In reply to the Final Report of the 2019-2020 Butte County Grand Jury released to the public on June 24, 2022, it falls to me as the City Administrator of the City of Gridley to provide two responses. First, I will be providing a formal response directly to the Butte County Grand Jury addressing their findings. Second, and more importantly, I would like this to serve as a response to the residents and taxpayers of the City of Gridley who deserve a clear and full explanation.

On June 24, 2022, the Gridley Herald published a story entitled: “City of Gridley the Focus of Butte County Grand Jury Report.” This story gave a fair and accurate report of the Butte County Grand Jury’s findings.

I would like to state up front that I recognize the important role that the Grand Jury process plays in helping to promote transparency and accountability in local government. Those that voluntarily serve in this capacity dedicate a great deal of time and make significant sacrifices to promote the public interest.

However, the Butte County Grand Jury’s report and findings suffer from several critical flaws including: a significant lack of context, a fundamental misunderstanding of municipal finance, and the interview process exposed a basic lack of understanding of the function of representative government.

I think the best way of approaching their stated concerns is to address their findings in the order in which they presented them in the Butte County Grand Jury’s report.

The BDGJ report lists 6 findings, outlined below:

F1. The City of Gridley has not posted its audited financial reports dated 6-30-20 and 6-30-21.

RESPONSE: It is correct that the City of Gridley has not posted its annual audit for FY 2019-2020. We are unable to provide the results of an independent audit that we do not have. The city, like all municipal governments in California, is required to contract out for an independently conducted audit of our financials. The City of Gridley contracts with MUN CPAs of Sacramento. Completion of the audit was anticipated in the Fall of 2021. The city was informed that it was further delayed as a consequence of staff changes, staff departures, and the effects of the COVID-19 pandemic. It might have been possible in that time frame to have canceled the contract with our existing audit provider and retained a new firm. However, that course of action might have served to delay completion even further because it would have effectively reset the entire process back to the beginning. I determined to stay the course. The delay of the financial audit is of no benefit to the city or its staff team. In fact, it frustrates our ability to navigate grant applications and a range of other critical financial processes. The city finance staff has continually and professionally worked to facilitate the successful completion of the audit and anticipates that it will be concluded and publicly available very soon.

F2. A portion of the funds in excess of the Electric Enterprise Operating Expenses are transferred annually into the City of Gridley General Fund.

RESPONSE: The fact that the city transfers revenue from the electric enterprise fund is a matter of public record. The city’s annual transfer is the subject of ongoing litigation, and we are confidant it will be found to be lawful and in compliance with all applicable statutory and constitutional requirements. We strongly disagree with the grand jury’s conclusion, but otherwise we cannot comment on pending litigation.

 

F3. The City of Gridley audits show an accumulation of cash over the Fiscal Years 2016-2019.

RESPONSE: The City of Gridley has accumulated cash. However, the accumulation of cash is overall citywide not specifically the electrical or any other enterprise fund. The accumulation of cash can be in consequence of several factors. First, it is an appropriate goal for municipalities to establish a responsible “rainy day reserve.” The state of California experiences significant economic fluctuations as a result of sudden policy changes in Sacramento and the national economic environment. We also reserve cash for an array of important capital projects and infrastructure investments. Additionally, the North State and specifically our community have experienced the significant financial impacts of historic civil emergencies such as the mandatory evacuations as a result of the Oroville Dam spillway failure, the Camp Fire that led to the emergency evacuation of thousands of Paradise Fire residents, and the subsequent establishment of the temporary FEMA housing center at Gridley’s Industrial Park. Second, there are a number of funding sources that resort in accumulated cash, which must remain separated, segmented, and can only be used in specified ways. For example, as a municipal provider of power, the city receives Green House Gas (GHG) Allowances from the California Air Resources Board, which can be auctioned through the State’s Cap and Trade program. This process results in (GHG) funds, which because of strict limitations on usage, accumulated to a balance of $1.3 million last year. However, it was exactly that planned accumulation that allowed the City Council to approve a one-time “Climate Change Rebate” to every residential electric customer. That rebate totaled over $475,000 and represented a significant benefit to ratepayers. There are several similar state and federal funding mechanisms like the American Rescue Plan Act funding, which resulted in the city receiving $1.6 million in federal funding for very specific eligible infrastructure investments. The Act allows jurisdictions up to four years to expend the federal funds because they recognize the limitations that exist currently where contractors and supply chain interruptions have slowed the ability of local governments to implement program investments. It is increasingly difficult to get a contractor and supplies. The result of the limitations outlined above can be what appears to be a significant and inappropriate accumulation of cash. However, things are rarely what they appear to be. 

F4. City officials have not identified the goal number of accumulated cash/investments.

RESPONSE: Again, this was largely addressed in response to finding F3 (above), however, I would add that the City Council has, in fact, set a goal of 20% for the budget reserve by 2024-2025. This is a matter of public record and can be found in the City Budget Summary for the past several years. As far as other state and federal programmatic income sources, in some cases, we have established funding goals to accomplish specific policy objectives and in others, it would not be possible due to the nature of the prescriptions placed on the use of the funds. Again, municipal finance and the regulations that govern it are complex and sometimes defy an easy answer.

F5. The City of Gridley has not provided the method or basis for the computation of the GEU rates.

RESPONSE: The Butte County Grand Jury’s report found that the City of Gridley’s electric rates are, in fact, comparable to northern California cities. Although the members of the Grand Jury may not have felt that the methodology employed in 2017 to establish the current electric rate structure was adequate, it is the role of the locally elected policy body to determine the efficacy of the methodology. We are currently preparing to engage in a new independent rate study that will ultimately provide a thorough and update analysis of our rate structures for electricity, water, and sewer.   

F6: The GEU rates per kWh are comparable to other northern California cities.

RESPONSE: The city concurs.

I hope that the residents and taxpayers find this information helpful. In an era where cynicism and distrust seem to have become the order of the day, I wish to assure the citizens of Gridley that we take our mission seriously. The City of Gridley and its staff remain committed to providing cost-effective, responsive, and professional municipal services to our residents. If any Gridley resident should have questions or concerns about the Grand Jury report or the responses I have provided, or any other matter, please feel free to stop into City Hall so that we can discuss them in person – anytime.

 

Thank you