Sebastopol OKs $17.5 million annual budget despite $1.2 million theft

Sebastopol leaders made modifications to the city’s anticipated expenses for its $17.5 million fiscal year 2021-22 budget Tuesday night – precautionary adjustments that they attributed to the recent theft of $1.2 million from the city’s reserve funds.

The proposed expenditures, which totaled $696,710, were reduced to $568,460 after the City Council deferred four of the 20 items that were part of the city’s annual expense plan.

The four items were a $28,250 pickup truck and $20,000 in zero-waste building upgrades for the public works department; $30,000 for the Senate Bill 1383 food recovery and composting program; and $50,000 for a city loan program to help residents experiencing sewage problems.

Mayor Una Glass described these expenses as "special, more unusual things particular to this budget."

"They're not as routine,“ she added.

Ultimately, Sebastopol City Council unanimously approved a FY2021-22 budget of $17.5 million in a 5-0 vote.

Sebastopol City Manager Larry McLaughlin said the latter two expenditures aren’t due until next year and all items will be revisited in October when the city has a better idea about whether insurance will recover the stolen $1.2 million.

City leaders went through each budgeted item during their regular meeting Tuesday night and, on Wednesday, McLaughlin said, “I think it was a useful exercise to go through every one of those items because these are key items in our budget.“

Approval of the budget came less than a week after the city announced that $1.2 million in reserves had been stolen in April.

The Sonoma County Auditor-Controller-Treasurer-Tax Collector office, which oversees more than $3 billion in public money, received a fraudulent email requesting a wire transfer from Sebastopol’s account.

Last week, Sonoma County Treasurer Erick Roeser said the seemingly authentic email had an account number for the transfer and a Sebastopol official’s email address.

Sebastopol’s Finance Department discovered the transfer around June 9 and the matter was brought to the attention of the FBI and Santa Rosa and Sebastopol police departments.

The theft wasn’t publicly disclosed until Sebastopol issued a statement Friday.

City officials said law enforcement advised against disclosing the theft, but they felt it was necessary since budget discussions were taking place.

“Hence, the statement that was issued,” McLaughlin told officials and attendees during Tuesday’s meeting.

City leaders stressed that the theft involved only a fraction of their reserves and there was still enough money to adopt their fiscal year budget as it was originally presented.

Sebastopol had about $9.6 million in reserves prior to the theft, which involved money from unassigned reserves that totaled about $1.7 million.

“The city is not in dire straights,” Glass said during Tuesday’s meeting. “We are not in some kind of situation where we’re lacking in funds. But that does not mean we should go out and spend all of this money. Because why we saved this money was for a rainy day.”

She presented council members with the option of passing the budget right away or starting over before they settled on reviewing it for items that could be put on hold.

Tuesday’s meeting ended at 12:30 a.m. Wednesday and several agenda items were continued to a future meeting, Glass said Wednesday.

She added the budget discussion involved “some friendly disagreement” on what should be included.

But, “the council prioritized spending that will help relaunch our economy, plan for the city’s economic future, help with the homeless crisis, support our nonprofits and support fire and emergency preparedness,” Glass said.

You can reach Staff Writer Colin Atagi at colin.atagi@pressdemocrat.com. On Twitter @colin_atagi