Accounting Blunder Boosts Westminster’s Budget Deficit

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A costly accounting mistake in Westminster has revealed that the city’s budget deficit is $2 million more than city leaders anticipated, although officials won’t explain the mistake and how it occurred.

In March, Finance Director Michael Solorza was citing numbers that placed the city’s budget shortfall at $3.1 million dollars. But then at a budget workshop late last month, city administrators revealed a $5.39 million deficit for fiscal year 2015-16.

Solorza, an at-will employee, was fired on May 4, according to Assistant City Manager Chet Simmons. Simmons would not elaborate further on the circumstances of Solorza’s departure, nor would he comment on whether it is related to the budget deficit.

City councilwoman Diana Carey confirmed that Solorza was terminated because of a “miscalculation.”

“There were PERS calculations that weren’t figured in. It wasn’t malicious, it wasn’t done on purpose — it was an oversight,” Carey said. “As soon as it was noted, he came forward. [But] by that time, it was very late in the game.”

Simmons attributes the ballooning deficit to new projections that show increased costs for public employee pensions and a decline in internal reserve funds.

When asked to explain Carey’s comments and how the miscalculation occurred, Simmons, who also acts as the city’s public information officer, declined to comment, citing confidentiality rules for personnel issues.

City Manager Eddie Manfro and Simmons did not return emails or repeated calls for clarification. Solorza has not returned repeated requests for comment.

The council has yet to find a replacement for Solorza.

Like neighboring Garden Grove and several other Orange County cities, Westminster has been struggling under the shadow of a budget deficit since Gov. Jerry Brown eliminated redevelopment agencies in 2011.

In 2000, city leaders declared all of Westminster a redevelopment zone. While this allowed the city to capture additional property tax revenue to improve blighted areas, it also put much of its budget in the same vulnerable basket.

The end of redevelopment created a $10.4 million budget hole and forced the city to lay off 67 employees.

Since then, city leaders have not called for any additional staff cuts but have trimmed the deficit by scaling back some services, reducing operation costs, shuffling around management duties, and seeking out grant money.

This year’s deficit has also been exacerbated by legal fees from two major federal lawsuits against the city’s police department.

Earlier this year, city staff returned to the council for some last-minute budget adjustments that added $1.1 million to this year’s spending, due in part to settlements and legal fees from two major federal lawsuits against its Police Department.

City revenue has also come in $1.13 million below initial projections, including more than half a million dollars in sales tax and $232,000 from charges for services.

The dip in sales tax revenue is due in part to the loss of a large recreational vehicle business and little growth in the city’s retail sector. Although a Costco is expected to open next year and a major recreational vehicle business, Dillon RV, opened in April, economic data suggests a slow and shallow recovery, according to staff.

Officials have relied on one-time monies and a dwindling rainy day fund to balance the budget each year. But if they continue to draw on reserves, the fund, which is now at $17.2 million, will be depleted by 2018, according to a staff presentation.

While the City Council has yet to discuss its strategy to deal with the structural deficit at public meetings, it is clear that views among council members are mixed.

At past meetings, Carey has emphasized the need to focus on raising revenue, arguing that no more cuts can be made to the already lean city staff.

Ideologically conservative members of the council, such as Tyler Diep and Mayor Tri Ta, have said they oppose attempts to raise revenue through additional fees or services or tax measures.

Members of the Westminster Police Officers Association filled the City Council chambers at a meeting earlier this month to show concern about the deficit and oppose additional cuts to the department.

At Wednesday’s Council meeting, the council members have the option of passing the budget as-is; make amendments to the budget; or they can approve a spending resolution to allow operations to continue while they re-work the budget.

Contact Thy Vo at tvo@voiceofoc.org or follow her on Twitter @thyanhvo.

  • David Zenger

    Too bad Solorza didn’t work for the County. He’d still be employed.