MEDIA RELEASE CITY OF WATSONVILLE City Manager's Office 275 Main Street, Suite 400 • Watsonville, CA 95076 www.cityofwatsonville.org 1/10/2013 CONTACT: Mayor Lowell Hurst, 831-768-3010 Carlos Palacios, City Manager, 831-768-3010 Ezequiel Vega, Administrative Services Director, 831-768-3470 (FOR IMMEDIATE RELEASE) Today the Santa Cruz County Grand Jury released a performance audit of the City of Watsonville conducted by the San Francisco based Harvey M. Rose and Associates firm. City staff and City Council are reviewing the report and an agenda item has been scheduled for the January 22 nd City Council meeting to discuss and approve the City’s response to the audit. City Manager Carlos Palacios stated the following: “We agree with some of the recommendations of the auditors regarding the need to update selected administrative rules and procedures and in fact had already implemented some of the recommendations. While the City has many good practices in place, we agree that some written policies could benefit from being updated. We agree that the City’s financial management computer system needs to be updated and replaced in the coming years. We also acknowledge that the City's finance staff, like other City Departments, has been over-burdened and understaffed for several years. In an effort to increase our focus on the financial systems, we have transferred some functions, like Utility Billing, Risk 1 Management and Health Plan Management to other departments in the past year. We agree that the City, like other cities in the State and Nation, has been in a challenging financial situation over the past three years due to the impact of the Great Recession on the City’s major revenue sources. We agree that the City has spent down reserve balances in the past three years. Budget decisions were made by the City Council after extensive public hearings, discussion and public debate and resulted in major cut backs to employee salaries and in layoffs. The City Council made the deliberate decision to prioritize public safety and prevent layoffs in Police and Fire personnel while making cutbacks in administrative staff and placing more stress on fund balances. We disagree strongly with the auditor’s characterization of the City’s financial strength because the auditor has discounted and ignored contextual background information and made poor choices in comparison cities. In fact, the City’s key financial indicators show that when the City is compared to truly comparable cities, the City is close to the median in financial strength. We disagree strongly with the auditor’s characterization of City budget management practices. The auditor made the error of comparing original budget to final budget amounts while ignoring City Council approved mid-year budget amendments. In fact, overall, the City General Fund has been under-budget for each of the last three years. The auditor also ignored City Manager approved intra-fund departmental budget adjustments as allowed by City Council Resolution. We disagree with the majority of the auditor’s evaluations of selected purchasing transactions. We look forward to a detailed discussion of each of the transactions and the demonstration that the transactions complied with approved purchasing procedures. 2 A true performance audit would acknowledge the City’s significant achievements during the time period under study including major projects such as the 1.3 billion gallon Water Recycling Plant, the LEED Platinum Water Operations Center, the 131,000 square-foot Civic Plaza Building including the new Main Library, new Superior Courts and 460 car Parking Structure, over six miles of scenic nature trails, an 850,000 KWH Solar Panel installation, the Contigo Gang Prevention and Intervention Program, the Urban Greening Plan and the Watsonville Vista 2030 General Plan. The City actively pursued and was awarded millions of dollars in grant funding to support these projects which leveraged our limited local funding.” Mayor Lowell Hurst stated, “After three years of intense scrutiny and now an $88,000 study, the Santa Cruz County Grand Jury has come up with the ‘earth-shattering’ news that we need to update some rules and procedures and that the City is in a challenging budget situation. The City Council has had numerous public hearings and staff presentations and debate over the past three years of the Great Recession and has made informed and difficult budget decisions. We especially appreciate the informed and willing cooperation and sacrifice by our City employees in taking painful salary cuts and other cutbacks to maintain critical public services. It is true that there is risk involved in reducing City reserve fund balances. It is equally true that there is risk to the community in Police and Fire personnel layoffs. We acknowledge that difficult decisions remain ahead. Rather than restating the obvious, the Grand Jury may wish to reconsider mandating that the Santa Cruz County General Fund sponsor their fishing expeditions and let the County use the funds for what it was intended for: critical health and human service provision to the most vulnerable in our community.” ### 3
"Watsonville Performance Audit Press Release"