GadFlies Were Right: Schwab Era Finance Problems Shown

Grand Terrace has been borrowing redevelopment money to bolster its general fund for years

10:00 PM PST on Monday, February 22, 2010
By DARRELL R. SANTSCHI
The Press-Enterprise

The Grand Terrace City Council tonight will begin grappling with a budget crisis that could drain the city's treasury for years to come.

In the short term, council members must trim $423,000 from the city's general fund budget for the 4½ months remaining in the current fiscal year.

Then, they must find a way to pay back $2.6 million funneled since 1990 from the city redevelopment agency to balance the general fund that pays for day-to-day expenses.

Part of this year's deficit includes a $155,725 loan that was to be taken from the redevelopment agency to bolster the general fund. The city manager will ask the council not to proceed with that loan.

Councilman Walt Stanckiewitz said by phone Monday that he had not been told the city was borrowing from redevelopment agency funds, which he believes can be used only to improve low-income housing and build up the city's infrastructure.

He acknowledged that some redevelopment money is routinely used to help pay the salaries of city administrators who devote a portion of their time to redevelopment projects. But he said the $2.6 million was siphoned separately.

"We have a gaggle of residents who have been crying ... about this kind of stuff for years," Stanckiewitz said. "They have been pooh-poohed away as gadflies. What this says is, these people were all right. They knew what was going on and no one would listen to them."

Grand Terrace's new city manager, Betsy Adams, is recommending that $2.6 million of the city's $3.7 million reserve fund be restricted as collateral for the loans owed to the redevelopment agency, and that a portion of the remaining money be used to help balance this year's $5.2 million general fund budget.

Stanckiewitz said the council will consider paying only interest on the money for several years until the economy -- and the city's finances -- recover sufficiently to pay back the principal.

"Everyone thinks our reserves are healthy, but we really only have $1.1 million," he said. "We are not as well off as we have been telling the world."

The City Council meets at 6 p.m. in its chambers at 22795 Barton Road.

Reach Darrell R. Santschi at 951-368-9484 or http://us.mc331.mail.yahoo.com/mc/compose?to=dsantschi@PE.com---


Grand Terrace to discuss budget problems

Stephen Wall, Staff Writer
Posted: 02/22/2010 04:18:57 PM

PST GRAND TERRACE - The nation's economy may be starting to rebound, but the city's budget woes are not over. The City Council will hold a 4 p.m. workshop today to talk about how toclose a $423,000 mid-year budget shortfall in the General Fund.

Spending and revenue projections have changed since the start of the 2009-2010 budget year in July. Construction permit revenue, sales tax receipts and investment earningsare all down since the budget was adopted. Most of the budget gap can be closed through unspecified "labor savings"with employees and use of reserves, City Manager Betsy Adams said in areport to the council.

The council also could freeze non-essential spending as a way to close theshortfall, Adams said. "Everything is on the table," said Councilman Walt Stanckiewitz said. "

It could be pay cuts, furloughs, you name it." Stanckiewitz said he is concerned about the city's dwindling reserves inthe General Fund. During the 1990s, the city transferred $2.6 million from the Redevelopment Agency to the General Fund.

That loan has to be paid back, lowering reserves from $3.7 million to $1.1 million, Stanckiewitz said. "We no longer have that healthy reserve because back in the `90s they were robbing Peter to pay Paul and didn't bother to tell anybody," Stanckiewitz said.

Mayor Maryetta Ferre said she is glad that Adams is providing the council with answers to the city's budget problems. "We would be nuts to say we didn't have a financial crunch," Ferre said."I'm not alarmed at this point. I'm waiting to see what is being suggestedand what we can do."