Expenditures Continue to Outpace Revenue, Impeding Hemet’s Ability to Meet Its Financial Obligations
Hemet’s persistent budget deficit, fluctuating revenue, and long‑term obligations have affected its financial stability and put it at high risk of being unable to meet its future financial obligations.1 For eight of the past nine fiscal years, Hemet’s general fund expenditures have exceeded its revenue, resulting in the city having to rely on one‑time revenues and its general fund reserves to balance its budget. In addition, Hemet’s significant long‑term obligations—particularly its unfunded pension liability—threaten the city’s ability to meet its future financial obligations. Although Hemet has recently taken steps to address its long‑term obligations, financial challenges remain. To address these concerns, we have identified additional opportunities for Hemet to increase its revenue, including implementing a fee for nonresidents who use the city library and, as we discuss in a later section, charging for emergency medical services provided by its fire department.
Hemet's Budget Deficit Will Persist Unless It Takes Action
Hemet’s ongoing budget deficit threatens its financial stability. Its general fund expenditures have exceeded its revenue in all but one of the past nine fiscal years, as shown in Figure 3. The city projects a similar outcome for fiscal year 2015–16. This trend affects Hemet’s financial stability because, when its revenue is insufficient to meet its financial obligations, the city has to tap into its limited reserve funds and generate revenue through other means to cover the difference. Hemet’s continued reliance on reserve funds is causing these funds to dwindle and potentially become depleted, affecting the city’s future ability to pay for public services. In October 2015, Hemet developed a five‑year revenue and expenditure projection to address its ongoing budget deficit. However, our review identified concerns that limit the projection’s effectiveness as a road map to address the city’s financial concerns.
General Fund Expenditures Exceeded Revenue for Eight of the Past Nine Fiscal Years
Sources: City of Hemet’s comprehensive annual financial reports.
Hemet has identified declining tax revenue and increased costs as the primary reasons for its persistent budget deficit. Hemet’s largest sources of general fund revenue are various taxes, specifically sales and property taxes. In its fiscal year 2011–12 budget, the city reported that the high unemployment rate and decreased housing values during the recession caused a steep decline in Hemet’s sales and property tax revenue. In fact, between fiscal year 2006–07 and fiscal year 2010–11, Hemet’s annual general fund tax revenue declined by approximately 25 percent. Further, Hemet’s general fund incurred additional costs at the same time that it was experiencing declining revenue. In its fiscal year 2012–13 budget, the city reported that the dissolution of redevelopment agencies was a contributing factor to Hemet’s financial difficulties, noting that with the loss of redevelopment funds, its general fund had to pay for costs that redevelopment funds had previously covered. For example, in fiscal year 2010–11, Hemet budgeted for 60 percent of the city manager’s salary and 55 percent of the deputy city manager’s salary to be paid for by redevelopment funds. Since the redevelopment agencies have dissolved, the city has had to pay for the majority of these positions out of its general fund.
Hemet reduced its expenditures for a number of years in an attempt to close its budget deficit, but expenditures have grown in recent years. From fiscal year 2006–07 to fiscal year 2011–12, Hemet made a concerted effort to reduce expenditures as a means of offsetting the impact of its declining revenue. During those years, Hemet reduced the number of city employees by 153 positions, representing a decrease of nearly 35 percent.
The city also implemented furloughs, sought voluntary demotions of staff members in lieu of layoffs, and required employees to pay the entire employee share of retirement contributions and a portion of the employer’s share. Nevertheless, as shown in Figure 4, expenditures exceeded revenue for eight of those nine years and have increased each year since fiscal year 2012–13.
Hemet’s General Fund Revenue and Expenditures Fluctuated Between Fiscal Years 2006–07 and 2014–15
Sources: City of Hemet’s comprehensive annual financial reports.
To make up for the gap between general fund revenue and expenditures, Hemet has relied on one‑time revenues and its general fund reserve balance. In October 2011, Hemet outsourced its refuse services, resulting in the city receiving a lump sum amount of $12.5 million from the contracted vendor, with an additional $12.5 million in total to be received over the subsequent 19 years. As seen in Figure 5, this lump sum amount temporarily augmented Hemet’s general fund balance, which was nearly depleted by the end of fiscal year 2010–11. Further, in fiscal year 2012–13, Hemet closed its refuse fund and transferred the remaining balance of more than $5 million to its general fund. Despite these one‑time influxes of revenue, Hemet’s general fund balance has recently declined because Hemet has been forced to use a portion of the balance to cover each successive year’s budget deficit. If Hemet’s current annual spending continues at the pace presented in its adopted budget for fiscal year 2015–16, which projected a $5 million deficit, the city will exhaust the remaining balance in its general fund by fiscal year 2017–18, thereby directly affecting Hemet’s ability to respond to emergencies and forcing the city to drastically cut additional services.
Despite Replenishing Its General Fund, the City of Hemet’s Fund Balance Has Recently Declined
Sources: City of Hemet’s comprehensive annual financial reports.
Hemet recently developed an approach to address its ongoing budget deficit. In October 2015, the city developed a five‑year revenue and expenditure projection to use as the basis for addressing its ongoing general fund deficit. The projection included revised spending plans for fiscal year 2015–16 that reduce the $5 million budgeted deficit for that year to a deficit of $1.9 million. Hemet based the reduction on several factors, including actions it took to reduce spending on retiree health care benefits and a moderate projected increase in tax revenue. We discuss Hemet’s retiree health care spending in a later section. In the remaining four years of its five‑year projection, the city assumes conservative increases in revenue while holding flat or minimally increasing the majority of expenditures. The projection shows considerably smaller annual deficits starting in fiscal year 2016–17, with a nearly balanced budget by fiscal year 2019–20. In particular, the projection shows the annual deficit dropping from about $1.9 million in fiscal year 2015–16 to $334,163 in fiscal year 2016–17, primarily due to reductions in expenditures, such as merging the vacant positions of two high‑level officials into a single position.
However, our review of the projection identified some concerns about the plan’s effectiveness as a means to address Hemet’s financial issues. Specifically, the projection assumes a savings of $1 million in fiscal year 2015–16 and $500,000 in fiscal year 2016–17 due to changes in the medical plans offered to its retirees. Using the documentation supporting the projection, however, we estimated savings that are closer to $736,000 in fiscal year 2015–16 and $612,000 in fiscal year 2016–17, increasing Hemet’s projected budget deficit in fiscal year 2015–16 to more than $2.1 million and its fiscal year 2016–17 budget deficit to more than $500,000. The deputy city manager stated that the difference occurred because Hemet developed the five‑year projection based on initial estimates of savings from its plan to reduce retiree health care costs, but has not updated the projection based on the actual changes in health plan participation. The deputy city manager indicated that the city intends to update its projection annually. However, we believe that the city should update the projection when substantial changes occur, which may happen more frequently than once a year. Failing to update its five‑year projection will result in inaccurate estimates being carried forward for each of the remaining years of the projection, as shown in Table 1. In fact, this difference results in Hemet’s projected budget deficit for fiscal year 2019–20 being closer to $268,000 rather than the nearly $17,000 included in its projection. We discussed this difference with the deputy city manager, who did not dispute our calculations.
|Projected budget deficit prepared by the City of Hemet (Hemet)||$1,867,046||$334,163||$213,376||$107,651||$16,906|
|Projected budget deficit as adjusted by the California State Auditor (State Auditor)*||2,127,522||522,102||420,319||335,510||267,781|
|Difference between State Auditor's projection and Hemet's projection||260,476||187,939||206,943||227,859||250,875|
Sources: State Auditor analysis based on our review of Hemet's five-year projections, fiscal year 2015–16 budget, and accounting system data.
* This State Auditor-adjusted projection corrects for the errors identified during our review.
In addition, we believe that some of the assumptions in the projection are overly optimistic. Specifically, the projection does not include any allowances for unanticipated costs. The deputy city manager stated that this was done to keep the expenditure projection as low as possible. Although Hemet cannot foresee the exact impact of unanticipated costs, it should, nonetheless, expect that these types of situations will arise and that this spending will further deplete its reserves. An example of this type of unanticipated cost occurred in January 2016, when the city spent $32,000 to hire a demographer to help it establish council districts. Hemet has also recently incurred another unexpected one‑time cost—spending approximately $130,000 in its efforts to place a public safety tax measure on the June 2016 ballot. This amount includes $63,000 for two contracts with a consultant to develop the tax measure and an estimated $67,000 for Riverside County to place the measure on the ballot. Because Hemet’s projection does not include any allowance for unanticipated costs, its total actual costs will be greater than projected if unanticipated costs arise and all other expenditures occur as expected.
We believe another unrealistic assumption is that there will be no staffing increases over the next five years. Even small staffing changes can have a significant impact on Hemet’s projection. For example, a 2015 operational review of the fire department conducted by a consultant identified that the Hemet fire department’s staffing levels are very low. Even if Hemet decides to hire only one additional firefighter during fiscal year 2016–17, the projected budget deficit for that fiscal year would increase by approximately $124,000, and the projected budget deficit for fiscal year 2019–20 would increase by more than $132,000. As a result, the overall deficit would be $646,000 in fiscal year 2016–17 and more than $400,000 in fiscal year 2019–20, far greater than Hemet’s projected deficit of $17,000.
Of note, Hemet proposed a 1 percent sales tax measure for public safety on its June 2016 ballot, which voters did not approve. Although this special‑purpose tax measure would have generated significant revenue, it would have had minimal impact on the budget deficit. Under the provisions of the measure, Hemet could have spent the additional revenue only on public safety services and, further, could not have reduced the percentage of the general fund that it already spends on its police and fire departments. Thus, even if the tax measure had passed, the additional revenue could not have been used to replace any of the city’s current general fund expenditures for public safety, which represented nearly three‑quarters of its budgeted general fund expenditures in fiscal year 2015–16.
In June 2016, the city council approved Hemet’s operating budget for fiscal year 2016–17. This adopted budget projects a general fund deficit of just under $350,000. Although the budget is consistent with the deficit portrayed in Hemet’s five‑year projection for fiscal year 2016–17, the approved budget projects revenue and expenditures that are approximately $1 million greater than the five‑year projection. However, we believe that several of the approved budget’s projections appear overly optimistic and that the actual budget deficit will likely be greater. Specifically, the budget projects an increase of $700,000 in property tax revenue, an increase of more than 15 percent from the previous fiscal year. In addition, the city projects a 12 percent increase in motor vehicle license fees. Hemet based these projections on information provided by a consultant it hired to forecast future tax revenue. However, the city was unable to provide any perspective to justify the reasonableness of the consultant’s information, particularly in light of the fact that Hemet projected only a 2 percent annual increase in its property tax revenue in its five‑year projection. In total, the city projects a $2.1 million increase in revenue, equating to an increase of 5.9 percent, which, in our opinion, appears unreasonable.
We also question the appropriateness of Hemet’s projected reductions in expenditures. For example, the city reduced its budget for engineering by $400,000, or 34 percent, from the previous fiscal year, despite engineering costs remaining at approximately the same level over the past three fiscal years. The deputy city manager indicated that this decrease is due to an expected slowdown in development in Hemet. However, this statement appears to conflict with the deputy city manager’s statement about the preparation of the five‑year plan, in which she indicated that the city assumed a 2 percent increase in development revenue going forward. Further, Hemet increased its fiscal year 2015–16 budget for building‑related fees based on an increase in actual building applications received and the size and scope of the projects, which also contradicts the expectation of a slowdown. In addition, the city reduced the budget for police department overtime to $450,000 and fire department overtime to $400,000, despite the police department incurring an average of nearly $918,000 per year in overtime from fiscal year 2012–13 to 2014–15 and the fire department incurring an average of nearly $1.3 million in overtime per year during the same period. In total, these questionable reductions in projected expenditures amount to nearly $1.7 million.
Adjusting for the overly optimistic revenue projections and expenditure reductions leads us to conclude that Hemet’s budget deficit will likely be substantially larger than the amount it projects. Accordingly, Hemet will not reduce its budget deficit to the level portrayed in its five‑year projection and will need to take additional actions to address its budget deficit.
Recommendations to Address This Risk
- To address its ongoing budget deficit, Hemet should identify additional sources of revenue and reduce costs, such as establishing and collecting fees for services it currently provides without charge and other options identified in this report.
- To ensure that its projection remains valid and useful for decision making, Hemet should reassess its assumptions and revise its projection, both annually and after it becomes aware of any significant changes to either its revenue or its expenditures.
Hemet Continues to Experience Rising Pension Costs
Projected pension cost increases and a large unfunded liability create uncertainty regarding Hemet’s future ability to make its pension payments while also maintaining city services. As presented in Figure 6, actuarial valuations by the California Public Employees’ Retirement System (CalPERS) predict that Hemet’s total pension payments, representing the combined cost of its pension plans for public safety employees and miscellaneous employees, will increase by about $2.9 million, or 55 percent, during fiscal years 2011–12 through 2016–17. These increases are largely due to the performance of CalPERS investments and the general economy. Hemet’s pension payments make up a high percentage of its operating costs and are the second largest category of expenditures after staff salaries, requiring the dedication of a substantial portion of the city’s limited budget. As an example of the increases in pension payments, in fiscal year 2012–13, approximately 11 percent of Hemet’s total operating expenditures were for pension payments, whereas by fiscal year 2014–15, this percentage had risen to 13 percent, an increase of more than $1 million. If Hemet’s pension costs continue to increase in the future, it will have less funding available for the other public services it provides. Therefore, it is essential that Hemet plan for and consider options to address its mounting pension costs.
The City of Hemet Faces Rising Pension Costs
Sources: City of Hemet’s comprehensive annual financial reports and actuarial valuation reports by the California Public Employees’ Retirement System (CalPERS).
* Estimates from CalPERS’ actuarial valuation reports.
Although Hemet has been making its required payments, its pension costs are projected to increase because of its large unfunded liability. An unfunded pension liability is the difference between the amount CalPERS expects an entity will need to pay for all benefits earned by retirees and the fiduciary net position of the plans, which includes the actual value of the pension plans’ assets. Table 2 shows the recent increases in Hemet’s unfunded pension liability. Hemet’s annual payments for its pension plans consist of the annual cost for the active employees in each plan and payments to reduce the size of its unfunded liability. The assets for both of its pension plans are invested by CalPERS, and therefore their value is dependent on CalPERS’ rate of investment returns, which has fluctuated significantly in recent years. CalPERS bases its projections for future pension payments on a certain assumed rate of investment returns. Therefore, if CalPERS’ investment returns are much higher than projected, Hemet’s annual payments could decrease. However, if CalPERS’ investment returns are lower than projected, as has occurred in recent years, Hemet’s annual payments would increase. In fact, during fiscal year 2013–14, Hemet’s unfunded liability increased substantially because its pension liability increased at the same time that the value of its plans’ assets decreased, thus causing an increase in the required payments. According to the deputy city manager, Hemet is in the process of researching options to adjust the payment schedule for its unfunded liability, which may reduce its payments. However, the city is still exploring this option, and the deputy city manager does not expect to present any resulting recommendations to the city council until at least 2017.
|Value of assets||160,651,471||166,940,228||153,659,468||177,071,000*|
|Total unfunded liability||47,666,367||48,924,376||68,430,957||65,190,374†|
Source: Comprehensive annual financial reports for the City of Hemet (Hemet).
* To comply with changes in accounting standards, Hemet changed how it reports this value, beginning with its fiscal year 2014–15 comprehensive annual financial report. It now reports "fiduciary net position," which equals assets minus liabilities and also takes into consideration amounts that are deferred due to other accounting rules.
† To comply with changes in accounting standards, Hemet changed how it reports this value, beginning with its fiscal year 2014–15 comprehensive annual financial report, to "net pension liability," which represents the total pension liability less the fiduciary net position.
Hemet’s annual pension payments may increase at an even greater rate than anticipated. Hemet has planned for annual 5 percent increases in its pension costs based on the costs of its public safety employees’ plan and its significant unfunded liability. However, other conditions exist that could further increase that rate. According to the deputy city manager, Hemet currently has staff positions, such as a media and intelligence analyst in the police department, that are fully budgeted but unfilled. If it fills that position and other vacant positions, the city’s pension costs would increase, which, in turn, could increase the projected budget deficit. To address such concerns, the deputy city manager indicated that Hemet would update its five‑year general fund projection with new information annually.
Recommendations to Address This Risk
- To ensure that it adequately plans for changes in its pension costs, Hemet should continue to update its five‑year projections at least annually to reflect changes to annual pension costs.
- To attempt to reduce its pension costs, Hemet should continue to explore options and work with CalPERS to reduce payments for its unfunded liability.
Although the Library Is Supported With City Funds, Nearly Half of the Library Patrons Live Outside of the Incorporated City
As one of seven cities in Riverside County to operate its own public library, Hemet spent about $1.8 million of its limited general fund resources in fiscal year 2014–15 to fund library operations and has spent similar amounts during the past several fiscal years. Despite the investment of city resources, the library is open to the public fewer hours than other nearby libraries that serve as branches for the Riverside County public library system.
Even though it faces an ongoing budget deficit, Hemet has no current plans to make the library self‑sufficient or to reduce its impact on the general fund. According to the deputy city manager, the library continues to innovate, using automation such as self‑checkout machines and book sorters, in order to provide services without the need for additional staff. The library also receives support from two private nonprofit organizations, Friends of the Hemet Public Library and the Hemet Library Foundation. According to the senior librarian, the Friends of the Hemet Public Library raises approximately $36,000 from book sales annually, and the Hemet Library Foundation raises $3,000 to $5,000 from fundraisers each year. We acknowledge that the city’s efforts to hold down staffing costs through innovation and seeking alternative sources of funding are helpful. Nevertheless, the vast majority of the library’s support comes from the city’s general fund.
Further, despite Hemet’s investment from its general fund for its library, nearly half of the library’s patrons do not actually live in Hemet. According to the library’s records, an estimated 44 percent of patrons are not residents of the incorporated city, as shown in Figure 7. The public’s interest in using Hemet’s library may be attributed to the large size of the building and breadth of its collections and reference material.
Many Patrons of the Hemet Public Library Do Not Live Within the City Limits
Sources: Hemet Public Library database.
Note: We identified the proportion of patrons by location based on the total number of library cards issued as of March 2016.
Charging a library user fee to those who do not live within the city limits could both reduce the burden on Hemet’s general fund and provide additional revenue to support the library and make it more self‑sufficient. State law requires that municipal libraries be free to the inhabitants and nonresident taxpayers of the municipality, but not to other users. The law does not provide clarification on identifying nonresident taxpayers. However, Hemet should seek legal guidance about establishing a user fee to the extent permitted under state law. Some other public library systems in California charge such fees—including the cities of Beverly Hills, Cerritos, Santa Ana, and the Lassen Library District—and the fees they charge range from $28 to $257 annually. As shown in Table 3, using differing levels for the percentage of current nonresident patrons who would pay for library resource privileges and a conservative annual user fee ranging from $40 to $75, we calculated that Hemet could generate annual revenue ranging from $333,890 to $2.5 million.
|Annual Fee||If Paid by 100% of Nonresident Library Users||If Paid by 75% of Nonresident Library Users||If Paid by 50% of Nonresident Library Users||If Paid by 25% of Nonresident Library Users|
Sources: California State Auditor analysis based on Hemet Public Library user data.
Note: The calculations in the table are based on our estimate of nonresident patrons with library cards who have borrowed material within the past two-and-a-half years, rather than all individuals with library cards. Nonresident patrons include those individuals who reside outside of the city of Hemet boundaries.
If Hemet implemented a fee, nonresident patrons who chose not to purchase library privileges or who could not afford the fee would have other alternatives for accessing library services. Nonresident patrons would still be able to access services without charge at a library within their own community. Specifically, there are two county libraries within five miles of Hemet in nearby San Jacinto and Valle Vista.
Recommendation to Address This Risk
Hemet should seek legal guidance to adopt an annual library user fee structure to charge individuals other than city inhabitants and nonresident taxpayers for the use of library resources.
Hemet Has Largely Addressed Its Retiree Medical Costs
In the 1990s, Hemet promised full lifetime medical coverage to all eligible retirees, but beginning in 1998 the city no longer offered this benefit to new hires. According to the deputy city manager, Hemet ended the policy due to the high cost. Nevertheless, the remaining pool of retirees and current employees of the city hired before 1998 continues to be eligible for full lifetime medical coverage. In fiscal year 2014–15, the annual cost of that obligation amounted to $3.3 million after steadily rising since fiscal year 2010–11, as presented in Table 4. Further, in fiscal year 2014–15, retiree health plan costs alone were 6.8 percent of the city’s annual general fund operating expenditures. According to a September 2012 presentation made by the city’s insurance broker to the city council, Hemet expected retiree health insurance costs to increase greatly when the “Cadillac tax” of the federal Patient Protection and Affordable Care Act (Affordable Care Act), a 40 percent tax on excessive benefits provided by an employer, was scheduled to go into effect in 2018. However, the federal government has since postponed the implementation of the tax until 2020.
|Retiree medical costs||$2,362,000||$2,839,000||$3,113,000||$3,186,000||$3,330,000||$3,191,000|
Sources: Comprehensive annual financial reports for the city of Hemet (Hemet), Hemet's retiree health care plan cost projections, and California State Auditor review.
* The fiscal year 2015–16 costs represent our estmate based on Hemet's projected health care plan costs, the total retiree health plan enrollment as of June 2016, and the number of participants who accepted Hemet's $5,000 incentive to change plans.
Recognizing that Hemet’s retiree health plan costs were growing to an unsustainable level, the city council approved a proposal in 2015 to move retirees with high‑cost plans to lower‑cost ones that Hemet asserted provided comparable coverage. The comparable plans are much more affordable for the city, and the deputy city manager believes these plans will not incur a penalty at this time under the Affordable Care Act. To implement this proposal, Hemet conducted an outreach effort and successfully transitioned all but 20 retirees away from the high‑cost plan, thus saving the city’s general fund approximately $736,000 in fiscal year 2015–16. The city’s outreach effort included sending letters to the applicable retirees, hosting public meetings about retiree health plans, and offering an incentive of $5,000 to retirees who switched to a lower‑cost plan by September 30, 2015. In September 2016, the city expects to terminate the high‑cost health care plan and, according to the deputy city manager, will move the remaining enrollees to a lower‑cost plan. According to the deputy city manager, the city expects that the $1.5 million in its retiree health care fund, which is not a part of its general fund, will be sufficient to cover any potential litigation resulting from retirees who refuse to change plans.
Despite the efforts Hemet has made to reduce its retiree health plan costs, its unfunded liability for these benefits remains significant, with its most recent valuation reported at approximately $74 million as of January 2015. In particular, the city currently does not have any assets dedicated to offset its retiree health plan cost liability. Further, although Hemet pays the full cost of retiree health benefits incurred each year, it does not make payments toward its unfunded liability, which continues to grow as more benefits are earned over time by current and former employees.
In 2009 the U.S. Government Accountability Office (GAO) reported that unfunded retiree health benefit liabilities at the state and local level raise concerns about future fiscal pressures that these governments could face. The GAO identified the use of a trust as a method to reduce a government’s unfunded liability in the long term. To address its unfunded liability, Hemet has begun to research the viability of establishing a trust. The deputy city manager indicated that she intends to propose that Hemet establish a trust into which savings from changes to its retiree health benefits and some of the fund balance from its retiree health fund could be deposited. According to a 2009 report by the Center for State and Local Government Excellence, by establishing and funding a trust, governments can reduce long‑term costs because the trust’s investment earnings help pay for future retiree health plan costs. The deputy city manager projects that, after the trust is established, it would take approximately 20 years for the city to accumulate enough resources generated through deposits and investment earnings in the trust to cover its unfunded liability for retiree health plan costs. However, Hemet is still developing this strategy, and the deputy city manager stated that she does not intend to propose the issue to the city council for consideration until the summer of 2016.
Recommendation to Address This Risk
Hemet should continue to research the feasibility of ways to pay down the city’s unfunded liability for retiree health plan costs and take appropriate action based on the research performed.
Ineffective and Inefficient Organizational Management Negatively Affects Hemet’s Provision of Public Services
Several of Hemet’s operations and management practices contribute to ineffective and inefficient provision of public services. In particular, Hemet has consistently underfunded its fire department. As a result, firefighters must work chronic overtime and frequently operate with insufficient equipment, putting themselves and the public at risk. Despite its struggles, Hemet’s city government has not made a consistent effort to reach out to the community, creating the possibility that residents who are unaware of the city’s risk will resist necessary reforms.
The existing organizational structure of Hemet’s city government also leads to some inefficiencies. For instance, there are currently eight individuals who report directly to the city manager, and this imbalanced ratio may inhibit the city manager’s ability to provide meaningful direction. In addition, the city government lacks a strategic plan and a succession plan. A strategic plan serves as the vision for an organization and helps ensure that the individuals within the organization work together toward the same goals. A succession plan helps ensure that an organization has the right people in the right positions and is developing staff members’ competencies so they will be prepared to fill the key positions eventually vacated by retirements or natural attrition. We also identified potential annual savings if the city outsourced the handling of parks maintenance.
Hemet Has Critically Underfunded Its Fire Department
Hemet has historically underfunded its fire department—which consists of five fire stations—resulting in insufficient staffing levels and substandard infrastructure, creating a risk to public safety. Operational reviews by two different consultants, one in 2013 and another in 2015, cited concerns about the fire department’s level of staffing. For example, the 2015 review concludes that the Hemet fire department’s staffing was very low compared to other agencies of similar size. The review states that Hemet has 0.55 firefighter per 1,000 residents, as opposed to the regional median of 0.92 firefighter and the national median of 1.3 firefighters per 1,000 residents. Hemet uses a principle called constant staffing, which means that the fire department should have exactly the same number of filled positions as individuals needed for a day’s shifts. Because Hemet had nine vacancies in firefighter and fire captain positions as of May 2016, existing staff members must work overtime to compensate for these vacancies.
Our concerns about low staffing are exacerbated by high demand for fire services. The 2015 review notes that the Hemet fire department is exceedingly busy, handling more than twice as many emergency incidents as other fire departments of similar size on the West Coast. The 2015 review also considers the combination of low staffing and high demand for services to be potentially dangerous and unproductive. Further, the 2015 review concludes that the fire department improperly staffed shift command positions with captains rather than appropriately trained battalion chiefs. Captains are typically trained to supervise a single unit and small incidents, whereas a battalion chief is trained to supervise three to seven fire stations and manage large‑scale incidents.
In addition to staffing, the fire department has critical needs for equipment and infrastructure repairs. For example, in a May 2015 presentation to the city council, the fire chief stated that the firefighters’ personal protective equipment—protective clothing critical to firefighter safety—had not been replaced in the last five to eight years. The chief also informed us that the personal protective equipment was riddled with holes and substandard repairs. In fiscal year 2015–16, Hemet finally purchased new personal protective equipment. The fire stations are also in need of significant structural changes, including seismic retrofits and alterations to comply with building codes. State law indicates the Legislature’s intent that an essential services building, such as a fire station, should be designed and constructed in such a way as to be capable of providing essential services to the public after a disaster. However, three of Hemet’s five fire stations are vulnerable to seismic activity. Although the fire stations were built before the passage of the state law, their location raises concerns, given that Hemet is in an area prone to earthquakes. The city also maintains a list of needed repairs for the fire stations but has not estimated the costs or budgeted for the repairs.
According to the deputy city manager, city management does not consider these improvements to be as critical as other needs, such as repairing aging water and sewer lines and making street repairs. She also stated that, with limited general fund resources, Hemet is unsure as to when and how it will address the capital improvements needed for the fire department. Although Hemet may view other infrastructure repairs as more critical, by not addressing the seismic safety and other structural needs of the fire stations, it could be placing residents at risk in the event of an emergency.
Hemet’s plan to address the staffing needs of its fire department relied primarily on a tax measure that failed to pass in June 2016. If the tax measure had passed, Hemet had planned to hire 25 fire department staff, including three battalion chiefs, over the next three fiscal years. The fire chief believed the additional staff members were necessary to address the staffing concerns identified by its consultants. Without the additional tax revenue, Hemet will have to reconsider its ability to meet the needs of its fire department. According to the deputy city manager, the city intends to hire battalion chiefs even though the tax measure failed.
However, as previously discussed, the city’s five‑year projection to address its budget deficit assumed no additional staffing. As shown in Figure 8, not including the undetermined costs of necessary capital improvements, the cost to operate the fire department will rapidly increase with the additional staffing Hemet has identified as needed. The fire chief informed us that he is currently working on contingency staffing plans. Moreover, Hemet has not planned how it will fund the fire department’s needed capital improvements.
Projected Costs of the City of Hemet’s Fire Department Will Increase Significantly To Address Critical Staff and Equipment Needs
Sources: City of Hemet (Hemet) fire department projections.
Note: The main contributor to the increases in projected expenditures is the increase in staffing costs. Hemet management has stated that to operate effectively the fire department needs additional staff, and planned to add most of those additional positions between fiscal years 2016–17 and 2017–18 if the city’s tax measure had passed. The remaining increase in projected expenditures is attributable to increases in existing costs for the fire department, including costs such as equipment and overhead.
Despite the tax measure failing to pass, other options exist for Hemet to increase revenue for the fire department. Currently, some cities, special districts, and counties charge fees for providing first responder services for emergency medical calls. Examples include the city of Long Beach, the city and county of San Francisco, and the Sacramento Metropolitan Fire District. However, the Hemet fire department does not charge for its services when it is the first responder to calls for emergency medical services. We did not locate any law that would prohibit Hemet from imposing a fee on those who receive emergency medical services and, unlike the failed special tax measure, Hemet may impose such a fee without voter approval as long as the fee does not exceed the cost of providing the services. In 2015 the fire department responded to more than 13,000 emergency medical calls, representing more than 80 percent of its total calls. Based on our calculations, the city could have generated from $941,000 to $3.8 million in fiscal year 2015–16 if it had charged for these types of calls, depending on the number of calls for which it could collect a fee. As shown in Table 5, even if the fire department was able to collect only 50 percent of all bills for medical calls, it could recover between $2.1 million and $2.8 million annually from fiscal year 2016–17 through 2019–20. In addition, since the fire department already recovers fees for responding to motor vehicle accidents, vehicle fires, arson investigations, and nonresidential false alarms, it has an existing relationship with a cost recovery collection service that could also handle billing for emergency medical services.
|Fiscal Year||100% Collected||75% Collected||50% Collected||25% Collected|
Source: California State Auditor analysis based on the City of Hemet fire department's call history and costs of operations.
Note: Collection percentages provide a range, with an assumption that some bills may not be collectible for a variety of reasons, including financial hardship or debt avoidance.
Despite the fire department’s need for additional revenue, the city has not charged for emergency medical services in the past. According to the city manager, Hemet has concerns about charging the community fees in addition to taxes, and believes that this action would require city council consideration and public input. However, as previously mentioned, the city charges fees for many other services it provides.
Because its tax measure did not pass, Hemet will need to identify other significant sources of additional revenue to adequately support the fire department. If it decides not to impose charges for emergency medical services as we recommend, Hemet should consider other service options to secure an adequate level of assistance to ensure the public’s safety. Hemet previously considered outsourcing its fire services, but it ultimately decided against doing so. In September 2014, the city council voted 3 to 2 to outsource fire services to Riverside County, believing outsourcing would provide Hemet the most service for the best value. However, in November 2014, a new city council member was voted in, replacing one of the members who had supported outsourcing. Subsequently, in December 2014, the city council reversed the decision to outsource the fire department. One alternative Hemet could pursue is a joint powers authority with other local governments for shared fire services. In June 2016, the city council for the neighboring city of San Jacinto voted to pursue a joint powers authority for fire protection with the community of Idyllwild. The city manager of Idyllwild stated that a joint powers authority could provide greater flexibility and allow for the ability to partner with other local agencies.
Recommendations to Address This Risk
- To ensure that it can adequately fund its operations and recover the costs of its services, Hemet should generate additional revenue, such as charging fees for emergency medical services provided by the fire department.
- If it implements a fee for emergency medical services, Hemet should conduct a comprehensive fee analysis to determine the fully burdened hourly rates for providing emergency medical service, specific to the duration of emergency medical calls, and ensure that first responder fees do not exceed the cost to provide the service.
- If Hemet does not adequately fund its fire department to address the concerns identified in its 2013 and 2015 consultant reviews, it should pursue alternatives for providing services, such as shared fire services with other local governments.
Hemet Could Do More to Engage Its Community
To address risk conditions such as its budget deficit and high crime rates, Hemet needs to be able to engage with the community to provide information on the challenges facing the city and to solicit relevant perspectives from the public. If city leaders fail to communicate with the public regarding the issues and concerns that are relevant to these conditions, Hemet may face increased resistance to the actions it proposes to address them. Hemet communicates with the public primarily through city council meetings and other commission and committee meetings. It does not have a public information officer, which, in conjunction with turnover in city leadership, contributes to the lack of a coordinated message and approach to public outreach. Instead, efforts are left up to individual departments. As a result, the community is not always informed about issues of concern and may be resistant to needed reform.
Many residents have been critical of Hemet’s efforts to engage the community. At a city council meeting in September 2015, a member of the public expressed concern that the city council was not trying to engage the community and recommended that more effort be made by the entire city council. She also stated that she feels there is no follow‑through unless the city council is forced to do so. Another individual expressed concern that Hemet has not communicated to the public the facts that led to the city’s financial situation and, at a subsequent meeting, stated that residents want to understand why Hemet has a budget deficit and what needs to be done to fix it. Among the many opinions voiced at council meetings was that the city would get support from the community if the city council could communicate its long‑term plan.
Hemet could bridge this communication gap by actively engaging the community. For example, the city manager could conduct regular town hall meetings that would facilitate increased community interaction with the city government. As evidenced by the estimated 800 participants who attended a city council meeting to learn about the public safety tax measure when it was formally proposed, Hemet appears to have individuals who are eager to understand the city’s challenges. Creating a plan for consistent and transparent communication with residents could help mitigate inaccurate assumptions about the city’s efforts to address its financial situation and economic outlook.
During fiscal year 2015–16, Hemet took steps to conduct more focused outreach to address specific issues. For example, it sent mailers and held educational meetings for retirees to discuss its retiree health plan obligations. In addition, Hemet directed the police and fire chiefs to manage outreach for its June tax measure. The chiefs made themselves available to conduct a number of town hall‑style meetings specific to the tax measure with a wide variety of interest groups.
Hemet could also pursue activities to engage members of the public in the concerns faced by the city government. An example of this type of successful public collaboration occurred in the city of Brea (Brea), which created a Budget Strategic Plan Committee consisting of 40 city staff members and 25 residents. The committee helped set priorities to balance the budget by preparing Brea’s five‑year projections. The committee generated nearly 200 budget suggestions, resulting in a reduction of $6.4 million in expenditures over two fiscal years. Brea received an organizational excellence award from the Municipal Management Association of Southern California for its advancement of local government service. Similarly, rather than attempting to address Hemet’s challenges alone, city leaders could help facilitate community involvement in addressing the city’s problems.
Recommendation to Address This Risk
Hemet should create and implement a plan for community engagement, including strategies to educate and engage 0the community in the city’s needed reforms and its efforts toward achieving financial stability. This plan should focus on seeking public involvement in a more participatory, deliberative, inclusive, and collaborative manner.
Restructuring City Operations Could Improve Efficiency and Effectiveness
In an effort to cut costs, Hemet reduced its staff from 432 positions in fiscal year 2006–07 to 286.5 positions in fiscal year 2014–15, a reduction of 34 percent. Part of the reduction involved the elimination of some middle management positions, resulting in a flat organizational structure with many functions reporting directly to executive management. For example, under the city’s current structure, eight individuals report directly to the city manager. Having too many individuals report directly to a single executive can make it difficult for the executive to provide effective oversight and may also create other inefficiencies, such as leaving the city manager unable to focus efforts on citywide issues.
In addition, Hemet’s current organizational structure results in inefficiencies in some reporting relationships. For example, engineering is a stand‑alone department in Hemet, unlike comparable functions in many other cities. This structure creates inefficiencies in the handling of building inspections and planning activities, which involve the engineering, public works, and community development departments. The community development and engineering departments are not only led by different individuals but are also located in different buildings, causing an inconvenience for developers and builders who have to go back and forth between departments. Additionally, the public works department handles sewer, streets, and water—key areas that also involve community development and engineering—yet the public works department is in another facility located across town. The police chief, who has worked for the police department for more than 23 years and also served previously as acting city manager, believes that the current organizational structure was designed based on the strengths of certain individuals, rather than focused on the health of the city.
Reorganization of city operations could result in considerable improvements in efficiency and effectiveness. Since the appointment of the current fire chief, the police and fire departments have made efforts to share staff. Specifically, the fire chief informed us that the fire department and police department share one staff person responsible for recruiting and background checks for new hires, and that they have experimented with sharing a data analyst. By sharing staff, the departments leverage their resources more efficiently and gain additional opportunities for cross‑training that can positively affect succession planning. For example, because the engineering and community development departments work closely in their operations, a collaborative effort to cross‑train technicians and administrative assistants across these departments’ functions could allow for more flexibility and increase Hemet’s internal talent pool. According to the directors of the engineering and community development departments, there may be opportunities to share staff and cross‑train across other departments, but they have not explored these possibilities. To further identify potential areas of improvement in staffing and training, Hemet could conduct a comprehensive organizational analysis, including work assignments, workloads, reporting relationships, and coordination points.
Realigning some city departments could increase efficiency and aid in succession planning. Under the current organization, community development, economic development, engineering, public works, and the Hemet Public Library all report directly to the city manager, along with the public safety departments and the deputy city manager. To regroup some of these functions, Hemet could move economic development and the library into the current community development department, creating a new community development and services department, as shown in Figure 9. Further, Hemet could include engineering as a division of its public works department. The city previously had a public works department that included engineering. These changes would streamline Hemet’s management by reducing the number of individuals reporting directly to the city manager from eight to five. By realigning the reporting relationships, the city could establish midlevel management positions under the community development director and public works director without the need for additional staffing. Establishing these positions would also help promote succession planning. Under the proposed structure, the community development director and public works director could proactively develop managers from any of their subdepartments as potential successors. The city manager stated that he supports having engineering as a division of public works and physically located with community development.
Reorganization of the Government Structure for the City of Hemet Could Increase Efficiencies
Source: California State Auditor analysis based on the current and proposed organizational chart for the City of Hemet.
* We present these departments under public safety due to sharing of administrative staff, but the police chief and fire chief would each still report to the city manager.
† Administration includes purchasing, utility billing, and risk management.
The current reporting structure of code enforcement within Hemet’s government is another critical consideration in improving efficiency and better serving the needs of the community. Code enforcement is currently managed under the community development department, where its focus is to respond to complaints from members of the public and identify violations occurring on public and private property. According to the community development director, who currently manages the code enforcement division, a city’s decision as to where it organizationally aligns its code enforcement division depends upon the needs and focus of that city. Hemet has clear needs in the area of public safety and, as we describe at the beginning of the report, Hemet’s crime rate is well above that of neighboring cities and the State as a whole. Further, code enforcement already has significant involvement with public safety, efforts it could improve upon if public safety was its priority. For example, in fiscal year 2015–16, the city reported that code enforcement worked with the city attorney to shut down eight marijuana grow operations and worked with the police department to inspect 14 massage parlors. In addition, in its fiscal year 2016–17 budget, the goals of code enforcement are closely linked to public safety, including working with the police department to address homelessness and gang issues. Code enforcement might better focus its efforts to address public safety concerns as well as the needs of the city if it were managed by the police or fire department.
In comparison, the city of Banning (Banning) has its code enforcement officers organized under its police department. The police sergeant who oversees Banning’s code enforcement division stated that being organized under the police department helps to address crime by making officers more aware of code violations that can aid in combating criminal activity. For example, the sergeant described a criminal complaint in which one of the parties lived in a garage, which is a violation of Banning’s code. Through his work with code enforcement, he was able to address both the criminal complaint and the code violation, which provided him the authority to remove the party from the residence.
Management within Hemet’s government has mixed opinions on the placement of code enforcement. Hemet’s police chief stated that he is open to restructuring code enforcement under the police department and does not see a significant impact on police department staff, other than designating a sergeant to oversee code enforcement activities. According to the fire chief, the synergy between code enforcement and the fire department would facilitate both departments working together efficiently, thus contributing to the city’s goal of creating an enhanced community risk reduction program. The fire chief noted that code enforcement could also assist the fire department with activities that it does not have the staffing to cover, such as required inspections for restaurants and multifamily residential buildings. In contrast, the community development director, who currently manages the code enforcement division, believes the division should remain within the existing reporting structure due to its current functions of building and property review. When the current city manager assumed his position in January 2016, he initially expressed interest in reorganizing code enforcement to better align with Hemet’s public safety needs. However, he later stated that, through ongoing evaluation of personnel, budget, and other aspects of the present organization, he now believes that code enforcement is properly located with community development. Nevertheless, this existing structure does not specifically address the city’s high crime rate. Although code enforcement currently helps to address public safety issues, it could do more to address the city’s challenges if public safety was its main concern. Hemet should consider how its organization can best meet the needs of the community, given its high crime rate, and take appropriate action to address those needs.
Restructuring city government could also provide additional focus on Hemet’s volunteer programs. Code enforcement personnel acknowledge that their department has many activities that volunteers could assist with in the field, such as removing signs, taking photos, and addressing boarded‑up buildings, but there are currently no field volunteers. The code compliance manager stated that, although the code enforcement department once had volunteers who worked in the field, they left for various reasons, and it has not sought other individuals to replace them. Further, the code compliance manager indicated that Hemet had concerns about safety, liability, and misuse of authority regarding the code enforcement field volunteers.
However, according to the police sergeant who oversees the police volunteer program, the Hemet police department has a significant number of volunteers who receive training in areas that address the code compliance manager’s concerns, such as in the use of police radios in the event volunteers need police assistance and in report writing to properly address issues and avoid potential misuse of authority. The fire chief stated that aligning code enforcement with the fire department would allow both departments to better engage and train volunteers, similar to the robust police department volunteer program. Further, this shift would allow the police volunteers to assist with clerical work across the fire department, police department, and code enforcement division. When we asked the city manager about involving police volunteers with code enforcement, he stated that he has not spent enough time with the police volunteers to provide an opinion.
Recommendation to Address This Risk
To streamline oversight, better align similar functions, and provide opportunities to leverage staff, Hemet should reorganize the structure of its city government. Specifically, it should conduct a comprehensive organizational analysis, including work assignments, workloads, reporting relationships, and coordination points, and pursue options to improve efficiency and effectiveness, such as creating a combined community development and services department, shifting engineering to become a division under public works, and shifting its code enforcement division to public safety.
Turnover and Lack of Consistent Leadership Have Inhibited Critical Planning Efforts
Hemet has faced a high degree of management turnover, which can result in a lack of consistent leadership, thereby reducing the effectiveness of services. Over the past nine years, the city has had eight different individuals serve as city manager—four in a permanent role and four others in an interim capacity. In addition, the city did not have a permanent fire chief for nearly two years, from July 2013 to April 2015. The city hired a fire chief in April 2015 and a permanent city manager in January 2016. However, the city’s economic development director left in July 2015, and the position has remained vacant since that time. In addition, according to the fire chief, the fire department has not had anyone serve in the role of battalion chief—a critical management position—since 2009. The city’s 2013 and 2015 consultant reviews of the fire department recommended that it be staffed with three battalion chiefs. The city intends to hire battalion chiefs, but these positions remained unfilled as of June 2016. The fire chief stated that he intends to present class specifications for the battalion chief position to the city council in the third quarter of 2016.
High turnover in city government has contributed to a lack of leadership and, in some cases, a lack of management oversight. For example, Hemet’s current fire chief stated that when he was first appointed to his position, he inherited a culture in which employees were allowed to do as they pleased. He attributed the previous culture to a lapse in leadership in prior administrations and a lack of organizational accountability. According to the deputy city manager, turnover and staff reductions have resulted in a loss of institutional knowledge and reduced efficiency, as staff members were forced to learn new roles and experienced increased workloads.
Hemet has some plans to address management positions that remain unfilled. Rather than hire both an assistant city manager and an economic development director, positions that have been vacant for some time, the city manager believes that, because of budgetary constraints and current city needs, it will be more useful to hire an administrative analyst with expertise in areas such as public information, risk management, human resources, and economic development. According to the city manager’s plan, this analyst would also be tasked with marketing Hemet to prospective businesses, creating media that spotlight areas of interest and unique features of Hemet, and coordinating community engagement and outreach efforts, including unifying public information messages across departments. He stated that hiring an individual to fill this position, in conjunction with a reorganization of departments to improve efficiencies, should eliminate the need for an assistant city manager at this time.
As a result of frequent turnover in the city manager position, city staff members have been unable to build the momentum needed to develop and finalize a citywide strategic plan. According to the city manager, he has been unable to locate any prior strategic plans for the city. In addition, the city’s mission and vision statements were last revised in 2005. The police department has its own strategic plan, which it hired a consultant to assist with, that includes annual strategic objectives, implementation strategies, and associated costs, allowing the police department to proactively review funding needs and the status of implementation. However, other departments have not taken a similarly proactive approach to planning. Although we do not expect each department to have its own strategic plan, we believe that Hemet should formalize an overall strategic plan to serve as the city’s vision and to ensure that staff members are working together toward the same goals.
Hemet is currently in the early stages of developing a citywide strategic plan. In April 2016, the current city manager initiated strategic planning efforts with the city council and department directors, stating his commitment to completing the plan by January 2017. As part of the planning process, the city should coordinate citywide goals with each department’s responsibilities and identify funding sources for each strategic initiative to facilitate the plan’s execution. The plan it develops should include departmental initiatives, implementation strategies, and associated costs that connect to Hemet’s overall vision. In addition, the plan should include performance measures to determine if the city is meeting its objectives and goals. Without such a plan, Hemet is operating without clear direction and unified goals.
Once the strategic plan is complete and the city has a clear direction, it should begin developing a succession plan for continuing its leadership in key roles. Despite the fact that nearly a third of its employees are approaching retirement age and many departments could be substantially affected by their absence, the city does not currently have such a plan. City management acknowledges the need for a succession plan to avoid the loss of valuable institutional knowledge.
A formal succession plan establishes an effective framework for recognizing, developing, and retaining key management employees. In addition, it ensures that staff members are being trained to step into positions when a more senior staff member leaves or retires. Succession plans can also identify gaps in expertise that should be addressed through internal training or recruiting. In Hemet’s case, succession planning can assist the city in identifying the appropriate individuals to assign to roles that promote the efficiency and effectiveness of its operations. Three department directors informed us that they conduct general succession planning and cross‑training efforts; however, these efforts are not coordinated under a citywide succession plan. The city manager pointed to the high turnover in management as the reason why Hemet has not formalized any succession planning. However, he stated that he will embark on succession planning after the strategic plan is completed.
Recommendations to Address This Risk
- Hemet should complete a strategic plan that identifies goals, initiatives, responsibilities, funding requirements, potential funding sources, and key performance measures by January 2017.
- Upon completion of its strategic plan, Hemet should complete a succession plan that coincides with its strategic goals by June 2017. The succession plan should analyze staffing needs, identify internal and external talent pools, and create employee development plans.
Outsourcing Maintenance of the City Parks Could Generate Savings
Although Hemet outsources landscape maintenance of some of its grounds and properties, we question its decision not to outsource the remainder of this maintenance, including for its parks, which could generate cost savings. The parks division continues to maintain seven parks, the city’s corporate yard, and some streetscapes near the entrance to the city. It has already taken steps to outsource other park functions, such as the administration of community interest classes and recreational sports leagues, to a special district. The city has also outsourced maintenance of some city streetscapes and neighborhood parks. This maintenance is overseen by its public works department and is funded through assessments to landscape and lighting districts—subsidiary special districts designed to provide streetlights and landscaping.
We reviewed a summary of bids obtained by another city for park and streetscape maintenance and determined that the annual cost of contracting with a private company to fully maintain a park ranges from 10 cents to 20 cents per square foot. In addition to landscape maintenance, the request for proposals required functions such as picking up trash, emptying trash bins, cleaning and restocking restrooms, caring for trees, and inspecting playground equipment for safety hazards. Graffiti removal was not included in that city’s scope of work, but Hemet could include this provision in the scope of its request for proposals to address the public works director’s concern that graffiti is an ongoing problem in Hemet. As shown in Table 6, the city could save between $64,208 and $300,956 per year if a private company maintained city parks at a cost of 10 cents to 20 cents per square foot. The city would still be responsible for some related expenditures, such as electricity, water, and liability insurance. In addition, Hemet would continue to incur some personnel costs, such as a portion of a supervisor’s salary for overseeing the contract with the outsourced maintenance provider. Nevertheless, outsourcing parks maintenance should result in a net savings for the city.
|Maintenance Cost per Square Foot||Projected Maintenance Contract*||Costs Retained by City†||Total Cost If Outsourced||Fiscal Year 2015–16 Budgeted Cost||Annual Savings to City|
Sources: California State Auditor analysis based on the fiscal year 2015–16 budget for the city of Hemet (Hemet), interviews with city staff responsible for parks maintenance, and bids for service to the city of Pomona.
* Projected cost based on an estimated 2,367,486 square feet of maintained park area multiplied by the applicable cost per square foot.
† If Hemet outsources park maintenance, the public works director indicated that the city would still pay some related costs, including water, facility repairs, utilities, a portion of the salary of a staff person to monitor the maintenance contract, and retiree benefits costs for previous maintenance staff.
Hemet previously decided against outsourcing its parks maintenance but did not conduct a thorough analysis of all services that could be outsourced. In 2011 city staff members conducted an evaluation to determine potential savings from outsourcing and determined that it was more cost‑effective to continue to maintain its parks within city operations. However, the analysis did not include other costs such as janitorial supplies and tree‑trimming services that are included in the savings displayed in Table 6.
Currently, city staff is reluctant to outsource and eliminate the groundskeeping staff entirely, despite the opportunity for cost savings. The director of public works explained that the parks division’s groundskeeping staff conducts maintenance on some streetscapes leading into town and has been correcting issues caused by the groundskeeping company contracted to handle the majority of city streetscapes. The public works director indicated that Hemet has experienced a number of challenges with the current contracted landscape service, and that staff and management have spent many hours rectifying these issues. However, she agreed that it may be beneficial to conduct a cost‑benefit analysis of retaining in‑house maintenance versus outsourcing with an appropriate contracted company. Alternatively, since Hemet already outsources maintenance of select parks and streetscapes under its landscape maintenance districts, it could issue a request for proposals for services that combines maintenance of all parks and streetscapes throughout the city.
Recommendation to Address This Risk
To increase the cost‑effectiveness of its park maintenance, Hemet should initiate a request for proposals to consider the costs and benefits of outsourcing citywide maintenance of all streetscapes and parks and take appropriate action based on the information it obtains.
We conducted this audit under the authority vested in the California State Auditor by section 8543 et seq. of the California Government Code and according to generally accepted government auditing standards. Those standards require that we plan and perform the audit to obtain sufficient, appropriate evidence to provide a reasonable basis for our findings and conclusions based on our audit objectives specified in the Scope and Methodology section of the report. We believe that the evidence obtained provides a reasonable basis for our findings and conclusions based on our audit objectives.
ELAINE M. HOWLE, CPA
August 4. 206
Linus Li, CPA, CMA, Audit Principal
Nathan Briley, J.D., MPP
Kelly Reed, MSCJ
Scott A. Baxter, Sr. Staff Counsel
For questions regarding the contents of this report, please contact Margarita Fernández, Chief of Public Affairs, at 916.445.0255.