Steering the City Council with False Information

With the recent release of Oxnard’s Comprehensive Annual Financial Report (CAFR) for fiscal year 15/16, it became apparent that the city management had previously given the city council and the public some grossly incorrect information during its campaign against Measure M.

Let’s take a stroll down memory lane.

Just over a year ago, on January 26, 2016, the Oxnard City Council approved a series of wastewater utility rate changes which would compound to an 87% increase over 5 years.  The first of these increases was a 35% jump which went into effect on March 1, 2016.

The consultant firm which calculated the rate increases projected that if the new rates went into effect on February 1, 2016, wastewater utility revenues for the fiscal year ending June 2016 would be $34.8 million.  The rate increase actually went into effect one month later than planned, so naturally one would expect the revenues to come in somewhat less than that $34.8 million projection.

In March, we filed the paperwork to start the initiative which became Measure M to roll back the 87% rate increase and require that the city try again to be more reasonable.  The city promptly filed a lawsuit in an attempt to prevent the initiative from getting on the ballot.

On April 15, 2016, a judge ordered the Oxnard City Attorney to immediately comply with the law and allow us to begin collecting the signatures necessary to qualify the initiative for the November 2016 ballot.

At that point, City Hall knew Measure M was coming their way, and they started the campaign against it.

Eleven days later, on April 26, 2016, city staff made a presentation to the city council which was an update on the financial status of the utilities.  During that presentation, the council and the public was given scare-data which was later demonstrated to be poppycock.

At that time, the council was told that there had been such excessive water conservation by Oxnard residents that even with the 35% rate increase which had taken effect on March 1, 2016, the wastewater utility revenues would only be $23.53 million for the fiscal year ending June 30, 2016 – much less than the projected $34.8 million.

Essentially, with almost ten months of the fiscal year already known, they were claiming that the consulting firm that calculated the rate increases had overestimated revenues for the year by about 45%.  Imagine what would happen to the stock price for any publicly traded firm who missed projected revenues by that much!  The city’s finance department had not raised any red flags about those same revenue projections just three months earlier when the city council adopted the rate increases.

Council members were clearly alarmed to hear the shocking revenue news.  Over and over during the meeting, city staff assured council members that the scary projection was accurate.  This bad information made the council feel even more confident they had been right to raise rates by 87%.  It likely made the council steel their resolve to defeat Measure M in the courts with expensive consultant lawyers and refuse to even meet with the Measure M proponents to find another path.

Video of this council meeting can be found here.  Here are some time stamps from that video to help you find the highlights of the discussion:

01:14:44 – CFO Dave Millican presents slide #5 with the revenue projections, indicating that the low revenue in wastewater is due to extreme conservation

01:39:10 - Aaron Starr's public comments questioning the reasonableness of the $23.53 revenue projection for wastewater

02:16:10 - City Manager Greg Nyhoff expresses confidence in the numbers as presented

02:18:05 – City Manager Greg Nyhoff says there is no reason to think those numbers will increase by the end of June

02:23:30 - Mayor Tim Flynn asks if slide #5 includes the rate increase adopted in January, and Dave Millican confirms that it does

02:52:20 - City Manager Greg Nyhoff again expresses confidence in the numbers on slide #5

03:05:15 - CFO Dave Millican says they spent "several weeks" confirming that the new lower revenue figure was accurate

03:10:18 – City Manager Greg Nyhoff says of the $23.53m wastewater revenue figure on slide #5, "This is what we now believe is how we are going to end this, and I feel 98% confident in that number that I'm looking at right there.  You're only 60 days from year-end.  We really scoured it."

Two months later, the fiscal year ended.  The financial reports are not typically available immediately, because first there must be an audit.  The audited numbers for wastewater revenues in the fiscal year ending June 2016 were first shown to the public on February 1, 2017.

Did the final wastewater revenue figures match the scare-projection made the previous April?  No, they did not!!!  Not even close.

The audited financials showed $30.6 million of wastewater revenues for that year.  That’s very different from the $23.53 million the council was told to expect with such certainty.  Things were not actually as bad as the council and the public had been told. In fact, it appears likely that by April 26 the city had already surpassed that $23.53 million figure for the year – with two months of the fiscal year remaining.

The city council can not make good management decisions if they are given such false data.  If the city staff had scoured the figures for several weeks to confirm their accuracy before delivering that April 2016 report to the council, how were they off by so much?

We don’t know what happens behind closed doors at city hall, but when such outrageously bad information is given to the public during a political battle, one has to consider the possibility that it was intentional manipulation.

It wouldn’t be the only time during this battle that the public was given bad info about the need for utility rate increases.  We previously caught the city falsely telling the public that a trash rate increase was needed in part due to new environmental regulations that required them to replace a fleet of vehicles.  There was no such regulation, and the city had to retract their claim after we pointed it out.

What are we to learn from this?  What do you do when the city management is willing to use false information to manipulate the public when the city wants to raise utility rates?

Unfortunately, it means that we can’t always take the city’s assertions at face value.  We have to do our homework to verify what they tell us.  We have to cross-check the city’s figures for consistency in order to separate the reality from the fiction.  City management has a long way to go to earn the trust of the public.

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