Tiny California city struggles to manage fire tax revenue. Now it’s asking voters for more
For more than three years, the city of Isleton has been collecting thousands of dollars in sales tax money through Measure B, a half-cent tax approved by voters to fund the city’s beleaguered volunteer fire department.
But despite recent efforts in the tiny Delta town to move past decades of fiscal mismanagement, a review of city documents reveals a familiar pattern that raises questions about Isleton’s ability to govern itself and its roughly $1.7 million annual budget.
Isleton officials struggle to provide basic information about how much revenue the special sales tax raises annually, and what it’s being spent on. Receipts for spending are often vague, or nonexistent.
The city has failed to maintain consistent accounting documents or form an oversight commission in a timely manner as mandated by state law and the Measure B ballot language. The fire department has spent thousands of dollars on products and equipment with few safeguards to ensure the city is getting a good deal.
“This sounds like the agency is being challenged to do the most basic accountability functions and that’s troubling,” said Michael Colantuono, a Grass Valley-based attorney and local government revenue expert.
Now the city hopes to further increase its funding for the fire department — Measure D, on the March 3 primary election ballot, would increase the fire fund sales tax to three-quarters of one cent for five years and remove the newly formed oversight commission. It needs a two-thirds vote to pass.
Isleton began collecting Measure B money in October 2016 after it passed several months before by a 3-to-1 majority. The ballot measure required the formation of a citizen oversight committee by the following fall. That committee was not formed until last summer, after a resident had to actively recruit his neighbors to apply for the commission.
The last two city budgets have included no details on how it planned to spend the special funds intended to pay for Isleton Fire Department training and equipment.
The city is behind on its state-mandated audits; the most recently published one, which covers fiscal year 2016-17, failed to report on Measure B revenue and expenditures as required by the measure.
And, according to state records, Isleton’s city budgets have consistently overestimated how much money the sales tax would rake in.
Despite a history of financial mismanagement and abuse, Isleton still does not have a written policy on how employees should be making purchases, such as requiring purchase orders or expense codes, said city manager Charles Bergson.
In one case, Isleton Fire Chief Scott Baroni repeatedly purchased products from a company that has faced allegations of overcharging small fire departments across the country for excessive supplies. Expensive vehicle purchases under Measure B never went through a competitive bidding process. At least one car, nearly $15,000, was purchased without City Council approval.
Initial language for Measure D, the 0.75-cent sales tax on this year’s ballot, didn’t include the expected amount of revenue it would raise, or that it would sunset. After being notified of the omission by The Sacramento Bee, the city sent out a notice to voters that Measure D would sunset in five years and would raise $110,000 a year.
That’s the same amount Isleton expected the existing half-cent sales tax would raise in 2018, and just $10,000 more than what the city expects to raise this fiscal year under Measure B, according to city budgets.
“The problem is, a lawyer might say it codifies their bad mismanagement,” said Dan Hinrichs, a former city manager of Isleton. “It’s about time the citizens knew what was really going on.”
‘Held with Band-Aids’
Fiscal mismanagement is nothing new for the Delta city of just over 800 people. In recent years, the city’s name is more likely to evoke past tales of scandal and corruption rather than its old moniker, “The Little Paris of the Delta.”
Financial and governance problems in town were so bad a decade ago that the Sacramento County grand jury released its 2008 report early to “call attention” to the severity of Isleton’s predicament. Officials were ousted. Funds were pillaged. Money would disappear. Taxes would go uncollected.
Bergson said Isleton had decades-worth of debts to climb out of when he first arrived in February 2017 as a part-time city manager.
“We’re trying to reinvent the wheel here,” Bergson said.
Before Measure B, funding for public safety services like the fire department — which in California is typically a city’s largest expense — was scarce. The city does not have a police department, contracting out services to the Sacramento County Sheriff’s Office.
“Things were continuously held with Band-Aids,” said Fire Chief Scott Baroni. “Nothing was ever purchased new, the lifespan of things wasn’t quite as long as with new equipment, we didn’t have money to have outside instructors teach classes.”
Volunteers didn’t have T-shirts identifying them as members of the fire department. Turnout gear — the protective uniform firefighters wear — were past their 10-year life span, Baroni said. Once, a council member wrote a personal check to pay for more oxygen in air tanks, according to Baroni.
“We were always one bad decision away from no longer having a fire department in town,” he said.
With Measure B money, the department has since bought new turnouts, gloves, helmets and T-shirts. The department has been able to send volunteers to training at neighboring agencies. Vehicles are getting regularly serviced, Baroni said.
But over the last three years, Isleton has failed to document basic and accurate information about how much money is coming in through Measure B, and how those funds are spent each year. The city has also consistently overestimated how much revenue Measure B would raise.
Lacking details
To get a ballot measure passed requires a city to go “over and above” their normal budget hearing process to make sure voters can ask questions and understand how their taxpayer money is being spent, said Michael Coleman, a local government finance expert based in Sacramento.
But Measure B spending has not been detailed in city budgets for at least two years. Bergson said the lack of information on Measure B spending is the result of the small town’s limited staff resources.
“We’re still working on a system to segregate costs,” Bergson said. “I’m really certain about where my expenses are and I’m tracking those revenue expenses, which have been going down since I got here. But actually segregating them out, that’s ongoing.”
The city is also behind on its state-mandated audits, which would detail how raised funds were actually spent.
Isleton’s most recent audit is from fiscal year 2016-17, and that audit does not include Measure B revenue or expenditures. After inquiries from The Bee, Bergson said the audit for 2017-18, which will be released this month, will now include Measure B revenue and spending as required by the ballot measure.
“In Los Angeles, if you’re asking how this $40,000 in equipment was spent last year, that’s a needle in a huge haystack and might be too micromanaging,” Coleman said. He hasn’t reviewed the city’s specific financial disclosures, but said, “In Isleton, for God’s sake, $100,000 is a large part of their budget. They’ve got the time and they can put more resources (towards accounting).”
Little town, big struggles
Much of the responsibility of overseeing the city’s finances has fallen to Bergson and city finance manager Frances Hernandez, a part-time independent accountant with Sacramento-based JD Tax and Accounting. The firm began contracting with Isleton in fall 2018 for about $35,000 a year, according to city budgets.
JD Tax and Accounting’s website states it offers “a broad range of services for business owners, executives and independent professionals.” The firm’s website does not specify experience with municipal government finances or accounting.
Hernandez confirmed that her firm works with Isleton, and that the city uses the accounting software QuickBooks to track its expenses, but did not respond to additional questions.
There has to be careful reporting of both revenue and expenditures to make sure special tax fund spending “fall into the categories of that which was approved by voters,” said Jon Coupal, president of the Howard Jarvis Taxpayers Association, “because that’s what the state constitution requires.”
“It should be obvious the money needs to be accounted for very specifically,” Coupal said.
Blake Michaelsen, the finance director for Dunsmuir, a city of about 1,600 people in Siskiyou County, acknowledged the challenges small cities like his face when keeping track of its checkbook, but added, “it’s important to have the ability to be able to answer these questions.”
“Within those budget line items, I can get a lot more detailed,” he said of Dunsmuir’s city budgets. “Something like oil could be in the vehicle fuel line item (but) I’m happy to provide detail like, we went to Mountain Counties Supply on this day and it was $30, and on this day it was $40.”
Tracking fire department expenses with that level of granularity for the public is a Herculean task, Bergson said. When a member of the recently appointed oversight committee made a request last year for three years’ worth of fire department’s financial records under the California Public Records Act, Bergson responded in a letter that providing those records is “beyond city capacity and resources” and would cost more than $7,000.
Bergson said “I have a rough idea of expenses and track them out,” but he acknowledged numbers used in city documents are at times insufficient.
He said he “couldn’t get into the state system” to check how much the Measure B sales tax had actually raised each year, and would use “ballpark” estimates when creating new city budgets.
Revenue information from the state Department of Tax and Fee Administration shows the city received under Measure B about $89,500 in fiscal year 2016-17, about $57,000 the next year, and about $92,500 the next.
Isleton budgets overestimated anticipated revenues during those years, noting between $100,000 and $110,000 in expected revenue.
Oversight committee
When Measure B was considered in 2015, “there was a lot of consideration about how the money got spent and misspent,” Bergson said. Issues like the ones raised in the 2008 county grand jury report had made residents wary of how Isleton would manage its tax dollars.
“Everything is on top of the table” now, Bergson said. “It’s running correctly, and the lack of trust back then is not here now.”
Don Cain, an Isleton resident and member of the Measure B oversight committee that was finally appointed in August, disagrees.
For nearly three years, the city was without a mandated citizen oversight committee, even as the City Council continued to approve Measure B spending. Bergson said the city struggled to find candidates who were willing to volunteer for the positions.
Cain said he first applied for the commission advertised at city hall in 2018, soon after he moved to Isleton when he was priced out of the Bay Area. He said he got no response. Tired of waiting, Cain began recruiting other Isleton residents for the oversight commission last summer and, within a couple months, seven individuals had applied. Five people, including Cain, were appointed in August.
But since then, the committee has received scattered and incomplete records on more than three years’ worth of Measure B revenue and expenditures.
Transaction reports the city has given the committee are missing key pieces of information, such as what specific items were purchased from sellers. The committee hasn’t received purchase order documents, revenue data or details on how much Measure B money the city has been putting into reserves each year, if any.
“We keep pressing for information,” Cain said, “and the city manager says we don’t have it.”
Michelle Burke, another a member of the oversight commission who’s worked as a bookkeeper for two decades, said a town the size and budget of Isleton shouldn’t have trouble keeping track of transactions.
“It may all come out in the wash and be fine. I can’t tell because the way the books are being done lacks decipherability like it should,” said Burke, who is Cain’s partner and also is a member of the city’s planning commission.
Despite concerns from the current oversight committee over the city’s ability to produce basic financial records on the voter approved sales tax, Bergson said the city is a “whole lot more sound than we were” prior to his hiring.
“It was built to improve public trust but they didn’t implement it in three years, and now they’re trying to do away with it when you completely failed at that task,” Cain said.
Measure D, if passed, would eliminate the oversight commission. Instead, the city manager would submit a report to City Council on the sales tax revenue collected and spent. Bergson said the oversight commission is unnecessary now because funds are “being tracked better now.”
“I’m not belittling it now, but it’s $80,000, $90,000 in Measure B (funds). Tracking it is not hard, it’s not going to be hard,” Bergson said. “I’m trying to get it squared away, and those questions are on target but … I just need to adjust it and get it squared away.”
What firefighters bought
Isleton has no written policy or protocol for how employees should make purchases using city funds, Bergson said. That has allowed Fire Chief Scott Baroni to buy equipment and products with little formal oversight.
In 2018, the fire department purchased a used fire engine from Cosumnes Community Services District Fire Department for $12,000, and a used SUV for $14,500 from Liberti’s Auto Electric, a repair shop in Milpitas. While City Council approved the purchase of the fire engine, there is no record in agendas or minutes from that year that council members reviewed the SUV purchase. In both cases, the city did not hold a bidding process to identify other competitively priced vehicles.
Additionally, the Isleton Fire Department has purchased more than $8,600 worth of fire-related products from a company accused by a Massachusetts town’s counsel of a “scam” in 2018 that led to the city’s volunteer fire department purchasing thousands of dollars in unnecessary and overpriced supplies.
Noble Industrial Supply Corp., a New York-based company, was one of two companies that engaged in high-pressure sales tactics to bill the town of Stockbridge $105,000 for fire foam and gear cleaner over the course of six years, despite the products only being worth about $60,000, according to an investigation by the town’s counsel. The amount of products purchased was also excessive compared to the small fire department’s annual needs, officials discovered.
“The experience of the Town of Stockbridge underscores the need for clear procedures governing municipal procurement, including proper documentation and oversight,” said town counsel Ray Miyares, who led Stockbridge’s investigation into Noble, in a statement. “This is a municipality’s best defense against unscrupulous businesses hoping to prey on unsuspecting fire chiefs and other local officials.”
Noble apparently targets smaller municipalities, fire departments and churches, according to reviews by the Better Business Bureau.
In 2016, a Noble salesperson called Assistant Fire Chief Jonathan Bradford of the volunteer-run Ross Van Ness Fire Department in Eudora, Arkansas, to try to sell him a 55-gallon drum of gear and hose cleaner. Bradford agreed to buy four gallons — the 18-person department only responds to about two to three calls a week, and uses about two gallons of cleaner a month.
Over the next few months, Noble continued to send the Arkansas fire department gallons of cleaner, arguing Bradford had agreed to purchase all 55 gallons in increments. Bradford eventually started rejecting deliveries and refused to pay the bill.
The cleaner they use now costs about $30 a gallon, Bradford said, and the department never spends more than $1,000 a year on cleaner.
“It cost us probably a thousand dollars for those three months, just for 12 gallons of chemicals,” Bradford said. “I still have it on the shelf. I should have used it for as much as it cost, but I guess I just hated it.”
The Isleton Fire Department is a comparable size: It responded to about three calls a week over the last two years, according to data from the Sacramento Regional Fire/EMS Communications Center, which dispatches local fire departments. There are 22 members currently involved with the volunteer fire department, Baroni said.
In 2018, available city expenditure records indicate the Isleton Fire Department spent nearly $4,000 on gear cleaner from Noble.
“There’s no way a department that small should be using that much cleaner,” Bradford said. “For a fire department that size, that’s very strange. ... If they bought something in January for $800, that should’ve lasted them until the next January.”
Baroni said that at the time, he resorted to using Noble because Isleton’s financial reputation made it difficult “to get vendors to deal with us.”
“We had to buy a bunch of it because we had never done it before,” Baroni said. “Now that we’re in a better spot, we have the ability to shop things out,” he said.
One week after the town of Stockbridge published its investigation into Noble’s high-pressure sales tactics, Baroni finished paying off more than $3,300 worth of fire foam to the company.
This story was originally published February 23, 2020 at 5:00 AM.