City of St Helena

F2. The City’s financial forecasting is not performed by an actuary, thereby leaving the results suspect. It is not reasonably possible to do five-year financial planning without accurate revenue and expense data and forecasts. Response: The City disagrees with this finding. The LRFF is a financial forecast _and not an actuarial exercise. The results are not suspect based on the information presented in Statements of Concern (SC) SC6 through SC13. The City’s Capital Improvement Plan does not list amounts to be expended for the Water and Wastewater Enterprise projects mandated by federal, state, and local authorities. The Upper York Creek Dam, Bell Canyon Reservoir, and Wastewater projects have been on the CIP docket for many years, without beginning construction or making other material forward progress toward their completion. 2018-2019 Napa County Grand Jury Response August 28, 2019 Response: The City disagrees with this finding. The City’s Capital Improvement Plan (CIP) does list estimated amounts for each CIP project; however, the CIP does not specifically indicate which projects are mandated by federal, state, and local authorities. Additionally, in recent years there has been material progress on the Upper York Creek Dam Removal, various Bell Canyon Reservoir improvements, and Wastewater CIP projects.

The various projects facing the City place tremendous time and expertise burdens on City Staff. City Staff lacks specific expertise to manage some of these complicated dam and reservoir projects. Response: The City disagrees with this finding. The City hires qualified outside firms, when prudent, for major projects. City Staff oversees the work of these firms.

The City has not adhered to its own Capital Improvement Plans for the previous 10 years. This is especially notable concerning how few of the major projects— listed repeatedly in the CIPs over these years—have been completed. Response: The City partially disagrees with this statement. The City has not completed some major projects that have been listed on the CIP list; however, the City has completed some significant projects and has made progress on other projects. Examples include: Flood Control Project, replacement of Tank 1 with Tank 1A at Bell Canyon, installation of a new water tower at Bell Canyon, various paving projects, and installation of a new practice range for the Police Department.

The Citys Water and Wastewater Enterprise rates are suspect, due to an inaccurate water and wastewater rate report. Response: The City disagrees with this finding. The inaccuracies noted by the Grand Jury impacted the last wastewater rate increase, not the water rate increase. The methodologies for the water rate study are correct and projected revenues are tracking with projections in the rate study for water. However, issues arose in connection with the rate study, including shortages in the City’s wastewater fund revenues. The City entered into a settlement agreement to resolve those issues. The City is currently under contract with an engineering firm to evaluate rate methodologies and concurrently completing an underground utilities master planning effort to identify critical infrastructure deficiencies and needed investments before initiating a subsequent new water and wastewater rate study, which is typically done every five years.

The SHAPE Committee recommendations to the City did not include the less- expensive options in the SHAPE Committee Report. 2018-2019 Napa County Grand Jury Response August 28, 2019

F8. FQ. Response: The City disagrees with this finding. All SHAPE Committee options to the City were included in its report, and therefore the City received all options considered by the SHAPE Committee. On a regular basis, the City’s Comprehensive Annual Financial Report has not funded the cost of deferred asset maintenance, which has left its physical assets in disrepair. Response: The City disagrees with this finding. The Comprehensive Annual Financial Report (CAFR) is not a funding document like a budget. Instead the CAFR contains the audited financials from the previous fiscal year. While this report would show if funds were set aside for asset recapitalization, it is not a © budgetary mechanism for setting aside funds. This is done through the budget process. The cost of the City’s ‘City Attorney’ is remarkably higher than comparable small cities in Northern California. Response: The City partially disagrees with this finding. The City acknowledges the annual attorney costs are high and is working to reduce costs each year; however, some attorney costs are derived from unanticipated expenses such as litigation. Additionally, there are attorney costs which are offset by revenues as stated in SC38. Recognizing these costs are still high, the City issued a Request for Proposals for Legal Services in June 2019 which included a solicitation for alternative legal service models. There is no budgeted or written method for dealing with the City’s unfunded pension liabilities, as reported to the City in the Bartel & Associates Report. - Response: The City disagrees with this finding. The City’s annual budget

includes the Unfunded Liability payment required by CalPERS. The LRFF projects the annual payments forecasted by CalPERS and Bartel & Associates in the next| ten years. Further, the City Council commissioned the Bartel study to better inform! itself with options in addressing this challenge. At the City Council meeting in August 2018 the Council directéd staff to accelerate the City’s pension payments from 30 years to 15 years which is projected to save the City $5.2 million. The . City’s residents are not adequately informed of the financial impact of decisions made by the City Council and City Staff. Response: The City disagrees with this finding. Significant financial decisions are made by the City Council, not City Staff. The financial impact on the City’s funds is discussed during the budget cycle as well as routinely disclosed in Staff reports prepared for the City Council and presented at City Council meetings. The financial impact of significant City Council decisions is typically reported to in the 7 2018-2019 Napa County Grand Jury Response August 28, 2019 St. Helena Star newspaper and also City emails to all residents who sign up for City informational email. The financial impact of water and wastewater rate increases is especially widely discussed, as they cannot be lawfully implemented without conformity to the notice provisions required under Proposition 218. In addition to being reported at regular City Council meetings, financial reporting is presented to City Council at the end of each fiscal year through the CAFR presentation and, more recently, included in the presentation of the PAFR as noted in SC5.