Isleton Small City - Big Challenges Originally issued February 15, 2008

Isleton's elected officials and city staff have, over a period of years, demonstrated an unwillingness, either through intention or negligence, to follow minimum standards providing governance services to the community. Isleton's governance problems are long-standing. They are not the product of merely one or two officials or staff members, but rather a cumulative and continuing series of bad decisions, often made contrary to specific legal advice. Isleton has been plagued with long-term vacancies in key staff positions. They were often filled on a temporary basis by people who were unqualified, people who held other city positions, or people who had conflicts of interest. One key position, City Manager, was filled without proper authorization by the City Council. A listing of inappropriate decisions and unsupported actions follows: • The City operated without an authorized or approved budget for several years, ignoring the specific advice of the City Attorney that decisions made on fiscal items were not authorized and thus void. • At full strength the Isleton City Council is comprised of five members. There were, however, long periods when the City Council was comprised ofjust three individuals, only one of whom was elected. The others had been appointed to fill vacancies. Government Code §§ 36512(d)(1) limits the number of vacant slots which may be filled without election to two. When the City Council was comprised of only three members, it needed a unanimous vote, i.e., a majority ofthe total authorized membership of five, to pass binding legislation. Ignoring the advice ofthe City Attorney in several instances, votes taken were 2-1, yet the mayor went forward on those votes. Such votes were meaningless, unenforceable, and subject to challenge. • Fees collected from residents by the City to pay the contract waste hauler were co­ mingled with the General Fund to pay other expenses. As a result the waste hauler contract payments fell in arrears by over $160,000. • Redevelopment Grant Funds were improperly transferred to the General Fund and used for other purposes. Those monies have not been fully repaid, even though Council members have acknowledged in open meetings that the monies are owed to the Redevelopment Fund. • The City has not been able to conduct an acceptable audit of its books and records, even in the face of repeated requests from State and Federal authorities. • An employment contract was entered into by a sitting mayor and the then Acting Fire Chief. It was not legally approved by the Council and was subsequently reversed by the Council. Nevertheless, the contract was used by the Fire Chief in a real estate loan application to substantiate financial capability. Upon review by the City Attorney, this contract was described as having the appearance of collusion and bordered on fraud. 42 • The City has been unduly influenced by, and improperly paid monies to, the Isleton Firefighters Association, an entity which has no legal standing in the City. • The City sent an inexperienced team ofrepresentatives, which did not include the City Attorney, to negotiate impact fees for a proposed housing development. Completion of this development with fees as presently negotiated will unduly burden current infrastructure and future budgets. • The City has gone for varying lengths oftime without the essential services ofin-house planning staffor a City Attorney, relying instead on contract personnel to meet those needs. Currently, these contracts are in substantial default. • City staffis insufficient to handle numerous required tasks. At times citizens suffer because services are incomplete or are handled incorrectly. • In the past four years there has been a palpable level oftension and dysfunction within the City Council and between some Council members and City staff.

Past financial mismanagement, lack ofexpertise and frequent animosity among City leaders has brought Isleton to a state ofserious indebtedness. Sacramento County is able to assist Isleton with the management ofits accounts. However, the County requires an acceptable audit before assuming that task. There have been several attempted audits over the past few years. Due to missing records, the City has been unable to produce an acceptable audit.

Isleton has incurred debt which is oppressive and could bankrupt the City. Long-term financing for debt consolidation appears to be the only practical solution to resolve the City'S outstanding obligations. Some creditors have expressed a willingness to renegotiate their accounts. The City Manager is currently attempting to secure a loan to consolidate the major debts ofthe City. He is investigating opportunities with several lenders which may be agreeable to work with the City ifassured ofthe cooperation ofCity leaders. 43

Isleton has an uncertain form of governance which often pits the office of the City Manager against the office of the Mayor or other City Council members. This causes conflict.

Isleton representatives failed to consider current and long-term consequences to the City when negotiating a residential housing development agreement and the impact fees to fund and maintain resulting infrastructure improvements. The negotiating team was untrained and inexperienced for this complex task. • When offered training to become proficient in the type of negotiation required, City representatives refused. • The City Council, Mayor, and the then Acting City Manager ignored professional advice from the City Attorney and others when considering impact fees arising from the development proposal.

In January 2006, there was a transfer from the Isleton Redevelopment account to the City's General Fund in the amount of$150,000. These funds have not been repaid. City officials refused to repay these funds, even after being advised by legal counsel on numerous occasions that such a transfer was unlawful. The following are documented instances of the City's longstanding awareness of its wrongdoing in transfers of this nature: • A legal memorandum dated September 19, 2000 from the former Isleton City Attorney expressed concern that the City was not following the requirements for use of Redevelopment Funds as set forth in the June 25, 1997, agreement between the City and the Redevelopment Agency. The funds were to be placed in a separate account and not co-mingled in the City's General Fund. The City was advised to stop co-mingling funds, but continued to do so. • A letter dated November 7, 2003, from the California State Attorney General to the Mayor informed the City of an investigation for a possible "major violation" of the California Community Redevelopment Law (Health and Safety Code § 33000 et seq.), for failing to submit required annual audits to the State Controller regarding use of Redevelopment Funds. • Another legal memorandum dated January 23,2006 from the City Attorney informed the Isleton Mayor that a loan or transfer oftax increment funds (Redevelopment Funds) to the City's General Fund was unlawful under existing California statutes. The City was also advised to maintain accurate records of Redevelopment Fund expenditures and to submit annual audits. • A third legal memorandum, dated February 22, 2006, from the City Attorney to the then City Manager and City Clerk, informed them that the transfer of tax increment funds (Redevelopment Funds) to the City's General Fund was unlawful and such a transfer should be reversed and the practice stopped. If there was a resolution memorializing such a transfer, it should be reversed. It was not authorized by law.

Many calls for fire and emergency services in the Isleton area require multiple fire agency responses. At present, several area fire agencies have restricted or qualified mutual aid assistance agreements with Isleton. This region's fire and emergency services, primarily 45 delivered by volunteer firefighters, lack uniformity of equipment and training to meet the objective ofmutual aid.

The City has been unable or unwilling to control its relationship with the Isleton Firefighters Association. The relationships and interactions between the City's Fire Department and the Firefighters Association are awkward at best. With limited dollars, the City's salaried Fire Chief, charged to organize a response to fires and medical emergencies, must rely on volunteer firefighters. None ofthe firefighters are paid by the Association, yet the Association receives money from the City for their services. To complicate matters, the Association is politically active. One of its members is an elected City Councilman who votes and promotes the Association's special interests at Council meetings. A recent Fire Chiefwith conflicting salary and employment interests with the City has been a very active and vocal leader ofthe Association.

There are seven separate fire protection and emergency related service groups in and around Isleton. (See Attachment 1.) River Delta Fire District maintains a fire station directly across the street from the Isleton Fire Department. Neither of the two fire agencies (the Isleton Fire Department or the River Delta Fire District) has a stand-alone fire protection and emergency services capability for the Sacramento County side ofthe Sacramento River. Recent concerns regarding bridge safety and bridge closures at the Rio Vista Bridge present a serious barrier to ensuring quality fire and emergency services in the Isleton area. For example, the California Department ofTransportation closed the bridge from 9:00 p.m. to 6:00 a.m. for three weeks this past November. This bridge is also raised and lowered for boat traffic on a daily basis. Currently, Isleton is unable to fully and reliably staff an efficient and consistent response for fire and emergency services. The combination ofall these factors makes the delivery ofreliable fire and emergency services to Isleton residents very uncertain.

The Police Department is well equipped. Costs are rising for gas, equipment, unifonns, vacations, sick leave, and accidents. Some City Council members appear biased against the Police Department.

Isleton is well known for its annual Crawdad Festival, sponsored by either the City or the Chamber ofCommerce. Started in 1986, this is the most socially significant event for the community and draws approximately 50,000 people each year, generating substantial revenue. The City's fiscal and accounting policies and procedures when the City operated the Festival were inadequate. City officials did not know exactly how much revenue was generated or what operating expenses were incurred. Security, collection, and safeguarding ofthese funds were all insufficient. Thousands ofdollars remain unaccounted for. City leaders have taken an indifferent attitude toward investigating this issue. 47

The City ofIsleton faces many fiscal and organizational challenges that require the immediate and continued attention of City leaders as well as the citizens.

Sacramento County can assist Isleton in its accounting and record-keeping. The county can provide experienced program personnel to help Isleton identify, secure, and administer all grants or other public monies available.

Without immediate improvements such as suggested in this report, Isleton may be unable to properly operate and maintain the necessary city services and governance required ofa general law city.