Once on the verge of bankruptcy, City of Atwater celebrates debt retirement
The Atwater City Council chambers resounded with applause Monday night after the council unanimously passed a resolution to effectively retire the city’s debt — nine years earlier than planned.
Atwater Mayor Paul Creighton called the moment a “monumental deal,” noting that the city at one time, not too long ago, had been on the verge of declaring bankruptcy.
“We had to fight and crawl and pick and scratch,” said City Councilmember and Mayor Pro Tempore Brian Raymond. “It’s just a huge accomplishment.”
As Atwater struggled financially for years, city officials borrowed money from the wastewater enterprise fund to keep basic services afloat. Such services are typically paid for via a city’s general fund, but Atwater’s was long in the red. An August 2012 treasurer’s report showed a $5.2 million general fund deficit.
The city in 2015 amended its loan repayment schedule from the wastewater fund to the general fund to slowly be paid off over a 15 year period, concluding in July 2029.
Atwater’s financial troubles date back to at least the Great Recession in 2006. While the whole Central Valley was hit hard, Creighton has said that in many ways Atwater never recovered.
Also blamed for the trouble was the city’s water and sanitation rates, which weren’t raised for decades, as well as spending habits of prior city councils.
“They were spending money hand over fist,” Raymond told the Sun-Star.
Raymond, whose six years on council makes him the longest serving current member, noted that freeing Atwater of the debt has been a council priority throughout his terms. When he first joined City Council, member pay and benefits, which added up to tens of thousands, were cut immediately and almost unanimously, he said.
“That was kind of the first step toward cost saving,” Raymond said.
Still, Atwater’s fiscal outlook was dismal. City officials and residents alike feared the city would go bankrupt and be taken over as a ward of the state, Raymond said. The state auditor’s office in 2018 began formally monitoring Atwater’s financial problems as city leaders worked to move away from years of debt-spending practices.
Plus, almost one year ago to the day, Atwater last October was ranked by the California State Auditor’s Office as the second most financially distressed city statewide.
When Creighton and Raymond learned of the ranking, they traveled in person to the state auditor’s office in Sacramento to lay out a plan for ameliorating Atwater’s finances.
Then recently, City Council directed funds from the sale of a promissory note to go toward paying off the remaining loan balance of $1.7 million.
The move left over just $4,000 left to be repaid, slated to covered by the city’s special department expense budget, thus retiring the loan in its entirety this fiscal year — far ahead of the anticipated 2029 deadline.
“Basically what this is, is the city becoming debt free,” Creighton said.
Creighton said Atwater has never been in better shape, noting projects like the new splash pad, cleaning up the city’s contaminated wells and more businesses coming to Atwater. “We’re the stewards of the people’s house,” Creighton said of Atwater City Council. “Their money, their city.”
With Atwater’s fiscal outlook looking up, the city’s general fund is in good shape to pay for public safety, parks and recreation and other intended programs, Finance Director Kellie Jacobs-hunter said. Atwater’s current finances also put the city on a good path with the state auditor’s office, she said.
Councilmember Cindy Vierra acknowledged that while the city worked to sort out its finances, residents have had to make sacrifices.
“Soon the citizens are going to celebrate better parks, better amenities,” Vierra said, adding, “We’re not out of the woods yet, but this is definitely a really cool stride forward.”
This story was originally published October 29, 2020 at 5:00 AM.
