Los Altos’ budget problems were so deeply rooted, based on the last few years of puzzle accounting, that the city might need a few years of budget cycles to right the ship.
That was the reading from City Manager Gabriel Engeland, who offered a candid assessment of the city’s financial situation during an April 27 online forum hosted by grassroots group Los Altos Residents.
Engeland, the former Sierra Madre city manager hired last year for his financial acumen, said the city has made progress in fixing bad habits — habits that included budgeting for projects that didn’t were not implemented and did not require reimbursement for subsidies, which forced the city to cover from the general budget.
He pointed to an unimplemented streetscape project for First Street that had a budget of $270,000 each year since 2016-17, but no work to show for it. He also cited $1 million in park replacement funds — funds typically raised from developers to fund park-related work — with no projects assigned. Another $211,000 was budgeted for streets and causeways, but no project was attached.
In other cases, the city has under-budgeted needs, such as replacing old playground equipment that was only budgeted for last year at 15.4% of a projected cost of more. of $4 million.
“We haven’t planned enough for the future,” added Engeland. “We passed a budget last year that was balanced, but it was balanced using maybe a little bit of government magic.”
Engeland gave examples of the city deferring items — he referenced a back-up generator purchased in the last century — and noted that some budget issues were more a lack of prioritization than a lack of money.
He posted an image of two men pushing a truck stuck in the mud. However, the men were pushing from the truck bed rather than on the ground directly behind the truck.
“It doesn’t matter how hard you work if you’re not focused on the right things,” Engeland said.
Much of the problem could be attributed to turnover and understaffing. According to Engeland, a new chief financial officer, John Furtado, was only recently hired, and only one finance department employee has been in the city for more than nine months.
However, hope is on the horizon. In a mid-year budget update last month, city officials pointed to higher-than-expected revenues and the elimination or reduction of previously budgeted items among the city’s priority capital improvement projects. .
“We started the year with a deficit of $2 million, unknown and unrecognized,” Engeland said. “The council took numerous steps mid-year to address this issue. They made tough decisions. »
Engeland and Furtado are expected to lead discussions on a new draft budget for the 2022-23 fiscal year next month.
Engeland also pointed to some changing council priorities and the recent adoption of a climate action and adaptation plan — an ambitious undertaking that will require the hiring of additional staff.
It was a problem for the city. According to Engeland, a recently advertised leadership position by the city elicited only two responses. He noted that 51% of personnel had been on board for less than five years.
“The environment we work in is one of constant turnover,” he said, with “very little institutional knowledge of our organization.”
He said the city compared its pay and benefits to other nearby communities and found that while Los Altos paid market price or above, the other benefits “didn’t even come close.”
A newly adopted “compensation philosophy” is an attempt to address those shortcomings, Engeland said.
The CEO has adopted a “zero-based budget” practice in which funding accurately reflects the need assigned to it.
“You try to find areas that lack resources and move them to areas that need them,” he said.
Later, he promised: “In the future, there will not be a penny in the budget that is not attached to a project or to a person.
England sees signs of progress.
“We have a lot of great employees, some of whom we haven’t supported enough,” he said. “We are talking about employees who lead their organizations with autonomy. I’m happy to report that we’re starting to see quite a bit of progress.
Freddie Wheeler, a member of the residents’ advocacy group organizing the webinar, thanked Engeland for his participation.
“Your candor and positive attitude are truly inspiring,” she said.