Where: Loyalton, California
Issue: The city faced a lawsuit due to financial hardship
Outcome: RCAC helped Loyalton develop sound financial policies and procedures and achieve a clean audit
Located in Sierra County, Loyalton has a population of 695 with a median household income of $40,563. The local sawmill, the main employer for residents, shut down in 2001.
In 2012, city leaders withdrew from its California Public Employees’ Retirement System (CalPERS) contract. Afterward the city learned that by agreement, it must still pay into the state pension fund. Loyalton determined it couldn’t make the payments and asked to establish a new CalPERS contract. This was not legally possible, and CalPERS sent a final collection letter in December 2015. In August 2016, after receiving no payment, CalPERS declared Loyalton in default and threatened to sue the city for $1.6 million.
In early 2017 the State Water Resources Control Board asked RCAC to perform a rate study for the city’s water and wastewater utility to determine reasonable service settings. Loyalton has no full-time employees and operates the utility under a license held by one of its retired employees, who acts as a mentor/supervisor to two part-time unlicensed operators. The mayor and City Council members receive a nominal $49 per month compensation, and the city operates with a part-time bookkeeper.
RCAC received a $5,000 grant from the Tahoe Truckee Community Foundation, which was used to build the City of Loyalton’s financial management capacity for its water and wastewater systems. Staff developed and trained the city’s bookkeeper how to maintain cash flow projections to plan for upcoming revenues and costs. The projections helped the city develop a plan and percentage it could afford to repay CALPERS. CALPERS then allowed Loyalton to reduce its liability to pay to only 60 percent of the retirees’ benefits, which would be paid in full over time. CALPERS meanwhile dropped its lawsuit and withdrew its claim for back payments. RCAC added internal controls and eliminated costly accounting mistakes. Loyalton’s accounting books are now ready to provide the information necessary to conduct rate studies on each of its enterprises.
RCAC staff also devised an Excel schedule for loan repayments; trained a bookkeeper; and trained city council members on how to read financial statements. RCAC also provided AB1234 (ethics) training and reviewed accounting transactions to assist in correcting errors. Audit findings for FYE June 30, 2016, had no material findings.
