may not without the express permission of the respective Party, disclose to the other Party that the Owner will accept rent/purchase price in an amount less than that indicated in the listing or that the buyer/lessee is willing to pay a higher rent/purchase price than that offered.
The above duties of the Agent do not relieve Owner from the responsibility to protect its own interests. Owner should carefully read all agreements to assure that they adequately express its understanding of the transaction. "OWNER" "AGENT"
City of Lindsay, a California municipal corporation C21 Commercial (Jared Ennis/Kevin Land) By: ___________________________________________ By:__ _______________________________________ Name Printed: Daymon Qualls Name Printed: Jared Ennis / Kevin Land Title: City Manager Title: Agent / Agent
Date: ___________________________________________ Date: _Thursday, February 20, 2025_ Agent License Number: 02032738 / 01945284 /
01516541
STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: Finance
FROM: Lacy Meneses, Director of Finance
AGENDA TITLE: Corrective Action Plan in Response to State Auditor Report 2024-801
ACTION & RECOMMENDATION
Approve Resolution 25-05, adopting the City of Lindsay Corrective Action Plan in response to State Auditor Report 2024-801.
BACKGROUND | ANALYSIS
On December 19, 2024, the State Auditor issued Report 2024-801 which was a follow-up to a previous audit conducted in 2021 where the State Auditor deemed the City of Lindsay high-risk in audit report 2020-804 published August 26, 2021.
The state auditor issued eight major findings in the original report designating the City of Lindsay as high-risk for fiscal insolvency. Of the eight major findings, only two have been resolved to date. The City has created larger deficits in attempt to correct previous findings, which has further increased the risk for fiscal insolvency for the City of Lindsay and decreased the potential of the City of Lindsay being removed from the high-risk audit status with the State of California. In fact, risk has increased as the deficit fund balance has increased rather than decreased putting the City at greater risk for fiscal insolvency and on the verge of bankruptcy.
The City shall take drastic measures to ensure fiscal solvency, as detailed in the attached corrective action plan. The deficit fund balance must be addressed immediately with a reserve established by the end of year two, enabling the City of Lindsay to begin recovering from the fiscal challenges of the past several years.
The City of Lindsay will remain in high-risk audit status until the State Auditor determines that satisfactory corrective actions have been taken and audits are being conducted more frequently, every six months, to monitor progress of corrective action and ensure compliance. The City must demonstrate progress toward the attached corrective action plan by June 19, 2025.
FISCAL IMPACT
The fiscal impact of implementing each recommendation will vary, but the City is expected to see a significant reduction in expenditures by addressing the negative fund.
ATTACHMENTS
1. Resolution 25-05
2. City of Lindsay Corrective Action Plan in Response to State Auditor Report 2024-801
3. State Auditor Report 2020-804
4. State Auditor Report 2024-801
Reviewed/Approved: ______
Item #: 11.1
Action Items
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF LINDSAY
RESOLUTION NO. 25-06
NUMBER 25-05
TITLE
MEETING
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF LINDSAY
ADOPTING THE CITY OF LINDSAY CORRECTIVE ACTION PLAN IN
RESPONSE TO SATE AUDITOR REPORT 2024-801
At a regularly scheduled meeting of the City of Lindsay City Council held on February 25, at 6:00 PM at 251 E. Honolulu Street, Lindsay, CA 93247
WHEREAS, on December 19, 2024, the State Auditor issued Report 2024-801 which was a follow-up to a previous audit conducted in 2021 where the State Auditor deemed the City of Lindsay high-risk in audit report 2020-804 published August 26, 2021; and WHEREAS, the State auditor issued eight major findings in the original report designating the City of Lindsay as high-risk for fiscal insolvency; and WHEREAS, of the eight major findings only two have been resolved, and the city has created larger deficits in attempt to correct previous findings, which has further increased the risk for fiscal insolvency for the City of Lindsay and decreased the potential of the City of Lindsay being removed from the high-risk audit status with the State of California; and WHEREAS, City staff have prepared a Corrective Action Plan to address the findings.
NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF LINDSAY DOES HEREBY RESOLVE AS FOLLOWS:
SECTION 1. The City Council adopts the Corrective Action Plan in Response to State Auditor Report 2024-801.
SECTION 2. This resolution shall be effective immediately upon its approval and adoption.
SECTION 3. The Mayor is hereby authorized to affix their signature to the Resolution signifying its adoption by the City Council of the City of Lindsay, and the City Clerk, or their duly appointed deputy, is directed to attest to them.
A RESOLUTION OF THE CITY COUNCIL
OF THE CITY OF LINDSAY
RESOLUTION NO. 25-06
PASSED AND ADOPTED by the City Council of the City of Lindsay as follows:
MEETING DATE February 25, 2025
MOTION
SECOND MOTION
AYES
ABSENT
ABSTAIN
NAYS
CERTIFICATION OF THE FOREGOING RESOLUTION AS FULL, TRUE, PASSED AND ADOPTED BY THE CITY COUNCIL OF THE CITY OF LINDSAY AS DETAILED. _____________________________________
Misty Villarreal, Mayor
CERTIFICATE OF ATTESTING OFFICER
The undersigned, Maegan Peton, City Clerk of the City of Lindsay does hereby attest and certify that the foregoing Resolution is a true, full and correct copy of a resolution duly adopted at a meeting of the City of Lindsay which was duly convened and held on the date stated thereon, and that said document has not been amended, modified, repealed or rescinded since its date of adoption and is in full force and effect as of the date thereof.
ATTEST: _____________________________________
Maegan Peton, City Clerk
Corrective Action Plan for The City of Lindsay
Re: California State Auditor Report 2024-801, December 2024 The city’s most recent State Audit has determined that the city will maintain a designation as a High-Risk entity. California Code of Regulations, title 2, section 61140, requires the city to provide a corrective action plan within 60 days of the conclusion of the audit which is February 17, 2025. The city will also be required to submit updates every six months due to maintaining High-Risk entity status. The first update will be due June 19, 2025.
HIGH-RISK AREA #1
Inadequate Revenue Led to Illegal Transfers to the General Fund Status: We conclude that Lindsay has not addressed this risk area. Although the city has implemented a plan to eventually repay transfers to its general fund, the city has depleted its general fund, leaving Lindsay poorly situated to handle unexpected economic conditions.
In our August 2021 audit, we found that the city forgave $6.3 million in loans made by several funds, including its water and sewer funds, to its general fund—an action that violated state law and exposed the city to litigation. Specifically, we observed that state law, as amended by Proposition 218, restricts cities from using revenue derived from property related fees 39 CALIFORNIA STATE AUDITOR Report 2024-801 | December 2024 LOCAL HIGH RISK and charges to pay for general government operations, and the city’s forgiveness effectively converted those restricted funds into general funds, violating state law. We recommended that the city develop and implement a plan to repay fully these funds.
During this audit, we found that Lindsay’s city council reinstated the loans and approved an interest free repayment plan in February 2022. The plan calls for annual payments of up to $136,000. Further, the plan describes that the city will first reimburse $1.8 million to the water fund and $2.1 million to the sewer fund, which the city anticipates will take until fiscal years 2049–50 and 2054–55 respectively. The city then plans to reimburse the other affected funds including the street improvement fund. The city began its repayments in fiscal year 2022–23, and it anticipates completing full repayment to all funds in fiscal year 2090–91, a period that does not violate state law.
Corrective Action:
The city is working to reduce the overall general fund expenditures by reducing on going salary costs back to pre-Covid staffing levels through attrition. Currently city management staff have identified 22 positions that will not be back filled and instead eliminated from the budget. In addition to reducing salary and benefit cost the city is exploring zero based budgeting to eliminate the deficit fund balance in the year two (2026) to begin building a reserve of at least a 3-month average of expenditures.
The city management is responsible for ensuring this is met.
Timeline: address deficit spending in year one (2025), establish reserve in year two (2026) and have a sufficient reserve by year three (2027).
HIGH-RISK AREA #2
Potentially Improper Contributions to the City’s Streets Maintenance Efforts Status: We conclude that Lindsay has partially addressed this risk area by conducting a cost study identifying the impact of water and sewer damage to roadway conditions.
In our August 2021 audit, we noted that the city charges its utilities for the cost of street repair and maintenance that result from damage by those utilities. For example, the utility’s water lines run underneath city streets and may cause damage through leaks or projects to replace or repair the water lines. However, we found that the city did not know the true annual cost of the damage its water, sewer, and refuse utilities caused to its roadways. Therefore, we concluded that the city violated Proposition 218 when it transferred nearly $900,000 annually from those utilities’ funds to the city’s general fund to pay for that roadway damage because it could not demonstrate how it knew that was the appropriate amount to transfer. The city received the results of a cost study in June 2022 that determined the cost of roadway damage that the city could attribute to the utilities to be a collective $688,000 annually. The consultant’s report noted that the estimated cost of the damage was conservative, because it included only certain types of damage caused by the utilities.
Lindsay’s director of finance stated that the city has not updated the amount it transfers from the utility funds since it received the cost study in 2022. The director started in her position with the city in 2024 and did not know why the city had not yet adjusted the transfer amounts. The director of finance anticipates that the city will revise the transfer amounts in January 2025. She further asserted that the city would review the transfer amounts every five years. Until it adjusts the amount it transfers for street repairs, the city continues to expose itself to liability under Proposition 218.
Corrective Action:
The city has adjusted the transfers to be made for current year. The rates have been adjusted to include the CCI of the past two years that have passed since the study was completed in 2022. The water fund is to transfer $105,741; the sewer funds is to transfer $83,361 and the refuse fund is to transfer $633,765.
The city finance department is responsible for ensuring this is met.
Timeline: completed
HIGH-RISK AREA #3
Insufficient Planning for Federal Assistance Funds
Status: We conclude that Lindsay has fully addressed this risk area by developing a plan for spending its federal funds.
Corrective Action:
None to be taken.
HIGH-RISK AREA #4
Inadequate Enterprise Fund Balances
Status: We conclude that Lindsay has partially addressed this risk area by developing a plan to build and maintain its fund balances, but risks remain for its water fund.
In our August 2021 audit, we noted that Lindsay’s annual deficits and loan forgiveness had led to concerning deficit balances in two of the city’s enterprise funds—the water and sewer funds. We recommended that the city develop and implement a plan to build and maintain these balances.
In June 2022, the city adopted a fiscal sustainability and financial improvement plan for the water and sewer funds that included provisions for outlining infrastructure replacement schedules, projecting cash flows and fiscal forecasts, and establishing contingency reserve policies for the water and sewer funds. Further, because the city reinstated the loans we describe under High-Risk Area #1, the unrestricted net position of the water fund is no longer negative. Nonetheless, the net position of the water fund depends significantly on the repayment of approximately $1.8 million as of the end of fiscal year 2022–23, which the city does not expect to fully repay until fiscal year 2049–
50. A more direct measurement of the financial health of the city’s enterprise funds is whether they can sustain themselves or require subsidies. As Table 3 shows, the city’s water fund has incurred operating deficits in fiscal years 2020–21 through 2022–23, and the sewer fund has been self-sustaining. The city approved water rate increases 42 CALIFORNIA STATE AUDITOR December 2024 | Report 2024-801 LOCAL HIGH RISK in October 2024, and those increases will go into effect over the next four to five years, with the first of the increases to take effect in January 2025. Establishing appropriate rates will assist the city in effectively operating its water utility.
Corrective Action:
The city has gone through the prop 218 process to increase the water and sewer rates. The new water and sewer rates went into effect as of January 2025. The new rates are projected to make the water and wastewater accounts whole at the conclusion of year one allowing a reserve to build. It is projected that the reserve meets $1 million in 5 years to address uncertain events such as a well going down or unforeseen costs with the water and wastewater infrastructure. As stated in High-Risk #1 The city is also working to reduce the overall general fund expenditures.
The city management is responsible for ensuring this is met.
Timeline: in progress and expected to be completed by June 30, 2025 HIGH-RISK AREA #5
Service Fees Did Not Cover Costs
Status: We conclude that Lindsay has partially addressed this risk area. It developed a fee study and improved its accounting system, but it must address other weaknesses in its cash receipt processing.
In our August 2021 audit, we raised concerns that because it did not periodically review and update its fees and rates, Lindsay had not ensured that it collected sufficient revenue to cover the costs of services it provided. Further, we noted that limitations in its accounting system made the city unable to identify the precise amount of revenue it collects from some of its fees and rates. Although the city addressed the issues we identified in our prior report, we identified other issues during this audit that raise concerns.
In December 2022, the city council adopted a new citywide fee schedule to set city fees at the same level as the full cost the city incurred to support the various activities for which it charged user fees, such as issuing plumbing or electrical permits. The city council also approved an amendment to the fee schedule in July 2024. City staff proposed that amendment to increase certain fees they had either listed incorrectly or had left out of the schedule of fee increases the city approved in December 2022. We also confirmed that the city’s accounting system has the capacity to track the revenue it collects from the fees it charges and that the city has established revenue accounts in that system for many of its fees.
However, as part of this audit, we identified other factors related to the city’s fees and rates that demonstrate that this area remains a risk to Lindsay. The city’s external auditor identified internal control weaknesses in its fiscal year 2022–23 audit. Specifically, for one city department’s fees, a single individual handled deposits of fee revenue and did so without preparing proper supporting documentation. Deposits that do not include supporting documentation leave a city at risk of misappropriation of funds. Further, city staff did not reconcile cash receipts from two departments to the city’s general ledger, which leaves Lindsay susceptible to the potential for misappropriation of fee revenue.
Without proper controls over its cash receipt processes, the city cannot ensure that it is correctly collecting and recording its actual fee revenues, and it increases its risk that it does not handle collected cash properly. The city’s director of finance stated that the city plans to centralize the fee collection process to better control fee collection and to better assure the city that its staff appropriately handle all fee revenue.
Corrective Action:
The city plans to adopt strong internal controls which would include centralizing all processes with fiscal oversight. Internal controls shall include every transaction having proper documentation to support each transaction, proper cash handling procedures followed, appropriate personnel access, fees schedule structures to cover costs of departmental expenditures, proper expenditure oversight and purchasing controls to maintain cost integrity, and segregation of duties to reduce the risk of fraud, misappropriation of funds and misuse of funds.
The city will create standard operating procedures outlining procedures to be followed as well as what positions are responsible also addressing segregation of duties.
The city management is responsible for ensuring this is met.
Timeline: address internal controls immediately to be able to show improvement by June 30, 2025
HIGH-RISK AREA #6
No Long-Range Financial Planning
Status: We conclude that Lindsay has partially addressed this risk area. It has developed a financial improvement plan, but it has not kept up with the financial forecasting requirements of that plan.
In our August 2021 audit, we raised concerns that, although Lindsay had taken some steps to improve its financial position in the short term, the city had no clear plan for its long-term financial decision-making. We noted that the GFOA recommended that all governments regularly engage in long-term financial planning as part of their overall strategic planning efforts, and that long-term financial planning should include key elements, such as revenue and expenditure forecasts, strategies for achieving and maintaining financial stability, and a process for periodically reviewing and updating that plan. In this audit, we determined that Lindsay has partially addressed this risk area. In February 2022, the city council approved a Fiscal Sustainability and Financial Administration Improvement Plan (financial improvement plan). The financial improvement plan established that the city would create annual five-year long-range fiscal forecasts, identify challenges to the city’s continued financial health, and take steps to reduce expenditures or increase revenues when the city is projecting a deficit. The financial improvement plan also included an initial five-year forecast of the condition of the city’s general fund.
Because the financial improvement plan calls for the city to perform the five-year long-range fiscal forecast annually, we expected at the time of our audit that the city would have already conducted two additional forecasts beyond the initial version included in the February 2022 financial improvement plan. However, the director of finance confirmed that the city has not performed any updates to its long-range financial forecast. She said that the city intends to include updated forecasts in future city budgets.
As we describe earlier, at the end of fiscal year 2022–23, Lindsay had negative general fund reserves. The city would likely benefit from following through with its long-range financial forecasting so that it can better anticipate its revenue and expenditures and take steps as necessary to improve its poor financial condition.
Corrective Action:
The director of finance has created reports for city council and management that are meaningful to make educated decisions. Previously council was not provided budget updates or reports that had revenues and expenditures in one place, which caused council to approve a negative $1.7 million budget in prior year. The director of finance is now educating council on budget and how to read each report presented to provide a better understanding of the city finances. As stated in High-Risk #1 the city is working to resolve the negative fund balance to establish a reserve by reducing salary and benefit costs and exploring zero based budgeting to eliminate the deficit fund balance in the first year (2025) to begin building a reserve of at least a 3-month average of expenditures in year two (2026).
The city management is responsible for ensuring this is met.
Timeline: address deficit in year one (2025), establish reserve at end of year one in year two (2026) and have a sufficient reserve by year three (2027), once first year deficit is addressed a 5-year projection will be presented at least bi annually in addition to each budget adoption.
HIGH-RISK AREA #7
No Formal Strategies to Address Its Rising Employee Retirement Costs Status: We conclude that Lindsay has not addressed this risk area. The city still needs to develop and implement strategies to reduce its retiree health benefit costs.
In our August 2021 audit, we raised concerns that Lindsay had not prefunded its OPEB liabilities as the GFOA recommends. Lindsay’s OPEB benefits include continuing medical, dental, and vision coverage to its qualified retired employees. Further, we stated that the lack of prefunding had caused the city’s OPEB liabilities to increase by 36 percent from fiscal years 2017–18 through 2019–20. In addition, we noted that the city’s pension costs could place a financial burden on the city unless it took substantial action.
The city’s financial improvement plan includes a commitment to fully fund the costs of the city’s retirement plans and hold annual discussions of the city’s progress in funding its pension program. Related to OPEB, Lindsay’s ACFRs show an overall decline in its OPEB liability, from nearly $2 million at the end of fiscal year 2021–22 to $1.4 million at the end of fiscal year 2022–23. However, a significant factor in this decline were changes in the assumptions the city made to estimate the OPEB liability, rather than any change in the city’s approach to funding OPEB. Similar to the condition at the time of our original audit, the city had not prefunded its OPEB in fiscal year 2022–23.
The director of finance explained that the city would develop a plan by June 2025 to help reduce its OPEB liabilities. She noted that she would work with the city manager to look into the city’s options to reduce its OPEB costs. Among the options the city would consider will be establishing an OPEB trust to prefund its OPEB liabilities and negotiating with the unions in preparation for the next bargaining agreement to consider requiring current employees to begin contributing to the future costs of their retirement health care benefits, among other strategies. As we described in our August 2021 audit report, if the city does not require its employees to begin contributing to their OPEB, Lindsay will likely have to make higher contributions from its general fund, displacing other spending priorities.
Corrective Action:
The city manager and negotiation team will address personnel costs through negotiations with the established unions. The state auditor will be kept informed during this process.
The City Manager and negotiation team is responsible for ensuring this is met.
Timeline: prepare a plan in year one (2025) and establish funding within year two (2026).
HIGH-RISK AREA #8
Lack of Planning for Public Safety Training and Equipment Needs Status: We conclude that Lindsay has fully addressed this risk area. It has evaluated the effectiveness of its combined police and fire department, ensured that its firefighters have appropriate training, and adopted a fleet management and replacement policy covering its police and fire vehicles.
Corrective Action:
None to be taken.
City of Lindsay
It Must Take Substantial Action to Address
Its Financial Problems and Its Inadequate
Management Practices
August 2021
REPORT 2020‑804
For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255 This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports 621 Capitol Mall, Suite 1200 | Sacramento | CA | 95814
CALIFORNIA STATE AUDITOR
916.445.0255 | TTY 916.445.0033
1.800.952.5665
For complaints of state employee misconduct,
contact us through the Whistleblower Hotline:
Don’t want to miss any of our reports? Subscribe to our email list at auditor.ca.gov Elaine M. Howle State Auditor
621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov August 26, 2021
2020‑804
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
As directed by the Joint Legislative Audit Committee, my office presents this audit report regarding the city of Lindsay (Lindsay), which we conducted as part of our high‑risk local government agency audit program. Our assessment focused on Lindsay’s financial and operational risks, and we found that the city is at high risk because of its financial problems and management practices.
Lindsay has improved the condition of its general fund over the past several fiscal years, and it appears to have recently met recommended reserve levels. However, this apparent turnaround was largely because the city forgave more than $6 million in loans from restricted funds to its general fund, a violation of Proposition 218, which restricts the use of certain local government funds. This unlawful action has exposed the city to possible litigation from taxpayers and utility ratepayers, and it obscures what we estimate to be a general fund deficit of more than $3 million as of June 30, 2020, instead of its apparent surplus.
Because of both Lindsay’s loan forgiveness and the fact that it has not regularly updated the fees and rates it charges for city services and utilities, it lacks resources in some of its utility funds. The city’s water fund recently incurred a nearly $1 million deficit and is unable to pay for necessary infrastructure projects, forcing Lindsay to seek to increase ratepayers’ water rates.
Not only has Lindsay forgone revenue by not adjusting the majority of its fees and rates for years, its general fund must now cover some of the city’s costs to provide utilities and other services. Finally, the city lacks a long-term financial plan to adequately address its financial problems, which include the need to pay for its aging public safety vehicles and retirement obligations, such as its retiree health care costs.
Among the actions we believe the city should take to address our concerns, we recommend that Lindsay develop a plan to fully repay its utility funds for the loans it unlawfully forgave, implement a plan to update its fees and rates, and formally adopt a long‑term financial plan that addresses its liabilities and financial stability.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
Selected Abbreviations Used in This Report
CalPERS California Public Employees’ Retirement System
GFOA Government Finance Officers Association
HCD California Department of Housing and Community Development OPEB other post-employment benefit
iv CALIFORNIA STATE AUDITOR
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HIGH RISK ISSUES
City of Lindsay, Tulare County Risk Designation: High Risk
ISSUE PAGE
Lindsay’s Actions Raise Doubt About the Financial Stability of Its General Fund • In Improving Its Financial Condition, the City Violated State Law, Exposing It to Litigation • Lindsay Has Not Ensured That Its Street Improvement Program Complies With State Law • Lindsay Has Found New Sources of Revenue in Recent Years, but These Have Not Adequately Improved Its Financial Condition
• The City Reduced Some Liabilities and Expenditures, Which Partially Improved Its Finances, but Other Financial Problems Remain
9 Lindsay Must Increase Its Efforts to Address Deficits in Its Enterprise Funds • Deficits and Inappropriate Loan Forgiveness Led to Negative Balances in the City’s Enterprise Funds, Limiting Its Ability to Effectively Operate Its Utilities
• Lindsay Has Not Ensured That Its Service Fees and Utility Rates Sufficiently Cover Its Costs 17 Lindsay Must Improve Its Management Practices to Effectively Plan for Its Financial and Operational Needs • The City’s Lack of a Long‑Term Financial Plan Is Hindering Its Efforts to Achieve Financial Sustainability • Lindsay Needs to Address Its Rising Employee Retirement Costs • Lindsay Has Not Adequately Planned for Public Safety Training and Equipment Needs 23 Appendices
Appendix A—Scope and Methodology 29
Appendix B—The State Auditor’s Local High-Risk Program 33 Agency Response
City of Lindsay 35
California State Auditor’s Comments on the Response From the City of Lindsay 43 v
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Risks the City of Lindsay Faces
The City of Lindsay (Lindsay) faces several
significant risks related to its financial and
operational management, and it would
benefit from better long‑term planning. In
November 2019, the California State Auditor’s
Office (State Auditor) informed the city that
Lindsay had been selected for review under
the high‑risk local government agency audit
program. This program authorizes the State
Auditor to identify local government agencies
that are at high risk for potential waste, fraud,
abuse, or mismanagement or that face major
challenges associated with their economy,
efficiency, or effectiveness.
We first identified that Lindsay might be
at high risk based on publicly available
audited financial statements and unaudited
pension‑related information from the
California Public Employees’ Retirement
System. Table 1 summarizes our risk
assessment of the last three fiscal years of
Lindsay’s financial indicators. We conducted
a review in December 2019 and identified
concerns regarding its financial stability,
including its continued operating deficits,
its use of funds restricted for other purposes
to support the general fund, and other
operational risks, such as its approach to
providing public safety with combined police
and fire services. For example, Lindsay used
funds from its water utility to pay general city
expenses, a violation of state law, and it has
not planned for the expensive replacement
of very old vehicles that its Public Safety
Department is using. After approval from the
Joint Legislative Audit Committee, we began
our audit of the city in January 2021.
Table 1
Some of Lindsay’s Risk Indicator Levels Have
Recently Improved
FISCAL YEAR
2017–18 2018–19 2019–20
General Fund Reserves High High Low*
Debt Burden High High High
Liquidity High High Low*
Revenue Trends Low Low Moderate
Pension Obligations Moderate Moderate Moderate
Pension Funding Moderate Moderate Moderate
Pension Costs Moderate Moderate Moderate
Future Pension Costs High High High
Other Post‑Employment
Benefit (OPEB) Obligations Low Low Low
OPEB Funding High High High
Source: Analysis of risk indicator levels.
* The improvement in Lindsay’s general fund reserves and liquidity levels that resulted in its “low risk” ratings for fiscal year 2019–20 are misleading because they are primarily the result of unlawful forgiveness of loans from its utility funds to its general fund in violation of Proposition 218, which we describe further in the report.
Lindsay has taken several steps to improve
its financial condition; for example, it
has reduced expenditures and increased
revenues through an increased sales tax and
by permitting certain cannabis businesses.
However, our audit found that the city has
made some questionable decisions that
violated state law, and until it addresses
these decisions, it will struggle to create a
sustainable financial future. For example,
as of June 30, 2020, the city had nearly a
$3.2 million surplus in its general fund, the
result of turning its $9.5 million general fund
deficit into a surplus over the course of the
three previous fiscal years. However, this
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turnaround was largely accomplished
by forgiving major loans from its utility
funds to its general fund in 2019. The city’s
decision to forgive these loans violated
Proposition 218, which was passed in 1996
and restricts how cities can use funds derived
from property‑related fees and charges,
such as for water and sewer utility services.
Because the city used fees paid by utility
ratepayers for general government purposes
rather than for utility projects and expenses,
the city may be liable for a repayment of more
than $6 million. If utility ratepayers decide
to sue, are successful, and obtain monetary
relief, court orders, or attorneys’ fees, the
city will face significant financial hardship,
and it would have a negative general fund
balance of more than $3 million instead
of its current surplus. We also found that
Lindsay violated a different provision of
Proposition 218 through fund transfers to
its Street Improvement Program (streets
program). Although Proposition 218 restricts
the use of utility funds, a nonutility fund may
be reimbursed for costs it incurs on behalf of
the utility, so long as the city demonstrates
that those amounts reasonably represent
the cost of street repairs and maintenance
that result from damage, such as leaking,
caused by those utilities. However, we found
that Lindsay has failed to demonstrate that
the nearly $900,000 it has been annually
transferring from its utility funds to the
streets program comply with that provision of
the law.
As a result of Lindsay’s unlawful loan
forgiveness, as well as the fact that it has not
regularly updated the fees and rates it charges
for city services and utilities, it lacks resources
in some of its utility funds, which creates
risk to its ability to meet its infrastructure
needs. For example, when Lindsay forgave
nearly $2 million in loans from its Water
Fund to its general fund, it no longer had
the capital necessary to pay for certain water
infrastructure projects in the city. Recently,
because the city’s Water Fund has incurred a
nearly $1 million deficit, Lindsay has sought
to increase ratepayers’ water rates to fund its
utility operations and future infrastructure
needs. In general though, Lindsay has not
adjusted the majority of its fees and rates for
years, likely resulting in missed revenues.
These outdated rates may no longer cover the
city’s costs to provide utilities, such as the
cost to maintain its water system, and other
services. As a result, the city’s general fund
must cover these costs, but it has a limited
capacity to do so.
Lindsay would benefit from better long‑term
planning. Although the city has worked to
increase revenues, reduce expenses, and
decrease its liabilities, it must make additional
substantial efforts to address its financial
management problems and ensure that it
can afford to maintain its services for its
residents into the future. Lindsay does not
currently have a long‑term financial plan,
which would provide useful insight into its
future financial situation and help the city
develop and deploy strategies for long‑term
sustainability. Instead, Lindsay has relied only
on its annual budget process to address its
short‑term financial problems. The city also
lacks plans to address its growing costs for its
employees’ post‑employment health benefits
and to replace its aging police and firefighting
vehicles. Without a long‑term financial
plan to ensure that the city is proactive and
transparent about addressing and resolving
its fiscal challenges, including its Water
Fund deficit, Lindsay continues to be at high
financial risk.
To help Lindsay address the risk factors
we identified, we developed numerous
recommendations the city should implement,
including the following:
• Address past violations of state law by
developing and implementing a plan
to fully repay its utility funds and by
documenting how the amount of utility
funds it transfers to its streets program
accurately reflects the allowable costs.
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LOCAL HIGH RISK
• Develop and implement a plan that
includes an update to its fees and rates to
ensure that it has the necessary resources
in its enterprise funds to pay for needed
infrastructure.
• Formally adopt a long‑term financial plan
that addresses its liabilities, including its
post‑employment benefit liabilities and all
of its infrastructure and capital needs.
Agency’s Proposed Corrective Action
Lindsay disagreed with several of our
conclusions, including that its unlawful
loan forgiveness violated Proposition 218.
Nonetheless, it did agree with some of
our recommendations and highlighted
various efforts that it has taken or plans
to take to address its financial condition.
However, because Lindsay did not submit a
corrective action plan as part of its response,
we look forward to receiving the plan by
November 2021 to understand the specific
actions it has undertaken or plans to take
to address the conditions that caused us to
designate it as high risk.
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Introduction
The city of Lindsay (Lindsay), located in
Tulare County, has approximately 13,000
residents. Lindsay is a charter city and
therefore has authority over its municipal
affairs and may establish certain local
ordinances beyond those state law allows for
general law cities.1 For fiscal year 2020–21,
Lindsay had 45 full‑time budgeted positions.
City staff provide many services to residents,
including public safety, utilities, and
recreational activities. Lindsay has combined
its police and fire services into a single public
safety department, and its practice is to
cross‑train its police officers in firefighting.
The city operates under a council‑manager
form of government. Thus, the city’s voters
elect officials to a five‑member city council
serving staggered four‑year terms, and the
council in turn appoints a city manager to
execute the council’s actions and to act as the
chief executive and administrative officer of
the city. The city manager is also responsible
for keeping the city council fully informed
about Lindsay’s financial condition, including
any financial challenges.
Background
Lindsay has undergone changes in important
leadership positions, including a complete
turnover in its city council members during
the last three years. In March 2020, Lindsay
hired a new city manager following the
January 2020 resignation of the former
interim city manager, who had simultaneously
1 Unlike a general law city, charter cities have the authority to adopt ordinances and regulations regarding municipal affairs that may be inconsistent with state law that is otherwise applicable to cities.
served as the finance director. The city hired
a permanent finance director in May 2021,
after filling the role on an interim basis
with its subsequent city manager and later
with a contracted finance director. The city
manager and finance department prepare and
administer the city’s annual budget, and the
city council is responsible for safeguarding
the city’s financial health and adopting its
budget. In 2018 the city’s voters elected two
of the current city council members. In 2020
the three other more experienced members
stepped down from their positions. Just
before stepping down, the five members
of the city council appointed—in lieu of an
election—three new members to replace the
council members who were stepping down.
Lindsay’s general fund makes up nearly
half of the city’s overall operating budget.
For fiscal year 2020–21, Lindsay adopted
a $15 million operating budget, of which
the general fund accounted for about
$6 million. Lindsay’s general fund revenues
have fluctuated in the last five fiscal years, as
shown in Figure 1. The city’s main source of
income for its general fund is tax revenue,
accounting for more than $5 million in fiscal
year 2019–20. The city also annually transfers
nearly $900,000 from its utility funds to
the general fund’s Street Improvement
Program (streets program) to pay for street
repair and maintenance. The remainder of
the city’s general fund revenue comes from
other smaller sources, including revenue
from licenses, permits, and fees. Under state
law, Lindsay can use general funds for any
legitimate governmental purpose, including
funding basic city operations.
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Additionally, the city has revenue in its
enterprise funds, which come from fees
charged to users for city services, such as
water distribution and waste collection.
Proposition 218 requires the city to spend
revenues derived from property‑related fees
and charges to benefit the users of those
city services. Some enterprise funds that
Proposition 218 affects include the Water
Fund and the Sewer Fund, which property
owners pay into for those services. Lindsay
also maintains a Wellness Center Fund that
users of its facilities pay to support; because
property‑related fees and charges are not
used to support the fund, Proposition 218
does not apply to the Wellness Center Fund.
As highlighted in Figure 2, the majority of
Lindsay’s general fund expenditures pay for
services such as public safety, public works,
streets, and parks. The city also pays nearly
$200,000 annually for bond repayments
for the construction of the McDermont
Field House sports complex. In 2008 the
city completed construction of the sports
complex, which is in a former citrus packing
warehouse, intending for it to become a
regional draw for sports competitions and to
generate revenue for the city. However, the
sports complex sustained annual operating
losses of nearly $1 million until the city leased
the complex to a third‑party operator in
December 2017, which we describe further in
the report.
Figure 1
Lindsay’s General Fund Revenues and Expenditures Have Fluctuated Over the Last Five Fiscal Years 2015–16
In Millions
2016–17 2017–18 2018–19 2019–20 2020–21
Revenues Expenditures
PROJECTED
0 1
2 3
4 5
6 7
$8
Fiscal Years
Source: Lindsay’s audited financial statements for fiscal years 2015–16 through 2019–20 and its fiscal year 2021–22 budget. 6 CALIFORNIA STATE AUDITOR
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Figure 2
Lindsay’s Budgeted General Fund Expenditures for Fiscal Year 2021–22, by Category $6.6
MILLION
3% | Parks
3% | Community Development
4% | Overhead
4% | Finance
5% | City Council, Manager, and Attorney
5% | Streets
5% | Debt Service
8% | Public Works
14% | Capital Outlay*
49% | Public Safety
Source: Lindsay’s adopted budget for fiscal year 2021–22. * The Capital Outlay category covers capital projects such as building improvements at city hall and purchasing police vehicles. 7 CALIFORNIA STATE AUDITOR
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Lindsay’s Actions Raise Doubt About the
Financial Stability of Its General Fund
In Improving Its Financial Condition, the City
Violated State Law, Exposing It to Litigation
Lindsay artificially improved its financial
condition by unlawfully forgiving loans,
which created liabilities that undermine
its future financial condition. After years
of deficits, the city achieved a general fund
surplus of nearly $3.2 million in fiscal year
2019–20, a $12.6 million improvement
from fiscal year 2016–17, when it had a
deficit of nearly $9.5 million. The general
fund balance is the accumulated amount of
revenues over expenditures. However, much
of the improvement in Lindsay’s general
fund balance was due to a substantial loan
forgiveness decision that was unlawful.
The city violated state law when it forgave
$6.3 million in loans that it had previously
made to its general fund, including about
$2 million each from its Water Fund and
Sewer Fund with the remainder coming from
other funds, including its Street Improvement
Fund. Specifically, state law as amended by
Proposition 218, restricts cities from using
revenues derived from property‑related fees
and charges to pay for general government
operations. Although state law allows a
city to temporarily loan restricted funds to
its general fund, here the city’s forgiveness
effectively converted those restricted funds
into general funds, a violation of state law.
Half of the city’s financial improvement since
fiscal year 2016–17 thus was a result of this
unlawful action. Without the loan forgiveness,
we estimate that Lindsay’s general fund would
have had a $3.2 million deficit in fiscal year
2019–20 rather than the surplus it presented
in its financial statements.
Although the city’s recent general fund
balance appears to have met recommended
levels, Lindsay’s loan forgiveness makes that
surplus misleading. The Government Finance
Officers Association (GFOA) recommends
that cities maintain a general fund balance
sufficient to cover at least two months of
operating expenses.2 The GFOA makes this
recommendation so that cities can mitigate
current and future financial risks, including
unplanned expenditures or revenue shortfalls.
However, as Figure 3 shows, from fiscal
years 2015–16 through 2018–19, Lindsay’s
general fund balance was below the GFOA
recommendation. The city finally met
the minimum level in fiscal year 2019–20
but only by inappropriately forgiving the
$6.3 million in loans.
To sustain its basic operations in the face
of budget deficits over many years, Lindsay
made transfers totaling $6.3 million from
its restricted funds to its general fund and
subsequently formalized those transfers
as loans, which was allowable; but then
in February 2019, it forgave the loans in
violation of state law. Table 2 shows the
amount of each restricted fund that the city
transferred to its general fund. The city’s
financial statements show that it made
the transfers over several years, at least as
far back as fiscal year 2009–10, so that its
general fund could maintain the city’s basic
operations. Before October 2017, the city
inappropriately presented these transfers in
its annual financial statements as short‑term
loans that it expected to pay back within one
year. However, the city’s external auditor
2 The GFOA represents public finance officials, and its mission is to advance excellence in public finance, which it does by publishing best practices for governments to follow.
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had recommended since at least fiscal year
2009–10 that the city stop presenting them
as short‑term loans because its general fund
did not have enough funds to repay them
on that schedule. State law allows a city
to loan money from a restricted fund to
the general fund if the action meets three
conditions: the restricted fund has a surplus,
the loan does not interfere with the purpose
of the restricted fund, and the borrowing
fund repays the loan as soon as possible. In
October 2017, the city council formalized
the loans to its general fund, changing them
from short‑term to long‑term with interest
and with dates on which it expected to repay
the funds. The city did not violate state law by
formalizing the loans, and its actions would
have been appropriate if it had eventually
repaid the loans and the interest, but it chose
not to do so.
Instead, Lindsay forgave the loans because it
believed that it did not have better options
for resolving its financial difficulties. In its
fiscal year 2016–17 financial audit, the city’s
external auditor concluded that the loans
raised significant doubt about the city’s ability
to meet its financial obligations because it
could not repay them in a timely manner. In
response, in February 2019 staff asked the city
council to formally forgive the $6.3 million
in loans to the general fund, which would
resolve the external auditor’s finding.
Specifically, staff noted in that request that
if the city did not forgive the loans, it would
Figure 3
Lindsay Recently Met the Minimum Recommended General Fund Balance Threshold Because of Its Unlawful Loan Forgiveness
2015–16 2016–17 2017–18 2018–19
Fiscal Years
(In Millions)
2019–20 2020–21
-12
-10
-8
-6
-4
-2
0 2
4 $6
Source: Lindsay’s audited financial statements, adopted budget for fiscal year 2021–22, and GFOA best practices.
Note: The general fund balance noted for fiscal year 2020–21 is a projection, as the city does not expect to complete the financial audit of these numbers until 2022.
* Although Lindsay forgave the loans in February 2019, the city did so as part of finalizing its fiscal year 2017–18 financial statements.
For accounting purposes, the forgiveness took place in that fiscal year and therefore first appears in the city’s fiscal year 2017–18 financial statements.
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receive a finding from its external auditor on
its upcoming financial statements that the
city was insolvent. However, the staff report
did not identify other options for the city
to consider when it forgave the loans, such
as adjusting the repayment schedule for the
loans or issuing municipal bonds to cover its
deficits. The former finance director indicated
that the city was aware that forgiving the
loans potentially violated state law and that
it did consider other options before forgiving
the loans, including adjusting repayment
schedules and bankruptcy. He indicated that
the city ruled out those options and that
forgiving the loans was the only option it
had at the time to address the city’s financial
difficulties. However, as we discuss above,
forgiving the loans violated state law, and we
therefore do not believe it was an appropriate
action for the city to take.
By forgiving the loans, the city violated
Proposition 218, and doing so has exposed
it to possible litigation from taxpayers and
utility ratepayers. Specifically, Proposition 218
amended the California Constitution to
prohibit local governments from spending
revenues from property‑related fees and
charges on general government operations.
Lindsay’s restricted funds include its
utility funds, which receive revenue from
property‑related fees charged to utility
ratepayers, which we refer to as utility rates.
By forgiving the loans, the city transferred
$6.3 million from its utility funds to its
general fund, including about $2 million each
from the Water Fund and the Sewer Fund, as
Table 2 shows. The city uses its general fund
to pay for services including police, fire, and
city administration. By transferring revenues
from property‑related fees to pay for these
services, the city violated Proposition 218. In
fact, the city has known about this violation
for several years because its external auditor
identified in each of the city’s past three
financial audits that its actions had violated
Proposition 218. The city manager indicated
that the city would like to repay the Water
Fund and Sewer Fund, but explained that it
has only informally discussed this potential
repayment and does not have a formal plan
for doing so. However, because the city
currently does not have a sufficient general
fund balance to repay these loans, it would
need to do so over multiple years. Although
the city confirmed that no one has made a
claim for refund or sued it yet, its ratepayers
may choose to do so, which could result in
the city being liable for monetary relief, court
orders, and attorneys’ fees if the ratepayers
are successful.
Table 2
Lindsay Transferred $6.3 Million From Restricted
Funds to Its General Fund Over Many Years
(In Thousands)
FUND AMOUNT TRANSFERRED
Street Improvement* $1,557
Water 1,907
Sewer 2,108
Refuse 402
Other† 358
Total $6,332
Source: Staff report, city council resolution, and audited financial statements.
* Lindsay’s Street Improvement Fund contains dollars from the Water, Sewer, and Refuse utility funds. However, the city did not provide a breakdown of the amounts within the Street Improvement Fund that came from each of the utility funds. † Other funds include a Park Improvement Fund and a Storm Drain Fund.
Lindsay Has Not Ensured That Its Streets
Program Complies With State Law
In addition to its unlawful loan forgiveness,
Lindsay has also violated Proposition 218
by transferring money from its utility
funds to pay for its streets program. As
described previously, Proposition 218
restricts cities from using revenues derived
from property‑related fees and charges,
such as utility rates, to pay for general
government operations. However, state law
does allow local governments to charge
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their utilities for the cost of street repairs
and maintenance that result from damage
by those utilities. For example, the water
utility’s water lines run underneath city
streets and may cause damage to the streets
through leaks and projects to replace or
repair the lines. Under Proposition 218,
the city must demonstrate that a charge for
repairs or replacement reasonably represents
these costs.
In 2004 the city published a study of its water,
sewer, and refuse rates and increased them, in
part, to fund its streets program, which pays
for the damage to the streets caused by the
city’s utility operations. However, Lindsay did
not demonstrate that the amount generated
by the rate increases represented the actual
costs of the damage those utilities caused. For
instance, Lindsay could have had the engineer
in charge of the study analyze and report
the damage that each type of utility had
caused to its streets so as to identify what the
appropriate amount would be to charge each
fund going forward. Instead, the city began
transferring a flat 23.6 percent of all its utility
rates to its streets program and continues to
do so today. These transfers averaged nearly
$900,000 annually during fiscal years 2017–18
through 2019–20.
The finance director indicated that she
does not know whether the 23.6 percent
is currently appropriate. For example, the
current rate does not account for the greater
wear that the finance director indicated
heavier refuse vehicles are causing to its
roads. However, the city acknowledged
that it has never performed an analysis to
demonstrate how much damage its utilities
cause and how much it should be paying to
the streets program to cover these damages.
Until it performs this analysis, the city will
not know whether it is using funds to pay
for street projects that it should be spending
instead on utility infrastructure. In addition,
the city may be using utility ratepayer funds
for nonutility purposes, such as paying to
improve streets that the city’s utilities did not
actually damage, which again state law does
not allow. If so, this unsupported transfer
would violate Proposition 218 and could
expose Lindsay to litigation from its taxpayers
and utility ratepayers.
Lindsay Has Found New Sources of Revenue in
Recent Years, but These Have Not Adequately
Improved Its Financial Condition
To improve its financial stability, Lindsay has
employed several approaches to generate
additional revenue. For example, the city
council placed a proposed local 1 percent
increase to its sales tax on the ballot, which
it estimated would generate approximately
$900,000 annually and which Lindsay’s voters
approved in June 2017. The tax is a general
sales tax, and the city may use its revenue
for any legitimate government purpose,
such as public safety, infrastructure, and
general services. The tax became effective in
October 2017 and has generated $1.1 million
in revenue annually—more than the city
initially projected. In fiscal year 2019–20, the
sales tax accounted for more than 15 percent
of Lindsay’s general revenues. Lindsay’s
external auditor acknowledged in the city’s
fiscal year 2018–19 financial statements that
the sales tax is bringing needed revenue
to the city.
The city has also worked to increase revenue
by adopting an ordinance in May 2019
permitting certain cannabis businesses,
including retailers and cultivators, to
operate in the city. State law authorizes
local governments to regulate or ban these
activities, and the city’s ordinance allows it
to issue permits and collect fees. The city
subsequently collected nearly $100,000
in revenue from cannabis businesses for
fiscal year 2019–20, although that was less
than the $125,000 it had budgeted for the
year. However, the city budgeted $175,000
in revenue earned from cannabis retailers
and cultivators for fiscal year 2020–21,
and cannabis‑related revenues exceeded
12 CALIFORNIA STATE AUDITOR
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LOCAL HIGH RISK
those expectations. The city now projects
in its budget for fiscal year 2021–22 that it
will receive $300,000 in cannabis‑related
revenues. The city manager believes that
the expansion of the cannabis industry in
Lindsay is a key component to increasing the
city’s revenue.
In addition, Lindsay will receive significant
revenue from the federal government for
COVID‑19 relief that it can use for a variety
of purposes. In March 2021, Congress passed
the $2 trillion American Rescue Plan Act of
2021 (American Rescue Plan), which includes
funding for state and local governments based
on their populations. Federal law allows cities
to use these funds to respond to the negative
effects of the COVID‑19 pandemic, to make
up for lost revenues, or to make investments
in utility infrastructure. In June 2021, the
federal government provided the first batch
of funds to California, which is responsible
for distributing the funds using a federal
allocation formula for cities with populations
under 50,000, which includes Lindsay. The
American Rescue Plan requires states to
distribute the funds using a population‑based
formula. The Department of Finance has
initially identified an allocation of $3.2 million
to Lindsay over two years from that act, and
the city should receive $1.6 million each year
in 2021 and 2022.
Lindsay has not yet specifically planned how
it will spend all of these funds. According
to the city manager, the city intends to
use at least part of the funding to perform
needed capital work on its water and sewer
infrastructure. In its fiscal year 2021–22
capital improvement plan, the city indicated
it would use American Rescue Plan funding
for some projects, but it did not identify
which ones. Until it develops a plan that
describes how it will spend these funds on
its highest needs, the city risks not using
them appropriately. For example, the city
has various needs that the American Rescue
Plan money could help address, such as to
pay for services to help those of its residents
most negatively affected by COVID‑19 and
updating its water and sewer infrastructure.
The city must determine which of its needs
it will fund with the American Rescue Plan
money.
Similarly, in 2020 the city received other
federal funding to help it respond to the
COVID‑19 pandemic. Specifically, the city
received $160,000 in federal COVID‑19
relief from the Coronavirus Aid, Relief, and
Economic Security Act, known as the CARES
Act, for COVID‑19‑related expenses. These
funds had more restrictive provisions than
the American Rescue Plan funds, and the
city used them to pay its employees a hazard
supplement for providing services that
increased their risk of exposure to COVID‑19,
as provided in the federal guidelines.
The City Reduced Some Liabilities and
Expenditures, Which Partially Improved Its
Finances, but Other Financial Problems Remain
Lindsay also improved its financial position
by reducing expenditures and addressing
several significant liabilities that were
driving its general fund deficit. Between
fiscal years 2016–17 and 2019–20, the city
moved its unrestricted general fund balance
from a nearly $9.5 million deficit to a nearly
$3.2 million surplus. As Figure 4 shows, this
approximately $12.6 million improvement
primarily was the result of Lindsay’s unlawful
forgiving of loans and increasing its sales
tax. In addition, Lindsay reached settlement
agreements that reduced the impact of a large
long‑term liability on the general fund.
Lindsay reduced its expenditures in several
ways. Between fiscal years 2015–16 and
2019–20, it lowered its annual expenditures
for operating the city government by
$600,000, or 45 percent. A total of
$400,000 of this reduction was before fiscal
year 2016–17 and, as Figure 4 shows, about
$200,000 was after fiscal year 2016–17.
It achieved the $600,000 in reductions
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by reducing staff, among other things.
Specifically, the city eliminated 36 positions,
nearly half of its previous staffing level.
Although the city manager believes the
city has sufficient staff to provide essential
services, he noted that further reductions to
city staffing levels would negatively affect its
ability to do so. Additionally, it limited staff
training costs by approving only its most
critical training needs, such as those related to
its police officers.
Lindsay also previously operated a sports
complex, which it built in 2008 to be a
regional attraction and a revenue source for
the city. Lindsay paid for its construction
from its general fund. However, the sports
complex’s costs outpaced the revenues that
it generated by more than $1 million each
year in fiscal years 2015–16 and 2016–17, and
by nearly $1 million in fiscal year 2017–18. In
response to the city’s financial challenges, in
December 2017 the city council leased the
sports complex to a third party, which became
contractually responsible for all expenses
associated with operating the complex. In
entering into this lease, the city no longer had
to incur the sport complex’s operating costs,
which were nearly $3 million in fiscal years
2015–16 and 2016–17, including the significant
costs for its employees. However, the city
continues to pay debt service costs of nearly
$200,000 annually related to a loan it entered
into in 2009 to cover the sports complex’s
operational cash shortfalls.
Figure 4
Several Factors Contributed to Lindsay’s General Fund Balance Turnaround From Fiscal Years 2016–17 Through 2019–20
$6.3M
$6,300,000
$62,000
$670,000
$2.5M
$2,500,000
$1,143,000
$126,000
$34,000
$1,148,000
$0.2M
$12 Million
$3.0M
Source: Lindsay’s audited financial statements and city council minutes.
Note: From fiscal years 2016–17 through 2019–20, the city improved its general fund balance by $12.6 million in total. Figure 4 shows the impact of specific actions the city took to improve the general fund balance and does not account for all of the general fund improvement. 14 CALIFORNIA STATE AUDITOR
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LOCAL HIGH RISK
Lindsay could earn money from this
agreement if the sports complex is profitable
after the deduction of maintenance costs.
Under the terms of the lease, the operator
of the complex must pay half of its annual
net profit to the city each year. In 2018, its
first full year of operations, the third‑party
operator did earn a small profit, of which it
shared $15,000 with the city. However, the
third‑party operator has not earned a profit
since 2018.
Lindsay also saved money through legal
settlements. In September 2020, Lindsay
settled with the California Department of
Housing and Community Development
(HCD) over the city’s inappropriate use
of state and federal housing grant funds,
which reduced its general fund deficit by
$2.5 million. The city had inappropriately used
HCD program funds to pay for city‑sponsored
activities and to cover operating deficits in its
general fund. Between 2008 and 2017, Lindsay
borrowed HCD program funds to pay for
operating deficits in its general fund, sports
complex, and Wellness Center (Wellness
Center). A result of the settlement agreement
is that Lindsay no longer has to reflect a
$2.5 million liability in its general fund, which
significantly improved that fund’s balance.
According to the terms of the settlement
agreement, instead of requiring Lindsay to
repay the $2.5 million immediately, HCD
required the city to make an initial payment of
$10,000, and 30 annual payments of roughly
$90,000 thereafter.
Lindsay also reached a settlement
agreement with the California Department
of Transportation (Caltrans) that reduced
some of the city’s financial obligations but
did not change its general fund balance.
Specifically, Caltrans found that Lindsay had
billed it for services, materials, and labor costs
that the city could not support with source
documentation and that Lindsay mismanaged
construction change orders for multiple
projects it completed using state funding in
the early 2000s. Caltrans initially demanded
that the city repay approximately $1 million in
fiscal year 2016–17. Following negotiations, in
2019 the city accepted a settlement offer from
Caltrans that required repayment of nearly
$350,000, which the city must pay in equal
installments over a seven‑year term. Although
this settlement did not increase the city’s
general fund balance, it significantly reduced
the city’s financial obligation to Caltrans and
mitigated the potential financial burden of the
repayment on the city’s general fund.
Recommendations to Address This Risk
• To address the $6.3 million it
improperly transferred to its general
fund, Lindsay should, by February 2022,
re‑establish the loans to its restricted
funds, and develop and implement a
plan to fully repay those funds.
• To make prudent investments from
federal funding to address its highest
needs, Lindsay should develop a plan by
November 2021 for how it will effectively
use all American Rescue Plan funds.
• To ensure that its transfers of utility
funds to the streets program comply
with state law, Lindsay should perform
a study to determine the appropriate
level of funding from its utility funds
for that program by August 2022
and update that study every three to
five years.
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Blank page inserted for reproduction purposes only.
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Lindsay Must Increase Its Efforts to Address
Deficits in Its Enterprise Funds
Deficits and Inappropriate Loan Forgiveness
Led to Negative Balances in the City’s Enterprise
Funds, Limiting Its Ability to Effectively Operate
Its Utilities
Lindsay’s annual deficits and loan forgiveness
have led to negative balances in its enterprise
funds. Table 3 provides information on the
balances of three of the city’s main enterprise
funds from fiscal years 2015–16 through
2019–20. Each of these funds is responsible
for receiving and spending revenue for specific
utilities, such as water and sewer, or the city’s
recreational services, which the city provides
through the Wellness Center Fund. Two of
these funds, the Water Fund and Wellness
Center Fund, are currently in hundreds of
thousands of dollars of deficit.
The Water Fund’s nearly $1 million deficit was
caused by the city’s loan forgiveness and by the
city spending more than the fund receives in
revenue from users. As we describe previously,
in 2019 the city violated state law by forgiving
a nearly $2 million loan from the Water
Fund to its general fund. Lindsay forgave
the loan because it believed that the general
fund could not realistically repay the Water
Fund; however, by doing so, the city created
a deficit in the Water Fund of $585,000.3 In
addition, the Water Fund has operated at a
loss in recent years, with operating deficits of
$143,000 in fiscal year 2018–19 and $149,000
in fiscal year 2019–20. The cumulative effect
of these two problems has led to a nearly
$1 million negative balance in the Water
Fund at the end of fiscal year 2019–20, which
Table 3 shows.
This deficit in Lindsay’s Water Fund is limiting
the city’s ability to effectively operate its water
system. Specifically, the Water Fund has no
money for capital improvements or unexpected
repairs to keep the system running safely and
efficiently. In a 2019 budget presentation, the
city indicated that its Water Fund could not
adequately fund needed projects, such as
replacing a main water line or renovating a
water storage tank. Similarly, in Lindsay’s fiscal
year 2019–20 financial audit, city management
stated that the Water Fund has no money
available for unplanned maintenance or other
necessary capital improvements. The city
3 This deficit appears in the fiscal year 2017–18 financial statements because of the timing and method of the loan forgiveness.
Table 3
Lindsay’s Enterprise Funds Experienced Frequent Deficit Balances From Fiscal Years 2015–16 Through 2019–20 (In Thousands)
Fund 2015–16 2016–17 2017–18 2018–19 2019–20
Water $1,039 $1,100 $(585) $(771) $(966)
Sewer (1,094) 1,253 (535) 36 341
Wellness Center (940) (879) (283) (360) (319)
Source: Lindsay’s audited financial statements.
Note: These amounts include the effect of both operating and nonoperating revenues and expenditures, and therefore the operating deficits discussed in the report do not correspond directly to these amounts. 17 CALIFORNIA STATE AUDITOR
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LOCAL HIGH RISK
manager indicated that the city’s general fund
would need to pay for any emergency expenses
that arise in the water system. The deficit in the
Water Fund also leaves the city ill‑prepared to
manage crises, including the current drought.
Governor Newsom declared a drought
emergency in May 2021 in portions of the
State, including Tulare County, where Lindsay
is located. During a drought, households must
conserve water, reducing their water usage;
however, this conservation would likely reduce
the utility revenues that the city receives
through water rates. A reduction in revenue
from the drought would drive the Water Fund
into a deeper deficit.
“
The deficit in the Water
Fund also leaves the city
ill‑prepared to manage
crises, including the
current drought.
”
The city’s Sewer Fund is also unable to
adequately fund projects. Lindsay’s Sewer
Fund had a positive balance at the end of fiscal
year 2019–20, in contrast to its other enterprise
funds; however, that positive balance is a result
of the city not investing in its infrastructure.
Specifically, the city has not had the resources
to update its sewer infrastructure as needed,
despite the positive balance. For example,
although the city plans to replace its main
sewer line, renovate its wastewater treatment
plant, and replace equipment, it cannot do so
with the limited resources in its Sewer Fund.
As a result, the city is reviewing its sewer rates
and may need to increase them to fund such
infrastructure needs.
Although Lindsay has discussed some methods
for addressing such deficits and limited
resources, it lacks a formal plan to do so. As
we describe previously, the city will receive
$3.2 million in federal American Rescue Plan
funds that it may use for utility infrastructure.
Lindsay’s city manager indicated that the city
intends to use those funds for some necessary
capital projects, including $500,000 in water
and sewer projects. However, the city has not
determined whether this is the highest and best
use of those funds. The city manager indicated
that the city will develop a plan for spending
those funds once the federal government
issues final spending guidelines. The city also
plans to contract for a utility rate study in the
fall of 2021 that will include the Water Fund,
Sewer Fund, and Refuse Fund, and potential
adjustments to utility rates. However, until it
receives the results of that study, the city does
not know to what extent rate increases will
address the current fund balances, including the
Water Fund deficit. As we discuss above, the
city improperly transferred nearly $2 million
from the Water Fund to the general fund. The
city explained that it intends to repay the Water
Fund from the general fund, but it does not have
a formal plan to do so and has only informally
discussed repayment.
The wellness center manages many of the
city’s parks and recreation functions, such
as rentals at city parks, a recreation center,
and a swimming pool. The Wellness Center
Fund has had a deficit since at least fiscal year
2015–16, and it ended fiscal year 2019–20 with
a $319,000 deficit. The city uses general funds
to cover the annual deficit in this fund. In fiscal
year 2019–20, the city transferred $200,000
from the general fund to the Wellness Center
Fund. Similarly, the city projects that it will need
to transfer $500,000 from the general fund in
fiscal year 2020–21, in part due to the pandemic.
Although the wellness center uses important
general fund resources, the center provides
health and social benefits to city residents, and
the city manager is not concerned with the city’s
use of general funds for this purpose. The city
manager stated that because the fund provides
for general parks and recreation expenses,
including the swimming pool, the Wellness
Center Fund is an extension of the city’s general
government activities.
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In addition, the local hospital district
contributes $230,000 annually to the wellness
center, which significantly reduces the center’s
operating loss. In 2021 the local hospital district
increased its contribution by a total of $375,000
over three years to pay for capital improvements
at the wellness center. State law grants hospital
districts in California the power to carry out
activities that are necessary for the maintenance
of good physical and mental health in the
communities they serve. The local hospital
district’s activities in the area include supporting
services at the wellness center. In part, because
the city has partnered with the local hospital
district to obtain resources to cover the
operating loss of the Wellness Center Fund, we
agree that the activities of the wellness center
provide an important service to the residents of
Lindsay and we do not have significant concerns
about the deficit in this fund.
Lindsay Has Not Ensured That Its Service Fees
and Utility Rates Sufficiently Cover Its Costs
Lindsay has not ensured that it collects
sufficient revenue to cover the costs of services
it provides because it does not periodically
review and update its fees and rates. Further,
the city may have foregone revenue that could
help relieve some of its financial burdens.
Under state law, a city can establish fees and
rates at levels that allow it to recoup the full
cost of services it provides as long as these do
not exceed the reasonable costs of providing
those services—a concept referred to as full
cost recovery. The city’s fees cover services
such as issuing building permits and business
licenses, facilitating background checks, and
use of the wellness center. Lindsay’s rates help
pay for services such as water, sewer, and
refuse collection.
We reviewed seven of more than 240 fees and
rates in order to identify when the city last
updated them, the city’s cost of providing the
related services, and whether the fees or rates
cover the city’s costs. Our selection included
a residential water rate, two sewer rates, two
swimming pool fees, a planning fee, and a
public safety fee. Although the city’s municipal
code requires it to annually evaluate whether
the fees and rates it charges recover the full
cost to provide the associated services, Lindsay
has failed to do so. Specifically, we found that
the city last updated four of the seven fees
and rates we selected in 2004, more than
15 years ago. Lindsay could not identify when
it last updated two of the fees and rates that
we reviewed, and it updated one in 2019. As
shown in Table 4, Lindsay has not regularly
reviewed and updated its fees and rates
as required.
“
The city last updated
four of the seven fees
and rates we selected
in 2004, more than
15 years ago.
”
The city attributes its failure to update its
fees regularly to the turnover in its finance
department and to limited staffing. As we
describe previously, the city reduced its
workforce by several dozen positions over the
last several years. Further, the finance director
position, which is responsible for many of
the steps involved in updating fees and rates,
has been filled by several directors since
January 2017. Although the city reported having
adequate staff to provide essential services, it
did not consider these administrative activities
as essential. We note, however, that since we
began our audit, the city has updated its fees for
building permits and related activities as well as
some of its public safety fees without increasing
its related staffing levels. In response to our
questions about its lack of updating fees and
rates, the city manager stated that he intends for
the city to review all of its fees and rates over the
next year or two but does not have a schedule
for doing so.
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The city’s municipal code requires Lindsay’s
city council to set fees and rates at amounts
that cover the full cost of operations, including
indirect and capital costs whenever possible.
For example, its municipal code requires the
city to include the overhead costs associated
with staff provision of services, such as
building and equipment maintenance and
operations; communications expenses; and
computer, printing, vehicle, and insurance
expenses, when it sets fees and rates.
However, we found that the city did not
always follow this requirement. For example,
Lindsay set its newly revised fingerprinting
fee at a level that only recovers the salary costs
for the public safety officer conducting the
fingerprinting and does not include indirect
costs, such as office space or supplies. Thus,
the city is undercharging for this service and
not recovering its full costs, as its municipal
code requires.
In total, the city’s fees and rates generate
almost $5 million annually in revenue, or
approximately one‑third of Lindsay’s overall
revenues. As Table 5 shows, the city does not
know whether annual revenue from six of
the seven fees and rates that we reviewed,
including one of its monthly water rates and
two of its sewer rates, covers its costs to
provide those services. Because Lindsay has
not regularly evaluated its service costs, it
risks both undercharging and overcharging
for those services. For example, we estimate
that the city has been losing approximately
$5,800 a year in fingerprinting revenue, a
potential loss of up to $93,000 since the
city last updated the fee in 2004. Lindsay
also could be overcharging for a service, for
example if it streamlined a process so that it
requires less staff time to conduct, but we did
not identify any examples of overcharging.
Table 4
Lindsay Does Not Follow Its Own Requirements for Regularly Reviewing Fees and Rates LINDSAY MUNICIPAL CODE REQUIREMENT LINDSAY’S PROCESS
COMPLIES?
Set fees and rates to support the full cost of operations, including indirect costs. X City manager must annually:
Review all fees and rates. X
Provide city council with the costs of all city services.* X Recommend fee and rate adjustments to city council. X
City council must:
Annually meet to review proposed changes to fees and rates. X Set fees and rates as part of the annual budget process. X Source: Lindsay Municipal Code, and analysis of seven of the city’s fees and rates. * Although the city manager does not provide this information for each city service, the annual budget that the city manager creates does include the overall costs for all city services.
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Because of its limited accounting records,
Lindsay was also unable to identify the precise
amount of revenue it collects from some
of its fees and rates. For example, the city
could not identify its revenue from individual
wellness center fees, such as the swimming
pool membership it charges for spring and
summer. According to the recreation director,
the city records that revenue in a larger
category of swimming pool fees that includes
public swim fees and lap swim day passes,
all of which the city deposits into a single
fund. As a result, the city cannot determine
whether its swimming pool membership fees
appropriately cover the costs to operate its
swimming pool during those times when it
is open only to members. Because the city
has not done so itself, we estimated the cost
Lindsay incurred to operate its swimming
pool for members during fiscal year 2019–20
and found that it was more than $186,000.
However, the city collected only about $8,500
in total swimming pool fees during that time.
This difference obviously contributes to the
deficit in the Wellness Center Fund that
the general fund must cover.
Lindsay is at risk of subsidizing its services
because it is undercharging, or it risks a
lawsuit from taxpayers if it is overcharging
for its services. By not regularly assessing
its costs and adjusting the fees and rates
to cover them, Lindsay is continuing
to miss an opportunity to minimize
burdens on its finances. Specifically, if it
undercharges for services, the city must
subsidize those services with its limited
general funds. However, if it overcharges,
the city exposes itself to taxpayer lawsuits
for imposing a tax in violation of state law.
Specifically, state law defines a charge for
a service that exceeds the reasonable price
of providing the service as a tax, which is
then subject to the State’s requirements for
imposing taxes, including a requirement that
the city submit and obtain voter approval in
order to implement the tax.
Table 5
Lindsay Has Not Evaluated Whether Its Fees and Rates Cover Related Costs
TYPE OF FEE OR RATE FEE OR RATE WE REVIEWED DATE LAST REVISED COST OF SERVICE KNOWN?
Planning fee* Home occupation permit 2019
Public safety fee* Fingerprinting 2004
Sewer rate Hotels, motels, and hospitals 2004
Sewer rate Residential and commercial 2004
Water rate 1” water meter 2004
Wellness center fee* Swimming pool rental for 0–25 guests Unknown† Wellness center fee* Spring/summer swimming pool membership Unknown† Source: Fee and rate documentation, and interviews with city staff. * The city reviewed these fees in 2021 after we brought the outdated fees to its attention. † The city was unable to identify when this fee was last revised. 21 CALIFORNIA STATE AUDITOR
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Recommendations to Address This Risk
• To ensure that it maintains adequate
balances in its enterprise funds for
significant purchases or capital
expenditures, Lindsay should develop
and implement a plan by June 2022 to
build and maintain these balances.
• To ensure that the rates and fees
it charges are appropriate to cover
the cost of the related services, by
August 2022 Lindsay should do
the following:
» Determine its cost to provide each of
the services for which it charges a fee
or rate and, as necessary, improve its
accounting records to identify these
costs. For any fees or rates that do
not cover the costs of their related
services, consider increasing those
fees or rates, including a phased
approach for large increases. For
any fees or rates that are above the
cost to provide the related service,
consider reducing those fees or rates.
» Improve its accounting records so
as to identify how much revenue it
receives from each fee or rate.
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Lindsay Must Improve Its Management
Practices to Effectively Plan for Its Financial
and Operational Needs
The City’s Lack of a Long‑Term Financial Plan
Is Hindering Its Efforts to Achieve Financial
Sustainability
Although Lindsay has taken some steps to
improve its financial position in the short term,
it has no clear plan for its long‑term financial
decision making. The GFOA recommends
that all governments regularly engage in
long‑term financial planning as part of their
overall strategic planning efforts. According to
the GFOA, a long‑term financial plan should
include several key elements, such as revenue
and expenditure forecasts, strategies for
achieving and maintaining financial stability,
and a process for periodically reviewing and
updating the plan. Figure 5 shows how Lindsay
could use the GFOA’s best practices to respond
to the audit findings in our report. We include
a discussion of the city’s financial obligations
related to retiree costs in the following section
of the report.
Figure 5
Implementing GFOA Best Practices for a Successful Financial Plan Would Help Lindsay Address Our Recommendations
STABILIZE GENERAL FUND
1 Develop a long-term financial plan to align financial resources with strategic goals.
2 Address improper transfers to general fund.
ADDRESS ENTERPRISE FUND DEFICITS
1 Identify any fees or rates that do not cover the costs of providing the related services and consider
increasing those fees or rates.
2 Determine the appropriate level of funding for the
streets program by the utility funds.
ADDRESS RETIREE COSTS
1 Identify a goal for prefunding retirement liabilities. 2 Identify the resources necessary to meet that goal
and develop a plan for doing so.
GOAL
1 GOAL
2 GOAL
3
Source: GFOA best practices and this report’s recommendations. 23 CALIFORNIA STATE AUDITOR
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However, Lindsay does not have a written
long‑term financial plan, and the long‑term
planning it has conducted omitted its general
fund. When we asked the city manager about
Lindsay’s current financial plan, he stated that
the only financial planning documents the
city has created are its annual budgets and
the capital improvement plan it presented
alongside its fiscal year 2021–22 budget
document. However, the city’s budget does
not include long‑term projections for its
most important fund, the general fund, which
directly affects the city’s ability to provide
essential services to its residents. Therefore,
the budget document does not provide the
long‑range perspective of a plan that looks
five to 10 years into the future, the time
horizon that GFOA recommends for such
plans. Further, in the capital improvement
plan that it presented with its fiscal year
2021–22 budget, Lindsay included five years
of anticipated capital improvement projects
for its various funds, including the Water
Fund, Sewer Fund, and Wellness Center
Fund. However, the capital improvement plan
includes several projects that cite the city’s
general fund as a funding source, but without
a long‑term plan for its general fund, the city
cannot ensure that these projects are feasible.
Finally, the city’s budget does not develop
and then use substantive strategies to achieve
long‑term financial sustainability, such as
the goals and actions included in Figure 5.
For example, to ensure that it can meet its
long‑term obligations, Lindsay could develop
and implement a detailed plan for prefunding
its pension and other post‑employment
benefit (OPEB) liabilities. Because of its
limited long‑term financial planning, Lindsay
lacks a clear picture of how best to address its
financial and operational needs.
The city manager and director of finance
stated that developing a long‑term financial
plan is a goal for the city, but they explained
that the city had not done so previously due
to financial instability and significant turnover
of top finance department staff. However,
given that the city has improved its financial
position and has hired a permanent director
of finance, it is imperative that Lindsay
begin to develop a long‑term financial plan.
Without a strategic framework to guide the
city’s budgetary decision making, Lindsay
will likely continue to struggle to address
its long‑term needs and to achieve financial
stability. For example, if Lindsay were to
implement the GFOA best practices that we
present in Figure 5 through a full financial
plan, the city could prioritize the many
financial challenges and risks that we have
identified, such as its general fund balance
and deficits in its enterprise funds.
Lindsay Needs to Address Its Rising Employee
Retirement Costs
Lindsay has not prefunded its OPEB liabilities
as best practices recommend, and the city’s
future pension costs are contributing to its
high‑risk status. The GFOA recommends
that cities fully contribute to their pension
plan each year and prefund OPEB liabilities,
which are the expected future costs for
employees who no longer work for the city,
such as health benefits for retired workers,
to ensure the sustainability of these benefits.
However, at present Lindsay covers only the
annual cost of the benefits for its current
retirees and does not prefund OPEB costs for
health benefits, including for future retirees
and for future years for current retirees. This
lack of prefunding has caused the city’s OPEB
liabilities to increase by 36 percent from fiscal
years 2017–18 through 2019–20.
Lindsay’s OPEB benefits are limited to
a health plan that covers future benefits
for 33 current city employees and
current benefits for five retirees as of fiscal
year 2019–20. The city contributes all of
the funding to the plan. The retired city
employees did not contribute to the plan,
nor do current city employees contribute. As
Table 6 shows, between fiscal years 2017–18
and 2019–20, Lindsay’s required annual
contribution—the minimum amount it
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LOCAL HIGH RISK
must pay—grew by more than $10,000 and
its liabilities grew by more than $500,000.
In fiscal year 2019–20, the city’s total OPEB
liabilities were nearly $2 million and it paid
only about $41,000, just enough to cover
the actual health care benefits for the city’s
retirees. The city did not prefund future
benefits at all.
Table 6
Lindsay’s OPEB Annual Contributions and Unfunded
Liability Have Increased Over the Last Three
Fiscal Years
FISCAL YEAR OPEB CONTRIBUTION OPEB LIABILITY
2017–18 $31,000 $1,441,000
2018–19 38,000 1,608,000
2019–20 41,000 1,958,000
Source: Lindsay’s audited financial statements.
Lindsay has not prefunded its OPEB liabilities
because of its poor fiscal condition, and it
has no formal plans to do so. Specifically, as
we discuss previously, the city had a deficit
in its general fund until fiscal year 2019–20.
The city manager stated that prefunding
OPEB is a secondary priority to addressing
other financial issues, such as the deficits in
its enterprise funds. However, the manager
did state that the city might begin prefunding
OPEB liabilities in future fiscal years if it has
extra revenue in its general fund. If the city
does not begin prefunding its OPEB liabilities
or have employees begin to contribute to
its funding, it will quite likely have to make
higher contributions from its general fund
in future years, displacing other spending
priorities such as public safety.
Although the city does require its employees
to contribute to their pension benefits,
Lindsay also has some future pension
costs that are high risk. We identify four
different indicators of pension risk in our
local government high‑risk dashboard, as
described in the text box. Three of Lindsay’s
pension risk indicators—pension obligations,
pension funding, and pension costs—are
at moderate risk, as Table 1 shows, but the
city’s future pension costs are high risk. We
classify cities as having high‑risk pension
costs when their projected future costs exceed
a threshold of 10 percent of their current
revenues. We calculated the future pension
costs for Lindsay using unaudited information
provided by the California Public Employees'
Retirement System (CalPERS) and compared
those numbers to the city’s audited financial
statements. By using fiscal year 2026–27
pension contribution estimates from CalPERS
to analyze future pension costs, we project
that Lindsay’s required contributions to
its pension plan will reach the 10 percent
threshold that year.4 This means that five years
from now, Lindsay’s pension costs could begin
to place a financial burden on the city if the
city does not take substantial action.
State Auditor’s Local Government High‑Risk
Dashboard Pension Indicators
Obligations: The amount a city owes to employees for
their retirement benefits. A large unfunded obligation
means higher pension contributions over time, straining the ability to provide other services.
Funding: The assets a city has set aside to pay for
employee pension benefits. Insufficient pension assets
also require higher contributions in the future.
Current Costs: The current financial burden of pension
costs. High pension costs can cause cities to curtail
critical services.
Future Costs: The future financial burden of pension costs, which pose the same risk of curtailing critical services.
Source: California State Auditor’s Local Government
High‑Risk Dashboard.
4 Our methodology for this calculation is explained in greater detail at the following link: https://www.auditor.ca.gov/local_ high_risk/process_methodology
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The city must ensure that it is able to pay
for its pension plan in future years. CalPERS
annually determines Lindsay’s required
contribution, which covers the cost of
pension benefits earned by its current
employees that year and an additional amount
for beginning to address unfunded liabilities.
Lindsay makes the required payment each
year, but it had unfunded liabilities of
$9.3 million as of June 2020. If the city paid
more than the required contribution, it would
reduce its unfunded liabilities and therefore
its future annual contributions. This action
could help the city to avoid the financial stress
of reaching the 10 percent threshold in its
pension contributions and could reduce the
burden on the city to pay for those pension
costs instead of other priorities.
Lindsay Has Not Adequately Planned for Its
Public Safety Training and Equipment Needs
Lindsay does not appear to be committed
to its current integrated public safety
approach and must evaluate whether its
combined police and fire department is
still an appropriate model for providing
services to its community. According to a
local newspaper, since the late 1970s and
in response to its financial difficulties at
the time, Lindsay has employed a public
safety model that integrates police and
firefighting services into a single public safety
department. A 2016 report by Michigan
State University noted that Lindsay is one
of approximately 130 cities nationwide
and only a handful in California that have
such combined departments. Lindsay’s
public safety director explained that the
city generally hires police officers who have
completed training that has been approved by
the Commission on Peace Officer Standards
and Training and then provides them with
training in firefighting.5 However, Lindsay
5 State law established the Commission on Peace Officer Standards and Training to set minimum selection and training standards for California law enforcement officers.
has not ensured that either of the two public
safety officers it hired in the past three years,
out of 13 total public safety officers, have
received training from a fire academy. As
a result, when these officers respond to a
fire emergency, a public safety lieutenant
explained, the city typically limits their role
to support functions rather than firefighting.
To the extent that the city needs additional
resources to adequately respond to fires or
emergencies, such as in case of a structural
fire or if an additional paramedic is required,
it relies on the county to assist through a
mutual aid agreement, one that does not
require reimbursement by the city.
“
Lindsay has not
ensured that two
recently hired public
safety officers have
received training from
a fire academy.
Lindsay’s director of public safety has
”
not prioritized training the newly hired
police officers in firefighting because that
would require them to stop their police
work and attend a fire academy. According
to the director, he wants to move away
from the integrated public safety model
toward a separate police department and
a semi‑volunteer fire department. He
believes the current integrated model is
not sustainable because the two disciplines
of police and fire have different mindsets
and it is difficult for public safety officers to
maintain their continuing training in both
professions. According to the director, the
current city council is in favor of this change.
However, the city manager has yet to formally
propose to the city council that it separate the
police and fire services into two departments.
Until the city council approves such an
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LOCAL HIGH RISK
organizational change, the Public Safety
Department must continue to ensure that all
of its public safety officers are duly trained to
respond to both police and fire emergencies.
By not ensuring such training, Lindsay risks
the safety of its residents and must rely more
heavily on its mutual aid agreement with the
county for fire response services.
Although we did not identify any problems
with the Public Safety Department’s response
times, the age of both its police and fire
vehicles could affect the safety of Lindsay’s
residents should those vehicles break
down while responding to an emergency.
The National Fire Protection Association
recommends that fire departments only use
properly maintained fire trucks older than
15 years as backup equipment for newer fire
trucks and retire fire trucks that are older than
25 years. However, Lindsay uses a 21‑year‑old
fire truck as a primary fire response vehicle.
Lindsay’s police vehicles are also old, averaging
13 years—significantly older than those of
other cities that we reviewed, whose average
vehicle ages ranged from 4.5 to 8 years old.6
We found that the city has recently taken
steps to address the age of its public safety
vehicles. In 2021 the city published a capital
improvement plan that included replacement
of five of its 16 police vehicles over the next
three fiscal years at a cost of about $1 million.
However, we expected Lindsay to identify a
schedule that details when it must retire or
replace all of its public safety vehicles as well as
the expected costs to replace those vehicles.
Lindsay also faces increasing maintenance
costs for its public safety vehicles. As Figure 6
shows, the city’s cost to maintain its public
safety vehicles nearly doubled in two years,
from $23,000 in fiscal year 2017–18 to $44,000
in fiscal year 2019–20. According to a public
safety lieutenant, it intends to absorb these
maintenance costs in its existing budget.
6 We compared Lindsay with two of its geographic and economically similar neighboring cities, Exeter and Farmersville, and one city with a combined public safety department, Sunnyvale.
As a result, the department will continue to
face escalating maintenance costs, which will
hinder the city’s overall efforts to improve its
financial position.
Figure 6
Lindsay’s Police Vehicle Maintenance Costs Are Rising
201718 201819
Fiscal Years
201920
0 10,000
20,000
30,000
40,000
$50,000
Source: Lindsay Public Safety Department police vehicle maintenance records.
Recommendations to Address This Risk
• Lindsay should adopt a policy for
long‑range financial planning by
February 2022 that, at a minimum,
identifies the forecast period for the
plan, the funds it will include, efforts
the city will make to increase revenues
and decrease expenditures, and the
frequency with which the finance
director and the city manager will
review the plan and propose any updates
to the city council.
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• City management should develop,
and the city council should formally
adopt, a long‑term financial plan
by August 2022 that aligns with best
practices published by the GFOA.
• Lindsay should include in that financial
plan a discussion of how it will reduce
its pension and OPEB liabilities. As part
of that plan, the city should consider
requiring current employees to begin
contributing to the future cost of their
retirement health care benefits.
• To ensure that Lindsay’s public safety
model still meets the city’s needs,
Lindsay should do the following:
» Evaluate the effectiveness of using a
combined police and fire department
by August 2022 and make any
necessary changes.
» Ensure that all public safety officers
receive any necessary training within
six months of employment beginning
August 2022, including any public
safety officers who are expected to
respond to fires or emergencies.
• To ensure that its fire vehicles meet
industry standards and its police
vehicles are replaced in a timely
manner, by November 2021 Lindsay
should develop a sufficiently detailed
public safety capital improvement plan
that provides for the replacement of
those vehicles.
We conducted this audit under the authority vested in the California State Auditor by Government Code section 8543 et seq. and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
ELAINE M. HOWLE, CPA
California State Auditor
August 26, 2021
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Appendix A
Scope and Methodology
In February 2020, the Joint Legislative
Audit Committee (Audit Committee)
approved a proposal by the State Auditor to
perform an audit of Lindsay under the local
high‑risk program. We conducted an initial
assessment of Lindsay in December 2019 in
which we reviewed the city’s financial and
operating conditions to determine whether
it demonstrated characteristics of high risk
pertaining to the following six risk factors
specified in state regulations:
• The local government agency’s financial
condition has the potential to impair its
ability to efficiently deliver services or to
meet its financial or legal obligations.
• The local government agency’s ability to
maintain or restore its financial stability
is impaired.
• The local government agency’s
financial reporting does not follow
generally accepted government
accounting principles.
• Prior audits reported findings related to
financial or performance issues, and the
local government agency has not taken
adequate corrective action.
• The local government agency uses an
ineffective system to monitor and track
state and local funds it receives and spends.
• An aspect of the local government agency’s
operation or management is ineffective
or inefficient; presents the risk for waste,
fraud, or abuse; or does not provide the
intended level of public service.
Based on our initial assessment, we identified
concerns about Lindsay’s financial condition
and financial stability as well as aspects of its
operations that were potentially ineffective
or inefficient. The following table lists
the objectives that the Audit Committee
approved and the methods we used to
address them.
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Audit Objectives and the Methods Used to Address Them
AUDIT OBJECTIVE METHOD
1 Review and evaluate the laws,
ordinances, rules, and regulations
significant to the audit objectives.
Reviewed relevant state laws and regulations, municipal codes, and other background materials applicable to the city.
2 Evaluate Lindsay’s current financial
condition and ability to meet its
short‑term and long‑term financial
obligations while continuing to provide
services to its residents.
• Evaluated the city’s financial statements to determine its financial condition, including its general fund balances, revenues and expenditures, and other major fund balances. • Assessed the city’s financial condition and its ability to meet its obligations by reviewing audited financial statements.
• Reviewed outstanding pension and OPEB liabilities and annual contributions. 3 Identify the causes of Lindsay’s
financial challenges, and determine
whether the city has developed an
adequate plan for addressing those
challenges, including the following:
a. Assess the appropriateness of any
interfund loans, transfers, and
advances over the last three fiscal
years; determine whether Lindsay
complied with applicable laws and
followed best practices in making
such transactions; and evaluate the
city’s ability to repay its interfund
loans, transfers, and advances in a
timely manner.
b. Assess the city’s efforts to improve
its financial condition by increasing
revenues and reducing expenses.
• Identified and documented the major events and actions that caused Lindsay’s financial challenges, including loans, transfers, and advances over the last three fiscal years, and the city’s efforts to address those challenges.
• Reviewed the city’s forgiveness of loans from its utility funds to its general fund to assess whether it violated Proposition 218 and the city’s response to address the violation. • Interviewed city council members and the former finance director to assess the city’s forgiveness of loans from its utility funds to its general fund.
• Reviewed the city’s streets program to determine whether the city’s approach to funding the program violated Proposition 218.
• Evaluated the sales tax proposal approved by city voters and compared the city’s revenue projections to actual amounts collected.
• Consulted with the city manager to identify the city’s attempts to pursue and promote economic development opportunities. In particular, we evaluated the city’s efforts to increase revenue by allowing and licensing cannabis businesses, to resolve outstanding financial liabilities to state agencies, and to reduce expenditures.
4 Determine whether Lindsay’s
budgeting processes comply with
best practices. In addition, evaluate
the city’s procedures and underlying
assumptions for projecting future
revenues and expenditures, and
determine whether they result in
balanced budgets and accurate
financial forecasts.
• Reviewed GFOA budgeting best practices and identified key practices that the city should follow. • Reviewed whether the city’s budget practices are timely and in line with the key GFOA budgeting best practices we identified.
• Examined Lindsay’s budgets for the past three fiscal years and assessed the reasonableness and accuracy of the projections it used by comparing budgeted and actual revenues and expenditures.
5 Assess Lindsay’s process for setting,
increasing, or decreasing fees or
rates to ensure that it complies with
applicable laws, rules, ordinances,
regulations, and best practices. For
a selection of these fees and rates,
determine if they cover the city’s costs
of providing services.
• Interviewed staff to obtain an understanding of the city’s policies, processes, and practices for setting fees and rates.
• Identified all the fees and rates Lindsay charges. Selected seven fees and rates and reviewed the city’s cost of providing each service. Determined when the city last updated each fee or rate and assessed whether the fee or rate covers the city’s costs of providing the relevant services. • For three of the fees and rates, we tested whether their last increases complied with applicable city laws and policies.
6 Determine whether the city council
provides adequate oversight of city
operations and the governance
necessary to ensure that Lindsay meets
its fiduciary duties to its residents.
• Identified and documented best practices related to training new city council members. • Interviewed staff and reviewed documentation related to training that the city has provided to council members since 2018 and compared this training to the best practices we identified. We did not identify any problems with the city’s process for training council members. • Documented city council oversight and decision making related to the city’s financial affairs from 2018 through 2020 and determined that it has increased that oversight. 30 CALIFORNIA STATE AUDITOR
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Assessment of Data Reliability
The U.S. Government Accountability Office,
whose standards we are statutorily required
to follow, requires us to assess the sufficiency
and appropriateness of computer‑processed
information that we use to materially
support our findings, conclusions, or
recommendations. In performing this audit,
we relied on electronic data obtained from
the Tulare County ADSi CADForce database
(9‑1‑1 database). We performed dataset
verification procedures and testing of key
data elements and found that about 15 percent
of the data were not logical, indicating data
entry errors and calls in which dispatchers
canceled officers’ responses. We otherwise
did not identify any issues with the data. We
did not perform accuracy and completeness
testing of these data because the system is
entirely electronic and there are no paper
source documents against which to check
the data. Consequently, we found the
9‑1‑1 database data to be of undetermined
reliability for the purposes of calculating
the exact response times for Lindsay’s
Public Safety Department. Although this
determination may affect the precision of
the numbers we present, there is sufficient
evidence in total to support our findings,
conclusions, and recommendations.
AUDIT OBJECTIVE METHOD
7 Evaluate Lindsay’s efforts to address
the deficiencies noted by its external
auditor during the most recent audit of
the city’s financial statements.
• Identified major findings from the external auditor’s last four annual audit reports. • Assessed whether Lindsay’s efforts for tracking and responding to the findings have been sufficient. We found that Lindsay has sufficiently tracked and responded to audit findings, other than those related to its violation of Proposition 218. 8 To the extent possible, determine the
impact of Lindsay’s integrated public
safety model and resources on its
ability to protect its citizens.
• Reviewed information about integrated public safety models and their use in California. • Identified recruitment and training standards and best practices for police officers and firefighters. • Identified how Lindsay recruits and trains its public safety officers and assessed the adequacy of these efforts. We found that its recruitment process was adequate. • Compared Lindsay’s public safety response times, staffing levels, and capital assets to those of three comparable cities and industry averages to determine whether they are sufficient to protect the public’s safety. Lindsay has slightly more firefighters and slightly fewer police personnel than the average for other small California cities.
• We attempted to compare Lindsay’s combined public safety model with those of other cities in California; however, their models or demographics were not similar enough to Lindsay’s to make a valid comparison.
9 Review and assess any other issues that
are significant to the audit.
• Reviewed best practices for recruitment of key city leaders and compared them to Lindsay’s practices and, in general, found that Lindsay employed those best practices. • Assessed strategic and succession planning efforts. Although the city does not have a formalized strategic plan, we found that the city does undertake some strategic planning as part of its budget development process. However, we identified concerns with the city’s financial planning efforts, which we discuss in the report. We found that although the city lacks a succession plan, it has adequately filled its key leadership positions, including its city manager and finance director positions.
Source: Audit workpapers.
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Appendix B
The State Auditor’s Local High‑Risk Program
Government Code section 8546.10 authorizes
the State Auditor to establish a local high‑risk
program to identify local government
agencies that are at high risk for potential
waste, fraud, abuse, or mismanagement or
that have major challenges associated with
their economy, efficiency, or effectiveness.
Regulations that define high risk and describe
the workings of the local high‑risk program
became effective on July 1, 2015. Both the
statute and regulations require that the
State Auditor seek approval from the Audit
Committee to conduct audits of high‑risk
local entities.
To identify cities that may be at high risk for
fiscal distress, we analyzed audited financial
statements and unaudited pension‑related
information for more than 470 California
cities. This review included using various
financial indicators to assess the fiscal health
of cities and rate them based on their risk of
experiencing fiscal distress. These indicators
enabled us to assess each city’s ability to
pay its bills in both the short and long term.
Specifically, the indicators measure each city’s
financial reserves, debt burden, cash position
or liquidity, revenue trends, and ability to pay
for employee retirement benefits. In most
instances, the financial indicators rely on
information for fiscal years 2016–17 through
2018–19.7
Based on our analysis from 2019, we
identified several cities, including Lindsay,
that met the criteria for being at high risk.
After establishing our list of cities facing fiscal
7 As we describe in Appendix A, we conducted our initial assessment of Lindsay in December 2019. In November 2020, we updated our financial indicators to include information through fiscal year 2018–19.
challenges, we conducted initial assessments
to further evaluate the risks those cities faced.
We performed independent, data‑driven
analyses to determine which cities to
send audit teams into to get local officials’
perspective regarding our areas of concern.
Our initial assessment concluded that
Lindsay’s circumstances warranted an audit.
In February 2020, we sought and obtained
approval from the Audit Committee to
conduct an audit of Lindsay.
If a local agency is designated as high risk
as a result of an audit, it must submit a
corrective action plan. If it is unable to
provide its corrective action plan in time
for inclusion in the audit report, it must
provide the plan no later than 60 days after
the report’s publication. It must then provide
written updates every six months after the
audit report is issued regarding its progress
in implementing the corrective action plan.
This corrective action plan must outline
the specific actions the local agency will
perform to address the conditions causing us
to designate it as high risk and the proposed
timing for undertaking those actions. We
will remove the high‑risk designation when
we conclude that the agency has taken
satisfactory corrective action.
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* California State Auditor’s comments begin on page 43. *
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Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE
RESPONSE FROM THE CITY OF LINDSAY
To provide clarity and perspective, we are commenting on Lindsay’s response to our audit. The numbers below correspond to the numbers we have placed in the margin of Lindsay’s response.
The city mischaracterizes our finding. As we explain on page 9, Proposition 218 prohibits a city from using revenues derived from property-related fees, such as fees for water service, for general government operations. We did not consider, as the city’s response suggests, whether the city’s residents were overcharged for services. Therefore, we stand by our finding that Lindsay’s transfers and subsequent loan forgiveness violated this provision of Proposition 218. Further, Lindsay’s response incorrectly cites state law relating to the statute of limitations that governs legal actions regarding the validity of property assessments when, in fact, the city derived these revenues from fees—paid by ratepayers such as for water and sewer utility services. We found no specific statute of limitations; therefore, the default three-year statute of limitations would apply to an action seeking judgment on the improper use of revenue derived from property-related fees.
Lindsay misrepresents the city’s obligations and the reasonableness of its engineer’s report related to the streets program. As we explain on pages 11 and 12, although Proposition 218 prohibits a city from using property-related services for general government services, a city may charge its utility funds for the costs it incurs against the general fund, such as for the costs of street repair and maintenance.
However, a city must be able to demonstrate that those transfers reasonably represented those costs. As we describe on page 12, the 2004 engineer’s report that supports those transfers—which averaged nearly $900,000 annually—did not demonstrate that the amount generated by the rate increases represented the actual costs of the damage the city’s utilities caused. Instead, we noted on the same page, that the city should analyze and report the damage that each type of utility has caused to its streets to identify what the appropriate amount would be to charge each fund going forward. Finally, Proposition 218 provides that in any challenge to the validity of a property-related fee or charge, the burden is on the local agency—in this case, the city of Lindsay—to demonstrate compliance. Thus, we stand by our finding.
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Again, Lindsay mischaracterizes our finding and refers to provisions of Proposition 218 relating to property assessments, which do not apply here. Our report focused on property-related fees, not assessments, which are distinct and governed by different provisions of Proposition 218. As we state on pages 11 and 12, those provisions of Proposition 218 allow the city to charge its utilities for the cost of street repairs and maintenance that result from damage by those utilities so long as the city demonstrates that a charge for repairs or replacement reasonably represents those costs. Thus, we stand by our recommendation on page 15 that Lindsay should perform a study to determine the appropriate level of funding from its utility funds for the streets program and update that study every three to five years.
We agree with Lindsay that this report “is not a court of law” and that, as of yet, a court of law has not imposed legal liability on the city for violating state law. However, audit standards require us to review the legal criteria governing the city’s actions, to gather and consider sufficient and appropriate evidence, to identify any bad effects, and to report our findings with recommendations where appropriate. Here we have done so, including reporting on the risk that its noncompliance poses to the city if challenged in court. We offer our conclusions solely for helping the city avoid an adverse judicial ruling and related financial award. Similarly, we note on page 11 that the city’s external auditor also reached the conclusion that the city’s actions violated Proposition 218. Thus, we stand by our findings and recommendations.
During the course of our audit, the city did not share with us information regarding its approval of the levy and collection of charges related to its utilities. We look forward to reviewing this information when it provides an update on its progress toward implementing our recommendation on page 22 that it develop and implement a plan to build and maintain adequate balances in its enterprise funds.
The city misrepresents its efforts to improve its financial policies as steps towards long-term financial planning. Although a long-term financial plan could include a component for updating financial policies, the city’s efforts to update its financial policies are not part of a larger, long-term financial plan. Instead, the city has proceeded through its financial challenges in a piecemeal approach, such as by updating these policies, without having a larger framework in place to comprehensively address these challenges. Thus, we stand by our recommendation.
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The city’s response incorrectly implies that we recommended it create a separate, stand-alone fire department. We explain on page 26 the director of public safety’s perspective that the current integrated model is not sustainable, and that the city manager has yet to formally propose to the city council that it separate the police and fire services into two departments. On the same page, we note that until the city council approves such an organizational change, the Public Safety Department must continue to ensure that all of its public safety officers are duly trained to respond to both police and fire emergencies. Thus, we stand by our recommendation on page 28 that the city evaluate the effectiveness of using a combined police and fire department and ensure all of its public safety officers have training to respond to fires or emergencies.
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621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov Local High Risk Program
The State Auditor Is Removing Its High-Risk Designation From Four Cities and Retaining the Designation for Three Others
Background
Government Code section 8546.10(e) requires that the California State Auditor issue a report on high-risk local government entities every three years, unless we have removed them from the high-risk program. Our prior audits of the cities of Blythe, El Cerrito, Lindsay, Lynwood, Montebello, San Gabriel, and West Covina identified areas of high risk related to the cities’ financial conditions, financial stability, and oversight of city contracts, among other issues.
For this audit, we evaluated these seven cities to determine the extent to which each city has addressed prior audit recommendations. We also assessed trends in the city’s financial condition and determined whether we should continue to designate any of these cities as high-risk local government agencies.
Key Recommendations
• The city of Lindsay should continue to implement
our prior audit recommendations: It should adopt
a policy for long‑range financial planning that
identifies efforts the city will make to increase
revenues and decrease expenditures, and it should
develop a plan to build and maintain its enterprise
fund balances.
• The city of Montebello should adopt a financial plan
with specific strategies to reduce its expenditures
and to build and maintain its revenue.
• The city of West Covina should establish a general
fund reserve level that is sufficient to mitigate
current and future risks.
Key Findings
• The cities of Blythe, El Cerrito, Lynwood, and San Gabriel have taken satisfactory corrective action and addressed key deficiencies we identified in our prior reports. Therefore, we are removing their high‑risk designations.
• Although the cities of Lindsay, Montebello, and West Covina have taken steps to improve their overall financial health, we are not removing the high-risk designation from those cities at this time. » The city of Lindsay has a negative general fund reserve level and deficits in key enterprise funds.
» The city of Montebello has continued deficit spending in its general fund.
» The city of West Covina’s approach to addressing its general fund reserve level increases its risk for future financial instability.
FACT SHEET
Grant Parks California State Auditor CONTACT: Communications Office | (916) 445-0255
COMMITMENT
INTEGRITY
LEADERSHIP
December 19, 2024
Report 2024-801
Local High Risk Program
The State Auditor Is Removing Its High-Risk Designation From Four Cities and Retaining the Designation for Three Others December 2024
REPORT 2024‑801
Follow-Up
For questions regarding the contents of this report, please contact our Communications Office at 916.445.0255 This report is also available online at www.auditor.ca.gov | Alternative format reports available upon request | Permission is granted to reproduce reports 621 Capitol Mall, Suite 1200 | Sacramento | CA | 95814
CALIFORNIA STATE AUDITOR
916.445.0255 | TTY 916.445.0033
1.800.952.5665
For complaints of state employee misconduct,
contact us through the Whistleblower Hotline:
Don’t want to miss any of our reports? Subscribe to our email list at auditor.ca.gov 621 Capitol Mall, Suite 1200 | Sacramento, CA 95814 | 916.445.0255 | 916.327.0019 fax | www.auditor.ca.gov Mike Tilden Chief Deputy
Grant Parks State Auditor
December 19, 2024
Audit 2024-801
The Governor of California
President pro Tempore of the Senate
Speaker of the Assembly
State Capitol
Sacramento, California 95814
Dear Governor and Legislative Leaders:
This audit report updates the status of the cities of Blythe, El Cerrito, Lindsay, Lynwood, Montebello, San Gabriel, and West Covina as high‑risk entities as part of our office’s high‑risk local government agency audit program. Our prior audits of these cities identified areas of high-risk related to the cities’ financial conditions, financial stability, and oversight of city contracts, among other issues. For this statutory audit, we reviewed the extent to which each city has addressed recommendations from prior audits, assessed trends in the cities’ financial conditions, and determined whether we should continue to designate any of these cities as high-risk local government agencies.
This report concludes that the cities of Blythe, El Cerrito, Lynwood, and San Gabriel have taken satisfactory corrective action and addressed key deficiencies identified in our prior reports. Therefore, we are removing their high-risk designation. In accordance with the laws relating to the local high-risk program, we may subsequently reevaluate the high-risk designations of the cities of Blythe, El Cerrito, Lynwood, and San Gabriel if situations change and these cities appear to be at risk of not being able to meet their financial obligations or provide efficient and effective services to the public, among other concerns.
Although the cities of Lindsay, Montebello, and West Covina have taken steps to improve their overall financial health, we are not removing the high-risk designation from those cities at this time. We will continue to monitor the cities and the actions they take to address the areas of high risk we have identified. When the cities’ actions result in sufficient progress toward resolving or mitigating such risks, we will remove their high-risk designation.
Respectfully submitted,
GRANT PARKS
California State Auditor
Prior Relevant Reports Issued by the California State Auditor Blythe
March 2021, City of Blythe: Inadequate Planning and Other Ineffective Management Practices Hinder Its Ability to Provide Needed Services to Its Residents, Report 2020-802 El Cerrito
March 2021, City of El Cerrito: Excessive Spending and Insufficient Efforts to Address Its Perilous Financial Condition Jeopardize the City's Ongoing Fiscal Viability, Report 2020-803 Lindsay
August 2021, City of Lindsay: It Must Take Substantial Action to Address Its Financial Problems and Its Inadequate Management Practices, Report 2020-804
Lynwood
December 2018, City of Lynwood: Poor Management Has Contributed to Its Financial Instability and Led to Its Failure to Comply With State Law, Report 2018-803
September 2021, City of Lynwood: Despite Taking Some Action to Improve Its Management Practices, the City Continues to Risk Financial Instability and Violations of State Law, Report 2021-808 Montebello
December 2018, City of Montebello: Its Structural Deficit and Poor Operational Processes Threaten the City's Financial Stability and Delivery of Public Services, Report 2018-802 October 2021, City of Montebello: Although It Is Making Positive Changes, It Remains at High Risk Because of Recent Declines in Its Financial Condition, Report 2021-807 San Gabriel
April 2021, City of San Gabriel: Its Ongoing Deficit Is Inhibiting Its Financial Recovery, Report 2020-805 West Covina
December 2020, City of West Covina: Its Deteriorating Financial Situation Threatens Its Fiscal Stability and Its Ability to Provide City Services, Report 2020-806
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Contents
Introduction 1
Audit Results
The City of El Cerrito Has Taken Corrective Action to Address Its Risk Areas, and the State Auditor Is Removing Its High-Risk Designation 5 The City of Lynwood Has Made Significant Progress in Addressing Its Risk Areas, and the State Auditor Is Removing Its High-Risk Designation 11 The City of San Gabriel Has Made Substantial Progress in Rebuilding Its Reserves and Addressing Other Risks, and the State Auditor Is Removing Its High-Risk Designation 19
The City of Blythe Has Addressed Challenges Related to Its Long-Term Financial Stability, and the State Auditor Is Removing Its High-Risk Designation 29
The City of Lindsay’s Negative Reserve Level and Deficits in Key Enterprise Funds Are Factors Resulting in Its Continued Designation as a High-Risk Entity 39
The City of Montebello Has Not Kept Its Costs Below Its Revenue and Thus Remains a High-Risk Entity 47
The City of West Covina Remains a High-Risk Entity Because Its Approach to Addressing Its Reserve Level Increases Its Risk for Future Financial Instability 55
Appendix
Scope and Methodology 63
Responses to the Audit
City of El Cerrito 65
City of Lindsay 67
City of Montebello 69
California State Auditor’s Comments on the Response From the City of Montebello 77
City of West Covina 79
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v
Selected Abbreviations Used in This Report
ACFR Annual Comprehensive Financial Report
ARPA American Rescue Plan Act of 2021
GFOA Government Finance Officers Association
OPEB Other Post-Employment Benefits
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Introduction
The California State Auditor’s High‑Risk Local Government Agency Audit Program State law authorizes the California State Auditor (State Auditor) to establish a local high‑risk program to assess, audit, and ultimately issue reports about local government agencies that we designate as high risk for potential waste, fraud, abuse, or mismanagement, or that we identify have major challenges associated with their economy, efficiency, or effectiveness. State law requires that all audits we conduct as part of this program initially be approved by the Joint Legislative Audit Committee.
If we designate an agency as high risk, that agency must submit to us a corrective action plan that addresses the conditions that caused us to make the designation. In this report, we refer to those conditions as high‑risk areas. An agency’s corrective action plan is due no later than 60 days after the publication of an audit that concluded the agency was high risk, and agencies must then submit periodic updates on the status of that plan every six months thereafter.
We remove the high risk designation when an agency has taken satisfactory corrective action. To assess local agencies’ progress in addressing their high‑risk areas, we may conduct assessments of the agency’s progress at six‑month intervals that correspond with the corrective action plan updates that the local agencies provide. Also, state law requires that we issue an audit report on high‑risk local government entities every three years, unless we have removed them from the high‑risk program. For this audit, we reviewed the
seven cities listed in the text box to determine the extent to which each city has addressed prior audit recommendations, assess trends in the city’s financial condition, and determine whether we should continue to identify any of these cities as high‑risk local government agencies.
Overall this audit concludes that the cities of Blythe, El Cerrito, Lynwood, and San Gabriel have taken
satisfactory corrective action and addressed key deficiencies we identified in our prior reports. Therefore, we are
removing their high‑risk designation. In accordance
with the laws relating to the local high‑risk program, we may subsequently reevaluate whether Blythe, El Cerrito, Lynwood, or San Gabriel should be identified as high risk if situations change and these cities appear to be at risk of not being able to meet their financial obligations or provide efficient and effective services to the public, among other concerns. Although Lindsay, Montebello, and West Covina have taken steps to improve their overall financial health, we are not removing the high‑risk designation from those cities at this time. Throughout this report, we have made additional recommendations to those cities whenever the circumstances of their risk areas meant that our previous recommended corrective actions were no longer Cities Included in This
2024 Local High‑Risk Follow-Up
• Blythe (Riverside County)
• El Cerrito (Contra Costa County)
• Lindsay (Tulare County)
• Lynwood (Los Angeles County)
• Montebello (Los Angeles County)
• San Gabriel (Los Angeles County)
• West Covina (Los Angeles County)
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relevant or sufficient. In cases when our existing recommendations from previous audits continue to be applicable to these cities’ circumstances, we do not make any new recommendations.
General Areas of Importance to This Local High‑Risk Audit Although this audit addresses the specific risks pertaining to seven cities, several topic areas are applicable to more than one city. We present background information about each of these areas below.
American Rescue Plan Act of 2021
In response to the COVID‑19 pandemic, the American Rescue Plan Act of 2021 (ARPA) appropriated federal funds to help provide state, local, and tribal governments with the resources needed to mitigate the fiscal effects. As Table 1 shows, each of the seven cities we reviewed as part of this audit received such funding, which we refer to as ARPA funding. Federal guidance on the regulations that govern ARPA funding prohibits recipients from using ARPA funding for debt service or to replenish financial reserves. However, the regulations permit recipients to claim a standard allowance of up to $10 million in ARPA funding as replacement for lost revenue. In effect, by claiming the lost revenue allowance, recipients could spend their ARPA funding on a wide range of activities and choose to save the revenue that they would have otherwise spent on those activities. To avoid reverting ARPA funding back to the federal government, recipients must spend the entirety of their ARPA funding by December 31, 2026.
Table 1
Total ARPA Funds Awarded to the Seven Cities We Audited
CITY TOTAL ARPA FUNDS AWARDED
Blythe $4,700,000
El Cerrito 6,100,000
Lindsay 3,200,000
Lynwood 24,400,000
Montebello 16,800,000
San Gabriel 9,500,000
West Covina 19,600,000
Source: U.S. Department of the Treasury and the California Department of Finance. 2 CALIFORNIA STATE AUDITOR
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Proposition 218
Proposition 218—a constitutional amendment adopted by the voters in 1996 to limit the ability of local governments to impose taxes, assessments, charges, and fees based on property ownership—prohibits the use of revenue from fees and charges for any purpose other than that for which the fee or charge was imposed. It also establishes that revenue from the fees and charges may not exceed the costs of providing such services. Proposition 218 helps ensure that the proposed levy amount is proportionate to the cost of the related governmental activity and prohibits local governments from using fee revenue on unrelated expenses.
Guidance on Reserves for General Purpose Governments
According to the Government Finance Officers Association (GFOA), it is essential that governments maintain adequate levels of general fund balances to mitigate current and future risks such as revenue shortfalls and unanticipated expenditures.
As a best practice, the GFOA recommends that governments, regardless of size, maintain an unrestricted budgetary fund balance in their general fund of no less than two months of regular general fund operating revenues or regular general fund operating expenditures. We use the term unrestricted when discussing funding over which the government has discretion (i.e., no constraint) over how the funds can be spent. For the purpose of our report, we refer to unrestricted general fund balances as general fund reserves.
Other Post‑Employment Benefits
City governments can provide compensation packages to employees who have completed their active service. The Governmental Accounting Standards Board defines Other Post‑Employment Benefits (OPEB) as retirement health benefits provided separately from or through a pension plan, as well as other benefits such as life insurance or long‑term care benefits as long as the city provided those benefits separately from a pension plan. OPEB benefits may include medical, dental, vision, hearing, and other health‑related benefits paid subsequent to the termination of employment. According to the GFOA, OPEB and defined benefit pension plans can represent a significant challenge in terms of their funding and long‑term stability. To ensure that these benefits are sustainable over the long term, the GFOA recommends governments evaluate key items specifically related to OPEB, including the structure of benefits offered.
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Agencies’ Proposed Corrective Action
Lindsay and West Covina acknowledged our current assessment of their progress in addressing their respective risk areas. Montebello generally concurred with our recommendations for addressing the risk areas that we determined were not fully addressed, but the city disputed some of our statements and conclusions about those areas. Although none of these cities submitted a corrective action plan as part of its response, we look forward to receiving the plans by February 2025. 4 CALIFORNIA STATE AUDITOR
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The City of El Cerrito Has Taken Corrective
Action to Address Its Risk Areas, and
the State Auditor Is Removing Its
High‑Risk Designation
RISK AREAS AS REPORTED IN MARCH 2021
STATE AUDITOR’S CURRENT ASSESSMENT OF
EL CERRITO’S PROGRESS IN ADDRESSING THE RISK AREA*
El Cerrito’s Failure to Manage Its Spending Resulted in Depletion of Its General Fund 1 Continual diminishing of financial reserves through overspending Fully Addressed 2 Ineffective budget development and monitoring practices Fully Addressed Without a More Coordinated Effort, El Cerrito’s Financial Condition Will Continue to Deteriorate 3 Lack of formal financial recovery plan Fully Addressed 4 Insufficient reductions in ongoing costs Partially Addressed 5 Missed opportunities to increase revenue Fully Addressed * In accordance with state law, we used our professional judgment to assess the city’s progress in addressing each of the risk areas in the table.
We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
HIGH‑RISK AREA #1
Continual Diminishing of Financial Reserves Through Overspending Status: We conclude that El Cerrito’s recent fiscal performance and increased general fund reserves demonstrate that it has fully addressed this risk area.
In our March 2021 audit, we reported El Cerrito was at high risk of being unable to meet its financial obligations. In the fiscal years preceding that audit, the city had consistently spent more than its general fund revenue and was relying on short‑term loans to cover its financial obligations. However, in recent years, El Cerrito has made a concerted effort to control its finances and has stabilized the condition of its general fund. Further, in our March 2023 assessment, we reported that because of its improved financial position, the city discontinued its practice of short‑term loan borrowing in fiscal year 2022–23. El Cerrito’s adopted budgets for fiscal years 2023–24 through 2025–26 assume that the city will meet its debt obligations in those years without the use of short‑term loans.
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Figure 1 shows that from fiscal years 2020–21 through 2022–23, the city’s general fund revenues exceeded its expenditures, which assisted the city in growing its general fund reserves to $23 million by the end of fiscal year 2022–23, which is an amount equal to about half of its general fund expenditures for that year. This amount surpasses the minimum of two months of unrestricted reserves the GFOA advises governments to maintain. According to the city’s fourth quarter budget update for fiscal year 2023–24, El Cerrito expects its revenue to nearly cover its expenditures, with the shortfall being about $186,000. This amount represents less than 1 percent of the city’s expected total expenditures for that fiscal year. According to its projections for future fiscal years, which extend as far as fiscal year 2028–29, the city expects that it may occasionally need to rely on its reserves starting in fiscal year 2026–27. However, the amount it expects to need in its reserves is proportionately small—less than 2 percent of the budgeted expenditures.
Finally, the city also benefited in recent years from its receipt of about $6.1 million in ARPA funding. As of March 2024, the city reported having spent all of this funding and having used it for a variety of general government purposes, such as the provision of public safety services and on administrative facilities.
Figure 1
The City of El Cerrito’s General Fund Expenditures Have Been Consistently Less Than Its Revenue in Recent Years
2020–21 2021–22 2022–23
Fiscal Year
0 10
20 30
40 50
$60
In Millions
$44.0
$50.8
$40.8
$50.3
$37.8
$46.4
General Fund Revenue General Fund Expenditures
Source: El Cerrito’s ACFRs.
Note: We calculated revenue by combining the revenue and transfers into the general fund in each fiscal year. We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year. The city did not have any material amounts of other financing sources or uses flowing in or out of its general fund in these three fiscal years. 6 CALIFORNIA STATE AUDITOR
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The city has several strategies planned that could help it minimize reliance on its general fund reserves. For example, according to its biennial budget for fiscal years 2024–25 and 2025–26, the city intends to develop a citywide cost allocation plan and comprehensive fee study. Doing so will better ensure that the city is distributing costs across its funds in the most appropriate way, potentially lessening the burden on its general fund, and that it maximizes cost recovery from the service fees it charges. The city intends to follow those studies with a service delivery study to ensure that it delivers services in the best and most efficient ways. The city estimates that it will complete the cost allocation plan in December 2024 and the fee study in February 2025. The city’s budget states its intent to complete the service delivery study sometime in fiscal year 2025–26. El Cerrito’s city manager stated that the city will use the data collected from these studies to make informed and sustainable decisions during the next two fiscal years that will improve the city’s ability to balance its future budgets and mitigate reliance on general fund reserves.
HIGH‑RISK AREA #2
Ineffective Budget Development and Monitoring Practices Status: In March 2022, we concluded that El Cerrito had fully addressed this risk area by improving its budget process and monitoring departmental spending.
In our March 2022 assessment, we reported that El Cerrito improved its budgeting processes to provide meaningful information for making fiscally sound decisions. The city improved its quarterly budget updates to the city council by providing revenue and expenditure amounts by department and comparing those amounts to both its budget and prior‑year expenditures. This additional level of detail can assist city council members in identifying when a particular department may be overspending.
The city has also improved the information presented in its adopted budgets. Its fiscal year 2021–22 budget included a five‑year forecast with a comparison to the prior four‑year period. Finally, its adopted fiscal years 2024–25 and 2025–26 biennial budget includes a forecast through fiscal year 2028–29 and a comparison of the prior two fiscal years.
HIGH‑RISK AREA #3
Lack of Formal Financial Recovery Plan
Status: In September 2022, we concluded that El Cerrito had fully addressed this risk area by issuing its Fiscal Recovery and Sustainability Plan.
In our September 2022 assessment, we noted that El Cerrito issued its Fiscal Recovery and Sustainability Plan in August 2022 and concluded that the city addressed this risk area. The city organized the plan by the actions it planned to take, and it identified a lead staff member, a target date of completion, and an annual fiscal 7 CALIFORNIA STATE AUDITOR
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impact for nearly all of the actions. Further, the city divided the plan into actions the city council had approved in August 2020, such as the elimination of the assistant to the city manager position; actions the city identified that it could still take; and actions based on recommendations from our 2021 audit. The plan provides a number of objectives for the city to improve its financial condition and information that will allow the city council and the public to hold the city accountable.
HIGH‑RISK AREA #4
Insufficient Reductions in Ongoing Costs
Status: We conclude that El Cerrito has partially addressed this risk area by making an effort to reduce personnel costs and completing a citywide salary study.
Nonetheless, the city will need to be attentive to costs in the future because the recent salary study could generate pressure to increase personnel costs.
Through a variety of methods, El Cerrito has controlled its spending and has kept the growth of its expenditures below the growth of its revenue. Since fiscal year 2019–20, general fund revenue has grown 27 percent, and expenditures have grown only 10 percent. By freezing salaries, eliminating positions, and instituting controls for departmental spending, the city has limited ongoing costs. For example, the city did not implement cost‑of‑living increases for its management and confidential employees in fiscal years 2020–21 and 2021–22. In addition, in fiscal year 2021–22, the city eliminated seven positions in its police department, some of which had become vacant because of retirements and resignations. By fiscal year 2022–23, the city had decreased the police department’s personnel costs by 3.4 percent from their fiscal year 2020–21 levels. However, the city reported that the actions it took to reduce the budget and staffing had a detrimental impact on the department, which the city asserts experienced high vacancies in 2022. According to its fiscal year 2022–23 budget, in fiscal year 2021–22 the city employed individuals in 28 of 37 authorized sworn positions. To address the police union’s concerns, the city agreed to adjustments in salary ranges and pay differentials according to educational experience. As a result, although costs declined in fiscal years 2020–21 through 2022–23, the city budgeted to increase the police department’s personnel costs by 18 percent in fiscal year 2023–24.
To sustain its financial health, the city will need to carefully approach any future compensation increases. In response to our 2021 audit, the city commissioned a salary study. In February 2024, the city received the results of that study, which identified that the city compensated some of its positions—including some public safety positions—at less than the market median when compared to similar positions at 18 other entities. The study found that, overall, the city’s base salaries were approximately 8 percent less than the market median. Further, the city’s total compensation, which includes salary and benefits, was about 2 percent less than the market median. Although the study did not explicitly recommend that the city raise compensation for its employees, it did provide suggested approaches the city could 8 CALIFORNIA STATE AUDITOR
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take to adjust its compensation. In March 2024, the city reported to our office that it plans to implement the study’s recommendations over time, and as resources allow, through bargaining and other phased adjustments, and it expects that doing so will assist the city in recruiting, motivating, and retaining competent staff, including its public safety staff.
The city’s fiscal years 2024–25 and 2025–26 biennial budget notes that the city was engaged in negotiations with several bargaining groups at the time it developed the budget. Therefore, the city may need to amend its budget if the negotiated compensation amounts exceed its budgeted costs. According to the adopted budget, the city plans to increase personnel costs by 6.4 percent in fiscal year 2024–25 and by 5 percent in fiscal year 2025–26. Overall, El Cerrito’s personnel costs represented 73 percent of the city’s budgeted general fund expenditures for fiscal year 2024–25.
However, despite the upcoming challenge the city faces in determining how much to compensate its employees, the city has appeared to have maintained fiscal discipline in the past few years, which indicates that it is committed to overall fiscal health when deciding such matters. Finally, the city may also find that the cost allocation plan, fee study, and service delivery study that we mention earlier present it the opportunity to save additional amounts in its ongoing expenditures, which the city could then use to balance any increases in personnel expenditures.
HIGH‑RISK AREA #5
Missed Opportunities to Increase Revenue
Status: In September 2023, we concluded that the city had fully addressed this risk area by completing a cost recovery analysis for its recreational services.
In our September 2023 assessment, we concluded that the city addressed this risk area. In particular, we noted that El Cerrito continued to subsidize its senior services with budgeted revenue for fiscal year 2023–24 covering 80 percent of the cost of those services—about $88,000 according to the city’s budget documents. In its 2023 update to our office, the city reported that full cost recovery would not provide services at an acceptable cost that contributes to the quality of life of all people in El Cerrito. Because the city has made a policy decision to subsidize these costs and the amount of the subsidy is relatively small, we considered the risk area addressed. 9 CALIFORNIA STATE AUDITOR
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The City of Lynwood Has Made Significant
Progress in Addressing Its Risk Areas,
and the State Auditor Is Removing Its
High‑Risk Designation
RISK AREAS AS REPORTED IN DECEMBER 2018 AND SEPTEMBER 2021 STATE AUDITOR’S CURRENT ASSESSMENT OF
LYNWOOD’S PROGRESS IN ADDRESSING THE RISK AREA*
Inadequate Financial Management Hinders Lynwood’s Fiscal Stability 1 Ongoing budget deficits and uncertain financial future Fully Addressed 2 Inadequate budgeting practices Fully Addressed
3 Questionable salary increases Fully Addressed
Violations of State Law, Weak Oversight, and Policy Breaches Make Lynwood Susceptible to Fraud and Waste 4 Violations of state law regarding the use of water and sewer funds Fully Addressed 5 Poor contract administration Fully Addressed
6 Inadequate controls over its financial operations Fully Addressed Ineffective Organizational Management Diminishes Lynwood’s Ability to Provide Public Services 7 Lack of strategic plan Partially Addressed
8 Inability to effectively measure staffing needs Pending 9 Significant turnover in key positions and no plan for identifying future leadership Partially Addressed
* In accordance with state law, we used our professional judgment to assess the city’s progress in addressing each of the risk areas in the table.
We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
Pending: The city has not taken substantial action to address the risk area and, at the time of this audit, the conditions that created high risk for the city continue to exist.
HIGH‑RISK AREA #1
Ongoing Budget Deficits and Uncertain Financial Future
Status: We conclude that Lynwood’s fiscal improvement and increased general fund balance demonstrate that it has fully addressed this risk area.
In our September 2021 follow‑up audit, we determined that Lynwood did not always keep its general fund reserves at recommended levels, and we recommended that the city revise its reserve policy to align with GFOA best practices to facilitate ongoing financial stability and guard against short‑term revenue shortfalls.
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Since that audit, the city has increased its general fund reserves and has maintained its expenditures below revenues. Figure 2 shows that the city’s revenue has increased over a three fiscal year period. By the end of fiscal year 2022–23, the city’s general fund reserves had grown to $47.5 million—more than its revenue for that year and substantially surpassing the minimum of two months of unrestricted reserves the GFOA advises governments to maintain. A significant factor in the advances that the city made in its general fund reserves was the city’s receipt of a total of $24.4 million in ARPA funding across fiscal years 2021–22 and 2022–23. The city was able to use this funding in place of its regular general fund revenue, thus allowing it to retain that regular revenue to be available for other needs.
Figure 2
The City of Lynwood Kept General Fund Expenditures Below Revenue for Three Straight Fiscal Years 2020–21 2021–22 2022–23
Fiscal Year
0 10
20 30
40 $50
In Millions
$29.5
$45.3
$30.0
$47.9
$36.1
$41.3
General Fund Revenue General Fund Expenditures
Source: Lynwood’s ACFRs.
Note: We calculated revenue by combining the revenue and transfers into the general fund in each fiscal year. This figure does not include other financing sources flowing into the general fund in the amount of $2 million in fiscal year 2021–22 that resulted from a one‑time sale of assets. We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year.
In addition, in October 2024, Lynwood adopted a reserve policy that aligns with GFOA guidance. Because of the city’s recent history of keeping spending below revenues and its improved general fund reserves, we determined that the city has mitigated this risk area.
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HIGH‑RISK AREA #2
Inadequate Budgeting Practices
Status: We conclude that Lynwood has fully addressed this risk area regarding its budgeting practices by adopting meaningful practices and formalizing those practices as required actions in its policies.
In our September 2021 follow‑up audit, we raised concerns that Lynwood’s budgeting process posed a risk to the city because it was incomplete and not done in a timely manner. As a result, we recommended that the city meet the specified timeframes in its budget calendar in future budget cycles. The city council’s recent actions show that Lynwood is now adopting budgets on time. The city council approved the city’s biennial budget for fiscal years 2023–24 and 2024–25 before the start of that period, which is the only full budget the city prepared since the conclusion of our last audit. The city council also approved the mid‑cycle update to that budget before the start of fiscal year 2024–25.
We also determined in our September 2021 audit that the city should follow its existing policy and provide quarterly reports to its city council that compare budgeted to actual general fund revenue and expenditures. Further, we recommended that the city align its policy on quarterly reporting with GFOA best practices for budget monitoring. For example, the city’s policy should require the city’s staff to present an analysis of the reasons for budget deviations. For fiscal year 2023–24, the city provided the city council with quarterly reports, each of which presented the budgeted general fund revenue and expenditures to actual general fund revenue and expenditures and explained the variances between these amounts. The city adopted a policy in October 2024 that formalized the expectation that it continue its practice of providing quarterly reports to the city council.
Finally, our 2021 audit noted that the city had not adopted a policy to produce multi‑year projections of its revenues and expenditures. Subsequently, the city included a multi‑year projection of its general fund revenues and expenditures as part of its biennial budget for fiscal years 2023–24 and 2024–25. The city also formalized its practice of creating multi‑year projections in its October 2024 policy update.
HIGH‑RISK AREA #3
Questionable Salary Increases
Status: We conclude that Lynwood has fully addressed this risk area by assessing its compensation against other cities and presenting reasons for proposed increases to its city council.
In our September 2021 follow‑up audit, we reported that Lynwood was not complying with its salary‑setting policy. Specifically, in the three cases we reviewed, Lynwood did not maintain documentation showing it had compared its proposed salaries to those in benchmark cities. In two of these cases it did not present the justification for the proposed salaries to the city council.
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During this audit, we found that the city was comparing salaries for certain city positions to those of other cities and that it presented justification for a set of proposed salaries to its city council. We reviewed the city’s 2023 salary survey, which evaluated salaries for 13 city positions, comparing the salaries for those positions to the salaries for similar positions when they existed at 10 nearby cities. The city's director of human resources and risk management explained that the city conducted the salary survey during its negotiations with the bargaining unit that represented the employees in those positions. At the conclusion of negotiations, the city presented to the city council the proposed salaries for those positions and explained that the salaries resulted from the agreement the city had reached with the bargaining unit.
Because Lynwood is documenting its salary‑setting analysis and has shared its rationale for raising salaries with the city council, there exists better assurance that it is setting competitive and reasonable salaries in a transparent manner.
HIGH‑RISK AREA #4
Violations of State Law Regarding the Use of Water and Sewer Funds Status: We conclude that Lynwood has fully addressed this risk area through the elimination of lease payments from its utility authority and the use of a cost allocation plan that identifies water and sewer costs.
In our September 2021 follow‑up audit, we identified risks associated with the city making inappropriate transfers to its general fund through a lease arrangement it established for its water and sewer infrastructure. Specifically, we noted that in fiscal year 2019–20 the city established a $1 million lease payment to its general fund from the utility funds, an amount for which the city could not provide justification.
Consequently, we recommended that the city dissolve the Lynwood Utility Authority (utility authority), the entity with which it made the lease arrangement, and discontinue making any lease payments. In response, Lynwood declined to dissolve the utility authority and stated that the utility authority has issued revenue bonds. We agree that the city’s concerns about dissolution are valid, insofar as the dissolution of the utility authority could potentially represent a breach of contract with the bond holders. Further, we noted that the city has planned to stop making the lease payments to the general fund. The city’s fiscal year 2024–25 budget shows no plans to transfer the $1 million lease payment to the general fund. Accordingly, we consider this element of the area of risk resolved.
The city recently addressed a concern regarding reimbursement for overhead costs from its water and sewer funds to its general fund. In our September 2021 report, we noted that the city had not approved updated cost allocation plans that it could have used to support the amount it transferred from its water and sewer funds to its general fund for overhead charges. We concluded that the city was at risk for either over‑ or under‑reimbursing the general fund. In April 2024, the city received the results of another cost allocation study, which identifies the city’s overhead costs that the general fund may recover from the water and sewer funds. The city incorporated 14 CALIFORNIA STATE AUDITOR
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those adjusted overhead costs into its revised fiscal year 2024–25 budget. These adjustments resulted in an overall reduction in payments of approximately $80,000 from the water fund and an increase in payments of about $69,000 from the sewer fund.
HIGH‑RISK AREA #5
Poor Contract Administration
Status: We conclude that Lynwood’s steps to strengthen its contract administration demonstrate that it has fully addressed this risk area.
In our September 2021 follow‑up audit, we found that Lynwood had not addressed a recommendation we had made in the 2018 audit that it amend its municipal code to require the city council to provide adequate written justification when bypassing competitive bidding through a supermajority vote and to define when such an action is appropriate. We also observed that the city had exempted contracts for garbage collection from competitive bidding, which we found jeopardized the city’s ability to obtain the best value for its residents and community. In October 2022, the city council approved updates to the sections of its municipal code addressing procurement procedures. The municipal code no longer includes provisions for the city council to use a supermajority vote to exempt a purchase from competitive bidding requirements or exemption from competitive bidding for garbage collection contracts. Further, unless the purchase is a type preapproved in the city’s municipal code for sole source procurement, the city’s procurement policy requires it to use a competitive sourcing process whenever a product or service is available from more than one source and is valued at more than $5,000. In August 2023, the city provided training to its staff on its updated requirements for contracting and purchasing. The training addressed the municipal code sections the city amended in October 2022 and amendments to its contracting and purchasing policy.
HIGH‑RISK AREA #6
Inadequate Controls Over Its Financial Operations
Status: In a previous audit, we concluded the city fully addressed external audit findings regarding control weaknesses in its financial operations.
In our September 2021 follow‑up audit, we determined that the city had fully addressed this risk area and addressed an external auditor’s findings regarding controls over its financial operations.
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HIGH‑RISK AREA #7
Lack of Strategic Plan
Status: We conclude that Lynwood has partially addressed its risk related to strategic planning.
Although the city engaged a consultant to help it to develop strategic priorities, that work did not include the development of specific strategies and outcomes to accompany the strategic priorities. Instead, the consultant’s report indicated that the city’s executive management team would meet later to identify those elements of a strategic plan. The city’s director of human resources and risk management confirmed that the city has not developed a full strategic plan, and he indicated that the city would work beginning in 2025 to select a vendor to assist it in developing a strategic plan.
HIGH‑RISK AREA #8
Inability to Effectively Measure Staffing Needs
Status: We conclude that Lynwood has not addressed its risk related to its inability to effectively measure staffing needs.
In our September 2021 follow‑up audit, we found that the city could not effectively determine whether its staffing levels were sufficient and appropriate to efficiently address the city’s priorities for the services that it provides. We identified that, according to the GFOA, strategic planning establishes logical connections between spending and an entity’s goals and that the focus of strategic planning should be on aligning resources to bridge the gap between present conditions and the envisioned future. Therefore, strategic planning is a critical element to a city’s ability to identify the appropriate staff levels it needs to achieve its goals. Accordingly, it will be important for the city to reassess its staffing after it develops a strategic plan. The city’s director of human resources and risk management stated that the city will work to align its staffing to achieve its goals within the strategic plan the city plans to develop, but any changes in staffing levels or the allocation of staff will be subject to the city’s budget constraints and availability of funding.
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HIGH‑RISK AREA #9
Significant Turnover in Key Positions and No Plan for Identifying Future Leadership Status: We conclude that Lynwood has partially addressed its risk related to significant turnover in key positions and a lack of a plan for identifying future leaders.
In April 2022, in response to our previous audits of the city, the Lynwood city council adopted the city’s succession plan, which has the purpose of identifying and developing internal staff with the potential to fill the city’s key leadership positions.
Among other actions, the plan calls for regular and recurring gap analyses to identify projected openings in positions that require certain skill sets, leadership and professional training opportunities, and job shadowing to provide opportunities for aspiring employees to develop an understanding of the positions into which they wish to advance.
Lynwood has begun implementing its plan. The city provided us with its September 2024 gap analysis identifying the city positions that face the greatest risk of employee retirements, and the director of human resources and risk management indicated that the city would amend its succession plan policy to include provisions for conducting the gap analysis annually. He also described his plan to coordinate with the city manager to develop a policy that would require department managers to document the processes they use to make key decisions to provide continuity among leadership, and he anticipated the city would complete that policy by the end of March 2025. In our September 2021 audit, we found that the city had implemented a leadership academy, and the human resources director described leadership training sessions from 2023 that the city was providing to designated staff members as part of that academy. However, he also confirmed that the city has not yet started its job shadowing program. As the city continues to plan for retirements from key positions, it should implement the remaining elements of its succession plan, such as the job shadowing program, as well as the policy changes described by the director of human resources and risk management.
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The City of San Gabriel Has Made
Substantial Progress in Rebuilding Its
Reserves and Addressing Other Risks,
and the State Auditor Is Removing Its
High‑Risk Designation
RISK AREAS AS REPORTED IN APRIL 2021
STATE AUDITOR’S CURRENT ASSESSMENT OF
SAN GABRIEL’S PROGRESS IN ADDRESSING THE RISK AREA*
San Gabriel’s Poor Financial Management Has Eroded Its Financial Condition 1 Declining financial health Partially Addressed
2 Unfavorable loan agreements Fully Addressed
3 Incomplete financial projections Fully Addressed
San Gabriel Needs to Consider Additional Expenditure Reductions and Revenue Increases 4 Rising employee retirement costs Partially Addressed
5 Operational losses from the Mission Playhouse Fully Addressed 6 Incomplete cost recovery Fully Addressed
Gaps in San Gabriel’s Management Controls Increase the Risk of Inefficiency and Waste 7 Lack of competitive bidding Fully Addressed
8 Inadequate contract management Fully Addressed
* In accordance with state law, we used our professional judgment to assess the city’s progress in addressing each of the risk areas in the table.
We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
HIGH‑RISK AREA #1
Declining Financial Health
Status: We conclude that San Gabriel has partially addressed this risk area by building its general fund reserves and operating at a net surplus in its general fund each year.
In our April 2021 audit, we found that the city’s general fund reserves decreased steadily from fiscal years 2014–15 through 2017–18 because of three primary reasons: a public works loan that restricted the availability of general fund cash due to a collateral requirement, insufficient oversight by the city council, and a lack of transparency by former city management. At the lowest point, the city’s general fund reserves decreased to a deficit of $9.9 million in fiscal year 2017–18.
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As a part of this audit, we found San Gabriel’s general fund reserves have recovered largely because of increases in the city’s tax revenue as well as one‑time infusions of funding. At the end of fiscal year 2022–23, the city’s general fund reserves were about $15.8 million—equaling three and a half months of its expenditures for that year. Assisting the city in reaching that level of reserves has been Measure SG, a new sales tax measure that went into effect in July 2020 and that has helped to increase tax revenue to the city from $22 million in fiscal year 2019–20 to $35 million in fiscal year 2022–23. The city also paid off the outstanding balance of its public works loan, which freed more than $5.8 million in funds to be available as unrestricted. Finally, the city used ARPA funds as lost revenue to pay for general government services. The city received a total of $9.5 million in ARPA funds during fiscal years 2020–21 and 2021–22, which allowed it to set aside some of its general fund revenue into reserves.
Although the city has in part relied on one‑time events to rebuild its reserves, it also maintained a cumulative surplus of more than $15 million in its general fund over a three‑year period of fiscal years 2020–21 through 2022–23. Figure 3 shows the city’s general fund revenue and expenditures for those fiscal years, inclusive of the annual transfers that the city made into the general fund. San Gabriel has historically relied on a special property tax to help pay the retirement costs of city employees (retirement tax), which San Gabriel voters originally approved in 1948. The city maintains the revenue from that tax in its retirement fund. Because this tax supports the city’s ongoing retirement costs, we considered it functionally equivalent to general fund operating revenue.
San Gabriel has made significant progress in addressing its general fund reserves, but it should continue to build its reserve. The city’s reserve amount as of the end of fiscal year 2022–23 was equivalent to about three and a half months’ worth of that year’s general fund expenditures. Although this amount surpasses the GFOA guidance about minimum reserve levels, the GFOA also advises governments to set their reserve levels at amounts that are appropriate for their unique circumstances. Given that San Gabriel must still address challenges in meeting its OPEB obligations—which we describe more about later—the city would be in a better position if it increased the reserves that it sets aside for potential future financial challenges.
HIGH‑RISK AREA #2
Unfavorable Loan Agreements
Status: We conclude that San Gabriel has fully addressed this risk area by paying the outstanding balance of its public works loan and not entering into additional loan agreements.
As indicated above, the city took out a public works loan of $7.8 million in December 2014, which significantly restricted the city’s ability to fund its city services using cash from the general fund because the loan agreement required that the city 20 CALIFORNIA STATE AUDITOR
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Figure 3
The City of San Gabriel’s Expenditures Have Been Below Its General Fund Revenue in Three Recent Fiscal Years
2020–21 2021–22 2022–23
Fiscal Year
0 10
20 30
40 50
$60
In Millions
$53.6 $53.4
$46.8
$57.2
$40.7
$48.0
General Fund Revenue General Fund Expenditures
Source: San Gabriel’s ACFRs.
Note: We calculated revenue by combining the revenue and other financing sources into the general fund in each fiscal year.
We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year. pledge an amount of funds equal to the borrowed amount as collateral. Our April 2021 audit report found that the city council and the city’s management team at the time did not adequately evaluate the financial impact of the loan. We recommended that the city develop a plan to renegotiate or refinance the public works loan. In fiscal year 2022–23, San Gabriel paid off the loan’s remaining balance of nearly $6 million, freeing up the general fund money that the bank used as collateral.
San Gabriel has also implemented our recommendation to create a policy that requires city staff to present options and considerations to its city council when entering into debt, including an analysis of alternative methods of financing and the impact on city finances. The city updated its debt management policy per our recommendation in January 2023. Further, other than two lease purchase agreements for the acquisition of public safety equipment totaling $1.4 million, the finance director asserts that the city has not taken on any new loans or debt since we issued our last audit. Before entering into these agreements, city management presented different financing options to the city council and described each option’s potential impact on the city’s finances. For example, in April 2022, city management presented to the city council options for purchasing or leasing two fire apparatuses for the 21 CALIFORNIA STATE AUDITOR
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fire department. The city council authorized staff to purchase one apparatus, but only if the terms would be the same as the terms offered for the two apparatuses.
Providing these types of analyses allows the city council and city management to make informed decisions and strengthens the city council’s oversight on city finances. San Gabriel has shown improvement in this area, sufficiently addressing the associated risk.
HIGH‑RISK AREA #3
Incomplete Financial Projections
Status: We conclude that San Gabriel has fully addressed this risk area by producing financial projections that provide a reasonable basis for financial planning for major categories of revenue and expenses.
In our April 2021 audit, we found that the city did not consider key factors such as collateral for the public works loan, the impact of the pandemic, nor potential salary increases when developing its five‑year financial projection. We noted that the GFOA considers it a budgeting best practice to analyze major revenue sources to identify forecasting assumptions and determine whether potential trends are likely to continue. To ensure that San Gabriel had relevant information for making decisions, we recommended the city update its financial projections to include in‑depth analysis of key revenue sources and future costs.
To assess the accuracy of San Gabriel’s more recent forecasts, we compared its financial projections for fiscal years 2022–23 and 2023–24 that the city made in its 2021–22 budget to the information about actual financial performance for those years found in the city’s ACFR and budget documents. In general, the city developed conservative projections of its revenue. The largest revenue category for the city is its tax revenue, which was more than 80 percent of the city’s annual revenue in fiscal year 2022–23. For both fiscal years we reviewed, the city’s projection under estimated what its tax revenue would be by more than 10 percent. This underprojection meant that during its budgetary deliberations, the city expected to have less revenue than it would ultimately have at its disposal. We acknowledge that conservative projections of revenue are less problematic than overprojections, which could cause a city to unknowingly plan to spend beyond its capacity.
The city has generally been more accurate when projecting its expenditures. After adjusting for a one‑time debt payment the city made in fiscal year 2022–23, the total expenditures the city made in fiscal years 2022–23 and 2023–24 were both within 10 percent of the forecasted amounts. Personnel costs are close to 75 percent of the city’s general fund expenditures, and the city projected these costs within 5 percent in each of the two fiscal years we reviewed, which is a relatively close margin. 22 CALIFORNIA STATE AUDITOR
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Although San Gabriel’s forecasts have at times been different than its actual financial performance, we found that its projections for fiscal years 2022–23 and 2023–24 were generally close to the city’s actual financial performance and therefore they were reasonable estimations for financial planning purposes. Accordingly, we consider this risk area fully addressed.
HIGH‑RISK AREA #4
Rising Employee Retirement Costs
Status: We conclude that San Gabriel has partially addressed this risk area by contributing to its OPEB trust and reducing post‑employment medical benefits for new employees.
In our April 2021 audit, we estimated that the retirement tax revenue would not be sufficient to cover pension costs from fiscal year 2020–21 through 2024–25.
However, in fiscal years 2020–21 through 2022–23 (the most recently completed ACFR at the time of our audit) the city has covered all but less than 2 percent of its pension costs using the retirement tax revenue it collected in those years, along with the available amounts it has retained as a balance in the associated fund. In other words, the city has not needed to use general fund revenue in any substantive manner to pay for its pension costs.
Although the city may not always be able to pay for its pension obligations through its retirement tax alone, we are not as concerned about the city’s overall ability to pay these pension obligations. The city’s projections show that it will need to use general fund money to cover about $230,000 of its pension obligations in fiscal year 2025–26 and intermittently use general fund money in subsequent fiscal years as well. The city’s finance director explained that the city’s projections assume zero vacant positions to represent the upper threshold of the potential costs it could face. In the event that the retirement tax does not generate enough revenue to cover pension costs, he stated that the city will likely borrow from the general fund and repay the borrowed amount using retirement tax revenues generated in the following years. The city’s projections show that in each year where the city expects to borrow from the general fund to pay for pension obligations, the retirement tax will generate enough revenue in the subsequent years to repay the general fund within two years.
In addition, our April 2021 audit report found that the city had been paying less than the amount needed to fully fund the costs of its OPEB benefits, increasing its total net obligation for OPEB. We noted that the city’s unfunded OPEB liability nearly doubled in only two years, in part because the city had stopped prefunding these costs. As of the June 2023 reporting date, the city’s net OPEB funding ratio was 13 percent, with more than $44 million in unfunded liability. 23 CALIFORNIA STATE AUDITOR
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San Gabriel has taken some steps to address its OPEB liability. At the time of our April 2021 audit, San Gabriel did not require its employees to contribute to their OPEB costs, and we recommended that the city negotiate with its unions to require employees to contribute. According to the finance director, the city’s primary focus has been on removing the lifetime medical benefit for future employees rather than negotiating with employees to contribute to the OPEB liability. The city negotiated with its unions to change post‑employment medical benefits for employees hired after January 2023 to the Public Employees’ Medical Hospital Care Act (PEMHCA) statutory minimum level of benefits. In order to calculate the savings resulting from eliminating the lifetime medical benefit and assigning new employees to the PEMHCA plan, the finance director stated that the city would need to contract the services of an actuarial firm. Although the magnitude of the benefit the city will eventually realize from this change is not clear, the step the city has taken will have positive effects on its overall retirement obligations at some time in the future.
In addition, the city contributed to its OPEB trust for the first time in five years. The city’s OPEB trust provides a way for the city to prefund its OPEB obligation and reduce its overall OPEB liability. In June 2024, the city contributed $250,000 to the OPEB trust, bringing the trust’s cumulative value to nearly $8.3 million. Also, the city has budgeted another $250,000 payment towards the trust in fiscal year 2024–25 and included contributions in this amount each year in its five‑year forecast through fiscal year 2029–30. Although these are positive steps towards addressing the city’s OPEB liabilities, the annual contribution amount is very small compared to the city’s overall liability for OPEB. Even an annual contribution of double the amount the city is planning on making would increase the city’s OPEB funding ratio by only 1 percent when using the outstanding liability of $44 million we describe above. Therefore, based on the actions it has taken and the sizeable OPEB liability the city still incurs, we consider the city to have partially addressed this risk area.
HIGH‑RISK AREA #5
Operational Losses From the Mission Playhouse
Status: We conclude that San Gabriel has fully addressed this risk area by reducing the general fund subsidies it provides.
Our April 2021 audit report noted concerns regarding the Mission Playhouse’s significant and consistent operating deficits that required the city to provide funding for it to remain solvent. The city subsidizes the operations of its Mission Playhouse—a community center that hosts various events, such as theater and music performances, and public meetings. According to the city’s ACFRs, for fiscal years 2020–21 through 2022–23, the playhouse continued to operate at a deficit and relied on general fund transfers. The finance director confirmed that the city council is committed to providing the Mission Playhouse services to the public and that it views the theater as a vital arts and entertainment service for the community. The finance director highlighted that the city has more recently decreased the amounts 24 CALIFORNIA STATE AUDITOR
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it transfers from its general fund. In fiscal years 2020–21 through 2022–23, the city transferred slightly more than $1 million to the Mission Playhouse—an average of $350,000 each year. This average represents a significant reduction in transfers, namely half the amount we reported in our April 2021 audit, thus indicating that the city has made efforts to reduce its costs.
In addition, the city has made efforts to improve costs and operations at the Mission Playhouse. For example, the city eliminated the Mission Playhouse director position from its fiscal year 2021–22 budget and assigned oversight of the playhouse to the community services director. The playhouse’s budgeted expenses decreased 22 percent that fiscal year. Further, the playhouse obtained a new ticketing system that the city asserts better serves its needs, results in lower ticket fees, and offers a more user‑friendly interface for staff compared to its previous system.
In light of the significant decrease in the amount of the general fund subsidy, the efficiency gains, and the public benefit that the Mission Playhouse provides, we consider the city to have fully addressed this risk area.
HIGH‑RISK AREA #6
Incomplete Cost Recovery
Status: We conclude that San Gabriel has fully addressed this risk area by updating its service fees annually.
In our April 2021 audit, we noted that the city had not evaluated whether the fees it charged for services aligned with the full cost of those services. In addition, we identified that the city had not adjusted a majority of its fees since 2016, and some had not changed since 2002. Consequently, the city had not ensured that it collected the commensurate amount of revenue that could have helped relieve the financial burden on the city’s general fund. To ensure that the fees it charged for services align with their costs, we recommended that San Gabriel implement policies and procedures requiring it to reevaluate the cost of its fee‑funded services at least every three years.
The city has increased its service fees and plans to increase those fees annually as adjusted to the Consumer Price Index (CPI) for the Los Angeles Metro area. The city’s March 2021 fee study determined that the city’s fiscal year 2020–21 fee revenue recovered only 42.5 percent of the city’s service costs, causing the city to lose nearly $6.6 million in subsidies. In the two fiscal years following the study, San Gabriel’s revenue from its charges for services averaged $4 million—an increase of 64 percent compared to the revenue the city generated in fiscal year 2020–21. In addition, from fiscal years 2021–22 through 2024–25, the city council passed annual resolutions that require the city to conduct comprehensive fee reviews at least once every five years to ensure that it is adequately recovering the cost of providing services. The finance 25 CALIFORNIA STATE AUDITOR
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director stated that the city intends to complete another fee study in fiscal year 2025–26.
Because it has raised its fees to collect revenue more commensurate with its costs and plans to take similar action in the future, we consider this risk area addressed.
HIGH‑RISK AREA #7
Lack of Competitive Bidding
Status: We conclude that San Gabriel has fully addressed this risk area by updating its contract bidding policy, and we no longer have concerns about its waste collection agreement.
In our April 2021 audit, we recommended that San Gabriel strengthen its purchasing policies to competitively bid services at least every three years or to document a justification for services that require a longer contract duration. In June 2023, the city updated its contract management administrative procedures, which are intended to strengthen the city’s purchasing policies and help to ensure that the city is receiving the best value on all contracted goods and services. The updated procedures direct city staff to rebid contracts for most services every three to five years, a variation from the three‑year interval we recommended. The finance director explained that with the exception of its waste collection contract, the city’s contracts have durations of three years and allow for two one‑year extensions. The finance director further explained that the city’s reasoning for allowing contracts with terms as long as five years before being rebid, is that the process to procure services takes a significant amount of administrative time and effort—sometimes taking up to a year to complete—and that the market for services does not change significantly in a period of three years. Because San Gabriel’s updated procedures direct staff to present service contracts to the city council at least every five years and to rebid contracts at this same frequency, we conclude that the city has ensured that it will regularly use the competitive bidding process.1
In addition, we conclude that the city’s waste collection contract no longer presents an immediate risk to the city. In our prior report, we noted concern that San Gabriel had not verified whether its waste collection contract provided the best value to its residents and recommended the city renegotiate with its waste collection company to revise the terms of the agreement. However, in 2023 the city conducted a survey of the residential waste hauler rates of four nearby cities, which showed that San Gabriel’s rates were the median rates among all of the cities. Further, according to the contract agreement with the waste collection vendor, any increases to waste collection rates that exceed the increase in the CPI would require the approval of the city council, which means that the city has a control in place to manage the rates its residents pay.
1 The policy makes an exception for the city’s waste collection contract, which has a 25‑year period and automatically extends another year on an annual basis.
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HIGH‑RISK AREA #8
Inadequate Contract Management
Status: We conclude that San Gabriel has fully addressed this risk area by developing a centralized system to track current contracts and implementing purchase order controls.
Our April 2021 audit found that San Gabriel did not have a centralized system for monitoring its contracts, which compromised its ability to prevent departments from overspending the amount of their contractual service budgets. We further noted that, because of its insufficient contract tracking system, the city could not track the total costs associated with each of its contracts over multiple years, and city management could not determine total citywide annual contract costs. In June 2023, the city implemented contract management administrative procedures that established a centralized contract depository and strengthened the city’s purchasing controls. The procedures require departments to submit contracts approved by the city council to the city clerk, who is supposed to maintain and regularly update a centralized spreadsheet to track the contract vendor, responsible department, and the contract expiration date. We obtained a copy of this spreadsheet and verified that recently approved contracts were included on the spreadsheet. In addition, the city’s contract management procedures include purchase order controls that require the finance department to verify that the contract is valid, properly authorized, and that funds are available in the current budget before payments under contracts are allowed.
Because of the improvements described above, we conclude that the city has addressed this risk area.
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The City of Blythe Has Addressed
Challenges Related to Its Long‑Term
Financial Stability, and the State Auditor
Is Removing Its High‑Risk Designation
RISK AREAS AS REPORTED IN MARCH 2021
STATE AUDITOR’S CURRENT ASSESSMENT OF
BLYTHE’S PROGRESS IN ADDRESSING THE RISK AREA*
Blythe’s Financial Stability Remains Uncertain Even With Recent Improvements 1 Low financial reserves Fully Addressed
2 Need for additional sources of revenue Fully Addressed 3 Lack of a long-term plan Pending
Blythe Must Address Deficits in Its Enterprise Funds as Well as Unmet Safety and Infrastructure Needs 4 Enterprise fund deficits Partially Addressed
5 Unpaid golf course loan Fully Addressed
6 Need for public safety resources Fully Addressed
7 Unaddressed vacant buildings Fully Addressed
The City Needs More Effective Management Practices to Improve Its Financial Stability and Its Ability to Provide Services to Residents
8 Utility rates and service fees insufficient to cover costs Fully Addressed 9 Poor oversight of city contracts Partially Addressed
10 Lack of a permanent city manager Pending
* In accordance with state law, we used our professional judgment to assess the city’s progress in each of the risk areas in the table. We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
Pending: The city has not taken substantial action to address the risk area and, at the time of this audit, the conditions that created high risk for the city continue to exist.
HIGH‑RISK AREA #1
Low Financial Reserves
Status: We conclude that Blythe’s increased general fund reserve demonstrates that it has fully addressed this risk area.
In our March 2021 audit, we determined that Blythe’s general fund reserve at the end of fiscal year 2019–20 was $804,000, which was only a little more than one month’s worth of operating funds. At the end of fiscal year 2022–23, Blythe had a general fund reserve of $8.3 million, 29 CALIFORNIA STATE AUDITOR
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an increase of more than $7 million. This amount was equivalent to more than seven months of annual expenditures, which exceeded both the three months of expenditures that the city’s reserve policy states the city will maintain and the GFOA best practice of at least two months.
HIGH‑RISK AREA #2
Need for Additional Sources of Revenue
Status: We reported in March 2022 that Blythe had fully addressed this risk area.
After that determination, the State decided to close Chuckawalla Valley State Prison. The economic impact of the closure will likely mean that Blythe would benefit from finding additional revenue, but the city has taken steps to address that need.
In 2022 Blythe contracted with a vendor to research economic development opportunities in the city and recruit retail businesses. In addition, in March 2022, we reported the city’s assertion that it had engaged with stakeholders in a formal economic development effort. These actions led us to conclude that the city had fully addressed this risk area. Subsequent to that conclusion, in December 2022, the State announced its plan to close the Chuckawalla Valley State Prison, which is located in Blythe. Originally planned to close in March 2025, the prison officially closed in November 2024.
The city commissioned a June 2023 study of the economic and fiscal impact of the prison closure, which estimates that the full effect of the closure on the city’s general fund revenue will be a reduction of $1.9 million, or about 12 percent, annually.
The study also found that the prison supported 13 percent of the total jobs held by Blythe residents and 22 percent of the city’s total wages. The study determined that the prison closure will raise the unemployment rate, considerably reduce average household incomes, and put pressure on local business, which will experience losses of both sales and profits. Figure 4 shows that the city’s general fund revenue exceeded expenditures during fiscal years 2020–21 through 2022–23, indicating that the city can absorb some loss in revenue. Nonetheless, the actual effect of the prison closure remains unknown, and the city will need to be careful to avoid relying on other funding to sustain operations at their present levels.
A recent study by a consultant hired by Riverside County, where Blythe is located, could provide the city with a roadmap for economic development and thereby a path towards financial sustainability in the wake of the prison closure. In early 2024, this consultant presented an overview of the results of an economic development study of the Blythe region. The study included several action steps that could stimulate economic growth in the area, such as making infrastructure investments and encouraging and attracting private investment in the area. For example, the study suggested attracting tourism and capitalizing on Blythe’s location along a regional highway system, the I‑10 corridor, by investing in charging infrastructure for 30 CALIFORNIA STATE AUDITOR
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Figure 4
The City of Blythe’s General Fund Revenue Has Consistently Exceeded Its Expenditures 2020–21 2021–22 2022–23
Fiscal Year
0 2
4 8
10 6
12 14
16 $18
In Millions
$13.8
$16.4
$13.0
$16.2
$10.9
$12.7
General Fund Revenue General Fund Expenditures
Source: Blythe’s ACFRs.
Note: We calculated revenue by combining the revenue and transfers into the general fund in each fiscal year. We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year. The city did not have other financing sources or uses flowing in or out of its general fund in these three fiscal years. electric vehicles. The study also recommended pursuing grant opportunities to help fund this type of infrastructure, and Blythe has already sought such grants. The city received a federal grant award of $19.6 million for the development of a publicly accessible, multi‑class, electric vehicle charging facility. The interim city manager believes that renewable energy, along with tourism and distribution centers will be key in Blythe’s recovery from the prison closure. According to the interim city manager, Riverside County will organize a work group of stakeholders at the start of 2025 to implement the economic development study’s action items. She stated that the city hopes to have these investments made in the community over the next three to five years, assuming that funding is available.
Finally, the city will also benefit from the remaining ARPA funding it has yet to spend.
The city received a cumulative total of $4.7 million in ARPA funding and, according to the city’s reporting to the federal government, the city had about $3 million of that funding still left to spend on general government activities as of the end of March 2024. The funding will be available to the city until December 2026, when federal regulations require the city to return any obligated but unspent funds. 31 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #3
Lack of a Long‑Term Plan
Status: We conclude that Blythe has not addressed this risk area because the city has not yet developed a long‑term strategic plan.
In our March 2021 audit, we recommended that the city develop a five‑year strategic plan to ensure that Blythe was adequately prepared to address long‑term financial, budgetary, and operational challenges. As part of that audit, we observed that a strategic plan would provide a framework for Blythe city officials to consider the city’s numerous competing priorities when allocating any additional revenue it received.
Consequently, we reviewed whether the city had addressed this recommendation. The interim city manager explained that the city has not done so because it has devoted resources to other priorities, such as opposing the Chuckawalla Valley State Prison closure. Moving forward, she stated that city staff will ask the city council to approve funding for a strategic plan as part of Blythe’s fiscal year 2025–26 budget. The interim city manager estimated adoption of a strategic plan by early 2026 if the city council approves the funding.
HIGH‑RISK AREA #4
Enterprise Fund Deficits
Status: We conclude that Blythe has partially addressed this risk area because the city’s enterprise funds no longer owe significant amounts to other city funds.
Although the city’s enterprise funds continue to have negative unrestricted net positions, the city’s recent rate increases reduce the risk that the water fund will strain the city’s general fund.
In our March 2021 audit, we reported that Blythe had subsidized its solid waste, golf course, and lighting district enterprise funds with other city funds. We reported that the city recorded these enterprise fund subsidies as loans that cumulatively amounted to more than $1.5 million. During this audit, we reviewed the city’s fiscal year 2022–23 ACFR and found that the city’s enterprise funds subsequently owe minimal amounts to other city funds, which resolves the condition that we found in our original audit. Specifically, the golf course and lighting district funds did not owe any amounts to other funds, and the solid waste enterprise fund owed only $101,000 to the general fund.
Although the city’s enterprise funds no longer incur those significant obligations, the enterprise funds continue to be a risk area for the city. The independent auditor’s reports for the ACFRs from fiscal years 2019–20 through 2022–23 have each noted significant doubt about the city’s ability to continue as a going concern— which means the city is at risk of not being able to continue meeting its financial obligations. Each of these auditor opinions notes that the negative unrestricted net 32 CALIFORNIA STATE AUDITOR
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position of the city’s enterprise funds is one of the reasons for the significant doubt.
At the close of fiscal year 2022–23, the unrestricted net position of the water, solid waste, and golf course funds were all negative, as they have been for the last few fiscal years, as Table 2 shows. A fund’s unrestricted net position represents the resources a government entity can use at its discretion to address a variety of costs, such as unexpected revenue shortfalls or infrastructure needs. Therefore, a fund with a negative unrestricted net position is less able to address those costs on its own and is at greater risk of needing assistance from other sources, such as a city’s general fund.
Table 2
The Unrestricted Net Position of Three Enterprise Funds at Blythe Has Remained Negative Over Four Fiscal Years
TOTAL UNRESTRICTED NET POSITION (ENDING BALANCE)
FISCAL YEAR WATER FUND SOLID WASTE FUND GOLF COURSE FUND 2019–20 $(1,728,000) $(624,000) $(2,300,000)
2020–21 (1,568,000) (586,000) (1,280,000)
2021–22 (1,883,000) (602,000) (26)
2022–23 (1,500,000) (337,000) (27)
Source: Blythe’s ACFRs.
Although it is significant that the independent auditor reported substantial doubt about the city’s ability to continue as a going concern, Blythe is on a path toward better financial health in its enterprise funds. The city’s finance director believes that the city will be able to address in the near future the independent auditor’s concerns about the enterprise funds. In February 2023 the city council approved water rate increases that began in March 2023 and are scheduled to continue through January 2027. For example, at the time the council approved the rate increase, a single‑family home paid about $2.20 per 1,000 gallons of water, but that rate will increase to about $4 in January 2027. As Table 2 shows, the water fund had the largest unrestricted net position deficit among the city’s enterprise funds as of the close of fiscal year 2022–23. The city’s finance director expects that the independent auditor will continue to express doubt about the city’s ability to continue as a going concern because of unresolved deficit balances for the city’s fiscal year 2023–24 ACFR, which has yet to be issued. Nevertheless, the overall increases in rate revenue over the next few years will help offset a potentially worsening position. 33 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #5
Unpaid Golf Course Loan
Status: In May 2021, we concluded that Blythe had fully addressed this risk area by paying off its golf course loan.
In our March 2021 audit, we found that the city owed more than $1 million for a loan that its former redevelopment agency had made to the city’s golf course fund.
We recommended that the city adopt a payment schedule to pay down the loan. We reported in our May 2021 follow‑up assessment that Blythe had paid the remaining balance of its golf course loan to the redevelopment agency’s successor, which fully addressed this risk area.
HIGH‑RISK AREA #6
Need for Public Safety Resources
Status: In September 2022, we concluded that Blythe had fully addressed this risk area by obtaining consulting services for its police department and by developing a plan to replace its fire vehicles.
In our March 2021 audit, we recommended that the city apply for consulting services from the Commission on Peace Officer Standards and Training (POST) to better assess its police department’s efficiency and effectiveness. POST accepted the city’s application for an organizational study in September 2021 and subsequently completed the study in November 2022. The interim city manager explained that the Blythe police department has implemented many changes in response to the POST study. For example, the city updated its public safety communication system, which now provides direct communication between the Riverside County system and the city to improve communications and coordination in case of multi‑jurisdictional incidents. In addition, the city developed a schedule for replacing its three oldest fire vehicles by the end of 2025. In the nearly four years since our March 2021 audit, the city has purchased one fire engine, one rescue truck, and two pickup trucks. The fire engine and rescue truck replaced two of the three oldest vehicles. 34 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #7
Unaddressed Vacant Buildings
Status: In September 2022, we concluded that Blythe had fully addressed this risk area by removing abated properties.
In our September 2022 follow‑up assessment, we concluded that the city had addressed this risk area, and we noted that addressing vacant buildings would be a long‑term effort. In addition, we reported that the city had identified properties that might be eligible for receivership—a legal designation that would allow the city to take control of certain aspects of the properties and bring buildings on that property up to code instead of demolishing them.
During this audit, we found that the city continues its efforts to address the risks associated with its vacancy rate. In May 2023 and February 2024, the city completed the removal of abated properties damaged by fires. Regarding the properties the city had previously identified for receivership, the interim city manager indicated that the city must address ongoing legal issues before proceeding with any further steps.
HIGH‑RISK AREA #8
Utility Rates and Service Fees Insufficient to Cover Costs Status: In March 2022, we concluded that Blythe had fully addressed this risk area by establishing a policy to annually review and update its service user fees.
In our March 2022 follow‑up assessment, we reported that the city had fully addressed this risk area. In January 2022, the city established a policy that allowed it to annually review and update its user fees and required Blythe to perform a rate study every five years. The city commissioned a consulting firm to perform a water and sewer rate study. The study analyzed the revenue sources and costs of the city’s utility system and proposed rate adjustments for full cost recovery. In February 2023, following a public hearing, the Blythe city council approved the water and sewer rate increases that the study proposed.
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HIGH‑RISK AREA #9
Poor Oversight of City Contracts
Status: We conclude that the city has partially addressed this risk area by creating and using a contract tracking spreadsheet to better monitor its contracts.
However, the city still has not implemented procedures for closing out its expired contracts, and it has not updated its financial management software.
In our March 2021 audit, we found that Blythe’s financial system did not link contract‑related payments to their corresponding contracts, hindering the city’s ability to ensure that those payments are appropriate. The city relied on a manual process to issue contract payments, and that process did not always ensure prompt payment. We concluded that without a method to ensure that it can properly manage its contractual obligations, Blythe risked paying wasteful and avoidable late fees.
Further, we found that the city did not have a way to determine which contracts were valid and active. We noted that without a reliable method of identifying and tracking contracts, the city risked making payments on expired contracts and missing opportunities to renegotiate contract terms or budget appropriately for multiyear expenditures. To ensure that it can properly manage its contracts, we recommended that Blythe develop a contract tracking system that would include the ability to identify contract amounts, durations, and any relevant special terms. We also recommended that the city develop procedures to close out expired contracts and clearly identify in its financial system the contract authority for a contract‑related purchase. As we note in our March 2021 audit, effective contract management practices at the end of a contract include reallocating unused funds and documenting information regarding the contractor’s performance to ensure that the city does not enter into another contract with an entity that performed poorly and that the city does not make payments on an expired contract.
In our September 2022 assessment of the city’s progress, we reported that the city had partially addressed this risk area. Our assessment reported that the city developed a contract tracking spreadsheet that identified the total contract amounts, contract dates and durations, and relevant special contract terms. The contract tracking spreadsheet procedures specify that the director of finance or a designee shall review and update the spreadsheet at least monthly. However, our assessment also found that the city had not implemented procedures to close out its expired contracts. We reported the city’s assertion that its current financial system did not have the ability to monitor contracts in the way we recommended. Subsequently, in January 2023, the interim city manager stated that the city planned to ensure that when it purchased new financial management software that the software would include a contract management module.
During this audit, we confirmed that the city continues to use the contract tracking spreadsheet to log the contract amounts, dates and durations, and special terms.
Relevant to our other recommendation, the interim city manager reaffirmed that the city plans to procure a new financial management system once its existing system is no longer supported, which she expects will occur after 2026. She also confirmed 36 CALIFORNIA STATE AUDITOR
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that the city still has not developed procedures for closing out expired contracts.
Therefore, the city should continue with its plan to procure a software solution that would allow it to monitor contracts and also develop procedures that would better guard it against the potential negative effects of not properly closing out a contract.
HIGH‑RISK AREA #10
Lack of a Permanent City Manager
Status: We conclude that Blythe has not addressed this risk area because the city has not yet hired a permanent city manager.
In our March 2021 audit, we recommended that the city begin the process for hiring a permanent city manager. At the time, the interim city manager had been in the role since July 2017 after the previous city manager resigned. Further, we found that in addition to performing the duties of the city manager, she was responsible for the role of the city clerk and for several other important positions within the city. We concluded that hiring a permanent city manager would not only remove some of the work burden from the current interim city manager, but doing so would also allow Blythe to more effectively plan its next steps for improving its financial stability and its ability to continue providing service to residents in the long term.
Blythe has yet to hire a permanent city manager, instead relying on the same interim city manager to fulfill the position that she had been responsible for during our 2021 audit. In addition, she still maintains her elected position as the city clerk. The interim city manager stated that the city council may revisit the subject of hiring a permanent city manager after the November 2024 election. However, she also noted that the city does not have a formal timeline for when the hiring process will begin. 37 CALIFORNIA STATE AUDITOR
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The City of Lindsay’s Negative Reserve
Level and Deficits in Key Enterprise Funds
Are Factors Resulting in Its Continued
Designation as a High‑Risk Entity
RISK AREAS AS REPORTED IN AUGUST 2021
STATE AUDITOR’S CURRENT ASSESSMENT OF
LINDSAY’S PROGRESS IN ADDRESSING THE RISK AREA*
Lindsay’s Actions Raise Doubt About the Financial Stability of Its General Fund 1 Inadequate revenue led to illegal transfers to the general fund Pending 2 Potentially improper contributions to the city’s streets maintenance efforts Partially Addressed 3 Insufficient planning for federal assistance funds Fully Addressed Lindsay Must Increase Its Efforts to Address Deficits in Its Enterprise Funds 4 Inadequate enterprise fund balances Partially Addressed 5 Service fees did not cover costs Partially Addressed
Lindsay Must Improve Its Management Practices to Effectively Plan for Its Financial and Operational Needs 6 No long‑range financial planning Partially Addressed
7 No formal strategies to address its rising employee retirement costs Pending 8 Lack of planning for public safety training and equipment needs Fully Addressed * In accordance with state law, we used our professional judgment to assess the city’s progress in each of the risk areas in the table. We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
Pending: The city has not taken substantial action to address the risk area and, at the time of this audit, the conditions that created high risk for the city continue to exist.
HIGH‑RISK AREA #1
Inadequate Revenue Led to Illegal Transfers to the General Fund Status: We conclude that Lindsay has not addressed this risk area. Although the city has implemented a plan to eventually repay transfers to its general fund, the city has depleted its general fund, leaving Lindsay poorly situated to handle unexpected economic conditions.
In our August 2021 audit, we found that the city forgave $6.3 million in loans made by several funds, including its water and sewer funds, to its general fund—an action that violated state law and exposed the city to litigation. Specifically, we observed that state law, as amended by Proposition 218, restricts cities from using revenue derived from property related fees 39 CALIFORNIA STATE AUDITOR
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and charges to pay for general government operations, and the city’s forgiveness effectively converted those restricted funds into general funds, violating state law. We recommended that the city develop and implement a plan to repay fully these funds.
During this audit, we found that Lindsay’s city council reinstated the loans, and approved an interest free repayment plan in February 2022. The plan calls for annual payments of up to $136,000. Further, the plan describes that the city will first reimburse $1.8 million to the water fund and $2.1 million to the sewer fund, which the city anticipates will take until fiscal years 2049–50 and 2054–55 respectively.
The city then plans to reimburse the other affected funds including the street improvement fund. The city began its repayments in fiscal year 2022–23, and it anticipates completing full repayment to all funds in fiscal year 2090–91, a period that does not violate state law.
As Figure 5 shows, the city spent less than its general fund revenue in fiscal years 2020–21 through 2022–23. Although the city’s revenue is sufficient to cover expenditures, its negative general fund reserves of $1.4 million as of the end of fiscal year 2022–23 will hinder its ability to react to current and future financial risks.
Fiscal year 2022–23 was the second fiscal year in a row in which the city ended the year with negative general fund reserves. The GFOA recommends that government entities maintain at a minimum two months of unrestricted reserves to mitigate current and future risks, such as revenue shortfalls and unanticipated expenditures.
Consequently, the city will have to identify additional sources of revenue or reduce its expenditures to ensure its financial stability. To help identify potential revenue sources, the city’s financial plan, which we describe in more detail below, has strategies Lindsay should continue to pursue to derive more revenue through economic development and to ensure that its enterprise funds do not require general fund subsidies.
HIGH‑RISK AREA #2
Potentially Improper Contributions to the City’s Streets Maintenance Efforts Status: We conclude that Lindsay has partially addressed this risk area by conducting a cost study identifying the impact of water and sewer damage to roadway conditions.
In our August 2021 audit, we noted that the city charges its utilities for the cost of street repair and maintenance that result from damage by those utilities. For example, the utility’s water lines run underneath city streets and may cause damage through leaks or projects to replace or repair the water lines. However, we found that the city did not know the true annual cost of the damage its water, sewer, and refuse utilities caused to its roadways. Therefore, we concluded that the city violated Proposition 218 when it transferred nearly $900,000 annually from those utilities’ funds to the city’s general fund to pay for that roadway damage because it could not demonstrate how it knew that was the appropriate amount to transfer. The city 40 CALIFORNIA STATE AUDITOR
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Figure 5
The City of Lindsay’s General Fund Revenues Were Higher Than Its Expenditures in Three Recent Fiscal Years
2020–21 2021–22 2022–23
Fiscal Year
0 2
4 8
10 6
12 $14
In Millions
$13.7 $14.0
$9.2
$10.4
$5.9
$7.3
General Fund Revenue General Fund Expenditures
Source: Lindsay’s ACFRs.
Note: We calculated revenue by combining the revenue and other financing sources into the general fund each fiscal year with the exception of $900,000 in one‑time proceeds from the disposal of capital assets in fiscal year 2022–23. We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year. received the results of a cost study in June 2022 that determined the cost of roadway damage that the city could attribute to the utilities to be a collective $688,000 annually. The consultant’s report noted that the estimated cost of the damage was conservative, because it included only certain types of damage caused by the utilities.
Lindsay’s director of finance stated that the city has not updated the amount it transfers from the utility funds since it received the cost study in 2022. The director started in her position with the city in 2024 and did not know why the city had not yet adjusted the transfer amounts. The director of finance anticipates that the city will revise the transfer amounts in January 2025. She further asserted that the city would review the transfer amounts every five years. Until it adjusts the amount it transfers for street repairs, the city continues to expose itself to liability under Proposition 218.
Recommendation to Address This Risk Area:
The city should update the amount that it transfers to the general fund to reflect the amount supported by its cost study.
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HIGH‑RISK AREA #3
Insufficient Planning for Federal Assistance Funds
Status: We conclude that Lindsay has fully addressed this risk area by developing a plan for spending its federal funds.
In our August 2021 audit, we raised concerns that Lindsay had not yet specifically planned how it would spend ARPA funding, and we recommended that the city develop a plan for effectively using those funds. As we describe in the Introduction, the city received $3.2 million in ARPA funds. In April 2022, Lindsay’s city council approved a spending plan for the ARPA funds. That plan largely reserved the city’s ARPA funds for future projects that the city would determine at a later date.
However, in the April 2022 spending plan, the city indicated that it planned to spend funding on downtown beautification, economic development, and two fire department personnel. According to federal regulations, these are allowable uses of ARPA funds. As of March 2024, the city reported having spent $1.3 million of its ARPA award.
HIGH‑RISK AREA #4
Inadequate Enterprise Fund Balances
Status: We conclude that Lindsay has partially addressed this risk area by developing a plan to build and maintain its fund balances, but risks remain for its water fund.
In our August 2021 audit, we noted that Lindsay’s annual deficits and loan forgiveness had led to concerning deficit balances in two of the city’s enterprise funds—the water and sewer funds. We recommended that the city develop and implement a plan to build and maintain these balances.
In June 2022, the city adopted a fiscal sustainability and financial improvement plan for the water and sewer funds that included provisions for outlining infrastructure replacement schedules, projecting cash flows and fiscal forecasts, and establishing contingency reserve policies for the water and sewer funds. Further, because the city reinstated the loans we describe under High‑Risk Area #1, the unrestricted net position of the water fund is no longer negative. Nonetheless, the net position of the water fund depends significantly on the repayment of approximately $1.8 million as of the end of fiscal year 2022–23, which the city does not expect to fully repay until fiscal year 2049–50.
A more direct measurement of the financial health of the city’s enterprise funds is whether they can sustain themselves or require subsidies. As Table 3 shows, the city’s water fund has incurred operating deficits in fiscal years 2020–21 through 2022–23, and the sewer fund has been self‑sustaining. The city approved water rate increases 42 CALIFORNIA STATE AUDITOR
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in October 2024, and those increases will go into effect over the next four to five years, with the first of the increases to take effect in January 2025. Establishing appropriate rates will assist the city in effectively operating its water utility.
Table 3
The City of Lindsay’s Water Fund Operates at a Loss, but Its Sewer Fund Is Self Sustaining
WATER FUND SEWER FUND
FISCAL YEAR NET OPERATING
INCOME (LOSS)
GENERAL FUND
TRANSFERS IN
NET OPERATING
INCOME
GENERAL FUND
TRANSFERS IN
2020–21 $(233,000) — $353,000 —
2021–22 (252,000) $99,000 382,000 —
2022–23 (569,000) 897,000 262,000 —
Source: Lindsay’s ACFRs.
Note: All amounts are rounded to the nearest thousand dollars.
HIGH‑RISK AREA #5
Service Fees Did Not Cover Costs
Status: We conclude that Lindsay has partially addressed this risk area. It developed a fee study and improved its accounting system, but it must address other weaknesses in its cash receipt processing.
In our August 2021 audit, we raised concerns that because it did not periodically review and update its fees and rates, Lindsay had not ensured that it collected sufficient revenue to cover the costs of services it provided. Further, we noted that limitations in its accounting system made the city unable to identify the precise amount of revenue it collects from some of its fees and rates. Although the city addressed the issues we identified in our prior report, we identified other issues during this audit that raise concerns.
In December 2022, the city council adopted a new citywide fee schedule to set city fees at the same level as the full cost the city incurred to support the various activities for which it charged user fees, such as issuing plumbing or electrical permits. The city council also approved an amendment to the fee schedule in July 2024. City staff proposed that amendment to increase certain fees they had either listed incorrectly or had left out of the schedule of fee increases the city approved in December 2022.
We also confirmed that the city’s accounting system has the capacity to track the revenue it collects from the fees it charges and that the city has established revenue accounts in that system for many of its fees.
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However, as part of this audit, we identified other factors related to the city’s fees and rates that demonstrate that this area remains a risk to Lindsay. The city’s external auditor identified internal control weaknesses in its fiscal year 2022–23 audit.
Specifically, for one city department’s fees, a single individual handled deposits of fee revenue and did so without preparing proper supporting documentation. Deposits that do not include supporting documentation leave a city at risk of misappropriation of funds. Further, city staff did not reconcile cash receipts from two departments to the city’s general ledger, which leaves Lindsay susceptible to the potential for misappropriation of fee revenue. Without proper controls over its cash receipt processes, the city cannot ensure that it is correctly collecting and recording its actual fee revenues, and it increases its risk that it does not handle collected cash properly. The city’s director of finance stated that the city plans to centralize the fee collection process to better control fee collection and to better assure the city that its staff appropriately handle all fee revenue.
Recommendation to Address This Risk Area:
The city should adopt appropriate controls to address the internal control weaknesses regarding fee revenue its external auditor noted.
HIGH‑RISK AREA #6
No Long‑Range Financial Planning
Status: We conclude that Lindsay has partially addressed this risk area. It has developed a financial improvement plan, but it has not kept up with the financial forecasting requirements of that plan.
In our August 2021 audit, we raised concerns that, although Lindsay had taken some steps to improve its financial position in the short term, the city had no clear plan for its long‑term financial decision‑making. We noted that the GFOA recommended that all governments regularly engage in long‑term financial planning as part of their overall strategic planning efforts, and that long‑term financial planning should include key elements, such as revenue and expenditure forecasts, strategies for achieving and maintaining financial stability, and a process for periodically reviewing and updating that plan. In this audit, we determined that Lindsay has partially addressed this risk area. In February 2022, the city council approved a Fiscal Sustainability and Financial Administration Improvement Plan (financial improvement plan). The financial improvement plan established that the city would create annual five‑year long‑range fiscal forecasts, identify challenges to the city’s continued financial health, and take steps to reduce expenditures or increase revenues when the city is projecting a deficit. The financial improvement plan also included an initial five‑year forecast of the condition of the city’s general fund. 44 CALIFORNIA STATE AUDITOR
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Because the financial improvement plan calls for the city to perform the five‑year long‑range fiscal forecast annually, we expected at the time of our audit that the city would have already conducted two additional forecasts beyond the initial version included in the February 2022 financial improvement plan. However, the director of finance confirmed that the city has not performed any updates to its long‑range financial forecast. She said that the city intends to include updated forecasts in future city budgets. As we describe earlier, at the end of fiscal year 2022–23, Lindsay had negative general fund reserves. The city would likely benefit from following through with its long‑range financial forecasting so that it can better anticipate its revenue and expenditures and take steps as necessary to improve its poor financial condition.
HIGH‑RISK AREA #7
No Formal Strategies to Address Its Rising Employee Retirement Costs Status: We conclude that Lindsay has not addressed this risk area. The city still needs to develop and implement strategies to reduce its retiree health benefit costs.
In our August 2021 audit, we raised concerns that Lindsay had not prefunded its OPEB liabilities as the GFOA recommends. Lindsay’s OPEB benefits include continuing medical, dental, and vision coverage to its qualified retired employees.
Further, we stated that the lack of prefunding had caused the city’s OPEB liabilities to increase by 36 percent from fiscal years 2017–18 through 2019–20. In addition, we noted that the city’s pension costs could place a financial burden on the city unless it took substantial action.
The city’s financial improvement plan includes a commitment to fully fund the costs of the city’s retirement plans and hold annual discussions of the city’s progress in funding its pension program. Related to OPEB, Lindsay’s ACFRs show an overall decline in its OPEB liability, from nearly $2 million at the end of fiscal year 2021–22 to $1.4 million at the end of fiscal year 2022–23. However, a significant factor in this decline were changes in the assumptions the city made to estimate the OPEB liability, rather than any change in the city’s approach to funding OPEB. Similar to the condition at the time of our original audit, the city had not prefunded its OPEB in fiscal year 2022–23.
The director of finance explained that the city would develop a plan by June 2025 to help reduce its OPEB liabilities. She noted that she would work with the city manager to look into the city’s options to reduce its OPEB costs. Among the options the city would consider will be establishing an OPEB trust to prefund its OPEB liabilities and negotiating with the unions in preparation for the next bargaining agreement to consider requiring current employees to begin contributing to the future costs of their retirement health care benefits, among other strategies. As we described in our August 2021 audit report, if the city does not require its employees to begin contributing to their OPEB, Lindsay will likely have to make higher contributions from its general fund, displacing other spending priorities. 45 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #8
Lack of Planning for Public Safety Training and Equipment Needs Status: We conclude that Lindsay has fully addressed this risk area. It has evaluated the effectiveness of its combined police and fire department, ensured that its firefighters have appropriate training, and adopted a fleet management and replacement policy covering its police and fire vehicles.
In our August 2021 audit, we raised concerns that Lindsay did not appear to be committed to the public safety approach it used at the time—a combined fire and police department—and that it needed to evaluate whether that approach was still an appropriate model for providing services to its community. We further identified concerns related to the city’s public safety training, noting that although Lindsay generally hired trained police officers and then provided them with training in firefighting, the city had not ensured that two officers had received firefighting training.
Finally, we noted that the age of Lindsay’s police and fire vehicles could affect the safety of Lindsay’s residents should those vehicles break down while responding to an emergency.
Lindsay evaluated the effectiveness of using combined police and fire functions, and in February 2022 presented a reorganization proposal to the city council. In March 2022, the city began its reorganization to create a single public safety department operated with separate functions for both police and fire. The city calculated the fiscal impact of the personnel elements of this change to be between $88,000 and $112,000 in additional costs annually. To support these additional costs, the city expected to use ARPA funds to pay for the first year’s costs and use general fund monies to pay for costs in the second and following years. The city indicated that it would seek grant funding as it became available. The city further requires annual mandatory training for its firefighters, and it has established checklists to show that its firefighters and volunteers have met their annual training requirements. The city also established tracking documents that it can use to track whether its staff have demonstrated the knowledge, skills, and abilities related to their assigned duties. Accordingly, we find that the city addressed our recommendation regarding its public safety approach and training.
In addition, the city adopted a fleet management and replacement policy in November 2021, which establishes, among other things, guidelines for replacing all city vehicles. The city included factors for consideration such as the vehicle’s age and mileage, its reliability and useful life, and the cost of maintenance and repairs. We note that Lindsay is currently monitoring the status of its public safety vehicles. For example, in its September 2024 annual fleet management and replacement evaluation, the city identified eight vehicles in its fleet that qualify for priority replacement and another two that qualify for replacement as the city’s budget allows. The director of finance stated that the city no longer needs two of the vehicles identified as priority replacements and plans to replace two others during fiscal year 2024–25. She explained further that the city’s chief of public safety had identified which two vehicles from the eight listed as priority replacements are in the greatest need of immediate replacement. The director of finance said that, beginning in fiscal year 2025–26, the city plans to replace three additional vehicles and begin budgeting to replace other vehicles as needed in the future. 46 CALIFORNIA STATE AUDITOR
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The City of Montebello Has Not Kept
Its Costs Below Its Revenue and Thus
Remains a High‑Risk Entity
RISK AREAS AS REPORTED IN OCTOBER 2021
STATE AUDITOR’S CURRENT ASSESSMENT OF
MONTEBELLO’S PROGRESS IN ADDRESSING THE RISK AREA*
Despite Progress in Some Areas, Montebello’s Financial Stability Remains Uncertain 1 Declining financial situation Pending
Montebello Continues to Make Questionable Decisions Related to Its Hotels 2 Did not provide analysis of hotel performance Fully Addressed 3 Did not include an important financial decision on the council agenda Fully Addressed 4 Did not adopt a policy to timely pay hotel management fees Fully Addressed Montebello Has Not Fully Resolved Problems With Its Procurement Process 5 Did not follow competitive bidding process Partially Addressed 6 Did not follow petty cash and credit card policies Fully Addressed 7 Made gifts of public funds Partially Addressed
* In accordance with state law, we used our professional judgment to assess the city’s progress in each of the risk areas in the table. We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
Pending: The city has not taken substantial action to address the risk area and, at the time of this audit, the conditions that created high risk for the city continue to exist.
HIGH‑RISK AREA #1
Declining Financial Situation
Status: We conclude that Montebello has not yet addressed this risk area because the city has continued deficit spending in its general fund.
In our December 2018 audit, we found that the city struggled to generate sufficient recurring revenue to meet its expenditures. Our October 2021 follow‑up audit found that the city’s finances improved slightly following our 2018 audit, but they declined dramatically in fiscal year 2019–20, in part because of the economic repercussions of the COVID‑19 pandemic. We reported that Montebello’s lower revenue and higher expenditures depleted its general fund reserves, thereby limiting its ability to respond to further revenue declines or expenditure growth while still maintaining services.
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In the years since our follow‑up audit, the city has built its general fund reserves through one‑time infusions of funding. According to the city’s fiscal year 2022–23 ACFR, Montebello had amassed a general fund reserve of $25.3 million by the end of that fiscal year, an amount that could cover nearly four months of that year’s expenditures. The city’s general fund reserves grew significantly between fiscal years 2021–22 and 2022–23—increasing by nearly $15 million. The increase in the city’s general fund reserves primarily resulted from selling its water system to the San Gabriel Valley Water Company for $16.2 million in February 2023, as we recommended it consider in our original audit. However, this condition is similar to the findings from our December 2018 audit of Montebello, which concluded that the city relied on one‑time revenue to preserve and grow its general fund reserves.
Although the city has made progress in building its general fund reserves, it will not be in a sustainable financial position unless it is able to avoid consistent deficits in its general fund.
Montebello has generally been unable to maintain general fund expenditures below the amount of its revenues. As Figure 6 shows, for fiscal years 2020–21 through 2022–23, there were two years in which the city’s expenditures and transfers out of its general fund exceeded general fund revenue and transfers into the fund.
The surpluses and deficits during this period ranged from a $7 million surplus in fiscal year 2021–22 to a $7.6 million deficit in fiscal year 2020–21, and the cumulative deficit in the general fund was $4.4 million. The director of finance shared with us that some of the expenditures in the city’s general fund during this period were expenditures of bond revenue from bonds that the city’s former redevelopment agency had issued. According to the director of finance, the city made the decision to record revenue from these bonds in the general fund before his tenure as director of finance. He believed that these expenditures—cumulatively $2.5 million during that period—were not reflective of the city’s true ongoing costs in the general fund because they were one‑time expenditures for restricted purposes. We reviewed the information the director of finance provided about these expenditures and found that, even after excluding those expenditures, the city still experienced deficits during two of the three fiscal years we reviewed and incurred an overall cumulative deficit.
In other words, although accounting for these expenditures reduces the magnitude of the city’s deficits, our overall concern remains that the city has not kept general fund expenditures below its revenues.
Further, according to the projections in the city’s fiscal year 2024–25 budget, Montebello anticipates that beginning in fiscal year 2025–26, it will enter a three‑year period of budget deficits of more than $1 million annually in its general fund. The director of finance stated that the city will use these projections to adjust current fiscal year expenditures, pursue opportunities to expand the city’s sales tax base, and review the organization as a whole in order to identify opportunities for cost savings or revenue enhancements. However, he also shared his belief that the city would eventually realize more revenue than these forecasts assumed. Specifically, he highlighted that the budget states that the city’s forecast does not include significant changes to sales tax revenue, which the city expects will occur in fiscal year 2024–25.
The director of finance stated that the city did not include or did not fully realize large revenue‑generating operations in the forecasted revenue because of the timing of 48 CALIFORNIA STATE AUDITOR
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Figure 6
The City of Montebello’s General Fund Expenditures Have Generally Been Higher Than Its Revenue in Two of Three Recent Fiscal Years
2020–21 2021–22 2022–23
Fiscal Year
0 20
40 60
10 30
50 70
80 $90
In Millions
$80.2
$76.4
$63.5
$70.5 $67.3
$59.7
General Fund Revenue General Fund Expenditures
Source: Montebello’s ACFRs.
Note: We calculated revenue by combining the revenue and transfers into the general fund in each fiscal year. This figure does not include other financing sources flowing into the general fund in the amount of $5.8 million in fiscal year 2020–21, $44,000 in 2021–22, and $1.3 million in 2022–23 that were related to the issuance of debt and the sale of assets. In addition, for fiscal year 2022–23, we excluded the $16.3 million transfer into the general fund because this was a one-time transfer that resulted from the city closing the water fund after the sale of the city’s water system. We calculated expenditures by combining the expenditures and transfers out of the general fund in each fiscal year. when the city developed the forecast. He explained that, in part, the forecast includes a conservative estimate of sales tax revenue, noting that the city did not have enough data from a recently opened entertainment venue at the time to more accurately project the growth of its sales tax revenue in future years. Nonetheless, Montebello has consistently overspent its general fund revenue and must show sustained progress in controlling costs to fully address this risk area.
Recommendation to Address This Risk Area:
To ensure that the city is able to sustain its general fund without relying on one‑time events, Montebello should adopt a financial plan with specific strategies to reduce its expenditures and build and maintain its revenue. 49 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #2
Did Not Provide Analysis of Hotel Performance
Status: We conclude that Montebello has fully addressed this risk area by providing detailed financial updates about hotel operations to the city council.
In our October 2021 audit, we describe that Montebello owns two hotels—the Hilton Garden Inn and the Home2Suites Hotel—both of which are operated by a third‑party we refer to as the hotel operator. Our 2021 follow‑up audit found that since our December 2018 audit, city staff presented a financial analysis of only one of these two hotels to the city council, and it did so just once in nearly three years. Without detailed financial information—which could include the hotels’ total revenue, expenses, and the amount due to pay for related debt—the city council has only limited ability to make informed financial decisions to protect the city’s interests. We determined that the city council is at risk of not detecting underperformance, errors, or misstatements in the hotels’ finances and that it cannot protect Montebello’s interests when it considers matters related to its contracts for hotel operations. In our May 2022 follow‑up assessment, we noted that staff were still presenting incomplete and inconsistent financial information to the city council.
Montebello has now provided more consistent and complete financial presentations to the city council. For example, in its first quarter budget report during fiscal year 2022–23, city staff presented that quarter’s revenue and expenses for both hotels and compared them with the actual revenue and expenses from the first quarter of each of the previous three fiscal years. We saw similar levels of detail in subsequent updates to the city council. These details provide transparency for hotel operations and allow the city council to more readily identify underperformance. Because the city has regularly provided detailed reports on hotel operations to the city council, Montebello has fully addressed this risk area.
HIGH‑RISK AREA #3
Did Not Include an Important Financial Decision on the Council Agenda Status: In May 2022, we concluded that Montebello had fully addressed this risk area by implementing our recommendation to include all matters of fiscal policy on its public city council meeting agendas.
Our October 2021 follow‑up audit found that the city council approved a loan of up to $3.4 million from its general fund for hotel renovations without properly including the issue on a council agenda. We recommended that the city council ensure that it includes all matters of fiscal policy on its council meeting agenda as state law requires. In May 2022, we reported that the city implemented our recommendation, and city council meeting agendas we reviewed during this audit show that the city has included matters of fiscal policy on council agendas. 50 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #4
Did Not Adopt a Policy to Timely Pay Hotel Management Fees Status: We conclude that Montebello has fully addressed this risk area because it has adopted a policy to pay its hotel fees on time and has recently paid those fees on time.
In our December 2018 audit, we found that because Montebello did not pay its hotel management fees, the city had accrued $2 million in interest costs by the end of fiscal year 2016–17. In our October 2021 follow‑up audit, we determined that the city was working to pay off its remaining management fee obligations, but Montebello had not developed policies to ensure prompt payment.
Following our October 2021 audit, the city created a policy related to timely payment of its hotel management fees. Further, trial balance reports from the city’s financial system as of June 2024 show that the city had no accrued unpaid interest for either hotel. According to a spreadsheet the city uses to track the payments it owes, only one payment remained outstanding as of June 2024 in the amount of $384,000.
According to the director of finance, the city will pay this amount when the hotel’s revenue account has sufficient funding. In recent years, the city has paid the fees for this hotel several months late without accruing interest. Further, the city has improved the timeliness of its payments since our original audit and follow‑up audit in 2021. Therefore, we consider this risk area fully addressed.
HIGH‑RISK AREA #5
Did Not Follow Competitive Bidding Process
Status: We conclude that Montebello has partially addressed this risk area by updating its municipal code to require city council approval for exceptions to the competitive bidding process, but the city can do more to improve its safeguards for procurement.
In our December 2018 audit, we found that Montebello had not sought competitive bids for certain contracts and that a former city manager had approved a contract that exceeded her approval authority. Further, our October 2021 follow‑up audit found that the city was not following requirements for contracting for services and would have benefited from increased city council oversight of its procurement activity. For example, we determined that Montebello violated its municipal code by not soliciting formal bids for a large professional services contract related to its golf course. To ensure that it obtains the best value when procuring services, we recommended that Montebello create a policy requiring staff to document when a valid exception—as described in the city’s municipal code—exists to the procurement process and report the rationale for using the exception to the city council in a public meeting.
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In January 2023, the city updated its municipal code, which addressed this risk by requiring city staff submit to the city council for approval a written justification for any exception to the procurement process. We reviewed examples of these notifications in two city council meeting minutes and found that the city staff had presented their rationale for using an exception when the city contracted for services outside of the standard process. In both instances, the city council authorized the exceptions.
However, Montebello has not adopted a policy addressing contracts without a maximum value. In both our 2018 and 2021 audits, we noted that Montebello needed a policy that addressed agreements without maximum values. We noted instances in both audits in which the city had entered into agreements with no maximum value, which provide fewer safeguards against overspending than contracts that include not‑to‑exceed values. In 2021 we recommended that the city establish a policy that requires contracts to include a maximum value when feasible and the city council to review and approve any agreement that binds the city financially and that does not include a maximum value. In March 2024, the city informed us that it had not implemented this recommendation, and the city’s director of finance confirmed during this audit that the city has still not adopted such a policy. He indicated that his preference would be for the city to amend its municipal code to address this issue.
Finally, because of our findings in 2018 related to the city not consistently using competitive bidding processes to ensure that it received the best value for services, we recommended that the city provide annual training on procurement requirements for all staff involved in the procurement process. In 2021 we found that the city had not provided the procurement training as we recommended.
Since our October 2021 follow‑up audit, the city has conducted procurement training and has taken steps to improve its training program. In February 2023, the city developed a policy for procurement training but, according to the city’s director of finance, the city manager never approved the policy. The city’s director of finance explained that the city manager at the time was on leave and the assistant city manager assumed his duties. The director of finance stated that because of this transition at the city manager level, the acting city manager never officially approved the policy. Montebello’s current city manager approved the policy in October 2024.
The policy describes the minimum topics covered in the training, such as the municipal code language and policies and procedures governing purchasing and procurement. The policy specifies the job classifications required to attend at least one training annually, and it requires the city to conduct three training events per year.
Before the recent approval of this training policy, the city had provided procurement training to its staff, but it could not present evidence showing that it ensured that all employees involved in procurement attended the training events. As it implements the new policy, it will be important for Montebello to track compliance with the policy. The city tracks attendance at training events by scanning and saving the paper sign‑in sheets, but it does not enter the attendance information into any electronic tracking system or searchable document. Although the sign‑in sheets provide records of who attended the training events, they do not allow the city to easily determine 52 CALIFORNIA STATE AUDITOR
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whether the necessary employees attended at least one training during a 12‑month period, challenging the city’s ability to monitor compliance with the new policy’s requirements. The director of finance indicated that he is open to implementing an electronic tracking system to make it easier to determine who did or did not attend training events.
Recommendation to Address This Risk Area:
To help ensure that city staff are properly trained in competitive bidding processes and other procurement activity, the city should monitor adherence to the new procurement training policy.
HIGH‑RISK AREA #6
Did Not Follow Petty Cash and Credit Card Policies
Status: In May 2022, we concluded that Montebello had fully addressed this risk area by generally eliminating the use of petty cash, issuing credit cards to individual employees instead of departments, and strengthening its purchasing controls.
In our May 2022 assessment, we reported that the city had fully addressed this risk area by implementing all of our recommendations regarding its use of credit cards and petty cash. Our December 2018 audit found that Montebello’s poor control over its petty cash and its lack of credit card policies increased the risk of fraud and abuse. Although the city implemented petty cash and credit card policies after that audit, our 2021 follow‑up audit determined that Montebello’s staff members had not consistently followed them. In our May 2022 assessment, we noted that the city stated that it had eliminated all petty cash drawers with the exception of a single drawer overseen by its finance department. In addition, the city eliminated departmental credit cards and instead issues credit cards to individual employees.
Montebello set individual transaction limits for each cardholder. The city also established a credit card policy that prohibits splitting a purchase into multiple transactions to circumvent the transaction limits and requires city manager approval for transactions that exceed the approved transaction limits. The result of implementing our recommendations is that the city has strengthened its purchasing controls and reduced the risk of abuse and fraud.
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HIGH‑RISK AREA #7
Made Gifts of Public Funds
Status: We conclude that Montebello has partially addressed this risk area by updating its municipal code to prohibit gifts of public funds, but the city has not ensured that its employees receive ethics training that addresses the prohibitions on gifts of public funds.
Our October 2021 follow‑up audit found that Montebello’s senior management circumvented the city’s credit card policies when it used multiple transactions to purchase gift cards and mugs to show its appreciation of its employees during the holiday season—purchases that we considered to have constituted gifts of public funds. To help prevent such occurrences in the future, we recommended that the city revise its municipal code to prohibit the purchases of employee gifts with public funds. In February 2022, the city revised its municipal code accordingly. We also recommended that the city obtain for the city council and all employees with purchasing authority periodic legal and ethics training regarding the appropriate use of public funds and the prohibition on such funds to make gifts. The city manager stated that the city has not yet required legal and ethics training, but he intends to hire an independent entity to conduct the training. Further, he noted that he will implement a formal requirement that all staff complete their ethics training every two years and a process to monitor their completion.
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The City of West Covina Remains a
High‑Risk Entity Because Its Approach to
Addressing Its Reserve Level Increases Its
Risk for Future Financial Instability
RISK AREAS AS REPORTED IN DECEMBER 2020
STATE AUDITOR’S CURRENT ASSESSMENT OF
WEST COVINA’S PROGRESS IN ADDRESSING THE RISK AREA*
West Covina’s Ineffective Fiscal Management Threatens Its Ability to Meet Its Financial Obligations and to Provide City Services 1 Continual diminishing of reserves Partially Addressed 2 Questionable use of city resources Partially Addressed 3 Financial decisions based on insufficient analyses Fully Addressed 4 Lack of formal financial recovery plan Fully Addressed West Covina’s Weak Enforcement of Its Procurement Policy Increases the Risk of Waste and Fraud 5 Inadequate management of purchase cards Fully Addressed 6 Lack of oversight to ensure that contracts provide best value Partially Addressed * In accordance with state law, we used our professional judgment to assess the city’s progress in each of the risk areas in the table. We determined whether the steps the city took and the overall conditions relevant to each risk area meant that the city fully or partially addressed the risk areas, or whether substantial action relevant to the risk area was still pending. We explain the statuses identified in this table in more detail below.
Fully addressed: The city has taken sufficient action to address the risk area when we consider its effort in combination with the related conditions at the time of this audit.
Partially addressed: The city has taken positive action to address the risk area, but its effort is incomplete when we consider it in combination with the related conditions at the time of this audit.
HIGH‑RISK AREA #1
Continual Diminishing of Reserves
Status: We conclude that West Covina has partially addressed this risk area. Although the city’s general fund revenue is higher than its operational expenditures, the city has chosen to maintain the minimum recommended reserve level, which introduces higher risk it will not be able to address future financial needs.
In our December 2020 audit, we reported that West Covina had diminished its general fund reserve by operating with a structural deficit, a condition in which operating expenditures exceeded revenue. We reported that the city’s general fund reserves had declined, leaving the city vulnerable to unexpected expenditures or reductions in anticipated revenue, which jeopardized the city’s ability to meet its financial obligations without reducing services.
Since our original audit in December 2020, West Covina has grown its general fund reserves from $12.6 million in fiscal year 2019–20 to $17.7 million as of the end of fiscal year 2022–23, which equals roughly two and a half months of general fund expenditures. The GFOA 55 CALIFORNIA STATE AUDITOR
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recommends that government entities maintain unrestricted fund balances in their general funds of no less than two months of reserves. West Covina’s general fund reserves were above that minimum standard at the end of fiscal year 2022–23.
In addition, the city no longer operates with a structural deficit. Instead, the city’s general fund revenue exceeds its operating expenditures. Figure 7 shows the city’s revenue, which includes the transfers the city made into its general fund, as well as operating expenditures and transfers the city made out of the general fund from fiscal years 2020–21 through 2022–23. Because the amount the city transfers out of its general fund causes the funding flowing out of the general fund to exceed the funding flowing in, we inquired further with the city about how it was managing its resources.
Figure 7
The City of West Covina Has Maintained Its Operating Expenditures Below Its Operating Revenue 2020–21 2021–22 2022–23
Fiscal Year
0 20
40 60
10 30
50 70
80 $90
In Millions
$66.8
$22.0
$88.8 $85.7
$61.9
$20.4
$82.3 $81.0
$68.2
$13.4
$81.6
$74.2
General Fund Operating Expenditures
General Fund Operating Revenue Transfers Out of the General Fund and Transfers In
Source: West Covina’s ACFRs.
Note: We calculated revenue by combining the revenue and transfers into the general fund in each fiscal year but did not include $185.6 million in transfers into the general fund related to the city's pension bonds in fiscal year 2020–21. The city did not have other financing sources or uses flowing in or out of its general fund in these three fiscal years. 56 CALIFORNIA STATE AUDITOR
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The city explained that it is managing the general fund according to its reserve policy, which states that the city will maintain a reserve of no less than 17 percent of its annual operating expenditures, equating to a two‑month threshold. In fiscal years 2020–21 through 2022–23, because the city’s general fund reserves were above the two-month threshold, the city made certain transfers out of its general fund.
During those years, the city calculated the level of general fund reserves its policy required it to maintain and transferred most of the remaining difference in general fund revenue to other city funds. These other funds include a fund related to the city’s OPEB costs and another fund accounting for capital projects. These transfers were discretionary as the city’s policy on reserves allows the city council to override them. Although the city also made other transfers that were not discretionary, its general fund reserves would have grown by the end of fiscal year 2022–23 if the city had not made the discretionary transfers.
The city’s approach to managing its general fund reserves is riskier than if it focused on building a higher reserve amount. Although the city’s reserve policy aligns with the GFOA’s fund balance guidelines, the GFOA also identifies that a government’s particular situation may require a reserve balance significantly in excess of this recommended minimum level. West Covina’s pension related debt may represent such a situation. The city’s net pension liability and pension‑related debt equaled nearly 200 percent of government‑wide revenue for fiscal year 2022–23. When a city’s pension obligations and debt reach levels that equal such high percentages of its overall revenue, the city is at high risk for obligations and debt payments supplanting other priorities or goals that the city needs to or wants to accomplish. The city’s pension debt represents a significant risk to the stability of the city’s general fund, which should prompt West Covina to consider establishing a general fund reserve target at a level above its current policy to better mitigate this risk.
Recommendation to Address This Risk Area:
West Covina should establish a general fund reserve level higher than its current 17 percent goal that is sufficient to mitigate current and future risks, including its pension‑related debt.
HIGH‑RISK AREA #2
Questionable Use of City Resources
Status: We conclude that West Covina has partially addressed this risk area.
The city has not renegotiated its labor agreements with its employee unions as we recommended, but it has updated its fee schedule.
In our December 2020 audit, we raised concerns about city leadership’s decisions regarding the use of city resources because we concluded that those decisions had significantly reduced the city’s financial reserves. Specifically, we focused on the 57 CALIFORNIA STATE AUDITOR
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decisions the city had made to fund its employees’ health benefits at rates well above the average for state and local governments. West Covina paid 95 percent of its employees’ healthcare premiums, compared to the 86 percent and 75 percent rates, on average, that state and local governments in the region paid for employee‑only and family plans respectively. As of fiscal year 2022–23, the city’s contribution rates to employee health benefits remained at 95 percent, demonstrating that the city is still incurring unusually high costs for healthcare. The finance director stated that the city has not yet renegotiated its agreements with its employee unions to alter how much it contributes to health benefits. The finance director also stated that West Covina is in the process of renegotiating those agreements and that the city hopes to complete its negotiations before the end of December 2024.
In December 2020, we also expressed concern about the fact that the city had not raised service fees to levels that would fully cover the city’s costs to provide services such as building permits and inspections. West Covina has now addressed that concern. The city’s August 2023 cost of service study calculated the full cost of city services and identified new fees for services the city had been providing without charging a fee. In December 2023, the city adopted an updated fee schedule with the amount the city planned to charge for specific services.
HIGH‑RISK AREA #3
Financial Decisions Based on Insufficient Analyses
Status: We conclude that West Covina has fully addressed this risk area. The city has improved its processes for providing financial information to its city council and has developed long‑range financial forecasts.
In our December 2020 audit, we noted that West Covina did not always provide complete information to the city council when it requested approval for budgetary or organizational changes. For example, we noted an instance in which the city council approved salary increases for firefighters based on the city fire chief’s assertion that the increases would save money in the long term, but the fire chief did not present a documented analysis to support this assertion. We also raised concerns that West Covina lacked a process for developing financial projections of its planned expenditures and anticipated revenue for the following years.
West Covina has taken steps to ensure that it considers the financial impact of its decisions. The city has developed a financial evaluation template that provides a guide for evaluating both the short and long‑term impacts of major revenue and expenditure decisions, and it has incorporated the template into its city council proposals for agenda actions. Further, West Covina has begun to regularly produce long‑range financial forecasts. For each of its last three budgets, the city has produced a corresponding long‑range financial forecast. The forecasts include projected general fund revenues and expenditures, and they identify assumptions the city used for projecting growth in its revenues and expenditures. 58 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #4
Lack of Formal Financial Recovery Plan
Status: In January 2022, we determined that West Covina had fully addressed this risk area by developing and implementing a financial recovery plan.
In our December 2020 audit, we concluded that West Covina had not developed a comprehensive financial recovery plan to improve its long‑term financial health.
In January 2022, we determined that West Covina had fully addressed this risk area. West Covina developed a financial recovery plan that included corrective action objectives, steps to achieve those objectives, expected completion dates for those steps, the lead and support staff responsible for accomplishing each of the steps, and the status of its progress toward accomplishing its objectives. The city’s finance director has submitted updates of this plan to the city’s audit committee— the members of which are a combination of city representatives and members of the general public—ensuring that the city is able to track its progress and be held accountable to its objectives by the public.
HIGH‑RISK AREA #5
Inadequate Management of Purchase Cards
Status: We conclude that West Covina has fully addressed this risk area by strengthening its purchase card policy.
In our December 2020 audit, we found that West Covina had inadequately managed components of its purchase card policy. In particular, we determined that the city did not have sufficient documentation showing that managers had authorized temporary increases to the amount that individuals were allowed to charge in a single purchase card transaction. We raised concerns that the lack of documentation could be indicative of systemic issues that, if left unaddressed, could result in increased risk of excessive expenditures or potential fraud.
The city’s July 2022 purchasing manual includes provisions covering employees’ use of purchase cards, including the process for requesting single‑transaction limit increases. We reviewed examples of completed single‑transaction limit increase requests, which document the individual’s current transaction limit and the temporary transaction increase amount. The examples document the duration for the temporary increase and the reason for the request. Because of its recent implementation of policies and practices, the city has addressed this risk area. 59 CALIFORNIA STATE AUDITOR
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HIGH‑RISK AREA #6
Lack of Oversight to Ensure That Contracts Provide Best Value Status: We conclude that West Covina has partially addressed this risk area. The city has addressed some but not all of our concerns regarding its contracting practices.
In our December 2020 audit, we found that West Covina had violated its competitive bidding requirements by contracting with a consulting firm because of a recommendation from the human resources director rather than comparing bids. We also raised concerns about repeated amendments the city had made to a waste collection contract. That contract provided to the city annual recurring payments of $300,000 from the waste collection company. It also included terms that we determined may not be in the best interest of the city or its residents, such as the contract’s built‑in extensions that annually reset the period of the agreement to 25 years. To address this risk area, we recommended that the city adopt policies clarifying when contract amendments are appropriate, adopt a policy requiring the city to document its rationale for contract periods longer than five years, and negotiate with the waste collection vendor for more favorable terms.
In response to our recommendations, the city has established policies clarifying the appropriate use of contract amendments. In particular, West Covina’s June 2022 update to its ordinances identifies circumstances under which the city manager may amend purchase orders or contracts. However, according to its finance director, West Covina has not amended its contracting policies to include a requirement that city management document reasons for entering into any contract or extension with a duration in excess of five years. The finance director stated that, by July 2025, the city will develop such a policy. Finally, the finance director stated that West Covina has not taken steps to address issues we identified related to the questionable terms in the waste collection contract. She indicated that the city’s commercial and residential rates under the contract were in line with rates from surrounding cities, as the city noted in a February 2022 staff report to the city council, and that it was in the city’s best interest to keep the terms of the contract in order to maintain the annual recurring payments that the city receives from its waste collection provider. City staff presented a similar analysis to the city council again in May 2023 as part of ongoing negotiations with its waste collection vendor about a contract amendment. In light of its regular comparison to the waste collection rates paid by surrounding cities, we are no longer concerned about this element of this risk area. 60 CALIFORNIA STATE AUDITOR
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We conducted this audit in accordance with generally accepted government auditing standards and under the authority vested in the California State Auditor by Government Code section 8543 et seq. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on the audit objectives. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
Respectfully submitted,
GRANT PARKS
California State Auditor
December 19, 2024
Staff: Bob Harris, Audit Principal
Ralph M. Flynn, Senior Auditor
Richard Power, MBA, MPP
Savanna Rowe
Legal Counsel: Richard B. Weisberg
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Appendix
Scope and Methodology
Government Code section 8546.10(e) requires that the California State Auditor issue a report on high‑risk local government entities every three years, unless we have removed them from the high‑risk program. For this audit, we reviewed the cities of Blythe, El Cerrito, Lindsay, Lynwood, Montebello, San Gabriel, and West Covina. Our prior audits of these cities identified areas of high risk related to the cities’ financial condition, financial stability, and oversight of city contracts, among other issues. The table lists the resulting audit objective and related procedures that address these high‑risk areas. Unless otherwise stated in the table or elsewhere in the report, statements and conclusions about items selected for review should not be projected to the population.
Audit Objective and the Methods Used to Address It
AUDIT OBJECTIVE METHOD
1 Evaluate the cities of Blythe,
El Cerrito, Lindsay, Lynwood,
Montebello, San Gabriel, and
West Covina to determine the extent
to which each city has addressed
prior audit recommendations,
assess trends in the city’s financial
condition, and determine whether
we should continue to designate
any of these cities as high‑risk local
government agencies.
• Evaluated each city’s progress toward addressing the risk areas we identified in our prior audits and the recommendations associated with those risk areas. The analysis of the cities’ efforts to address these risk areas and recommendations included a review of the specific documentation relevant to each risk area and recommendation. These steps included a review of city policies and procedures, tracking spreadsheets, budgets and financial information, contracts and contract management practices, among other information and documents as we describe in more specific detail throughout this report.
• Interviewed city officials and staff to inquire about specific actions taken to address the risk areas and recommendations. To the extent possible, substantiated assertions by analyzing the documentation and information referenced above. • Reviewed the cities’ audited financial statements to determine and assess trends in their financial conditions, including their general fund balances, revenues and expenditures, and, when relevant, other major fund balances. At the time of our audit, the most recently available audited financial statements for each city were for fiscal year 2022–23.
• Determined whether the cities had taken satisfactory corrective action in addressing their areas of high risk and concluded whether we should remove their high-risk designation. We drew our conclusions about each city’s high-risk status from our assessment of the unique circumstances at each city and the relative importance of the high-risk areas that we identified during previous audits. We did not make our determinations based on a formula or standard number of high-risk areas that the cities needed to have demonstrated progress in addressing.
Source: Audit workpapers.
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CITY MANAGER’S OFFICE
CITY HALL 10890 San Pablo Avenue, El Cerrito, CA 94530
Telephone (510) 215-4305 Fax (510) 215-4379 http://www.el-cerrito.org 1 November 22, 2024
Grant Parks
California State Auditor
621 Capitol Mall, STE 1200
Sacramento, CA 95814
Dear State Auditor Parks:
The City of El Cerrito has reviewed the Draft Audit Report for Audit 2024-801, which is a follow-up to the original Audit Report 2020-803 issued to the City in March 2021. The City is pleased that the California State Auditor’s office is removing the City of El Cerrito from the Local High Risk Program.
As your report stated, the City has made significant progress in addressing the identified risk areas, and we are committed to ensuring that the City continues to maintain fiscal discipline to sustain our financial health, particularly in the area of ongoing costs. We are resolved to continue to right-size the budget and consider additional strategies to ensure our long-term sustainability, including conducting a cost allocation and fee study and a service delivery study as indicated in the Audit Report. Engaging these studies will allow the City to objectively look at operational protocols and streamline processes while ensuring that services are equitable and costs are effectively recovered, and confirm that these risk areas remain addressed.
The City is extremely proud of our accomplishments that have addressed the identified risk areas and beyond. The remarkable turnaround in the City’s financial position, completion of all the recommendations in the report, and removal from the Local High Risk Program in just three years is the result of a great deal of hard work on the part of the City Council, City staff, and community. We want to thank the State Auditor team and appreciate the opportunity that the audit and the Local High Risk Program presented the City to enhance and improve our policies and procedures and address our structural financial issues, which has ensured the City’sfiscal sustainability and provides a bright future for El Cerrito.
Please feel free to contact me should you have any questions.
Respectfully,
Karen E. Pinkos, ICMA-CM
City Manager
City of El Cerrito
cc: El Cerrito City Council
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1 * California State Auditor’s comments begin on page 77. *
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Comments
CALIFORNIA STATE AUDITOR’S COMMENTS ON THE RESPONSE FROM
THE CITY OF MONTEBELLO
To provide clarity and perspective, we are commenting on Montebello’s response to our audit. The numbers below correspond to the numbers we have placed in the margin of its response.
Montebello misstates the number of risk areas that we determined it has fully or partially addressed. As page 47 shows, we determined that the city fully addressed four high-risk areas, partially addressed two other high-risk areas, and the city's progress in addressing another risk area is pending.
The city’s response cites various factors, such as increases in sales tax and property tax revenue, occurring during a period that audited financial statements were not available at the time we conducted our audit. We look forward to reviewing information from these financial statements, when available, that Montebello can use to demonstrate its progress in addressing its risk areas.
The city’s response refers to criteria that is not relevant to our audit's findings. Our analysis of the city’s reserve was primarily accomplished by considering two factors:
the relative size of the reserve and the means by which the city built its reserve.
Governmental Accounting Standards Board Statement Number 54 does not establish criteria for assessing either of these factors. Further, the city incorrectly states that our report appears to penalize the city for the way it grew its reserves. On page 48, we report our concern that the city primarily relied on one-time revenue to grow its general fund reserves. That condition is similar to the condition we found during our 2018 audit. Relying on one‑time revenue to build or maintain a general fund reserve is an unsustainable approach. As we state on page 48, the city will not be in a sustainable financial position unless it is able to avoid consistent deficits in its general fund. Moreover, we disagree with Montebello’s characterization of how we describe the sale of its water system. On page 48, we recognize the positive impact that the sale had on the city’s general fund reserves by reporting that the city’s reserve grew by nearly $15 million between fiscal years 2021–22 and 2022–23, an increase we attribute to the sale of the water system and describe as significant.
During our audit, Montebello brought these expenditures to our attention, as well as other expenditures the city stated were one-time in nature, and we determined that it would be inappropriate to exclude them from our analysis. All of these costs pertained to city operations and should be accounted for as general fund expenditures that impacted the city’s financial position. The city’s description of its experience with these types of expenditures underscores why it is important for Montebello to maintain a sustainably healthy level of general fund reserves to mitigate current and future financial risks.
1 2
3 4
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We stand by our assessment of Montebello’s progress in addressing High-Risk Area #1.
The comments we made above, specifically comments 3 and 4, explain our position on the city’s objections to our review of its general fund reserves and general fund expenditures. Furthermore, we acknowledge on page 47 that our 2021 audit of the city reported that the pandemic affected revenues and expenditures of the city’s general fund in the fiscal years addressed by that audit. Therefore, our assessment of the city’s progress in addressing its financial condition is accurate.
We stand by the conclusion we reported in October 2021. As that audit report states, we believe that purchases the city made to provide gift cards and mugs to its employees constituted a gift of public funds. Although the city disputed our conclusion and stated that these purchases were not violations of the law, no evidence the city presented convinced us that we were incorrect in our conclusion.
Montebello inaccurately characterizes our office’s involvement and role in its effort to implement a recommendation from the 2021 audit. First, the city implies that our office was not forthcoming with information about the type of training we recommended the city obtain. To the contrary, our recommendation specifically contained this information. That recommendation states that “To ensure the city does not make gifts of public funds, the city should … obtain for the City Council and all employees authorized to make expenditures with city funds bi-annual legal and ethics training from an entity that is independent from and not affiliated with the city or the city council, such as from the Attorney General’s Office or the District Attorney’s Office, regarding the appropriate use of public funds and the prohibition on using public funds to make private gifts.”
Secondly, Montebello implies that after the 2021 audit, we did not provide it with direction about specific legal and ethics training that the Attorney General’s Office or District Attorney’s Office could offer to the city. To be clear, our recommendation never precluded the city from obtaining training from another source that it deemed to be independent. Moreover, we believe it would be inappropriate for our office to choose a specific training course for the city. The audit standards we are required by state law to follow specify the need to avoid management participation threats, such as the preparation of an audited entity's corrective action plan. Consequently, we believe it is not our role to make decisions about the selection of training for city staff.
Finally, Montebello mischaracterizes that it was eventually able to move forward with implementing this recommendation only after we amended the phrasing of the recommendation. Although page 54 presents a summarized version of the recommendation that we made in our 2021 report, the recommendation remained unchanged. The city was always at liberty to procure ethics training from any independent source it felt was appropriate.
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STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: City Clerk
FROM: Maegan Peton, City Clerk and Assistant to the City Manager AGENDA TITLE: Lindsay Economic Development Committee Member Selection
ACTION & RECOMMENDATION
Select two applicants to serve as Committee Members for the immediate vacancies on the Lindsay Economic Development Committee.
BACKGROUND | ANALYSIS
At the September 10, 2024, Council Meeting, the City Council adopted Resolution No. 24-31 formally establishing the Lindsay Economic Development Committee and approving the bylaws that will govern its operations. Additionally, on November 12, 2024, the committee bylaws were amended through the adoption of Resolution 24-39. This amendment expanded the residency requirement from within the City limits to the boundaries of the Lindsay Unified School District, in order to include residents who may reside within the City’s sphere of influence.
The bylaws were most recently amended on February 11, 2025, through Resolution No. 25-04 to increase the number of members from five (5) to six (6) and the application period was opened.
The application period opened February 12, 2025, and ends February 25, 2025, at 5 p.m.
Staff recommends selecting two applicants to fill the immediate vacancies on the Lindsay Economic Development Committee.
FISCAL IMPACT
There is no fiscal impact directly associated with this action.
ATTACHMENTS
1. Member Applications
Reviewed/Approved: ______
Item #: 11.2
Action Items
Anita Gustuson
Lindsay, CA 93247
Dear Selection Committee:
I am excited about the opportunity to serve on the Economic Development Committee for the City of Lindsay. As a resident of Lindsay for over 30 years, with more than 25 years of experience in procurement and city operations, along with a background in finance and extensive involvement with the Lindsay Chamber of Commerce, I offer a solution-oriented, resourceful, and dependable approach to advancing economic growth and strategic planning.
My objective is to support Lindsay’s growth and prosperity by leveraging my experience in procurement, communication, and strategic planning. Key responsibilities I’ve undertaken include:
• Building and maintaining communication with vendors, city departments, and the community.
• Researching resources and ensuring compliance with city regulations and policies. • Identifying cost-saving strategies and evaluating opportunities for improvement. • Managing records and contracts for community capital projects. • Preparing reports and coordinating between city departments and vendors. • Leading Lindsay Chamber of Commerce Main Street revitalization efforts to boost local business and enhance the downtown area.
• Implementing policies to promote economic development, community relations, and business sustainability.
• Coordinating community events to support local businesses and attract visitors. • Serving as the primary point of contact for inquiries and providing referrals and resources.
Now retired from the City of Porterville Finance Department, I hold an Associate of Arts degree and a Paralegal certificate. I am also a proud graduate of the Leadership Lindsay class of 1993.
Colleagues describe me as professional, resourceful, and committed to community service. I am eager to bring these qualities to the Economic Development Committee and work collaboratively to support Lindsay’s growth and prosperity.
Regards,
Anita Gustuson
STAFF REPORT
TO: Lindsay City Council
MEETING DATE: February 25, 2025
DEPARTMENT: City Manager
FROM: Daymon Qualls, City Manager
AGENDA TITLE: Update on Development Projects and Water Infrastructure
ACTION & RECOMMENDATION
Receive updates on current City development projects and water infrastructure projects.
BACKGROUND | ANALYSIS
Water Infrastructure & Feasibility Study Update
• In 2023, the City completed a comprehensive water feasibility study to assess our current water infrastructure and identify necessary improvements to support new residential and commercial development. In 2024, a water capacity Addendum was issued to the feasibility study. This memo aims to concisely document the City’s current state of water supply availability under present conditions and the feasibility of adding additional water users to the system from the perspective of water supply availability.
Well 11 & Future Water Treatment Facility:
• A key finding from the study is the importance of the planned water treatment facility for Well 11, which is scheduled to come online in 2026.
• This facility is central to our strategy for serving increased development in the City.
Ongoing RFP for Well 11 Inspection:
• The City has initiated an RFP process for a detailed inspection of Well 11. • Purpose: The inspection aims to determine the current condition of Well 11. • Outcome: Data collected from this inspection will be critical in informing a technical memo that outlines the City’s capability to support new development. Once this project is completed and the inspection data is reviewed, staff will incorporate the findings into the technical memo. Staff will subsequently present the updated information to the City Council to better inform decision-making regarding water infrastructure and service capacity for upcoming development projects.
Conclusion
The City continues to make steady progress on multiple development projects while also addressing critical infrastructure needs. The forthcoming Well 11 inspection and acceptance of the water capacity technical memo are key steps in ensuring that our water supply system can support the anticipated growth in both residential and commercial sectors.
Development Projects Update
Below is an update on the status of current development projects within the City of Lindsay:
1. Mission Estates – 90 Parcels
o Status: Final Subdivision Map approved in the mid-2000s. o Next Steps: The property owner has been in contact regarding resubmitting up-to-date Improvement plans.
o Action: Pending Improvement plan submittal.
2. Palm Terrace 3 – Tentative Subdivision Map (10 Parcels) o Status: Palm Terrace III is proposing 10 single family dwellings. o Stage: Tentative Subdivision Map.
Item #: 12.1
Discussion Items
3. 1001 Fresno Street – 4 Parcels + Remainder
o Status: Proposed lot split includes 3 dual plex units and 1 triplex on the four parcels. o Next Steps: Awaiting final map resubmittal and currently working on the 5th Improvement Plan check.
4. Travel Center – Tulare and Hwy 65
o Status: All submittals have been approved.
o Next Steps: Awaiting permit payment for both onsite and offsite improvements.
5. Lindsay Transit Center – Mt. Vernon and Hermosa
o Stage: RFQ Currently out for Architecture Design Services, due 3-6-25.
6. O’Hara Subdivision – Phase 1 (48 Parcels; Total of 145 Parcels) o Status: Phase 1 improvement plans, landscape designs, and Final Subdivision Map have been approved.
o Next Steps: Pending update of the engineer’s estimate and resolution of a storm drain issue.
7. O’Hara Subdivision – Phase 2 (39 Parcels)
o Status: Phase 2 improvement plans have been approved. o Next Steps: Landscape plans and Final Subdivision Map are pending.
8. Hidden Oaks – Tulare and Hwy 65 (50 Parcels)
o Stage: Tentative Subdivision Map, Conditional “Will-Serve” letter for water issued February 2025.
9. Hermosa Subdivision – 137 Parcels
o Stage: Preliminary Site Plan Review was completed 06/26/24.
10. Sierra Mini Storage – 1200 Units & Office
o Stage: In the Improvement stage.
11. Clone Estates – 7 Parcels
o Stage: Tentative Subdivision Map in the review process.
12. Westmore Senior Apartments – 40 Units
Stage: Site Plan Review is in process.
13. 1078 E. Tulare Rd. – 4 Units
o Stage: Site Plan Review is in process.
14. 232 S. Mirage Ave. – 3 Units
o Stage: Site Plan Review is in process.
15. 110 N. Westwood Ave. – 7 Units
o Status: All permits have been approved and issued.
o Next Steps: Construction is underway, though a Certificate of Occupancy has not yet been issued.
16. Living Water Lot Line Adjustment – Lot Merger
o Stage: Lot Line Adjustment is in process.
17. Ordinance Amending Zoning Ordinance and Subdivision Ordinance to comply with State Housing Laws, etc. – Ordinance Text Amendment
o Stage: In process by staff and consultant. Will be brought to City Council in March.
18. Regional Housing Element – General Plan Amendment
o Stage: In process by Rincon Consultants. Next submittal to HCD is expected at the end of March or early June.
19. Rezone of properties back to Mixed Use from Light Industrial – Rezoning Stage: Staff is ready to bring a City-initiated Rezone to City Council if desired.
FISCAL IMPACT
There is no fiscal impact associated with this action.
ATTACHMENTS
1. None.
Reviewed/Approved: ______