Team Lincoln member/Lincoln resident Terrie Robinson recently sent City Manager Jim Estep eight questions about his city of Lincoln website response to a News Messenger editorial (page 4, Dec. 16, “City officials should be more forthcoming”) on the misallocation of the city’s $3.2 million investment losses. Estep’s answers, which are printed to the right, were not what Robinson, a lawyer, expected. “I wasn’t expecting those answers. I had hoped this was a chance for him when I saw his response to The News Messenger,” Robinson said. “I thought, maybe we just need to ask all the questions surrounding this issue and get everything out on the table. I don’t think he was forthcoming.” In Question No. 3, Estep replied there wasn’t a budget workshop in August. He did not mention the Oct. 26 City Council meeting. But there was a Measure K workshop in August, in which the budget was discussed. “The answers didn’t leave me feeling more confident with the decisions made by city government. I think Jim Estep’s answers speak for themselves.” In Estep’s response to Robinson’s questions, he pointed out three times that there was no misallocation; rather, it was a reallocation. Yet Lincoln Assistant City Manager/Chief Financial Officer Anna Jatczak e-mailed City Council members and Estep this past June 30 that “Staff researched to ensure that no prior year audit adjustments had corrected this misallocation...” Estep told The News Messenger on Dec. 13 that Jatzcak could explain the financial aspects better than he. ~ Carol Feineman Hi Terry, While there are many misstatements included in your questions, I have tried to answer them as best I can. Please see my answers below. Thank you, Jim Estep 1) Had the losses been properly re-allocated across all the funds shortly after June when the error was confirmed, would any public safety officers have received pink slips for the 2010-2011 budget year? If so, would those pink slips have been rescinded during the 2010-2011 budget year at a later date assuming that the losses would have been properly re-allocated for the 2010-2011 budget year? Estep: Reallocating the investment losses is a management decision as whether to have the General Fund absorb the entire loss or allocate the loss. Of course given the dire condition of the general fund balance it would make sense to reallocate the losses if permissible. The reallocation wouldn’t have occurred in June as the number wasn’t finalized and is now being included in the closing of the books and the fiscal year 2009-2010 audit. Because there is such a large structural deficit, it would still have been a recommendation and prudent to reduce the workforce to reduce the imbalance of revenues to expenditures. I won’t speculate as to whether the “pink slips” would have been rescinded other than to say, that I wouldn’t have recommended that action. 2) Were union contracts re-negotiated based in whole or in part on the premise that the 2010-2011 budget would run a general fund deficit? If so, when did you intend to tell the unions about the misallocation and the possible one-time infusion of $3 million to the general fund for budget year 2010-2011? Estep: The union contracts were not “renegotiated.” The employees agreed to make concessions to both save jobs and reduce the budget imbalance. The budget imbalance and deficit still exists. 3) Why wasn’t the misallocation ever mentioned at your budget workshop in August or the Oct. 26 city council meeting? Estep: There were no budget workshops in August. The possible reallocation (not misallocation) of the investment losses has no bearing on the need for additional on-going revenue and the reallocation to date has not occurred. 4) Did the council tell you not to mention the misallocation? Estep: No, all relevant information available at the time was presented. 5) But for the Lincoln News Messenger articles, would you or the council have come forward with this information earlier? Estep: The City Council, both current and past, was informed that we would be discussing the $3M reallocation and what options are available for its use at the meeting in January. 6) Since Lehman Brothers went bankrupt, aren’t the losses on the Lehman Brothers bonds realized, as opposed to unrealized, losses for accounting purposes? Estep: No, because the City has not sold them and they are increasing in value. This has been discussed in detail at the Investment Committee meeting. 7) Who else in the city’s management, including the city attorney, knew of the misallocation and when did they know about it? Estep: Again, it is not a misallocation. As best as I can recall, the first discussion of the possible reallocation of the investment losses was in May. This would have included Anna, the former Assistant Finance Director and me. 8) Did you or anyone else in city management approve of any written educational materials on the effect of Measure K that were distributed by the city AFTER you found out about the misallocation? Did those materials reflect the possible one-time infusion of $3 million to the general fund in budget year 2010-2011? Estep: Again, it is not a misallocation. I am not aware of any materials discussing the possible “infusion,” because at the time there was no direction as to what to do with the one time money should it be reallocated to the general fund and the number wasn’t finalized by our auditors. Again, the “infusion” of one time money does not change the imbalance of revenues to expenses. To suggest that it somehow solves or even helps the structural deficit would be misleading.