ATWATER -- A severe lack of financial oversight as well as unwillingness to act by the City Council has led the municipality to the brink of bankruptcy.
The situation can partially be blamed on the poor economy, but city officials have been made aware in recent weeks that depleted funds have eaten away at restricted monies and drained the city's cash reserves.
An August 2012 treasurer's report shows the general fund has a deficit of $5.2 million, a water enterprise fund has a deficit of $9.3 million and a sanitation enterprise fund deficit of $1.3 million.
The public pays fees into enterprise funds, which ideally would allow the services the funds provide to be self-sufficient. But water rates haven't been raised in 20 years and sanitation rates have not been raised in a decade.
As noted in a report by Fitch Ratings, which recently downgraded Atwater's financial status, the City Council's lack of leadership in addressing budgetary issues has resulted in a near financial catastrophe, including the possibility of dozens of layoffs and bankruptcy.
Council members have tried to address the water and sanitation deficits in recent years.
In 2009, Mayor Joan Faul made a motion for a vote on rate hikes in both funds, but no other council members supported her action, despite staff having warned the council that the rate increases were "a necessity."
In April, Faul made a similar motion to begin laying the groundwork for rate increases. "We're headed for bankruptcy if we don't do something," she said.
That time, she got a second from Councilman Craig Mooneyham, but the move was struck down with "no" votes from Mayor Pro Tem Joe Rivero, Councilman Jeff Rivero and Councilman Gary Frago.
City officials have conceded that they knew something had to be done to correct deficits in two of the utility funds but that they didn't realize just how toxic the situation was. As blocs of council members shot down opportunities such as the rate increases to bring more money into city coffers, funds were bleeding out faster than they may have realized.
It wasn't until the fiscal crisis started coming into clearer view that the council got enough votes to begin studies on possible rate increases.
Council members have confirmed that they were being told by the staff that there was a $7 million budget surplus. Then six weeks ago, they were informed that instead of having a $7 million surplus, all that money was for restricted uses and not available for general purposes.
Mooneyham said staff failed to highlight the dire situation the city was facing. The result was a council that didn't see an immediate need to make changes and raise utility rates.
"I think they (the council) didn't do it, honestly, because we had a huge budget surplus and they didn't want to hit the citizens with a higher bill if they could get away with it," Mooneyham said.
During an all-hands, closed-door meeting with city employees in early September, interim City Manager and Police Chief Frank Pietro joined then-City Attorney Jose Sanchez and Finance Director Glen Carrington to explain how bad the crisis had become.
"Last month, basically, has been a hurricane," Sanchez said in the meeting. "At the end of the month, which was actually July 31, I got a call and I was told basically the way our finances work, it seems as though restricted funds that should not be used for paying general fund obligations are being used."
City officials and staffers haven't been able to pinpoint where the money has gone.
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