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Grand Jury report slams Chico financial mismanagement

By Kelli Saam
Published On: Jun 26 2014 08:59:18 AM CDT
Updated On: Jun 26 2014 08:00:00 AM CDT
CHICO, Calif. -

The Butte County Grand Jury has released its findings from the investigation into Chico's finances.    

Overall, the investigation found that many people failed to take action to help stop the financial mess amid a $15 million dollar deficit.

The report showed the previous city manager failed to take action with the hopes the economy improved.

Top city officials and firefighters got raises, while other staff faced layoffs and pay cuts.  Account balances had been shifted around to make them look better than they really were.

The grand jury did not find any criminal activity, or that anyone personally profited,  just irresponsibility.
The report did say the new city council and manager seem to be taking a better path to help repair the problems.

To see the full report, go to

UPDATE: After the publishing of this article the Butte County Grand Jury has removed the report from their website.

As to what caused the City of Chico's financial crisis, the Grand Jury concluded:
• Inflated salary and benefits clearly outpaced revenues;
• Fees charged by the various enterprise funds did not cover costs of the
services provided;
• The major City revenue source (sales, property, utility, etc. taxes) decreased
due to a major recession, and enterprise accounts were used inappropriately
to balance the General Fund to sustain the salary structure and make up the
differences in City expenses;
• The City Administration failed to provide the necessary pertinent
information to Council to make the difficult decisions pertaining to staffing
reductions and other adjustments that were needed.

FINDINGS
F1 The Grand Jury found no evidence of illegal activity on the part of Chico City
management.
F2 Budget cuts required that the City eliminate positions and lay off 29
employees in 2013.
F3 A council-manager model of governing lends itself to potential problems.
F4 The City Council failed in its responsibility to oversee the actions of the
Management Team and allowed it to frame its own agenda.
F5 During the years 2008-2012, the City of Chico's upper level management
failed to share complete and accurate information with Council members.
F6 Some Council members believed that financial information presented to
them was accurate.
F7 With respect to finances and structural deficits, it appears that the prior City
Manager abdicated his responsibility and allowed the Finance Director to
take charge.
F8 The Grand Jury found no evidence of wrongdoing for personal gain, but
questions how salary increases and enhanced pension benefits were granted
to selected employees.
F9 Enterprise accounts were manipulated and used to shore up the General
Fund.
F10 Council members were aware that the City was in a deficit condition as far
back as 2007.
F11 Salaries and benefits consume over 80 percent of the General Fund budget.
F12 The largest portion of General Fund expenditures is for Public Safety (police
and fire).
F13 A firefighter who works overtime in a position classified at a pay rate lower
than his/her own position is paid at the higher rate.
F14 Park and cultural programs, which helped make the City a tourist
destination, have been severely cut or eliminated. .