Can Oceano make employee payroll?
May 24, 2011
Crippled by years of financial mismanagement, Oceano Community Services District is facing the possibility it will not be able to cover payroll in August.
“It is to early too tell if we can make payroll in August,” said Raffaele Montemurro, the district’s general manager. “We have to see when the water rate increases go into effect, how much we will collect.”
On June 1, the district’s water and sewer rates increase by eight percent, the first raise since 1997. Both former and current district officials point at years of financial deficits without raising rates as one of the primary reasons for the district’s precarious financial situation.
“I am frustrated, we shouldn’t have to be wondering how to make payroll,” said Matt Guerrero, an Oceano board member. “I want to see the ship righted. I want to make sure we stay solvent.”
Even though the district has more than $1.5 million in several accounts, all but about $887,901 is restricted or already allocated. Of that, $561,450 is owed to the county in payments due in June and September, according to a recent financial statement.
In an attempt to remain solvent, Montemurro wrote a letter on Friday to District 4 San Luis Obispo County Supervisor Paul Teixeria asking that the county defer the district’s bills until September.
The district, responsible for serving about 7,600 residents and business owners in Oceano and Halcyon with fire protection, street lighting, sewer and water services, has been running about $25,000 in the red for more than a year depleting its reserve account.
Even so, in a February 2011 report titled “Financial Challenges,” Montemurro said the district had about four years before insolvency under the current budget, which only allows for $20,000 in capital improvement expenditures for the 2011/2012 fiscal year.
Those numbers did not take into account monies already allocated or the likelihood that expected and needed repairs could put Oceano further in the red. For example, at Wednesday’s meeting the board plans to discuss putting a new roof on the district offices building which leaks during rainstorms.
In addition, the district needs about $1.2 million to provide necessary repairs to five water mains, according to district reports. Since Montemurro took charge in Oct. 2009, water mains have required three substantial repairs.
And while municipalities typically apply for loans and grants to ward of insolvency while rates or fees are raised, the district has been disqualified by the fact that most loans and grants require that communities have audits and accounting records available, and the district has yet to complete its 2008/2009 audit. In July, the district is slated to be three years behind on its audits.
In March, former directors Jim Hill and Carole Henson tendered their resignations, citing disagreements with Montemurro over his accounting practices and failure to follow the board’s direction that asked him to complete the past few years of audits. Most of the current board members have been serving the district for less than a year.
Also at Wednesday’s meeting, the board is scheduled to conduct a closed session employee performance evaluation into Montemurro’s management practices.