In a recent review of Hercules' finances, Municipal Resources Group said, "A City Council assumes ultimate financial responsibility for the financial health of the City, assuring that adequate resources are available to provide core public services and to implement community vision and goals."
What three things could the Hercules City Council have done differently to ensure financial health for the city?
The Hercules City Council could have done the following three things differently to ensure financial health for the City: FIRST, the Hercules City Council could have a Finance Director who is directly elected by the voters of Hercules; and, therefore, the Finance Director is directly responsible to the electorate. Some other California cities have already implemented this hierarchy. In the City of Hercules, the Finance Director reports directly to the City Manager which means that the Hercules Finance Director actually takes direction from the Hercules City Manager. Second, the Finance Director should give a report on the City's financial condition at each and every Hercules City Council meeting. The report should compare the actual year-to-date revenue and expenses with the budgeted year-to-date revenue and expenses. This report could also identify problem areas and potential solutions. Third, the City of Hercules should separate the major capital projects from the budget process and develop criteria for funding these capital projects; in addition, policies should be established that require projects to be fully funded prior to initiating the projects.
When I was first elected in November 2008, the economy had just fallen into a deep recession and I was concerned about our City’s finances. The City Manager assured me that Hercules was financially strong and did not need to cut budgets and staff like other cities were doing. I asked this question of the City Manager each time there were large expenditures on the City Council agenda during my weekly meetings with him. These items were also discussed in Finance Subcommittee meetings before placing them on the Consent Calendar for approval. I did not sit on the Finance Subcommittee so I relied on the recommendations of my fellow Council members.
There are several things that could have been done differently. First, an outside financial audit should have been done in late 2009 after news of the questionable affordable housing loans was disclosed. I recommended this course of action in several closed sessions but no one else felt it was necessary. I also suggested that the City Manager consider hiring a new Finance Director, when the previous one left for health reasons, but he decided to fill the position internally. I was concerned that the internal replacement did not have the necessary skills or experience, which turned out to be true. A third action that could have been taken by the Council is to adopt policies and procedures for greater financial accountability. Excessive invoices submitted by some consultants and developers were approved by staff, without a higher level review.
- The Council should have taken an active role in analyzing the financial condition of the city using current financial statements. It shouldn’t have relied solely on the City Manager’s verbal or summary reports. If the council performed prompt and periodic assessment of the city’s financial condition and if they only took their fiduciary responsibility seriously, it could have devised corrective measures and could have been alerted to any challenges beginning to emerge.
- The council members should have taken a more active role in debt management and correct use of loan proceeds. The City Administrators ran up about $180 million in debt, the proceeds of which were used to finance numerous capital projects that were not properly evaluated for their cost and benefits.
- The Council should have ensured that approved policies and procedures were documented and followed. There was blatant disregard for approved policies. Also, the Council should have established written policies and procedures where they don’t exist such as in Conflicts of Interest, Nepotism, and Cronyism.
- The City Council should have implemented and enforced a stronger ethics and conflict of interest codes.
- Each member of the City Council should have independently reviewed, questioned each contract, agreement, etc the city was entering into. As a part of that, the City Council should have provided clear direction to their view of the City Attorney’s responsibility in reviewing, discussing and advising them on transactions and issues.
- There should have been a quarterly review of the revenue and expenses so that changes and corrections could have been made and oversight maintained. With the economic downturn and decline in housing values, each City Council member should have anticipated the need for reductions and questioned the continued level of expenditures and taking on debt.
The City Council did not perform its due diligence necessary to ensure our financial health. Council bought into every money spending project presented to them without studying the finances, the feasibility or the practicality of many big ticket projects.
- Why would we spend city money on a project outside city limits, such as "Big League Dreams," without first consulting with the property owner about the specifics of the project and annexation of the property into the City?
- Why would we build Sycamore North with more affordable housing units than were required under City Ordinance and State law? Why would we ever move forward on a Redevelopment Agency Project, such as Sycamore North, without a private developer as a partner? That four story unfinished building could end up as a blight on Hercules for years and add to our deficit.
- Whatever possessed City Council to go along with Red Barn as developer, without it investing one penny of its own money on the project? Why set aside $12 million as a primary project fund for Red Barn to use for its private slush fund?
- Why has the Waterfront initiative, which could spur huge economic growth in Hercules, been so badly neglected after the City drew over 60 million dollars in bond funds to start the project. Why weren't these funds spent on the Waterfront?
The list of financial and economic disasters goes on and on. City Council members must be willing to study the issues, analyze the costs verses the benefits, and finally determine the practicality of any project brought to them. Without doing the homework, including hiring and retention of the right staff, additional financial disasters can be expected.
The City of Hercules has been turned into a well lubricated business machine meant to generate additional income for the benefit of a few while the rest of us pay for it. The City Council was not in control of their appointed City manager and City attorney. They were actually in control of nothing. The City Council should have publicly stepped up and exposed wrongdoings. And yet, they did not. Too risky perhaps?
Our little sleeping community was the perfect target for badly intentioned minds hungry for cash. It’s unfortunate the previous Council did not dismantle the plot and I believe they still don’t really understand the extent of the damages. Ms. Ward and Mr. Kuehne still today live in a delusional mode: they don’t even accept the reality, the facts. Maybe it’s too much for them to take in. If I were one of them, I wouldn’t sleep at night thinking of the consequences of my actions and inactions. We are talking about $70M lost down the drain due to their silent allegiance to the City manager and his acquaintances.
The lack of leadership of the previous council is beyond comprehension. The fact no one dared to speak up is something I will never understand and never forgive.
All projects were used as a vehicle to create cash from backdoors deals, even fake projects like Big League Dreams, or aborted ones like the New Town Center.
The previous council could have done a lot of things different, but that’s the problem with Monday morning quarterbacking. Everyone is a genius after the tough decisions have been made. I nstead of detailing what three things, I saw wrong with our previous councils, I will take a different approach and let voters know what you can expect from Mark A Jones. First, honesty – Everyone that meets me in our restaurant gets an honest, approachable guy trying to do the right thing, daily. Second, hard work – I will do the necessary work to make sure that the items presented to me are for the betterment of the community at large and just not the benefit of a few. Finally, dedication – I am taking on the task of city council member, because I am willing to dedicate myself to the tasks at hand and help our city get back to prominence.
Has not responded to questionnaire as of May 6.