Office of the City of Sacramento City Hall City Manager*

0 Based on data supplied by city employees, a consultant's draft report estimated that the city's annual cost of potential violations is more than $5 million. The present worth cost of one-time projects and recurring costs over the last three years is in excess of $21 million. The mayor and members of city council received copies of this report in July 2008. No action was taken. Response: The City disagrees in part with this finding. The referenced engineering consultant was retained to review cost data associated with various practices identified by City staff, and prepared and submitted a draft report in May of 2008 quantifying the cost associated with these practices. However, the analysis provided in the draft report consisted solely of cost estimating. The draft report expressly stated that it was not intended to provide an opinion regarding compliance with Proposition 218, and for this reason the various cost estimates in the consultant's draft report were not necessarily 1 indicative of any actual violations of Proposition 218. To the extent that this finding suggests otherwise, the City disagrees. In addition, actions were taken after the consultant's draft report was received, as noted in the response to Recommendation 1.2, below.

0 Once the city manager and the assistant city manager over the Department of Utilities (DOU) learned that there were potential and substantial Proposition 218 violations, they had a duty to pursue the issue and determine the existence and extent of any actual violations. They failed their duty. Response: The City disagrees with this finding. As noted in the response to

0 For years DOU has supplied water to city parks at a reduced rate of only 15% of the usual rate of providing water to other metered users. The grand jury is of the opinion that this is a violation of Proposition 218, which limits fees or charges to ratepayers for property related services. Providing water at reduced rates to the Department of Parks and Recreation (DPR) is not a property related service to ratepayers. The April 2009 agreement between DOU and DPR provides for this violation to be corrected over a 15 year period. The grand jury finds this timeline to be too lengthy. Response: The City disagrees in part with this finding. City staff undertook this phased approach to lessen the significant general fund impact of increasing the Department of Parks and Recreation' annual water costs, and as of July 1, 2009, the annual amount paid for water by the Department of Parks and Recreation has already been significantly increased. Given these circumstances and the City's ongoing and significant general fund deficits, the City does not find this timeline to be too lengthy.

0 The city has shifted the cost of providing city services from the general fund to the enterprise funds of DOU. The city improperly uses DOU labor and equipment, without 3 reimbursement, to provide services to other city departments, sports facilities and city buildings. Response: The City agrees with this finding, with the clarification that beginning July 1, 2009, the Department of Utilities ceased the use of its personnel or equipment to perform work for non-Utility facilities without receiving full cost reimbursement either in funds or through trade of in-kind services.

0 For the last several years DOU was directed to allocate $1 million to pay for capital improvements related to private economic development projects. The city dropped the allocation from the FY 2010 budget. Response: The City agrees with this finding, with three clarifications: (1) the funding was used for public utility infrastructure, (2) the referenced allocation of $1 million was not necessarily an annual contribution of this amount, because in any given fiscal year if allocations for specified utility infrastructure projects were not fully expended or encumbered, the unspent/unencumbered balances were returned to the applicable Utilities funds; and (3) the funding was discontinued beginning July 1, 2009 due to budgetary considerations.

0 The grand jury found a lack of accountability, absence of transparency and failure of responsibility by individuals who hold positions of public trust in Sacramento City government. Response: The City disagrees with this finding. City staff has been working to resolve the issues identified in the Grand Jury report as noted in the response to