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Extracted from Consolidated Report

This investigation was originally published as part of a larger consolidated report containing multiple investigations. View the consolidated PDF for the complete document.

Santa Cruz County Grand Jury • 2001-2002

Investigation of the Reporting Structure between the Capitol City Council and City Manager

Published: June 26, 2001 8 pages
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Findings 16 findings

F1 Page 22
A current comprehensive Policy & Procedures Manual for the City of Capitola was not available for review by the Grand Jury.
F2 Page 22
The current finance director started working for the city in1994 as a part-time controller.
F3 Page 22
The city council created the position of finance director, reporting to the city manager, and approved the employment agreement and job description of the current finance director on November 26, 1996 effective January 1, 1997 (Resolution No. 2854).
F4 Page 22
The organizational charts of the city included in the FY 1998, 1999 and 2000 financial statements show the finance director reporting directly to the city manager.
F5 Page 22
Based on interviews, the Grand Jury found the working relationship between city manager and finance director negatively impacted city operations, contrary to Municipal Code §2.08.220.
F6 Page 22
On January 27, 2000, the city council revised the job description of the finance director to include direction over the Capitola Redevelopment Agency.
F7 Page 22
In January and February 2000, the finance director filed grievances against the city manager. Ordinarily, the city manager would review and act upon the grievance as stated in the Management Employee’s Compensation Plan. However, since the grievances were against the city manager, the city council decided to review them.
F8 Page 22
The Capitola City Attorney authored a memo to the city council dated February 17, 2000 regarding potential conflicts with the city’s ordinances and the job description and employment agreement of the finance director. In particular Municipal Code §2.08.210 and 2.08.220 were cited. This concern was reiterated in the March 3, 2000 memo from the city attorney citing Municipal Code §2.04.060.
F9 Page 22
On March 23, 2000, the city council voted to approve an amendment to the November 26, 1996 employment agreement with the finance director. This amendment was executed on March 30, 2000 and removed the finance director from the direct supervision of the city manager. “Employee” in the quote below refers to the finance director. Item 1 states: “…The parties therefore agree that when, in Employee’s professional judgement it is necessary or desirable, Employee shall present such matters directly to the city council for consideration and copy the City Manager.” Item 3 states: “The City Council shall have sole and exclusive authority to impose discipline upon Employee for any alleged misconduct, misfeasance, malfeasance, incompetence or negligence in the performance of his duties, and/or take any other adverse action toward Employee. Employee shall not be terminated from employment or placed on administrative leave with or without pay, except by the City Council.” Investigation of the Reporting Structure between the Capitol City Council and City Manager 2000-01 Santa Cruz County Grand Jury Final Report
F10 Page 23
Immediately following this vote, a council member resigned citing the acrimony within the city government, as recorded in the minutes “…The extent of the acrimony at meetings of the Council, as well as the on going attacks by elected officials against individual council members and city staff are unprecedented in the 8 years she has served here. This behavior has already seriously impacted the services provided to residents and has eroded the morale of even the best of our employees. She went on to state she would not participate in the destruction of this city and neither should you. When previous councils have had differences, and faced difficult financial situations, the council and the staff pulled together to resolve them. In contrast, the renewed efforts of the city treasurer to embroil the city in controversy, and the support of the council majority to allow this to occur, are causing paralysis in a previously well-functioning city government. The damage that this course of actions causes is significant. While fingers point and voices shout, Capitola languishes. She regrets that it has become impossible for her to get the work of the Capitola community that she cherishes completed in this vicious atmosphere…”
F11 Page 23
In a letter dated March 30, 2000 to the mayor, the finance director withdrew his grievances citing that his new job description and supplemental employment agreement resolved most of the issues in his grievances.
F12 Page 23
On June 18, 2000, the Capitola City Manager submitted his resignation effective August 1, 2000.
F13 Page 23
On September 28, 2000, the city council rescinded the super-majority (four-fifths) vote requirement for removal of the city manager per Municipal Code §2.08.240.
F14 Page 23
On January 11, 2001, the City of Capitola and its finance director negotiated the Amended Supplemental Employment Agreement. This amendment superceded the March 23, 2000 amendment in its entirety. This action reinstated the direct supervisory relationship between the city manager and finance director. Item 2 states the current finance director will retire June 30, 2001. Item 6 states: “…The parties expect that the directive of the City Manager will be consistent with the position’s ‘Essential Duties and Responsibilities.’ If the Finance Director believes that a directive of the City Manager cannot be reconciled with the above-quoted duty, he may pursue that as a grievance under the grievance procedures in the Management Employees Compensation Plan.” Investigation of the Reporting Structure between the Capitol City Council and City Manager 2000-01 Santa Cruz County Grand Jury Final Report • Included as an exhibit to the January 11, 2000 agreement, the City of Capitola and the current finance director entered into a Contract for Professional Services commencing September 1, 2001 terminating on June 30, 2003. In this contract, the contractor would give advice, recommendations and drafts on several policies and procedures and perform other non-routine tasks. Under the agreement, the contractor is expressly prohibited from performing day-to-day routine tasks. Item 3, under the Duties heading states: “Contractor shall not be requested to, nor shall Contractor, perform any day-to-day, ongoing, routine accounting or fiscal duties, and Contractor shall not supervise, or be supervised by, any official, employee, or agent of the City.” • In response to a question, the finance director stated in the interview the list of contemplated projects attached to the Contract for Professional Services included some tasks that he characterized as ordinarily the responsibility of a finance director.
F15 Page 24
Despite the impending retirement of the finance director, at the close of fieldwork the City of Capitola had not begun its search for a new finance director. Under the Professional Services Agreement signed by the current finance director, the contractor is prohibited from assisting the city in its day-to-day operations after his retirement. This raises the question: Who will act as finance director after June 30, 2001? The Grand Jury was unable to determine the plans of the city regarding this matter.
F16 Page 24
In preparing this report, the Grand Jury found it necessary to interview the finance director alone. For six weeks, the Grand Jury attempted to arrange for such a routine interview. This was refused and he was therefore subpoenaed to appear before the Grand Jury. In preparing this report, the Grand Jury found it necessary to conduct a private interview with the finance director. For six weeks, the Grand Jury attempted to arrange for an interview, however, the finance director refused to appear alone. Based on review of the correspondence received from the City of Capitola on this matter, the finance director’s refusal to voluntarily cooperate was supported by the city attorney, mayor and new city manager. A subpoena was subsequently issued and the finance director did appear alone. Penal Code §939 has been interpreted by the courts as operating to prohibit the presence of anyone at a grand jury session other than grand jurors and witnesses actually under examination. The only exceptions are a bailiff, court reporter, or interpreter. Conclusions The city council spent an inordinate amount of time in 2000 discussing and restructuring the reporting relationship of the city manager and finance director that was ultimately returned to its previous state in conformity with Municipal Code. The city council allowed itself to be diverted from crucial city business by the antagonism between these two important city officials, which, in part, led to the resignation of a council member. Instead of using standard government practices to resolve a formal personnel grievance, the city council entered into a contract with one of the parties that contravened its own Municipal Code. A change in the reporting relationship between the city manager and finance director as a quid pro quo agreement for the withdrawal of the grievances presents serious public policy questions. Investigation of the Reporting Structure between the Capitol City Council and City Manager 2000-01 Santa Cruz County Grand Jury Final Report

Recommendations 5

Conclusions 2