28 Jun Mismanagement a Major Factor in Richmond’s High Financial Risk
Mismanagement of the Richmond Housing Authority cost the city nearly $15 million. The city and RHA made the agreement outlined above to prevent similar future losses. (Screenshot captured by Samantha Kennedy / Richmond Pulse)
By Samantha Kennedy
Following a 2022 state audit that labeled Richmond’s financial situation “high risk” for the coming years, state auditors recommended several actions to remedy the city’s problems. The city began implementing a corrective action plan at the beginning of 2023, but it still requires some work.
At its Tuesday meeting, the Richmond City Council adopted additional financial policies for the next fiscal year to improve its financial stability. The city can reduce its costs and increase its financial security with this direction.
Among the biggest factors in the city’s financial situation, the state audit identified mismanagement of the Richmond Housing Authority and retirement benefits that continue to be poorly funded as some of the greatest obstacles. The auditor also ranked Richmond as having the 12th-highest financial risk among California cities.
>>>From the Archives: State Auditor Deems Richmond ‘High Risk’ for Financial Distress
The state audit found that the Richmond Housing Authority, which City Council members act as commissioners for but is a separate legal entity, has been mismanaged for a decade. Mismanagement caused the city to lose nearly $15 million in repayment costs because federal requirements were not met.
To prevent similar losses from occurring, Richmond and the Richmond Housing Authority adopted an agreement Tuesday that defines the financial obligations of each.
Two of the financial policies adopted Tuesday target the city’s pension and benefits obligations that are expected to increase due to low returns by CalPERS, the California Public Employees’ Retirement System.
The city has previously tried to reduce costs associated with CalPERS by prepaying at the beginning of the year, a payment plan that gives the city a discount, but this would not be enough if CalPERS continues to decrease in returns.
City Council adopted a policy that uses the savings it gets by prepaying CalPERS to use for funding pensions. This, in addition to a 10% contribution of the city’s year-end surplus, will be put in a trust that can help further fund pensions.
Similar contributions will be used to fund OPEB, the medical benefits the city provides to retired employees. While continuing to pre-fund these liabilities, another 10% of the city’s year-end surplus will be used to cover costs. Before 2023, 50% of the year-end surplus was used to fund OPEB liabilities.
Council member Claudia Jimenez said a five-year forecast of contributions to OPEB would’ve been helpful to see its impact over the years. City staff, however, did not have the direction or time to produce the analysis Jimenez asked for.
“We’re really doing the best we can,” City Manager Shasa Curl said. “When we have meetings like this, I think it makes it difficult for us to attract a finance director because it makes it seem like we’re not trying.”
Curl said staff answered all questions council members had asked before the meeting, but Jimenez did not ask for this particular thing beforehand because of her own time constraints. Curl said this happens a lot and knowing questions ahead of time allows staff to better prepare for meetings.
Mayor Eduardo Martinez said part of this miscommunication could be due to staffing shortages within the council, where only one person is assisting six council members. Martinez said he would do his best to make sure questions are provided before meetings.
The next regular Richmond City Council meeting is July 11.