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Sat08182018

Last updateWed, 27 Sep 2017 1pm

For the second time in six years, Palm Springs voters have agreed to open their pocketbooks a little wider.

Measure D, voted in last November, and Measure J, approved in 2011, will bring in a total of about $20 million in tax dollars annually to the city.

One problem: Millions from Measure J were given to John Wessman, the original developer of the downtown redevelopment project, and now the subject of numerous bribery indictments along with former Mayor Steve Pougnet.

One question: Will the city seek reimbursements from Wessman if he is found guilty?

Anticipating legal issues in the wake of the bribery scandal, which culminated in an FBI raid of City Hall, Palm Springs officials hired a new city attorney, Edward Kotkin, in April. While previous city attorneys were contractors, Kotkin was brought on as a city employee, at a salary of $206,088 a year plus benefits.

Kotkin is a former Riverside County deputy district attorney who is expected to develop strategies to protect the city from potential legal troubles regarding the outcome of the Wessman-Pougnet criminal case. He came to the city with a fantastic reputation as a skilled attorney.

Here’s an edited version of Kotkin’s answers to my questions, done via e-mail.

If or when Wessman is convicted of the criminal charges, will you seek retribution from Wessman’s companies—in other words, seek to get our taxpayer money back?

If there are convictions in the district attorney’s prosecution of Messrs. Pougnet, Wessman and (Richard) Meaney, those convictions will have civil legal ramifications that the City Council will consider and act upon in its discretion. The council will always act in the best interest of the city, its residents and businesses. The city has already initiated litigation aimed at protecting the city’s rights and remedies as to assets involved in transactions related to the criminal case, and will certainly continue to do so if and when the council determines that new litigation will advance the city’s interests.

It seems the city’s finances are always supported by yet another tax measure, but how long (will this go on)—until the next measure, or until the city’s bankrupt?

There is no potential whatsoever for future increases to the local sales tax. Only a certain amount of tax can be charged at the local level, and Measure D brings the percentage of tax passed through to local government to the maximum. The city has no current plans to consider or present the voters with any additional taxes in the foreseeable future. The city manages its finances effectively, and does not foresee any potential for municipal bankruptcy.

What are the city’s total annual expenditures, all funds included, and what are the annual revenues?

The city’s adopted budget with respect to all funds reflects revenues of nearly $222 million, and expenditures of nearly $230 million. It is misleading and inappropriate to view or portray this data as reflecting “deficit” spending by the city. For example, revenues from past years are being applied this year, based upon the timing of projects. That creates an artificially high figure regarding expenditures. Airport customer facility charge revenue accumulated through many years of rental car fees is being spent this year on Phase 1 of a significant new airport car-rental facility. Revenues of approximately $2 million are dwarfed by project-related expenditures of $6.5 million. Further, the general fund anticipates a small surplus this year, and leaves a reserve of approximately 20 percent.

I presume that you will not frame this revenue and expenditure data in a misleading or inappropriate manner. If you do so, it will compromise your relationship with my office irreparably.

Would it (have been) possible to keep the city of Palm Springs financially afloat, (and residents safe), without Measure D? For how long?

The city of Palm Springs handles its finances in a responsible manner at all times, and will always advance the interests of its residents, businesses and visitors to the greatest extent possible, within its means. Public safety will always be a top priority for the city. Your question presumes that there is an objectively quantifiable amount of funding that will make the city “safe,” and presumes that some level of public services translates to the city remaining “afloat.” The city rejects your question as based upon false presumptions. The city will always be safe, and always remain afloat. More resources at City Hall equate to better public safety and more city services.

What are the city’s legal tools and remedies to recoup the taxpayers’ money if there is or was a developer’s default, such as a prolonged timeline in finishing the additional structures (in the downtown redevelopment plans)?

The city declines to discuss legal strategies that may be employed to address any matter of city business. Doing so disadvantages the city in the event that those legal strategies must be employed. The city has made, and will continue to make, all decisions with respect to the evaluation and pursuit of the city’s legal rights and remedies, as they relate to the downtown project, in the best interest of the city’s residents and visitors. The city is proud of the West Elm building and store, and extremely excited about the … Kimpton Rowan hotel and related commercial locations. Your question contains a determination that the developer of the downtown project is in default. The city is the only party authorized to make that determination, and has not done so to date.

The city’s budget is a complex financial package. How do you help ordinary but curious Palm Springs residents, who are not accountants, grasp where and how taxpayers’ money is spent and used?

The city has implemented the OpenGov Portal (palmspringsca.opengov.com) to assist residents and other interested parties secure access to very user-friendly data regarding the city’s finances. … The city adheres to Governmental Accounting Standards Board requirements and segregates funds accordingly. The city’s comprehensive annual financial report is independently audited for compliance with all GASB (requirements), and all other applicable federal and state requirements.

The city claims transparency and that all of the information is out there on the site. Why, then, did the FBI raid City Hall in 2015 and seize certain records that resulted in indictments, if everything was in order?

The 2015 FBI search and seizure and the prosecution by the District Attorney’s Office did not reflect systemic problems at City Hall. The allegations in this matter pertain to a single elected official, his relationship with developers, and certain specific transactions where the elected official is alleged to have violated conflict-of-interest laws. The city has provided full cooperation with law enforcement’s efforts to investigate and prosecute this matter, and also initiated civil litigation to protect city rights and remedies related to the prosecution. The city has been, and remains, transparent with respect to its dealings with the developer of the downtown project. When money is spent under the PFA, an independent fund control agent and a city-retained consultant for “on-call” facility construction owner representative services help ensure the proper expenditure of all public funds through separate escrows for private and public improvements.

Published in Local Issues

It’s official: Palm Springs now has the highest sales tax in Riverside County. Thanks to newly approved Measure D, the rate will be 9.25 percent. The half-cent sales-tax hike will bring in an extra $6.7 million annually, according to estimates.

Voters in November also approved Measure E, a new tax on recreational marijuana.

These new revenues will be coming into city coffers along with, among other revenue sources, funds from Measure J, the one-cent sales tax increase approved by voters in 2011.

Measure J has indirectly led to a lot of bad publicity for the city—because some of those funds were and are being used for the now-coming-to-fruition downtown redevelopment project that was embroiled in the shady dealings that led to the arrest of developer John Wessman and former Mayor Steve Pougnet on bribery charges.

With an entirely new City Council taking office over the last two years, it’s worth taking a look at those Measure J funds, as well as the whole city budget—a budget that is, according to many observers, not so transparent and very hard to understand.

Palm Springs, with 47,000 residents (and a lot of visiting tourists), has a general-fund budget of $110,130,162 for the fiscal year 2017-18. However, the city’s various special funds actually total more than the general fund—bringing the total fiscal-year budget to $229,966,656, an amount confirmed by City Attorney Edward Kotkin, although he added that the amount has yet to be audited.

Figuring out what’s going on with all of these special funds is nigh impossible. I spent several weeks trying to get information from the city’s director of finance and treasurer, Geoffrey Kiehl. After not getting a response, I reached out to Councilman J.R. Roberts.

Roberts said there are 64 separate special revenue funds. “I had to look that up,” he said.

Why are there so many funds—totaling an amount more than the general fund?

“Unlike most cities in the valley, Palm Springs has an airport, a sewer treatment plant, a convention center, etc.,” Roberts said.

Of course, having so many separate funds raises questions about transparency and fiscal responsibility. Roberts responded that city’s website OpenGov website is easy to navigate. He also pointed out that Measure J funds are under the strict supervision of its oversight committee.

“Once the Measure J oversight committee has made its recommendations, the money is moved to the various projects that were decided upon,” he said.

However … if everything concerning the city’s use of Measure J funds is clearly posted on the city website, how did the fund end up getting FBI attention, including a raid at City Hall? Robert Stone, a self-proclaimed FBI informant and constant city-government critic who unsuccessfully ran for the City Council this year, said one of the problems is that the public is only able to find out how the funds were spent after the fact.

“The Measure J funds are controlled by the city manager and the council, with recommendations from the Measure J Committee,” Stone said. “The reasons behind who gets what are not always clear, and disbursements are pretty much at the discretion of the city manager for smaller disbursements, and council for the larger disbursements.

“We only find out how the funds have been administered at the end of the fiscal year,” Stone said. “We never know in advance where the Measure J money is going. We only find out as the transfers are made.”

As for the new Measure D funds: In their pitch to voters, city officials claimed the funds would help the city maintain essential city services, such as public safety. However, it’s unclear what the city will do to handle its huge long-term pension obligations.

“Measure D does nothing to address the ongoing $220 million unfunded pension and health care liability of the city,” Stone said, claiming that the burden from pension and health-care liabilities will bring the city to its knees if it does not fundamentally change the way it does business.

One common complaint about the city budget: generous salaries. In recent years, Palm Springs City Manager David Ready has been the Coachella Valley’s highest-paid public official, with salary and benefits totaling more than $420,000. However, the problem extends well beyond Ready: According to TransparentCalifornia.com, 68 city of Palm Springs employees earned more than $200,000 in pay and benefits in 2016—and when these employees retire, they’ll be in line for huge pensions. Councilman Roberts confirmed that former Palm Springs Police Chief Al Franz, who retired in December 2015, is receiving a pension of $189,083 per year.

In other words … when it comes to transparency and getting the city budget under control, the all-new Palm Springs City Council has a lot of work to do.

Published in Local Issues