Isleton needs $1 million -- or else
By Loretta Kalb, Vallejo Times Herald
November 20, 2008
Isleton's city manager said Wednesday that if the debt-laden city can't borrow $1 million by the end of the year, he will urge the City Council to seek bankruptcy protection.
City Manager Bruce Pope, hired in March 2007 to repair the city's failed efforts to properly manage spending and revenues, said in an interview that he has issued several warnings about the fiscal danger the city faces if it cannot borrow $1 million to repay $950,000 in accrued debt.
Vice Mayor Michael Gomez said the bankruptcy question will be discussed at the Dec. 10 council meeting.
"Time isn't on our side, unfortunately," he said, adding, "The loan seems to be our best option. If that comes through, fantastic. If not, we do need to have a backup plan."
The city of about 850 has an operating budget of $1.4 million, only slightly more than the needed loan.
"On numerous occasions, I've told (council members) if we don't get the loan, my recommendation the next day would be to go into (bankruptcy)," Pope said. "I don't see any other options."
He expects to make that recommendation at the first council meeting in January if no loan comes through.
The debt accumulated during years of inattention to budgeting, a problem that helped draw the attention in February of the Sacramento County grand jury.
Among the debts were unpaid obligations to the city's waste management contractor, the contract city attorney, utilities providers and various other creditors.
"They basically took from the accounts and threw them into the general fund and then wrote checks," Pope said, recalling his discoveries as he worked to repair the city's financial records. "We have to pay that back."
More than a year ago Pope proposed that the city borrow $1 million to be repaid over 10 years.
The city hired an underwriter, which helped create the Isleton Financing Authority to carry out the plan.
In the meantime, the city began working with the county to transfer accounting responsibilities to that ju-risdiction.
In the time it took to lay the groundwork, Pope said, the credit market began to tighten.
Now he's working with three lenders, but he's not optimistic.
"The question is," he said, "are they going to take a shot with Isleton?"
In the past year, other cities have begun to show the strain of a tight economy.
In May, Vallejo sought Chapter 9 federal bankruptcy protection.
Pope said he believes Vallejo won't be the last.
"If you look at the massive debt that the state and federal governments have accrued, you see that the little cities in in California are not on anybody's radar," Pope said.
In February, the county grand jury criticized Isleton for being "in a state of perpetual crisis" and warned that it needed to fix both governance and fiscal problems.
It said Pope's efforts were helping on the fiscal front but warned that if problems could not be resolved, the city would need to take steps to dissolve itself.
Pope said he does not favor disincorporation.
That would take two to three more years and cost about $300,000, he said. That's money the city doesn't have.
Call The Bee's Loretta Kalb, (916) 478-2641.
