September 11, 2004
Yesterday, Our Interim City Manager, Phil Batchelor, handed out copies of his 170-item list of things that have to be done to fix Richmond. The most refreshing part for me was the fact that the shortcomings were actually being acknowledged. Richmond city government at the management level has been in denial for a long time.
One example, and a prominent one in Batchelor’s list, was the inability of our SAP computerized accounting system to perform even the most basic functions. While the City has been drowning in dysfunctional accounting applications for years, our management was on the campaign trail, singing the praises of SAP and helping them sign up more public agency clients. See SAP - Winner or Loser? February 21, 2004, SAP Needs Work to Serve City's Needs February 29, 2004 and City's SAP System Remains Under Siege June 16, 2004. The employees knew we had a problem, and the City Council knew we had a problem, but top management never acknowledged it. In fact, they denied it for a very long time.
Now, we have a city manager who not only acknowledges problems; he is committed to doing something about them. I hope action proves to be swift and certain.
Following are three items of media coverage of Batchelor’s presentation. The first is courtesy of Eleanor Boswell-Raine of the Richmond Globe. It is an actual transcript of Batchelor’s remarks. Following are stories from today’s West County Times and San Francisco Chronicle.
The Phil Batchelor Report
“Initial Assessment of the Fiscal and Organizational Stabilization Needs
of the City of Richmond”
By Eleanor Boswell-Raine, The Globe Newspapers
On Friday, September 10, Interim City Manager, Phil Batchelor presented an “Initial Assessment of the Fiscal and Organizational Stabilization Needs of the City of Richmond” to the Mayor, City Council members, City Officials, invited members of the press, and a hand full of residents in the City Hall Council Chambers.
Introducing the City Manager, Mayor Anderson stated, “We directed him to find out what our fiscal and organizational problems are and to bring some recommendations. He has done so.” Mr. Batchelor gave the following report and handed out a 47-page document, plus attachments, identifying 170 issues and recommendations. The following is a transcript of Mr. Batchelor’s comments prior to distributing his document:
“The Mayor and the City Council asked me to join the staff for a short time to see if I might help, and I appreciated the opportunity to do that. Since that time, I met with the senior staff and department heads and some of their staff and I’ve been impressed with their willingness to work with me to help to prepare an assessment. The Council said they were not satisfied with the way things were in the City. They asked that I take a look at the operation, the organization, the systems and the finances, and to bring back an initial assessment. I’ve only been here a little over a month, but we’ve done that. By definition the assessment is preliminary. We can do a much more in depth assessment given more time. But, I felt the Council wanted something out now. They want to understand where things are and to begin to move forward in a positive direction. They’ve gone through some very difficult times.
When the financial picture was brought to their attention, they began to move on it. There’s been a series of 3 layoffs. There have been hundreds of positions reduced. It has had a significant impact on the City. It’s noteworthy that the fire department, the police department and it goes on...Every department has felt the impact.
Now, the assessment: What is the format for the assessment? We wanted to cover as much ground as possible and put it in as concise, succinct format as possible so that we could put all of these priorities out without having hundreds and hundreds of pages of text. And so we did it using a format that has recommendations; each begins with an action verb and is focused on moving ahead. There’s a number of recommendations that say “understand”, “note”, “observe”, “recognize”, “realize” just to bring the situation to the attention of the community, and then be able to deal with it.
It’s important to realize that there are many things in the City that are praiseworthy, that are worthy of emulation; there are many people that are dedicated. We did not cover that in the report. That was not the purpose of the report. This report was to look at things that need attention. So, that’s what we’ve done. We have over 100 recommendations of things we think need to be attended to.
The question could be asked, “Why would you bring these things out at once, knowing that we don’t have the financial resources to deal with them. I would say that we could take any one of these things and bring it to a council meeting, we could do one a week, and every single thing would be wholeheartedly embraced by not only the council, but anybody from the community that heard it. They would recognize that in 1968 we had 158 employees; today we have 83. We have a response time that is 6 minutes or less, we hope, with the goal of moving it to 5 minutes. Now why is that significant? Because 75% of the calls the fire department gets are for medical purposes, and 6 minutes response time isn’t good enough, it needs to be less, but, we saw reductions in the fire department resulting in the closure of one of the fire stations. We have rotating. This is very difficult.
What about the police department? We had a shooting last night, again, another homicide, and 22 homicides so far. We have another person who is on life support right now. It might be 23 before the end of the day. What is the situation in the police department? Again, a year ago we cut out 18 sworn positions, this year 21, not counting another 15 that are not sworn.
We have insufficient resources to do things we’d like to do. What about code enforcement? There are some people who treat the streets of Richmond as a garbage dump. It’s unacceptable. We need to do something to go after this. Do we have the resources? We don’t right now. Not sufficient resources to go after that.
The report that you are going to get deals with these things and many more. It deals with issues of a capital program for the City. Where are we on building? Many of the items that are dealt with have been to the Council before. They have surfaced...once, twice, some of them four times, but there’s not sufficient resources to do anything about many of them. For example, the Civic Center. We had four studies done on the civic center, beginning in ’91. Everyone said we need to do something seismically strengthening the city hall. As you know, we vacated it. We need to do something about the Hall of Justice, about the auditorium, about the library, many fire stations. In fact there were many 21 buildings that were looked at by Interactive Resources in ’91, and they said a lot of work is required to fix these. What have we done? Very little. There haven’t been resources to do it. We had a report done in 2003 by AI Architects. It said that we needed $116 million dollars to complete a master plan on the civic center. We don’t have that. It is significant. We worked with one of the foremost experts in the State, Charles Steele, who has taught structural engineering at Stanford, who is one of the leading experts in the State. We asked him to look at this. I met with him a few days ago at the civic center, and he reminds us that the civic center is 1.4 miles from the Hayward fault and he says the Hayward fault is the most dangerous fault in the state. We need to do something. We don’t have the resources right now.
So, what are we going to do? People say let’s borrow money, but then we look at the City’s Credit rating. The City’s credit rating has been suspended by S&P, Moody’s has given us a BA3 which means we have no access to the market which means we have no long-term borrowing. How do we get the money to make these changes. We have to be creative, because something has to be done.
The Emergency Operating Center is not prepared and not properly equipped to handle emergencies. We do not meet FEMA standards. That has to be dealt with immediately. The roads. We had a private firm come in and look at the roads. They looked at the 279 miles of roads. They said 138 miles of the road system were classified in poor and very poor condition. They estimate that if we are going to bring the roads up to an acceptable level in the next ten years, it will take $209 million dollars. We don’t have the money.
We have reduced the hours of the library by 26%. We reduced the materials budget by a third. We closed the two branches. What are we going to do with the library, a valuable, important asset in this community and especially for our children. What do we do about that?
Parks. We have 55 parks. They are not adequately maintained. We don’t have the staff to be able to cover them, to provide for recreation facilities that need to be a resource for our children. More needs to be done. And we could go on and on. We could go through every department in the City, because every department has been impacted by the reduction.
Of particular concern to the Council are the finances. They asked us to look at that. The report is chilling to me. Chilling in that the budgetary system needs serous help. The budget last year was prepared manually on Excel spread sheets. Over 100 budget units were prepared using Excel spread sheets. Any time that you change any factor that is common to them you have to go through and manually change it and then add it up, unacceptable way. This is in light of the fact that in 2000 the City bought a computerized budget and accounting system. They paid $500,000 for the license, another $3.5 million to install it. The system was installed with a system that was used in the private sector. It had to be modified for the private sector and they decided to make us a test case. After that additional augmentations were added for GIS, and the cost of the system now is over $5 million, and it doesn’t work the way it need to. It does not allow us to prepare the budget the way it needs to. That has to be fixed. We have an accounting concern. There’s been such a reduction in the finance department that the accounting system is inadequate. Accounts payable doesn’t work. We have a reputation with vendors for not paying on a timely basis. Accounts receivable, we don’t have a centralized effort to collect debts that are owed to the City on a timely basis. The general ledger is not what it should be. We don’t have current financial statements for the City. Not acceptable. How do you ever have a chance of restoring your credit rating if you don’t have adequate financial statements. We are required to bring a CPA in every year to audit. How do they audit if you don’t have the statements prepared. It has to be fixed. It’s not acceptable the way it is.
Our reserves have been decimated. We need millions of dollars to restore those. Workers Comp is under funded. General liability is under funded. there is no contingency fund for emergencies. Something has to be done with that. The City’s Central servers, processors to help run the citywide system are located in the old city hall. It’s not seismically safe. We have to get them out of there. A central switching system for the telephones. It is archaic. It cannot be updated or repaired easily. It is deteriorating. It needs to be replaced. And so the list goes on.
There is much to do. Why did we bring all these things out at the same time? So that the council can look at them and prioritize and understand where they are. We have good people here that can make a difference if we can agree on the direction that we are going. I would anticipate that when we give the report out to the Council and make a presentation to them on Tuesday, that they will direct us to go back and to prepare an action plan to define the tasks that need to be done to accomplish these things. To prioritize, to assign staff members responsibility for each item, to bring back an estimated schedule. There are hundreds of millions of dollars of items that need to be taken care of . They all cannot be done immediately or next month, or even next year. Some will take years, but we need to decide where we are going next. That’s the assessment that we made.”
The Mayor ended the meeting with the following comments:
“We all know that in order to solve a problem you have to define it. Today I think we are on course defining what the problem is and we are fortunate to have been given some solutions. As the mayor and I’m sure as council persons, I am dedicated to lead us and to follow through with embracing this plan and directing the staff and the City Manger to come back after we prioritize the problems with recommendations to move forward. For me, I see a light at the end of the tunnel. We know what the problems are and we have competent persons to move us forward to solve it. With the commitment of our council, I know we will move forward with the light at the end of the tunnel. And the citizens of Richmond will begin to get what they need and deserve.”
After an initial probe of Richmond's finances, interim City Manager Phil Batchelor today issued 177 recommendations for change, the most immediate of which include revamping administration and establishing an emergency center that meets federal standards.
In a morning press conference, Batchelor, flanked by a supportive mayor, staff and city council members, acknowledged that the sweep of changes could cost hundreds of millions of dollars and take years to enact.
Among the most urgent: Tailoring the city's failed $5 million computerized financial system to meet the needs of government.
The numerous snags have stymied the city's ability to pay bills and collect debts on time, and to accurately project its own expenses and revenues, Batchelor said.
He said that while more than a third of Fortune 1,000 companies are successful using a similar system, Richmond's was never adapted for police, fire or government budget uses.
The city council must now develop an action plan, he said, prioritizing recommendations that include beefing up police and fire ranks, making $209 million in critical road repairs, replacing an antiquated phone system that is beyond repair, plotting a course for the seismic overhaul of the Barrett Avenue civic center, and shoring up library, parks and recreation services.
"People say, 'Let's borrow money,'" he said. "Standard & Poor's has suspended our credit rating. Moody's has given us a B-A-3 (rating), which means we have no access to the market. So we must be creative."
The five council members in attendance committed to following through on what Councilman Tom Butt described as "a great, big, long to-do list." And at least two said the report contained no revelations.
"What is different and refreshing is, this is the first city manager who has acknowledged these problems, and the depth of them," Butt said. "They say the first step toward recovery is acknowledging a problem."
Although in the past, Mayor Irma Anderson has balked at pinning blame for a financial plunge that left the city $35 million in the hole, she praised Batchelor this morning for routing out the causes of the deficit, if not those personally responsible.
"If you have to solve a problem, you have to find it, and define it," she said. "I am embracing this plan. I see a light at the end of the tunnel. I know we will move forward. The people of Richmond will begin to get what they need and deserve."
Contra Costa's retired county administrator gave Richmond city leaders a lesson in Finance 101 Friday, laying out 170 things the city could do to start digging out of the huge financial mess that has forced it to close community centers and let some streets crumble.
Interim city manager Phil Batchelor wants the city to immediately start producing monthly financial reports, write a code of ethics, fix computer problems and collect from accounts due.
He also asked the mayor and City Council to begin ranking longer-term issues including the need for a seismic retrofit of City Hall and a looming $209 million tab to fix 138 miles of city roads in dire condition.
"Being prepared for an emergency is something we have to act on," said Batchelor, who noted the city's lack of a backup generator in its Emergency Services Center. That means the city could find itself without computers and working phones in the 72 hours after a major earthquake on the Hayward fault.
The city is also without a contingency reserve in case of an earthquake, fire or other disaster. Batchelor wants the city to set aside $8 million in such a rainy-day fund.
Batchelor, who retired in 2001 after 17 years as Contra Costa County administrator, agreed to tackle the city's budget woes until a permanent city manager is hired.
Richmond is trying to emerge from a $35 million deficit and has been plagued for decades by allegations of mismanagement, fiscal problems and political infighting.
Batchelor said it was chilling to see how city officials had been preparing the budget -- manually on Excel spreadsheets instead of using the expensive computerized accounting system it bought several years ago.
"The budgetary system needs serious help," Batchelor said, urging finance and information technology staff to work with the company that sold the city the technology so that it can be used for accounting and budgeting.
He also recommended the city's finance director develop a process to guard against embezzlement and to review the city's credit card policy and cancel unnecessary credit cards.
Batchelor unveiled his recommendations Friday morning at a news conference attended by Mayor Irma Anderson and several City Council members. Anderson said she was committed to following through on his recommendations.
"I see a light at the end of the tunnel," Anderson said. "The citizens of Richmond will begin to get what they need and they deserve."
City councilman Tom Butt said he was pleased with Batchelor's findings.
"What is different and refreshing is that this is the first city manager who has acknowledged these problems exist," Butt said. "The first step toward recovery is acknowledging the problem."
The city's bleak financial picture is readily apparent throughout Batchelor's recommendations. The city's workers' compensation fund is $9.5 million short of actual claims, and the Fire Department has seen its work force cut from 158 people in 1968 to 83 people in 2004.
Meanwhile, staffing in the libraries was cut by 60 percent, and spending on children's materials in the libraries has dropped from $3.27 to 34 cents per child in recent years.
There are more than $300 million worth of infrastructure improvements needed for city streets and buildings, Batchelor said. Much of that stems from 138 miles of the city's 279 miles of roadway that are in poor condition. Deferring road maintenance can be costly, he said; every $1 of deferred street maintenance ultimately costs $50 when streets must be replaced.
E-mail Kelly St. John at firstname.lastname@example.org.