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Report is misleading Allison K. Sampite | Sat, Jan 01 2011 12:00 PM

Responding to a report by economist Peter Donohue suggesting Chula Vista has more than $154 million in unrestricted net assets, which can legally be used to avoid layoffs and save public services, City Manager Jim Sandoval said the analysis was invalid and disappointing.

In an email to city employees last Thursday, Sandoval wrote:

"The report asserts that the city has $154 million in net assets, including $33.5 million in General Fund reserves, all of which are available to reduce the City's projected budget deficit. The report also claims that the City is maintaining "inflated reserves" equal to 23 percent of the operating budget. These claims are incorrect."

Sandoval said the funds Donohue refers to are held in restricted accounts and can only be used for specific purposes such as multiple city sewer funds, transit and grant funds, because they are strictly limited by laws and contracts. "We couldn't use them if we wanted to," Sandoval said.

Donohue responded with his own written statement.

"Mistakenly or deliberately, Mr. Sandoval makes the fundamental error of confusing the City's choice not to use its unrestricted net assets to maintain public services with those resources that, under an enforceable tort, an outside entity could sue the City for using restricted resources for other than their contractually-specified uses."

Donohue said Sandoval repeatedly uses vague terminology when talking about the city's financial condition. "Which is it, Jim, is the City's CAFR wrong or is something else going on here...?" Donohue's response read.

"If we had the resources we would not be making the cuts," Sandoval said.

The city faces an $18.5 million budget deficit for the next fiscal year. Its operating cost is $90 million annually, while usable reserves equal 7.2 percent or $10 million.

Sandoval said reserves that the city could legally borrow may exist , but it would be irresponsible. "Borrowing the city's future just doesn't make any sense," he said.

Layoffs begin Jan. 7.

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