Santa Ana’s General Fund Balance Dips to Just Over $300,000


Friday, Oct. 21, 2011 | The city of Santa Ana is essentially living paycheck to paycheck, according to records released this week by the city's finance director, Francisco Gutierrez.

Santa Ana's general fund balance at the end of September was $313,343.50, according to the records. This represents about one-tenth of 1 percent of its nearly $200-million general fund budget.

The balance has dropped precipitously since the end of July, when it stood at just under $3.4 million, records show. Then it dived to $161,035.46 by the end of August, according to the records.

These numbers are the latest in a series of revelations in recent months showing Santa Ana to be teetering on the edge of insolvency. An August report by the city's budget consultants, Management Partners Inc., stated that the city has spent through its $41.4-million unrestricted fund balance.

The city announced in September that it is facing a potential $30-million budget deficit for fiscal year 2012-13.

"Simply put, the city must now take substantial action to reduce its spending," the consultants wrote in a cover letter to the report.

Interim City Manager Paul Walters is supposed to release in January his first set of recommendations to close the deficit. Union leaders have indicated a willingness to reopen contracts. Yet it remains to be seen whether the city will act soon enough.

The firefighters union hasn't proposed sufficient pay and benefits cuts, Councilman Sal Tinajero said, and the city has asked the Orange County Fire Authority for a proposal to outsource the fire department.

City officials also acknowledged that they're leveraging internal service funds set up for special purposes, like payouts for legal settlements. The city transferred $5.2 million from those special funds to balance its books in September and is planning a $2.8-million transfer this month. That money will not be available again, according to the Management Partners report, and some of the special funds are already underfunded.

Last week, Joaquin Avalos, president of the Santa Ana chapter of the Service Employees International Union, said the city was in danger of missing payroll perhaps as early as November. Walters refuted that claim, saying in an email that the city expects to meet payroll obligations for the rest of the fiscal year.

It is common for cities to run low on cash in the first part of a fiscal year as they await cash infusions in December, when the largest property and sales tax installments are paid to the city.

Nonetheless the city's cash position has raised eyebrows among other government officials and is raising alarm bells among some members of the Santa Ana City Council.

"I want answers if we only have $300,000 in the bank," Tinajero said.

To put the Santa Ana situation in context, Costa Mesa Mayor Gary Monahan rang warning bells based on the fact that his city's general fund balance dropped to $5 million last November.  Costa Mesa is one-third the size of Santa Ana.

Orange County Supervisor John Moorlach, who is a former county treasurer-tax collector, said Santa Ana's situation is reminiscent of Vallejo's, the Bay Area city that filed for municipal bankruptcy in 2008. Vallejo had been leveraging all of its internal funds until there was nothing left, prompting the city to go bankrupt, Moorlach said.

"It's when you're out of cash — and when your bank says, hey, we don't want to extend more credit — that's when you're really hitting the wall," Moorlach said.

Tinajero and Councilmen Vincent Sarmiento and David Benavides said they would be making inquiries at City Hall.

Councilwoman Michele Martinez said she asked Gutierrez about the city's cash flow after Voice of OC's post on the issue last week. She said she was told that the city is waiting for its large revenue disbursements at the end of the year and that the city would be able to pay all of its bills.

But Gutierrez did not inform her of the city's low cash position, she said.

"I believe we should have a reserve policy for times like these," Martinez said.

Mayor Miguel Pulido and council members Carlos Bustamante and Claudia Alvarez did not return a reporter's calls.

Correction: Due to an editing error, a pervious version of this story incorrected stated that the Costa Mesa's fund balance available was estimated to be $5 million by this November. In fact, the city's fund balance available was $5 million in November 2010. We regret the error.

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