City Administrator Dale Neiman proposed to the council that they cut about nine staff positions – including several police officer jobs – in an effort to save hundreds of thousands of dollars in the coming budget year.
Neiman told the council that by this coming June 30, the city's general fund is expected to have about $13,000 left. The Proposition P fund, which collects funds from a special salex tax to support the police department, is estimated by that time to be in the red by $204,160, and the development review fund will be $224,000 in the red.
“We've faced a number of significant financial challenges in the last few years,” he told the council. “You've had to make a lot of difficult decisions.”
In developing the recommendations, Neiman said, “A lot of good people have been negatively impacted, and that's really unfortunate.”
One of Clearlake's most significant problems is that it doesn't get the same amount of retail sales tax as other areas, including Lakeport; there, Neiman said they receive 182 percent more retail sales tax than in Clearlake. If Clearlake had similar returns, it would have $1.8 million in its general fund.
Coupled with that lower sales tax return, Clearlake has higher service costs. Neiman said that, without additional revenues, there is no way to fix that disparity.
The proposed Lowe's home improvement store and regional shopping center on Highway 53 was key, Neiman said, in helping the city solve its financial problems. It would have helped cover his salary and that of City Engineer Bob Galusha.
The agreement with Lowe's calls for the store to open in February of 2012, with sales tax revenues beginning to arrive in city coffers the following month, Neiman said. “That would help us dig out of the hole that we've been in,” he said.
However, the Sierra Club Lake Group last month filed a lawsuit against the city's redevelopment agency and developer KK Raphel Properties LLC over the project, specifically the city's decision to move forward without an environmental impact report, as Lake County News has reported.
In the wake of that lawsuit, “Basically we have no choice but to reduce our expenditures so we don't become financially insolvent,” which could happen as quickly as late this summer or fall, Neiman said.
City staff cuts have been ongoing over the last several years. Since 2006 the city has reduced its workforce by 40 percent, said Neiman.
Now, more cuts are likely, as Neiman said bankruptcy isn't a viable option for the city, with attorney fees likely to be “substantial” but little or no relief from the city's debts likely to result. It also isn't legal to borrow from the city's redevelopment funds to keep going, he added.
“Where we are, we're basically about ready to run out of money,” Neiman said.
He said the city had some unbudgeted expenses. Specifically, the city incurred $66,000 in animal control costs with the county because it wasn't able to cancel its contract this budget year before Nov. 1, 2009. The city also has had $7,000 a month in unemployment insurance not included in the budget.
The city's retirements costs – particularly for the police department – are another problem. When in 2000 the city agreed to a new retirement plan – going from 2 percent at 50 to 3 percent – it doubled the city's retirement costs, Neiman said. That plan can't currently be changed.
While cuts on sales tax and other issues are depleting the general fund, other specific problems have caused the development review fund to decline, including a 2006 lawsuit filed by the contractor who was supposed to process the Provinsalia housing development's environmental impact report. Neiman said that contract wasn't correctly canceled and it cost the city $115,000 to settle the suit. The city also failed to collect $90,000 in fees in a timely manner around 2006.
To have adequate cash reserves, the city needs 15 percent of its operational expenditures, or $638,000, he said.
If the city's redevelopment plan isn't amended it shuts down July 1 and the city will immediately lose about $288,000.
With the city redevelopment plan amended and extended, the city would need about $747,000 to get up to the necessary general fund levels; without the plan, it would be more than $914,000 needed for the general fund alone, in addition to the deficits in the development review and Proposition P funds, based on Neiman's report.
Neiman's proposed cuts include closing Austin and Redbud Parks, for a general fund savings of $97,850; and eliminating planning and code enforcement, $54,660 savings for the general fund, $84,410 for the development review fund.
His proposals also include cutting five police officer positions, which would save nearly $300,000 from the general fund and $183,140 from Proposition P.
Neiman said that would bring the total cuts to the police department to 9.5 positions since 2006.
He also proposed cutting his job to half-time, which would save the general fund $72,230. Clerical support to the city engineer also would be cut.
Even with all of those cuts, Neiman said the city still would be short $69,000 of where the city would need to be. It would erase the Proposition P deficit but there would still be a $140,000 deficit in the development review fund.
If the city's redevelopment plan isn't approved, more positions – including another police officer spot – would need to be eliminated, bringing the total jobs lost to 11.5, Neiman said.
“None of these things are pleasant. They're very difficult,” said Neiman, adding that he's had challenges in his career “but nothing ever like this.”
Neiman said a combination of factors over the last 15 years plus the economy led the city to its current situation.
“We need to get to a position where we can stay financially solvent,” he said. “The recommendation is to make these cuts because if we don't we're not going to be able to pay our bills.”
He suggested they not make any decisions that night, because there were some other options city staff wanted to look at that might change the situation slightly.
“Over the last two weeks, a lot of the employees haven't slept very well at night. I haven't and I'm sure you haven't,” he told the council.
Councilman Roy Simons, referring to the differences in sales tax revenue between Clearlake and Lakeport, said Lakeport has a higher level of affluent people, and a downtown with sidewalk, curb and gutter where people can walk and enjoy themselves. “They're just more in tune with things than we are.”
Mayor Judy Thein pointed out, “This isn't just happening to Clearlake.”
She added, “We need to get past the politics now. We have some enormous decisions ahead of us.”
Thein said the council wasn't going to make a decision that night, and that a full council should be there for the decision. Council member Joyce Overton was out of town.
Community members split in criticism, praise of the city
Estelle Creel questioned how the city had managed to do overlays of city streets in recent years if it didn't have any money. Neiman said they used gas tax money and other revenues. When Creel asked why some of the projects had been bid separately, Neiman said they were able to save about $200,000 by rebidding one of the projects.
Businesswoman Jeri Spittler criticized Neiman for blaming the Sierra Club lawsuit for the city's current problems. “The Sierra Club didn't put us here,” said Spittler.
Neiman said his only point in mentioning the Sierra Club was that “the decisions wouldn't be nearly as bad as they are” if the suit hadn't been filed.
Alice Reece said redevelopment defers money from public use and that it hasn't been successful for the city.
Referring to proposals to cut the parks, Reece said, “This is our community and you're destroying it because you're so worried about getting redevelopment dollars to pay your salaries.”
She criticized the city for wanting to give redevelopment money to assist the Lowe's project, which will likely cause the closure of some local businesses. “It's not our salvation, it's not going to help us,” she said, urging the council to let redevelopment die.
Jim Scholz, a 30-year city resident, noted, “We've had a lot of growing pains over the years. It's been very frustrating.”
He's been coming to city council meetings for more than three years, and said he thought the council and Neiman were doing a terrific job. “I think most of the problems this city is now confronting are inherited.”
Another city resident, Frank Taylor, agreed with Scholz's sentiments.
“We never, ever, had a city administrator who was so good and worked so hard and has done so much with so little as we have with our present one, Dale Neiman,” Taylor said.
Taylor added that the council has done its best to improve the city and “work with virtually nothing.”
District 2 Supervisor Jeff Smith, himself a former city council member, also defended Neiman, noting that the bad things the city endured occurred before Neiman's tenure began in early 2007.
He suggested that when Neiman came on board he didn't know how bad the city's condition truly was. “He's done as much with the impossible as he could do,” Smith said.
Smith said Clearlake wasn't alone in its struggles, pointing out the economic challenges all over the county. “A lot of blame has been put here and it doesn't need to be put here.”
He added that if redevelopment goes away, “it will be the worst thing that could ever happen to the city at this point in time. It would be a shame and we'll never recover from that.”
After closing the public hearing, no council members offered any comments, and Thein said the matter would be brought back for a future meeting.
In other council business, the council voted unanimously to deny a request from Charlene Goodrich, who asked the city to waive administrative penalties for a nuisance abatement on property at 3287 Lilac Ave.
Goodrich foreclosed on the property from Scott Gabaldon and when she went to pay the taxes, paid $4,000 to bring it current. What she said a title search and the county tax collector didn't tell her was that another $2,500 in administrative penalties was owed because Gabaldon had failed to clean up the property, which she later did.
“I paid a lot of money in back taxes and I would like a little help,” she said.
Several community members spoke up to defend Goodrich, including Aqeela El-Amin Bakheit. “You all seem to be very unfair to people, unwilling to bend at all, and I just want you to know, I don't like it,' she told the council.
Councilman Curt Giambruno suggested the county and the title company had dropped the ball, and Goodrich should seek them out to pay the bill. Goodrich said she had been directed by everyone to go tot he council.
Bakheit began deriding the council from the audience, with Thein telling her she was out of order.
“You're getting to be ridiculous, Madam Mayor,” Bakheit replied.
The council then voted unanimously to reject Goodrich's appeal.
In a closed session before the public portion of the meeting, the council discussed appointing a finance director, but no reportable action took place, Thein said.
E-mail Elizabeth Larson at
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