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City Administrator Jim Armstrong (on right)

Paul Wellman

City Administrator Jim Armstrong (on right)

Employee Loan Review: All Over but the Shouting

Controversial Program Vetted in Finance Report

Thursday, April 14, 2011
By Nick Welsh (Contact)

Aside from a self-inflicted wound delivered by Santa Barbara City Administrator Jim Armstrong and a shouting match between Councilmember Dale Francisco and citizen crusader Kate Smith, City Hall’s controversial employee loan program emerged relatively unscathed from its first review by the council’s Finance Committee after the story broke three weeks ago.

Since 2001, City Hall has loaned a total of $4.8 million from General Fund reserves to 45 employees in order to attract and retain workers by helping them buy homes on the South Coast. Public-access TV talk-show host and City Hall watchdog Ernie Salomon has complained the program lacked sufficient oversight, that many of the loans were issued after the real estate market collapsed, and that some of the properties are now worth less than their loans are. Had that money not been loaned out, he claimed, the cash-strapped city’s reserves would be in better shape.

Armstrong emailed Lopez back, instructing him to take his time processing Molina’s request. Armstrong accidentally emailed his instruction to Molina, as well, who has since made hay of it in the pages of the Sound.

The Daily Sound has picked up the story and run with it. Last Friday, Sound reporter Josh Molina submitted a request for information to assistant administrator Marcelo Lopez, who then sent the request up to administrator Jim Armstrong. Armstrong emailed Lopez back, instructing him to take his time processing Molina’s request. Armstrong accidentally emailed his instruction to Molina, as well, who has since made hay of it in the pages of the Sound. Molina wound up getting a response to his request by Monday.

But according to an initial report issued by Finance Director Bob Samario, the loan program does not rise to the level of municipal scandal. Of the 48 loans issued, nine have been paid off entirely. Of the 36 loans — worth $3.8 million — remaining, $1.6 million in principal and interest have been paid off. None have been defaulted on. One is $5,000 in arrears. And two — worth $191,000 — are coming due soon and could be at risk. Samario said the average loan recipient had worked for City Hall 7.8 years. Three had worked for 20 years or more; 13, for three years or less. Three were department heads. And six have either retired or left City Hall. Although a handful of loans were issued after the market crashed, the City Council approved dipping into reserves to pay for them on three separate occasions. All those votes took place before the crash. They also took place when City Hall had more in reserves than city policy dictated. Since then, reserves have dropped to roughly 10 percent of what policy dictates.

Even Councilmember Michael Self, who has been harshly critical of the loan program in Sound articles, said she had no beef with the program or the employees who take advantage of it. She did express concern that the politically moribund Plan Santa Barbara has called for expanding the program. Councilmember Bendy White expressed concern that the loans did damage to the city’s reserves, but Samario insisted they had no impact.

To the extent there were fireworks, they came when Kate Smith — an outspoken critic of what she terms “the school-to-prison pipeline” — repeatedly chided Councilmember Francisco, chairing the meeting, to stop looking at the clock and pay attention. Francisco — who has locked horns with Smith before — would notify her of how much time she had left to speak every 30 seconds or so. When he announced that Smith’s two minutes at the mike were up, she refused to go, and a shouting match ensued. Francisco prevailed by killing the mike and adjourning the meeting until Smith left.

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