City of Hemet Audit – Where are we now?

Several key concerns remain unaddressed

File photo
From left to right: Michael Carle, general manager of Golden Village Palms RV Resort, Alex Meyerhoff, Hemet city manager, San Jacinto City Manager Rob Johnson, and San Jacinto City Councilman Andrew Kotyuk.

■ Melissa Diaz Hernandez / Reporter

A strategic plan addressing the issues brought forth by the state audit had a deadline for completion of January 2017. A strategic planning meeting was scheduled for the beginning of February 2017 but was postponed, according to insiders, by the appointment of Councilman K. Paul Raver’s replacement Russ Brown after Raver’s unexpected December resignation from the Hemet City Council.
Named in the audit were the following key issues: “turnover of key positions and lack of consistent leadership; lack of coordinated approach to promote community engagement; inefficient structure of city government; underfunded fire department; inconsistencies in outsourcing maintenance activities; ongoing budget deficit; rising pension costs; use of city-supported library by nonresidents; significant retiree medical costs; and unfunded liability. The results of the audit caused Hemet to be placed on a list designating Hemet as one of two “high risk” cities.
The city received a letter from State Auditor Elaine Howle in October 2015 addressing items she felt needed to be resolved as a result of their assessment. Howle stated in the letter that even if all items were addressed that the state may still conduct an audit. One of those provisions was to address the “turnover of city staff, including the city manager and director of community investment positions.”

Meyerhoff’s hiring and contract specifics
The deadline to provide evidence of progress was Dec. 31, 2015. The current city manager, Alex Meyerhoff, was approved for hire by the City Council in a special meeting on Dec. 22, 2015. Councilwoman Shellie Milne was absent from the meeting, but the rest of the council unanimously approved the hiring of Meyerhoff with a base annual salary of $200,000.
Stated in his contract is the following: “It is the intent of the City Council that the City Manager have and retain the highest base salary of any employee of CITY. The City Council will consider salary compaction among executive employees as such may arise from time to time among executive employees and take such actions as are reasonable to maintain a separation of at least ten percent (10%) between the base salary of the MEYERHOFF and the base salary of the next highest paid active employee of CITY.”
The contract also states that the city manager cannot be fired within 120 days of the appointment or election of a new council member and upon a review, the council may give Meyerhoff a performance bonus not to exceed $20,000 as well as a merit increase in base salary. Meyerhoff’s contract also states that “Within One Hundred and Eighty (180) days of the Commencement Date, MEYERHOFF will have guided the City Council through a strategic planning process and developed a strategic plan embodying City Council defined goals, priorities, activities, and programs for the City organization.”
Meyerhoff acknowledged an email requesting comment regarding the March 14 City Council meeting, but he did not respond.
The only city Meyerhoff previously managed was Holtville, California, where he was paid $46,791.50 in 2011 according to the Transparent California website. The United States Census Bureau has the median income for the city of Hemet at $33,989 with a poverty rate of 26 percent. The citizens just voted and passed a 1 percent sales tax to go to the general fund, Measure U, back in November 2016. Holtville has a population of a little more than 6,000 people, a median household income of $24,974 and a poverty rate of 37.3 percent.

Photo by Melissa Diaz Hernandez / The Valley Chronicle
Hemet City Hall.

Audit issues include turnover of key positions
One of the main issues addressed in the audit was the turnover of key positions and lack of consistent leadership within the city. Hemet has yet to get a handle on this issue as Councilman K. Paul Raver and City Engineer Steven Latino resigned in December. A few weeks ago, the Deputy City Manager/City Finance Director Jessica Hurst also resigned. The city’s human resources manager will also be resigning per conversation during the March 14 city council meeting, which is why the case has been made for the hiring of an additional HR person through Measure U, to keep the applications and hiring process of public safety personnel moving. The city is beginning to prepare its FY 17/18 budget with Joy Canfield, who retired from the city of Murrieta as administrative services director, taking over the role in the interim.
The lack of community engagement is still an issue for the city. The Council has yet to make the City Council meetings available for the public to view outside of physically attending the council meetings. The City Council has discussed this very recently for the second time since the audit results were released last August.
With three new faces on the City Council, seasoned members Mayor Linda Krupa and Councilwoman Bonnie Wright have stated that the recording of council meetings is important and that it needs to be done. In addition, the city puts out the agenda two business days prior to the council meeting. If a community member wanted to incorporate a media presentation into their comment during the communications from the public, the city would require three business days to review/scan the files for any issues/viruses. With the release of the agenda two business days prior to the meeting, it is impossible for a community member to incorporate any media into their comments. Councilwoman Karlee Meyer is the only council member of the five having consistent visible contact with the community as she hosts monthly Coffee with Karlee meetings.

Understaffed fire department
The issues regarding the underfunding of the fire department can be addressed with the passage of Measure U. The audit addressed the need for updated equipment and infrastructure as well as the need for more staff. The high demand of the fire department is an issue as its bare-bones staff responds to a large number of calls.
In 2015, the Hemet Fire Department responded to more than 16,000 calls for service. The Valley Chronicle recently reported that the City Council approved the purchase of a vehicle to be used by the battalion chiefs once hired. The award did not go to the lowest bidder but the “most responsive bidder.” Chevrolet of Watsonville came in $12,834.41 under the awarded bidder Reynold’s Buick. $133,800 of Community Block Development Grant (CDBG) funds will be used to rehabilitate Fire Stations 1 and 2. The details of the rehabilitation are unknown at this time as the information was not provided in the staff report attached to the council agenda. On Sept. 27, 2016, the city council decided not to pursue Emergency Medical Service (EMS) Cost Recovery. However, Fire Chief Scott Brown implemented a pilot program to reduce the calls for service to assisted living facilities in the city.
On Dec. 13, 2016, the City Council unanimously approved the following expenditures for the fire department as provided in the Action Plan given by Fire Chief Brown with the use of Measure U funds: Three fire captains, two firefighters, two dispatchers, emergency service coordinator (part-time to full-time), office specialist -part time (20 hrs/wk), personal protective equipment – full ensemble, uniforms – NFPA compliant, portable radios – Motorola – PSEAC, command vehicle, communications – command box, adult ALS full body trainer, pediatric ALS full body trainer, emergency medical services coordinator (increase to 96 hours per month) and a recruiting/marketing/HR professional services totaling $746,429.

Budget deficit and unforeseen expenditures
The ongoing budget deficit has been an issue for the city since FY 2006/2007 with the exception of FY 2012/2013 when it took the remaining balance from the refuse account and transfered it over to the General Fund. The state auditor pointed out that “Hemet disagreed with our designation of the city as high risk. It plans in August 2016 to submit its corrective action plan, in which it will outline how it will address our recommendations.”
The state auditor is uncertain that the budget projections as provided are accurate. Howle expressed concern that projections do not allow for any unforeseen expenses that may incur over the next few years. One expense that the city did not prepare for was the placement of Measures E and U on the June and November 2016 ballots, respectively. Measure E cost taxpayers approximately $130,000 that included “$63,000 for two contracts with a consultant to develop the tax measure and an estimated $67,000 for Riverside County to place the measure on the ballot.”
Any unanticipated costs will hinder the city’s ability to produce a balanced budget sooner than later as the city’s plan to balance the budget was to remain status-quo. The city has been giving quarterly updates regarding the status of the city’s budget during the council meetings and will be receiving additional tax revenue as a result of the passage of Measure U.

Retiree medical costs
The city has made improvements with retiree medical costs. This took some negotiating but the city was able to cut this cost down significantly with all but 20 retirees, at the time the audit report was published, shifting from high cost plans to low cost ones. According to the audit report, the retirees that switched over to the low cost plan received a $5,000 incentive. Even though the improvements have been made, Howle warned that the unfunded liability was still an issue. With the work of Deputy City Manager/Finance Director Jessica Hurst before her resignation, the city established an OPEB Trust to address the issue of unfunded liability.
According to the council presentation, the prefunding amount of $750,000 in addition to a yearly investment should address the issues pertaining to the unfunded liability. Hurst also worked to reduce the cost of the CalPERS unfunded liability. The council unanimously approved staff’s recommendation to move to a 20-year amortization schedule on Nov. 15, 2016. The projected 20-year annual cost would be $165,531,104 with a projected savings of $12.5 million. The city will get a 2 to 3 percent prepayment discount by paying the unfunded liability in July instead of in monthly payments. By switching to the 20-year amortization schedule, the city can never change the amortization period back to 30 years.

Hemet’s response
In a letter dated July 11th, 2016, the City of Hemet responded to the audit report stating that “the City strongly disagrees with the State Auditor’s designation of the City as High Risk.” The response goes on to state that the city took “numerous cost saving measures to improve its financial position” since 2008 such as reduction in staffing levels, balancing services with revenue, employee compensation and benefit reductions, retiree medical benefit reductions, public private partnerships, contracts for service, grant funding, external funding sources, financial sustainability and responsible financial practices.
The city stated its intent to submit a corrective plan to the State Auditor by Aug. 4, 2016. Howle responded with the following comments: “We stand by our designation of Hemet as high risk. Although throughout the report we acknowledge that Hemet has undertaken various actions focused on achieving cost savings, the city’s expenditures continue to outpace revenue, impeding its ability to meet its financial obligations.”
The auditor goes on to state that “Hemet’s statement that its five‑year plan will end its historic practice of deficit spending by fiscal year 2019–20 is misleading” with a budget deficit closer to $268,000 than the projected $17,000.

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