Lindsay councilwoman ‘optimistic' about city's future

LINDSAY — “The Friendly City” has not lived up to its billing as of late.

Citizens here are upset. They want answers. Some have gone so far as to initiate a recall effort to have all five of the City Council members replaced.

In spite of the turmoil, one councilwoman, a 10-year veteran on the dais, is confident that the right people are now in place at City Hall to steer the city in the right direction and restore it to financial health.

Pam Kimball, who has served on the council since 2001, sat down with The Recorder on Wednesday to talk about how she believes the city arrived at where it is today and what the current administration, led by City Manager Rich Wilkinson, is doing to ensure that the same errors, which many city employees have attributed solely to the previous administration, are not made again.

Kimball said she has been “very disappointed, appalled and angry over the course of many months” as the findings of a sobering audit, conducted by Bakersfield-based Brown Armstrong Accountancy Corporation, were released to city staff in July. City officials saw the 64-page draft audit Sept. 9 before it was presented to the council four days later.

“We expected [former City Manager Scot Townsend] to manage,” Kimball said. “The last year of his administration, he very clearly didn’t do that very well.”

Citing alleged death threats aimed at his family, Townsend resigned in early November after serving as city manager for eight years.

Included in Brown Armstrong’s report are a litany of condemning findings, including a report that Townsend and former Finance Director Kenny Walker “deliberately ignored” compliance standards to dole out more than $1 million in fraudulent home loans to city employees and/or their relatives.

In March 2004, the city entered into an agreement with the California Housing Finance Agency (CalHFA) to borrow $1.25 million for a first-time homebuyer primary loan program.

The money was to be used to service 35 loans.

However, according to the report, all of the money was used to service just 11 loans, and 10 out of the 11 loans were given to city employees and/or their relatives. Additionally, Brown Armstrong deemed $1.1 million to be fraudulent, out-of-compliance loans to city employees and/or their relatives.

“We have concluded that [Townsend and Walker] used their authority to override compliance on loans funded by CalHFA, as the various eligibility requirements were deliberately ignored,” states the report.

When reached by phone Sept. 8, Walker confirmed that he and Townsend had the sole authority to approve and issue the loans, but he said it was a practice that the council was completely aware of and had previously authorized.

Kimball, however, questioned Walker’s statement.

“I don’t know what Kenny was trying to say. I personally didn’t even know there was such a thing as a Loan Committee,” Kimball said. “[The council] did not receive reports on who got loans and what the terms of the loans were.”

Kimball added that the city and CalHFA signed the agreement at the height of the housing bubble, so it would have been impossible to issue 35 loans anyway, she said.

Kimball went on to say that CalHFA has not expressed to the city any concerns about how the money was spent.

To avoid running into the same problem again, a new Loan Committee has been established that now includes five city officials, not just two.

Additionally, quarterly reports that identify what loans are issued and to whom will now be included in the city budget, Kimball said.

“The committee is currently in the process of updating the city guidelines to ensure fairness, uniformity of application and decision making, and to eliminate any vague and non-specific language that could possibly create any ambiguity or arbitrary application,” states city management’s response to the report.

Also among Brown Armstrong’s findings is a report that Townsend and Walker owned “at least three” businesses that “were operated during normal working hours.” The report also states that the two “profited from using the City of Lindsay facility to run their consulting firms.”

According to the report, Townsend and Walker “would prepare a grant application for the City of Lindsay and use it as a template for all the other clients they consulted with by changing the pertinent details, and prepare applications for other cities in surrounding areas.”

Kimball said suspicions raised about this issue “are not valid.”

“That’s been resolved,” she said. “That was a misunderstanding.”

Kimball said Townsend owned a consulting firm before he became city manager, but she said he severed his ties with the business once he took over at Lindsay.

“To our knowledge, [Townsend] stopped all that when he became city manager,” Kimball said. “We did address that when he was hired, that we didn’t want a conflict of interest.”
She said the issue has been removed from the final audit.

Townsend has in the past been described by some council members as “a visionary.” Kimball said she believes that Townsend’s expectations were sometimes “unrealistic” and that “he just kept himself kind of blind” to the city’s true financial picture.

“His talents were more on envisioning and making those things happen, but obviously not on the financial control management,” she said. “He trusted his own staff as we trusted him.”

Kimball did concede that the council “should’ve been less trusting and should’ve demanded clearer reporting.”

However, she added that Townsend failed to produce an audit report for the 2008-09 fiscal year. This audit, had it been prepared, “would’ve raised red flags,” she said.

In the “Summary” portion of the draft audit, Brown Armstrong offers up some sobering news.

“It took many years for the city and its component unit to reach this point of crisis, and it will take at least two years for the current management team to restore the city to financial stability,” states the report.

Kimball and other council members are optimistic. She said she believes the current management team has what it takes to bring a sense of stabilization to the city and ensure that these problems and others like them are avoided at all costs.

“Things are being resolved and dealt with by people who are in the best positions to do so.

I’m optimistic that we’re going to get through this, put it behind us and move forward,” she said. “We’re implementing correct procedures and policies to make sure this sort of thing doesn’t happen again.”

As for the recall effort, which was launched Aug. 23 by a group of displeased citizens, Kimball said she “would hope that the community would show patience and understanding as we deal with this process.”

“The motives of this council are as good as you can get. No one has a personal agenda here,” she said. “We’ve done our best for this town, and we’re still committed to doing that.”

Contact Alex K.W. Schultz at 784-5000, Ext. 1050 or aschultz@portervillerecorder.com.