During the Turlock City budget subcommittee process including Mayor John Lazar and Councilman Ted Howze, four holding accounts were identified to have been holding excess funds totaling over $5 million.
The Turlock City Council held a Special Meeting on Tuesday night when Turlock City Manager Roy Wasden explained that Workers Comp Fund 144, Liability Fund 149, LTD Fund 104, and Life Fund 104 were overfunded and have high reserves according standards that a private business, Governmental Accounting Standards Board (GASB), and Risk Management Authority would recommend.
The LTD Fund 104 and Life Fund 104 will just be leveled off by not continuing to overcharge departments on premiums as they have excess funding of only about $370,000 each.
The excess funding from Workers Comp Fund 144 and Liability Fund 149 however were identified to have excess funding of $5.35 million of General Fund monies.
Councilman Ted Howze requested the Council consider putting around $4 million in the General Fund Reserve and $1 million in the Equipment Replacement Fund because of a known fire engine replacement costing approximately $550,000 and that no money has been allocated for equipment replacement over the last two years.
Councilman Amy Bublak said “I would agree that we need to look into the fleets but I think that initially putting it back into reserves and working with people first, and property second, is probably the most prudent thing to bring back a little trust from the community.”
With Councilman Howze pointing out that as long as people know that some of the newfound money could be needed for equipment replacement in the near future and Councilwoman Amy Bublak suggesting staff come back to Council in about August with the City’s equipment needs, the Turlock City Council voted unanimously to put the $5.35 million into the General Fund Reserve where it can be used at Council’s discretion as needed.
The General Fund Reserve will increase from aproximately $12.2 million to approximately $17.5 million.
In addition to the funds being returned to the General Fund Reserve, over $1 million will be returned to other non-General Fund department accounts.
Because the premiums charged across City departments will be adjusted down, the City’s budgeted expenses will decrease by approximately $1 million a year.
Who Lost Over $5 Million and How (or Why)? Staff Knows Nothing.
The accounts reviewed at the meeting had a ten year average showed that sharp increases of contribution to the accounts began in 2006, especially in the Liability Fund 149 where $1 million to $1.5 million a year was put away into the fund.
Vice Mayor Kurt Spycher stated that a lot of the information is new to Council and questioned if Council ever approved the changes to grossly overfund these accounts and why it would change in 2006. Vice Mayor Spycher asked if anyone from staff could shed any light on the decisions or if Mayor Lazar knew since he has history on the Council.
City Manager Roy Wasden said “I have not done an exhaustive search but I couldn’t find anything that I could say this is why it changed.”
Mayor John Lazar recalled that maybe the increase was because of some pretty big claims in the late 1990’s or year 2000.
Vice Mayor Spycher pointed out that the overfunding began in 2006 however.
Councilwoman Mary Jackson suggested that the increased funding could’ve been due the introduction of the Workers Comp reform in 2006.
“I know I talked to staff, I don’t believe there was any intent to hide,” said Councilwoman Mary Jackson. “Maybe there were concerns to be prudent and they had no idea what Workmans Comp reform was going to do.”
City Manager Roy Wasden pointed out that the Workmans Comp reform helped stabilize the swings though.
City Manager Roy Wasden went on to explain that staff has had discussion about the issue and that the City also no longer has a Finance Director.
“We’ve made a number of changes, very complimentary of the hard work by the finance folks. To their credit, they were following the pattern that they had been given to implement and charge these rates out to the different departments. They were just following the protocols that had been set up over the last four or five years,” said Wasden.
Councilman Ted Howze said “The real point is though, it doesn’t matter. There was absolutely no reason to stick these balances in these funds that they did, none, because in the end it’s all general fund money anyway.”
“To take 1, 2, 3, 4 million dollars and sit it in a fund that there is never any direction given by this elected body or any information shared with this elected body as to what is going on is unforgivable,” said Councilman Ted Howze. “As we have this discussion go forward, it’s a lesson learned that from now on there has to be transparency in how this money is being shifted between these funds.”
Through the discussions regarding the funding of these overfunded accounts, it was also discovered that hundreds of thousands of dollars were transferred from one fund to another without Council knowledge, let alone Council approval.