A city that nearly went bankrupt

John Alnas, left, a San Juan Councilman at the time the city nearly went bankrupt, Mayor Priscilla Hill and City Manager Larry Cain with the Mission City’s main street behind them.

San Juan Bautista is a city well known for bickering, a city
passionately divided about growth and a city where politicians
fight over its chickens and run campaigns about the fowl.
It’s a city many do not deny as the

tempest in a teapot.

Shrouded by unique history, San Juan also became nationally
known as the city that nearly went bankrupt almost 10 years ago
today when its financial status hit a crisis by Dec. 27, 1992.
San Juan Bautista is a city well known for bickering, a city passionately divided about growth and a city where politicians fight over its chickens and run campaigns about the fowl.

It’s a city many do not deny as the “tempest in a teapot.”

Shrouded by unique history, San Juan also became nationally known as the city that nearly went bankrupt almost 10 years ago today when its financial status hit a crisis by Dec. 27, 1992. The Mission City made headlines in The New York Times, but that is all behind them.

A decade ago an emergency ordinance was adopted to disband the city’s police department to save itself from bankruptcy.

Ironically, in August when the City Council was planning the fiscal year 2002-03 budget, Laurence M. “Russ” Russell, the former San Juan Chief of Police and a San Jose police officer, presented the Council with a feasibility study to reorganize the police department.

City Manager Larry Cain said the city had suffered through several lawsuits because of the police department, forcing officials to increase its insurance coverage as legal fees and other related costs were draining the city’s general fund of barely $1 million.

Mayor Priscilla Hill is the only current Councilmember who recalls the events leading to the Council’s decision that dreaded day nearly a decade ago.

“Ten years later we’re still picking up the pieces,” she said. “In 1992 we had Tom Mancini as the city manager and we had to get him quickly removed.”

As city manager, Mancini was somewhat evasive when it came to the city’s finances, Hill said.

“The finances were in medium shape when I first was elected, but by 1992 the police department was bleeding us dry,” she said. “We had to do something.”

Hill has since been through a half a dozen city managers, but it wasn’t until after Mancini was fired and replaced with Russ Carlson that officials discovered the seriousness of the situation.

“I’ll never forget that day the Council disbanded the police department,” Carlson said in a telephone interview from Seattle, Wash.

Carlson received a phone call shortly after attending a small cities convention where he spoke about issues that rural cities face.

“It was (then-mayor) Steve Hambacker who called me and asked if I would serve as the interim city manager until the city found a permanent replacement, which I helped them to do,” he said.

Carlson requested an audit that revealed the severity of San Juan’s financial state and what may be in store for the Council.

“They had about two weeks of payroll left,” he said.

Mike Riback, the former city counsel, drafted an emergency ordinance to eliminate the police department.

“San Juan Bautista is a unique, tiny town,” he said. “It’s difficult to be in their situation because other communities are more powerful. San Juan distinguishes themselves as an independent.”

John Alnas, a Councilman at the time, said the city could not balance the budget and at the time the police department had grown larger than officials anticipated.

“Instead of one reserve officer and a police chief, we had seven reservists,” Alnas said. “A reserve officer is supposed to work so many hours, but the next thing you know we had more officers and they were suing the city for full-time wages and overtime. Then they turned around and sued us for $300,000.”

A city like San Juan, Alnas said, cannot generate much revenue because of its size.

“It is like being on a fixed income, so we were watching our Ps and Qs,” he said.

Compared to the city’s past performance, Alnas said San Juan has improved its financial condition. Hill agreed.

“Our budget today isn’t that much different from when we had to put a new budget in place when we disbanded the police department,” Hill said.

The current budget – a conservative $1.5 million – was not based on the outcome of the state budget.

“It’s easier to come back to the Council and put extra money into the general fund than it is to say we don’t have enough,” Cain said.

Compared with previous years, the city’s financial statements from the June 30, 2001 audit indicated remarkable progress.

David Snyder, a CPA with Snyder Accountancy, said San Juan’s current assets-to-liabilities ratio improved from 0.89:1 to 1.42:1, an increase of 55 percent.

Cain said it was an increase in revenues combined with a cut on expenses that helped increase the city’s balance by $85,000 from its previous budget and put San Juan in the black for $120,000.

“Glad to hear the city is in the black,” said Bob Paradice, a Council member from 10 years ago. “But you know they had to cut something to be in the black because the funny thing about the government – if you have a surplus, something is wrong.”

Paradice remembered facing 40 to 50 angry people at the Sept 23, 1992 Council meeting.

“They were ready to lynch us that night,” he said. “Not one person would come out and say, let it (police department) go.”

The next step was to get the city’s finances under control by sticking to the new budget.

“It wasn’t always easy to do,” Hill said.

San Juan is unique in many ways, but as in small towns across the country, budgets are tight.

“No small city is out of the woods,” Snyder told Council in June.

Paradice like the others, sees San Juan as unique, but he never understood why Reader’s Digest, The National Enquirer and The New York Times were so interested in the city’s finances.

“San Juan Bautista sets its own course to somewhere I’m not exactly sure,” he said. “But we all got a big kick out of it when all it was was we just didn’t have any money.

“One thing they (media) all got wrong was that nobody was fired. They were laid off.”

As for starting a new police department, it’s a wait-and-see proposition. Ultimately, the Council agreed the proposed “reorganization” of the SJBPD should be postponed until more information is available for the next fiscal budget.

Local activist and resident Rebecca McGovern said the city is better off than before, but disagreed with Council’s decision to turn over police services to the county sheriff’s department.

“We need a police department and we need 24-hour coverage,” McGovern said.

Though she objected to the Council’s decision, McGovern decided to “stay out of that whole mess.”

Riback said San Juan may be known for its bickering, “but that’s because they all care about the town unanimously and courageously, I might add.”

But one thing everyone agrees on from 10 years ago: It was a lesson learned.

“Hopefully for more than one generation,” Riback said.

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