After over a month of proposals and discussions, the Sebastopol City Council adopted the budget for the fiscal year 2021-22 at their meeting July 20. However, some items were deferred for further approval in October after a $1.2 million wire-transfer theft put the city’s reserves in a precarious situation.
The draft budget was first presented on June 15, and at the city council meeting June 21, the council approved expenses for essential services within the city. At the July 6 meeting, the council discussed nearly a dozen additional budget proposals.
With all five city councilmembers in attendance at the meeting July 20, the Sebastopol City Council approved the $11.4 million budget in a 5-0 vote, which includes items like city pension transfers, the Civic Sparks grant worth $29,000, contracting services for the Relaunch Sebastopol effort and more.
But following the theft of $1.2 million from Sebastopol’s collected property taxes in a fraudulent wire transfer, the city council members chose to delay the approval of four items for 90 days to ensure the city’s reserved funds in case of an emergency.
“We will not expend any of those funds until we re-review this on October 19 in light of whether or not we have received compensation for the stolen money,” said Mayor Una Glass.
The four items deferred were a Zero Waste initiative, the purchase of a public works truck, Zero Waste Building upgrades and the sewer lateral revolving fund. The total amount this would defer is $128,250.
In June, the Sebastopol Finance Department discovered a fraudulent transfer had been made to look like it was requested by Sonoma County, and the actual recipients are currently being investigated.
“The minute we feel we can safely release any more information and it won’t jeopardize any criminal investigations, we will certainly do so because we actually want the public to understand every detail of this because it speaks for itself. We really don’t feel that the city government and staff did anything wrong in any of these situations, and we frankly have no interest in withholding any of that information except that it may assist law enforcement in bringing the perpetrator or perpetrators to justice,” said Larry McLaughlin, Sebastopol’s city attorney and city manager.
McLaughlin expects the insurance claim for the loss should pay out in about six months.
This theft put a significant dent into Sebastopol’s general reserve funds, which the city’s policy is to keep at 15 percent of the total budget. With the loss of the $1.2 million, the general reserve fund dropped to about $500,000, which is 5 percent of the budget.
To ensure the city has a more secure rainy-day fund and a decent stash in case of emergencies, the city council chose to put a 90-day hold on some of the expenses until they have a status update on the reimbursement of the lost funds. But Glass wanted to reassure the public this was just an extra precaution, and the city is not in a dire financial state.
“The city is not in a dangerous situation; we do have, in addition to our missing cash, we actually have a lot of cash in various kinds of accounts. So, we have our operating bank account; we also have various reserves,” Glass said.
The mayor pointed out that in 2008 the end-of-year reserves for Sebastopol were $850,000 and compared to 2020 were just over $9.6 million.
“I want to make sure there is not a rumor out there that the city is in big trouble because we are not. That does not mean we take the loss of any funds lightly at all,” Glass said.
The meeting, which ran for over six hours Tuesday night, did not cover all agenda items and the councilmembers pushed the rest to a special meeting on July 28 from 8-10:30 a.m., which will include the approval of a competitive lottery process for the city’s annual Fourth of July fireworks show.
However, before they got into the budget discussions that took up most of the meeting, the city council members unanimously approved a pilot program to provide the community a way to offer feedback to Sebastopol Police through openpolicing.org. People contacted by police on a call will receive an email or a text after with a code to a survey where they can give feedback.
Also, at the meeting, the council voted 5-0 to approve the first phase of the Bodega Avenue pavement rehabilitation, which will include from Nelson Road to Pleasant Hill Road and will cost an estimated $1.6 million. The project consists of roadway stabilization, repaving, adding sidewalks and bicycle lane striping.