Saturday, June 28, 2014

(Butte County) Grand Jury faults FRRPD for lacking long-term financial planning, massive debt load

June 25, 2014
Oroville Mercury-Register
By Barbara Arrigoni

OROVILLE >> Despite noting positive improvements through a new general manager and other endeavors, the 2013-14 Butte County Grand Jury took the Feather River Recreation and Park District to task on two key points: failure to adopt a long-term financial plan, which previous Grand Juries recommended, and the district's "massive debt load" prompted by the purchase of the Activity Center.
The Grand Jury Report was released online late Wednesday afternoon, though it was reportedly not scheduled to be released until Friday.
The 11-page FRRPD report begins with a summary and the statement, "Poor management and unsound fiscal practices caused the serious problems facing the Feather River Recreation and Park District."
In its investigation, the jury reviewed previous Grand Jury reports and FRRPD's responses for 2005-06, 2006-07 and 2011-12; looked at past and current board agendas and meeting minutes; interviewed the current board of directors, administrators and supervisors; attended meetings; analyzed financial data; and reviewed the 2012-13 Matson and Isom audit report dated Feb. 7, 2014. Jurors also checked other sources, according to the report.
Although the Grand Jury affirmed that the new general manager has set the district "on a better path," the panel states her accomplishments are "overshadowed" by FRRPD's $4 million debt.
In the report, the Grand Jury states the total debt service payment required for the fiscal year ending June 30 is nearly $600,000. (The district's proposed 2014-15 budget shows FRRPD's yearly loan debts at more than $623,000). In June 2015, monthly payments for the Activity Center will increase from $23,262 per month to $42,586.
"If no corrective action is taken, in two years the annual debt service will jump to $825,000, a 40 percent increase," the report states.
Citing the recent audit, the Grand Jury noted that unless the district can generate additional revenue and renegotiate its debt, its "prospects for survival are doubtful."
According to the report, in 2011-12, that Grand Jury panel recommended the board adopt a financial plan, but the FRRPD board has failed to do so.
The current panel focused on determining if the past "shortfalls," particularly the financial problems identified in previous reports, had been corrected.
Besides finances, the Grand Jury found that most of the parks are in poor shape, and buildings, facilities and equipment are aging.
It also found that vandalism is a problem throughout the district that is serious and costly.
Another point the Grand Jury made was that two current directors have served since fiscal year 2005-06 and there are no limits on the number of terms a director may serve. The panel recommended the board consider adopting term limits and rotating participation on committees.
There were positive findings, such as improvement in record-keeping, a well-designed, current Web page and professionalism in the workplace.
"Under the General Manager, the District's operations have greatly improved," the report states. "However, the General Manager (and the Board) would benefit from the expertise of a qualified financial professional who could provide direction in long-term financial planning."
The Grand Jury was also critical of the purchase of the Oroville Gymnastics Sports Academy, now the FRRPD Activity Center.
"The purchase of the Activity Center, and, with it, the gymnastics and childcare programs, was ill-advised and unsupported by a realistic projection of income potential," the report states. "There was no performance review of the operation to determine if it was financially sustainable."
The district board has been attempting to restructure the debt on the Activity Center, but as the Grand Jury noted, there is a legal requirement to repay the debt within 10 years that complicates the process. The jury suggested "enlisting someone knowledgeable in both banking systems and commercial financing would contribute greatly to the negotiations."
Other options the Grand Jury mentioned were for the district to seek a grant to pay off the debt, negotiating a sale/lease-back agreement for the Activity Center, deeding the building back to the bank and moving to another facility, or declaring bankruptcy. Those were options given to the board last year by then-interim manager Tom Lando.
There were several recommendations the district has to respond to. Among those, the Grand Jury recommended the district continue to seek refinancing and other options to manage the debt load; seek professional guidance and develope a long-term financial plan, install security cameras; and explore the possibility of setting term limits for directors.
The Mercury-Register could not immediately reach the board or general manager for responses and will follow up on this report.
Contact reporter Barbara Arrigoni at 533-3136.

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