Monday, June 6, 2011

Marin grand jury releases scathing report on Corte Madera's finances

By Jessica Bernstein-Wax
Marin Independent Journal
Posted: 06/06/2011 06:00:24 PM PDT

Corte Madera may be nearing financial insolvency due to years of poor planning and careless spending, according to a Marin County Civil Grand Jury investigation.

Despite its high per-capita revenue from sales taxes generated at major shopping centers and car dealerships, Corte Madera has the lowest reserves of any Marin municipality both in total dollars and as a percentage of its budget, the grand jury found. The report recommends Corte Madera adhere to "best practice" financial policies, take a longer view of its budget and maintain higher reserves, among other suggestions for improving the town's money woes.

"The genesis of Corte Madera's fiscal problems is rooted in practices that span several decades and a management approach that appears ad hoc instead of long-range; reactive instead of proactive; and hopeful instead of strategic," the report said.

But town officials say they've spent money on important projects, such as street improvements and flood protection, and couldn't have anticipated the global economic downturn.

"Corte Madera, relative to other cities and towns in the county, does have excellent infrastructure," Mayor Alexandra Cock said.

"From my personal philosophy, it is a (fine) line to walk," she said. "Although I agree that we should have reserves and that's a prudent thing to do ... when taxes are being collected I also think that money should be spent to the benefit of the taxpayers. It really doesn't do us a whole lot of good to have it sitting in the bank."

Cock noted that a large amount of town money has also been spent on various lawsuits, including one with disability rights advocate Richard Skaff that settled last year.

Between 1983 and 2002, the town raked in an average of almost $1 million in surplus funds each year but spent $15.4 million of that $19.6 million on one-time projects — and failed to set aside adequate reserves, according to the grand jury report. In fact, the town hasn't met its goal of putting 10 percent of its general fund expenditures into reserves for the past 29 years, the document said.

This year, Corte Madera — which boasted $1,416 in general fund revenue per resident — had only $978,090, or just over 7.5 percent, of its $12.9 million budget in total reserves, the report said. By contrast, San Rafael had only $901 in general fund revenue per resident, but put $6.5 million, or just over 12 percent, of its $54.5 million budget into reserves.

The East Bay city of Emeryville, which like Corte Madera relies heavily on sales tax revenue and has a similar population of about 10,000, put $7.2 million of its $28.4 million budget into unrestricted reserves alone, the report said. Unlike committed reserves, which cities set aside for specific anticipated needs, unrestricted reserves serve as a general "rainy day" fund. Corte Madera had about $264,900 in unrestricted reserves during the same fiscal year.

A significant decline in sales taxes due to the economic recession and the 2006 purchase of the Park Madera Center on Tamalpais Drive for $10 million have further exacerbated the town's financial problems, according to the report.

An appraisal showed the Park Madera Center was actually worth just $5.9 million.

"Even when the Town Council learned that the appraised value was well below its contingent offer, it moved ahead with the transaction, pledging Corte Madera's town hall, two fire stations and the Park Madera Property as additional security for the debt financing," the report said.

The document acknowledges town officials have cut costs in recent years, freezing vacant positions, laying off three employees and instituting furlough days. However, it points out that — unlike all other Marin municipalities — Corte Madera has a single-tier pension plan for fire employees and foots the entire Kaiser health insurance bill for town employees and their dependents.

The civil grand jury began looking at municipal finances last summer after a scandal about public funds in the Southern California city of Bell attracted national attention, jury foreman Fred Cushing said.

"We looked at finances across the county," Cushing said. "It was through casting that wide net that Corte Madera just kept popping up as making bad decisions and as not having adequate reserves."

Cushing noted that Corte Madera officials have been cooperative and aren't suspected of any intentional wrongdoing.

"Our hope is certainly that they do rectify the situation and move into a path that creates more financial solvency for the town," Cushing said.

George Warman, the town's treasurer and administrative services director, said it's no secret that Corte Madera and other municipalities around the state are having fiscal problems because of the recession.

He said, however, that the grand jury undervalued the town's reserves in prior years by using a forecasting model that didn't take into account certain funds.

Corte Madera began working to reduce its staffing and capital improvement expenses even before the recession hit in 2008, he added. A beautification budget that once exceeded $500,000 to $600,000 for hanging baskets and landscaping on medians and around government buildings has also been reduced to less than $100,000, and town officials are negotiating with unionized employees about possible reductions in pension and health care costs, Warman said.

"We have been making continual reductions and changes over a period that actually goes back several years — it actually predates the meltdown of September and October of 2008," Warman said.

Asked whether he wished the town had put more money aside for emergencies over the years, he replied, "If we had known that there was going to be an economic collapse, we probably would have done that.

"In retrospect we probably should have done that, but we didn't know it was going to happen and neither did anyone else," Warman said. "We have people coming in and demanding that they want their sidewalks fixed. ... They want the nice median islands. They want parks. They want recreation programs. They want fire protection in the area.

"We don't have anybody come in here saying, 'You should have more money saved.'"

The entire grand jury report is available at

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