Outlook still murky, ask again later

Extension of financial report approved under shadow of alleged fraud

Mayor Scott Gruendl slams the gavel as Councilmembers Tami Ritter and Randall Stone look on just before the City Council meeting begins.

Mayor Scott Gruendl slams the gavel as Councilmembers Tami Ritter and Randall Stone look on just before the City Council meeting begins.


A clear picture of the city’s grim financial situation remained elusive after the Chico City Council meeting on Tuesday (Feb. 4), with city officials yet to outline specifically what—or, perhaps more appropriately, who—caused the $15.2 million general fund deficit the city now faces.

For months, Mayor Scott Gruendl and Vice Mayor Mark Sorensen have maintained that blame lies with former city employees, a premise Gruendl reiterated during the State of the City address on Jan. 30 at the CARD Center (see Second & Flume, page 4), during which he alleged that former city staff members withheld critical information from the public and the council, acted without authority and committed fraud.

Under that shadow, Administrative Services Director Chris Constantin on Tuesday requested that the council extend the deadline on a presentation of the city’s financial status based on the findings of an independent auditor. Constantin explained that “there is still one significant issue outstanding with regards to how we will present our financials.”

For the past seven years, he said, auditors have allowed the city to treat deficits in certain funds, such as the private development fund and capital-projects fund, as “separate liabilities.” However, Constantin said, the current auditor maintains that the funds “should all be collapsed into the general fund to reflect that the general fund is truly underwater and that, in fact, you end up not having a reserve at all.”

Constantin said the city is waiting for a response from the Governmental Accounting Standards Board, which may dictate whether the city has to accept the current auditor’s financial interpretation. If that’s the case, presenting city finances in that manner would have “far-reaching effects,” said Accounting Manager Frank Fields, indicating the city might need to pay off its debts more quickly than previously thought. (In December, the council adopted a plan that includes repayment of $1.52 million each year through fiscal year 2021-22, and an additional $700,000 during the final year, 2022-23.)

Councilwoman Mary Goloff questioned why previous auditors didn’t combine the funds in past financial reports.

“Given I wasn’t here last year, I do not know,” Constantin replied. “I have serious concerns about how [finances] were presented in the past, if our current auditors are correct.”

Fields also suggested possible negligence by previous auditors: “If auditors six or seven years ago said ‘You have to combine [the funds],’ our financial situation would probably look a lot different now,” he said.

The only public comment came from Mary Fitch, one of three former city employees, including Alicia Meyer and Quené Hansen, who have repeatedly questioned the narrative of financial mismanagement vaguely outlined by Gruendl and Sorensen. Once again, Fitch blasted the council members for making “accusations against former staff to try to shift the blame away from policymakers, and in the process ruining the reputations of former staff.”

“Mostly shame on you, Mr. Sorensen,” she continued. “You’ve made it your personal mission to destroy the reputation of former staff, using the threat of the audit’s findings as constant foreshadowing of some major revelation, leaving citizens to believe you’ve been left in the dark all this time.

“The truth is the information was provided over and over again. Just because you didn’t understand it doesn’t mean it wasn’t there.”

Rather than giving Fitch the gentle warning provided to most speakers who exceed the three-minute time limit, Gruendl abruptly ended her comments by slamming his gavel.

The council voted unanimously to allow the extension, pushing the financial presentation back to the March 18 City Council meeting.

The panel also considered a budget appropriation of $25,000—in addition to $80,000 approved last fall—for professional guidance in the city’s ongoing negotiations with its labor unions. To date, the city has reached agreements with four of the nine bargaining units, including the firefighters’ union.

The $25,000 would come from the city’s emergency reserve fund, a point that didn’t sit well with Hansen. “Even though we’ve been told there’s no money in this fund, you’re asking to use it again,” she said.

But Constantin insisted it would be a worthy investment, estimating the city would save $2 million over the next three years through the negotiations and that the savings would be used to shore up the emergency reserve fund.

The board voted 6-1, with Councilwoman Ann Schwab dissenting, to approve the appropriation.