Las Cruces’ big budget mistake explained

THE DOCUMENTS
•Las Cruces’ current-year budget
•City manager’s Nov. 18 email to councilors
•City manager’s Nov. 18 email to staff

Las Cruces City Councilor Bill Mattiace broke news last week when he publicly asked the city manager to explain an “overstatement in the budget.”

Mattiace’s comments at the Dec. 1 City Council meeting were the first time the public heard about the budget problem.

“I’d like some answers,” Mattiace said. “I received an email about an overstatement in the budget. I’d like to know the amount. I’d like to know when it occurred and I’d like to know if the city manager can explain it today.”

Mattiace said he had already asked for more detail and hadn’t received it. “As a public servant I feel it’s my duty to get it out there and be transparent,” he said.

City Manager Ikani Taumoepeau took four minutes at the meeting to respond, but he didn’t share many details. He refused to disclose the dollar amount.

“The official numbers I’m not able to make public at this time because we just barely sent that to our state auditor today,” Taumoepeau said. Such details aren’t normally released publicly until after the city finalizes its annual audit, he said.

“But we can share some draft numbers with you offline,” the city manager offered to Mattiace.

If the city discovered problems in its current budget, those numbers are public record, no matter what Taumoepeau says. So I filed a records request for emails between Taumoepeau and city councilors related to this issue. I also asked a series of questions of the city’s communications director, Mandy Leatherwood.

Here’s what I learned.

How much is the overstatement?

It’s $8.33 million, Leatherwood told me, even though Taumoepeau refused to provide that number to Mattiace in front of the public last week.

“The overstatement was due to a duplication error when preparing the beginning balance available for the budget,” Leatherwood said. That, she added, “allowed us to budget more than we should have.”

Mid-year adjustments are commonplace, but such a large error is not.

For context, the city’s current budget allows $612.2 million in spending, the Albuquerque Journal reported. That incudes $175.3 million from the city’s general fund, which is where the error occurred.

What’s the impact?

The mistake creates a shortfall that must be made up somehow. “The budget will be balanced by the end of this fiscal year,” Taumoepeau promised at last week’s meeting. That’s June 30.

The city is taking several steps to reduce spending:

• A freeze on hiring and reclassifying positions that took effect on Nov. 18. Leatherwood told me there are currently 255 vacant jobs that won’t be filled.

• Temporary jobs will be “scaled back” on Jan. 1 “to cover critical operational functions only,” Lesley Doyle, the city’s finance director, wrote in a Nov. 18 memo to city councilors. Leatherwood said the city doesn’t yet know how many temporary positions will be eliminated. “This analysis is currently being conducted,” she said.

• City employee travel will be limited to “that which is necessary to maintain required professional certifications” as of Jan. 1, Doyle’s memo states.

• The city will use other money, including sweeping cash balances from certain funds, “to lessen the impact on the General Fund while maintaining the same level of service,” the memo states. What that might include is not clear, but the city’s budget document lists dozens of funds and their balances as of May 19 of this year. That includes, for example, $14,321 in the DWI prevention fund and $3.9 million in the Convention and Visitors Bureau fund. It’s likely that some of those funds can’t legally be used for other purposes.

How much will these measures save?

The city doesn’t yet know. “The city has not set a specific dollar amount for savings,” Leatherwood told me. 

“Each department is conducting an ongoing analysis to identify potential savings, and the total impact will depend on the results of those reviews and decisions made between now and the end of the fiscal year,” she said.

But it’s critical that the city find the savings. Doyle’s memo makes clear that city spending increases have outpaced revenue growth in recent years.

How will this impact services for residents?

The official line, or at least the hope, is the situation won’t impact residents. “Our goal is to make these changes with no impact to city services,” Leatherwood said.

When did the city discover the error?

At the end of July, the city’s finance director “discovered a probable discrepancy” and shared it with Taumoepeau, according to Leatherwood. After that, she said, “the discrepancy needed to be investigated and confirmed.”

It wasn’t until Nov. 18 that city staff notified councilors and the mayor of the problem. That day, Taumoepeau emailed councilors and shared Doyle’s memo. Later that day, the city manager notified city staff in a second email.

Leatherwood didn’t explain why it took so long to investigate and notify councilors, but she did note that the Dec. 1 meeting, where Mattiace brought up the overstatement, was also “the first opportunity that City Manager had to share the information publicly” after notifying councilors in writing.

What are councilors doing about it?

Other than Mattiace, no councilor has asked questions or raised concerns about the overstatement at a public meeting.

I filed a public records request seeking any emails councilors sent to Taumoepeau in response to his Nov. 18 message. The city said it was unable to locate any.

That doesn’t mean councilors and the mayor haven’t talked with Taumoepeau and other city staff. Mattiace certainly has.

But a quorum of councilors — four of seven, including the mayor — discussing how to address the situation with Taumoepeau outside a public meeting, even if they do it individually, would be illegal under the state’s Open Meetings Act. If city administration needs advice or guidance from the City Council, that discussion and any votes must take place in a public meeting.

The city’s auditors will investigate the situation and include a finding related to the overstatement. Annual audits require Council approval.

In addition, staff will ask councilors to approve a budget amendment to remedy the situation on paper “in the coming months,” Leatherwood said.

Does the city have money in reserves?

Yes. This year’s budget includes a reserve of $29.2 million, Leatherwood said. While the state requires that the city keep an amount equal to 1/12 of its general fund expenses in reserves, the city keeps twice that.

“It is important to note that there is no risk of the city defaulting on any of our financial obligations,” Leatherwood said. “…We are making these adjustments to ensure that we continue to operate as a fiscally responsible organization with a balanced budget.”

What does Mattiace think now? 

After Mattiace raised concerns at last week’s meeting, city staff answered his questions in private. He’s the one who first told me that staff discovered the error in July, which I later confirmed with Leatherwood.

Mattiace is unhappy that staff kept councilors and the public in the dark for four months.

“Where the hell is their transparency with the public money?” he asked.

Mattiace is a former mayor and has been around city government a long time. He said mistakes happen, and he’s not upset about the overstatement itself.

In fact, Mattiace said he’s proud of Taumoepeau for doing the hard work of investigating the impact of the error and making difficult decisions to correct it.

But he doubts Taumoepeau’s pledge that the budget will be balanced this fiscal year. He sees it taking two years. And he said it’s going to hurt.

“I don’t see how they can come up with that many millions and not sacrifice,” Mattiace said. “Our priorities on public safety, the fire department, the light program, the housing, the homelessness programs, Community of Hope — all of those programs are needing more money. Every single one of them needs more money.”

He’s really upset about the secrecy. Mattiace is the only member of the Council who isn’t a Democrat (the former Republican is now a registered independent). In questioning why the city took months to disclose the problem, he noted that Taumoepeau’s email came a couple of weeks after the Nov. 4 city election.

I asked if he was suggesting the city kept the situation quiet to avoid scandal and benefit Democratic candidates. He chuckled.

“That’s a big thing to just put under the rug,” he said about the budget overstatement.