In three and a half years as Hercules’ top dog, former City Manager Nelson Oliva had so consolidated power and decision-making within the four walls of his office that when health problems forced him to take medical leave last year, this small town found itself virtually paralyzed.
Oliva’s tight-fisted control of city affairs, from unilateral decision-making to his aggressive pursuit of grandiose redevelopment projects—solidified in large part by the fact he was also executive director of the city’s Redevelopment Agency and Public Financing Authority—has left Hercules' finances in . Today, the city’s taxpayers find themselves more than a quarter of a billion dollars in , and general fund deficits have forced of two dozen city employees.
Moreover, Oliva’s management style and attendant lack of transparency with the public and his own bosses on the City Council, created an administrative vacuum when he departed, causing further confusion. Nobody really knew what had been going on behind his closed office door.
Among those who would like to know is the Federal Bureau of Investigation. At least one former city official has been questioned by FBI agents looking into the affairs of a city thrown into chaos by the hasty departure of top municipal officials.
“When Oliva was hospitalized, City Hall basically stopped functioning,” said Don Kuehne, a city councilman now the target of a . He said the assistant city manager at the time, Lisa Hammon, was ill-prepared to fill in because “Oliva didn't really train her to take the reins in his absence.”
In an ideal world, the assistant city manager could have stepped in to manage the city, but that didn’t happen, said Kuehne.
Hammon, who resigned with a pointed to the council in December, said Kuehne is correct. Not only was she not trained to take on the city’s top job when Oliva was out ill for two months, from October to December 2010, Hammon said she was circumvented in her attempt to do so.
“Even though he was supposed to be out on sick leave, he was still working, still emailing staff,” she said. “And I asked the city attorney, am I supposed to be in charge here? I wanted the other senior staff to know who was in charge.”
After she resigned in December, FBI agents came calling.
“They met with me a couple of hours and asked me about all kinds of things,” she told Hercules Patch. “I don’t remember the specifics.”
In March, following a review of several California local redevelopment agencies, including Hercules, a issued by state Controller John Chiang hinted at possibly multiple investigations.
“At the outset of our review, it was brought to our attention that there were numerous concerns that stemmed from financial dealings of several former key employees of the City of Hercules and the RDA,” his report revealed. “It is understood that these issues are being investigated at several levels. These matters are beyond the scope of our review.”
“Unfortunately, this is a case where we can’t confirm or deny an investigation,” said FBI spokeswoman Julie Sohn.
Interim Hercules City Manager Fred Deltorchio, who is also the city’s police chief, declined to discuss the matter, saying simply that Hercules is “committed to cooperating with any law enforcement agencies investigating any wrongdoing.”
Numbers out of thin air
Nowhere is Oliva’s penchant for dominating City Hall better illustrated than by the budget process for the current fiscal year.
“The city manager sat with each department head and went through the items line by line and made unilateral decisions about what was to stay and what was to go in the city budget,” said Hammon. The budgets were prepared internally and then discussed in the council's finance committee, which met behind closed doors in the city’s conference room, she said.
The result of Oliva’s back-room budgeting last year was a 38-page document basically summarizing, in general terms, what the city expected to receive in revenues and spend on municipal services and projects—a document in stark contrast to the 412-page budget for the previous year, containing detailed departmental breakdowns.
“The budget was written in a way that failed to provide information,” said Charles Long, who was hired by the City Council as interim city manager during Oliva’s medical leave.
Long said the budget, approved last June, didn’t meet commonly accepted standards—there was no five-year forecast, a “mixing” of ongoing and one-time revenue and money that was simply “thrown” into the general fund to finance projects.
“Deficits in the budget were portrayed as revenue. I attribute that to a high degree of incompetence,” he said.
It was obvious, Long said, that the budget contained “fantasy” numbers and “misrepresented the financial condition of the city.” And it was also “clear that the professional staff responsible for the budget were struggling to understand what was going on.”
“I think ultimately that Nelson Oliva is responsible for that,” Long said.
Shortly after Long assumed his interim management position, he attempted to alert the City Council to problems with the city's finances.
“While a major part of the financial problems that the city and agency face today result from the drop in property values and tax increment revenues in the redevelopment project areas, many problems also result from faulty budgeting and lack of appropriate internal controls,” Long wrote in a memo prepared for delivery at the Dec. 7 council meeting—a document he was unable to deliver himself because he was summarily before he had the chance.
Oliva did not respond to an interview request left with a family member who said he was not at home.
An erosion of trust
“There were a lot of problems with that budget,” recalls Kuehne. “It really wasn’t a complete budget, and there was just so much information missing. Money was being moved back and forth; the right hand was giving to the left, and that’s not accountability. One of the things I had hoped for was to get Mr. Long and Mr. Oliva in the same room to discuss the budget,” he said.
Kuehne said much of the problem boiled down to the issue of trust, but over the course of the last year he’d lost trust and confidence in Oliva.
“There was a lot of trust and loyalty. Oliva had done many good things for the city. He was trying to do all these projects for the city, and in the crashing economy, it just wasn’t possible,” said Kuehne. But “toward the end of 2009, when I was hearing about the affordable housing loans, he didn’t give me the answers I was looking for. He was very defensive.
“People assume the council members knew a lot more than they do. There were a lot of surprises last year, unfortunately. When we brought in Long, we realized our finances weren’t anything like we were led to believe by Mr. Oliva,” he said.
A chemical engineer by profession, Kuehne had been a councilman less than two years when Oliva’s medical problems necessitated an extended leave. Now, Kuehne is facing a recall attempt by an angry electorate who blame him and Councilwoman Joanne Ward for the city’s dire financial condition, which has forced cancellation of popular community events like the Christmas tree lighting ceremony and the layoff of city employees, and has inspired talk of trying to raise taxes to keep the police department open.
Kuehne and Ward have taken a beating in recent months. They are, after all, the only public officials left to blame. Mayor Ed Balico, who presided over a decade’s worth of decisions leading up to the current crisis, when served with a recall petition early this year. Other senior city officials have also jumped ship.
Management style needed improvement
Oliva’s desire to control the full spectrum of city government was addressed in an internal performance review last year, an evaluation suggesting best management practices weren’t always being followed and finding that “limited effort has been directed toward staff succession planning.”
“The organizational structure for Hercules is convoluted, and encourages reliance on the solitary power and control by the City Manager,” said a Nov. 10 report on Oliva’s performance. “There does not appear to be a cohesive strategy of project implementation, nor did it appear that resources, information and contractual services were being shared.”
“The City Manager also serves as the Director of the Redevelopment Agency, which is a common organizational structure,” the report continued, “however, most cities with as active a Redevelopment Agency as Hercules also employ a Redevelopment Agency Manager, who handles the Agency’s operations and provides the necessary checks and balances to the formal oversight by the City Manager/Redevelopment Agency Director."
Oliva’s review found that the Hercules public works, planning, finance, parks and recreation services and the city attorney appeared to have been focused more on “special projects” than “the routine but necessary tasks and duties of civic activities. As a result, some of these departments are functioning more like divisions of the Special Projects staff or Redevelopment Agency than providers of general government.”
City Hall hiring practices didn’t escape evaluation either, raising questions about some staffing decisions. “Persons who were not hired via commonly accepted employment practices occupy several positions in the city,” the evaluation determined. “Key city services are being performed under contract, such as the Affordable Housing Program and the management of the Hercules Municipal Utility. The contractual managers of these programs have previous or existing relationships with the City Manager, as family members, a private sector business partner and a former employer.”
The final grade in municipal management: Oliva needed to improve his leadership and the city’s “organizational structure needs to be revamped using best management practices.”
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