Grand Jury Report: City of Lake Elsinore

R1

In this matter, I generally agree with the city's official response - a county municipal response team is not necessary. I also agree that the city has made a number of positive financial moves in recent in regards to reducing the interest rates on its myriad of bonds. Page six There is one point I would like to clarify, however. The city's official response states that the "most recent budget shows adequate revenues and reserves to cover anticipated expenditures.. .9 , Technically, that is correct. However, it may be considered as disingenuous because it fails to mention that the city has run annual general fund operating deficits of up to nearly $1 million for the past few years and expects to run an operating deficit in the current fiscal year. To say the city (and its redevelopment agency) is paying its bills and meeting its debt obligations is, again, technically correct. However, considering the annual deficits (which are draining the city's reserves) and the redevelopment agency's approximately $15 million in unsecured debt to both the city's general fund and its own low-and-moderate income housing set-aside program, I fear that the official response does not paint a truly accurate picture of the city's financial situation. Be that as it may, I agree that a county team is not necessary. However, I do support a complete and thorough forensic accountant audit, process audit, and management study. (Further explained below)

R2

As the Board of Supervisors decided against offering the city a municipal response team, I have no comment on this recommendation.

R3

As noted in my response to Recommendation 1, I agree with the Grand Jury's recommendation that the city "engage an outside firm to perform a complete and in-depth audit of city finances and practices." In fact, the city council recently took a step towards doing just that when it engaged a firm to complete a salary survey and "process audit." Page seven The salary survey and process audit should be completed by February, 2003 and I am hopeful that its findings will provide the city with a roadmap to improving its internal operations in the future. As for the financial audit, I understand the city is audited annually by an outside firm and I find no fault with their work. However, I believe the Grand Jury was looking for something more in-depth than a typical annual audit and, as stated above, I would support such a "forensic" look at all of the city's finances and financial practices. Recommendations 4 and 5 Please see my response to Findings 5 and 6, respectively, for my comments on the final two recommendations. I hope the above comments have been helpful and/or illustrative. I would also again like to point out that the above comments are the feelings and opinions of a single councilmember and should be taken simply as such. But I do believe the city must do a better job in two key areas, areas not specifically raised by the Grand Jury but areas which relate to almost all of the Grand Jury's concerns: Communication and public trust. We as a city must do a better job making our residents feel empowered and more in control of the city. Too often, city hall has appeared as a "blank wall" to our residents, offering little help or hope. Once we involve more of our citizens and communicate better inside and outside city hall, we can then begin to build a new base of public trust and rebuild the city's image. While this letter has been admittedly rather negative, I must say that a lot of good work is being done in city hall and by the city council. I also believe that, in general, the city, through the work of the most recent P Page eight councils, is beginning to turn the corner and will, hopefully, very soon become a model of civic responsibility and probity. I thank you for taking the time to read this letter and hope it has been of some use. Sincerely, - City of Lake Elsinore qw % 0 SUBMllTAL TO THE BOARD OF SUPERVISORS COUNTY OF RIVERSIDE, STATE OF CALIFORNIA FROM: WECUTIVE OFFICE SUBMllTAL DATE: July 2,2002 SUBJECT: Grand Jury Report: City Of Lake Elsinore I RECOMMENDED MOTION: Receive and file. BACKGROUND: The attached report has been issued by the Grand Jury. The City of Lake Elsinore is an independently elected, general law city with its own governing council, and has no reporting relationship, with regard to the Grand Jury reports, to the Riverside County Board of Supervisors. This report is filed for purposes of providing general information to the public regarding the Grand Jury's findings. --n

R4

Large legal fees include a city attorneyf ee of $500,000f or 2001-2002 and a projected city attorneyf ee of $450,000f or 2002-2003. Those extraordinary legal expenses for the city in 2001 included but were not limited to: The Camelot Theater Project Proposed developmentf or thejlood channel The stadium management contract Litigation associated with drownings RESPONSE: The City disagrees with this finding. The City believes that defending itself fiom meritless claims and pursuing litigation against those that break their contracts with the City constitutes a sound approach and that legal expenses in connection with such actions are not "extraordinary." The City makes great efforts to avoid litigation and find resolution and settlement short of going to trial. As recognized by the Grand Jury, attorneys retained by the City are engaged in a variety of matters. Many of those matters, including the cases cited in the finding, involve complex legal issues and time-consuming analysis and negotiations. As a point of clarification, the defense costs for "drownings" litigation are covered by the City's insurance carrier. The City Attorney's involvement has been limited to reviewing updates from the carrier's defense attorney. Accordingly, the City Attorney's fees in this matter are nominal.

R5

A licensing agreement by the City ofLake Elsinore for the City Campground with aprivate corporation was entered into on December 11, 2001. fie agreement required that the corporation conduct an ". . . Aquatic Safety Study that shall include recommendationsf or maintaining and potentially improving the level of aquatic safety. " RESPONSE: The City agrees with this finding and the City's concessionaire is completing the study.

R6

Lake Elsinore City Council adopted a Code of Ethics with an eflective date of October 14, 1986, which has not always been followed. RESPONSE: The City agrees with this finding in that there has been one documented violation; thus, the Code has not "always" been followed. As to that single occurrence, that council member was subsequentlyr emoved from office pursuant to a judgment handed down by the Superior Court. Recommendations fie Lake Elsinore City Council submit a request to the Board of Supervisors for the assistance of a Municipal Response Team in accordance with the Board of Supervisors' .< Policy Number A-54. RESPONSE: The recommendation will not be implemented because it is not warranted. ., (I * Beginning in 1996, the City implemented a comprehensive financial plan commencing with the issuance of the above-referenced Recreation Authority bonds. In the last 6 years, the City has aggressively restructured its debt load to reduce interest payments and overall debt service payments. In doing so, the City has freed up general fund monies and increased the level of public services. Over the last 6 years, the City has demonstrated its ability to responsibly manage its expenditures and pay all of its financial obligations. The City's most recent budget shows adequate revenues and reserves to cover anticipated expenditures and the City and Redevelopment Agency are not in default on any bond issues. In summary, the inclusion of another public agency is unnecessary and could undermine economic gains by discouraging those looking to locate businesses in Lake Elsinore or otherwise invest in the community. The Board of Supervisors respond favorably to a request from the Lake Elsinore City Councilf or a Municipal Response Team. RESPONSE: See response to Recommendation 1 above. Additionally, Supervisor Bob Buster was recently quoted in the Press-Enterprise as stating, "The financial problem Lake Elsinore has is the result ofpast irresponsible political decisions, not ongoing administrative or financial mistakes or incompetence." (Press-Enterprise, 6/27/02). The Lake Elsinore City Council engages an outsidefirm toperform a complete and in-depth audit of cityf inances and practices. RESPONSE: The recommendation will not be implemented because it is not warranted and, given current public auditing requirements, is redundant. The City retains an independent third party to audit the City's financial records every year. The City's current independent auditor is a well respected Certified Public Accounting firm, Teaman, Ramirez & Smith which specializes in auditing municipalities. The audit is conducted in accordance with auditing standards applicable to financial audits contained in the Government Auditing Standards issued by the Comptroller General of the United States. The audit is designed to assure that the City's financial statements are free of material misstatements. The audit includes examinations of evidence supporting the amounts and disclosures in the City's financial statements. The audit also includes assessing the accounting principles used and significant estimates made by the City. The City's audited financial records are public records and available for inspection by the Grand Jury and any member of the public upon request. In addition, the City recently entered into a professional services agreement with Hayhurst & Associates to conduct a process audit and parity study. The Lake Elsinore City Council require the immediate completion of the Aquatic Safety Study and, once completed, develop policies and procedures for ensuring that all provisions of the study are met. RESPONSE: The recommendation is being implemented. The Lake Elsinore City Council review and make a commitment to conduct all city business according to their Code ofEtlzics. RESPONSE: The recommendation has been implemented. The City is not aware of any current member of the Council or City staff in violation of the Code of Ethics. However, in deference to the Grand Jury's recommendation, and by formally adopting this response, the City reaflirms its commitment to conduct City business in accordance with the City's Code of Ethics. In addition to the Code of Ethics, the City complies with all provisions of the Political Reform Act. The City has adopted the standard Conflict of Interest Code promulgated by the Fair Political Practices Commission. The City Council and designated employees annually file statements of economic interests. The Conflict of Interest Code and the annual statements are on file with the City Clerk. F I L E September 17,2002 Office of the Grand Jury County of Riverside P.O. Box 829 Riverside, CA 92502 Dear Grand Jury: This letter is in response to the Riverside County Office of the Grand Jury's report on Lake Elsinore dated June 24,2002. I assume that the Grand Jury has already received the city's official n response, approved by the council on a 3-2 vote, to its findings. However, I, as a dissenting vote and an individual councilmember, wish to expand and expound upon the city's response of September 5,2002. While I offered this letter to the rest of the council for review prior to its mailing, I would stress again that I am writing this "minority report," if you will, as an individual councilmember only. Please include this letter in any city-related file that you may keep. First, there is the issue ~f tone. I personally believe that the wording, style, etc. of the city's official response makes it clear that the city simply did not take the Grand Jury's findings and recommendations seriously enough. The inclusion of the quote from Supervisor Bob Buster that Lake Elsinore's problems are the result of "past irresponsible political decisions" is only one indicator of a dismissive stance in regards to the Grand Jury's criticisms and an unwillingness to seriously consider significant reform. r‘ Page two I will now address each of the Grand Jury's findings and recommendations.