County chief and top planner cut.
Two supervisors warm the bench.
Are builders and developers calling the plays?
What's the GAME PLAN?

by Judy Hodgson
photos by Brandi Easter

Paul Kirk photoRoger Rodoni photoBonnie Neely photo


Paul Kirk, 5th District Supervisor; Roger Rodoni, 2nd District Supervisor; Bonnie Neely, 4th District Supervisor

For months Chris Arnold had been telling people she was job hunting and would submit her resignation in the spring. The budget brawls, finger pointing over accounting snafus and surprise surpluses, and battles with other department heads had taken a toll on the county administrative officer.

Supervisor Bonnie Neely had criticized Arnold for years -- often in public. And newly seated Roger Rodoni, from sprawling southern Humboldt's 2nd District, ran his campaign on the promise to get rid of her.

"With those two people, and the animosity on that board, I knew there was no way that the county could function," she said in an interview last month.

Among the people she told was 5th District Supervisor Paul Kirk, one of the three supervisors who still supported her.

"I told him several months ago I was looking around," she said. But on Monday, Feb. 24, after regular county workers had gone home, Kirk came to her office and told her, "'Chris, I can't wait.'"

"We had a close personal relationship. He had trouble getting it out. I finally said, 'Paul, does this mean you're the third vote?'"

But Kirk had more in mind than forcing the early resignation of the embattled CAO.

Planning Director Tom Conlon, who has been with the department since 1973, was on vacation the week Kirk visited Arnold's office. He returned March 3 to a pile of messages from Kirk, but the first hint that something was up was a 7:30 a.m. phone call from the CAO's office. That board agenda item he was supposed to prepare, he was told, well, there was no rush now.

At 8:30 a.m. the call came from Kirk, who was in Portland at a fisheries conference. "He said he was the swing vote and I had the option to resign or another board member would put my termination on the agenda," Conlon said in an interview last month.

Arnold's resignation was accepted March 11 and Conlon's one week later. Both were given three months' severance pay.

These bold moves by Kirk forged a new majority on the Humboldt County Board of Supervisors. But it also left two other supervisors out of the loop.

Stan Dixon photoJohn Woolley photo

Dixon said he felt disenfranchised when Kirk acted without consulting
other board members. He called it a "political show of force."
Woolley, a newcomer, said it's not the way other boards operate.

"I'm angry about not being included in the process," said 1st District Supervisor Stan Dixon. "We have let other department heads go in the past, but the discussions have been in accordance with the Brown Act in closed sessions with all of us present. There was acrimony involved, but it was something that the board talked about as a whole," Dixon said. "I feel disenfranchised that the people I represent, who have faith in me, believe I ought to have a right to participate in the debate when things like this happen."

Dixon is a board veteran of nine years, but the actions by Kirk also stunned newly seated 3rd District Supervisor John Woolley.

"I can't say I felt disenfranchised because I've just come onto the board," Woolley said. "I felt that I didn't have a chance to evaluate either (Arnold or Conlon). I've served on other boards and in all cases, usually you have a board evaluation process. I didn't get a chance."



What caused Kirk's change of heart halfway through his first four-year term as supervisor?

Kirk admits Rodoni's defeat of Roy Heider in November opened the door for him. But he said his own change of heart came after consulting with the people in his district who backed him two years ago.

"I went out to my constituents -- Rick Hanger (McKinleyville Chamber of Commerce), Eleanor Sullivan (McKinleyville Senior Center), Phil Nesset (developer), people I have a lot of trust in. I said, 'Here's the predicament: We've got a budget process in place, we've got a new budget year coming and I have some real concerns. We are not rebuilding any credibility and the last few years have been a disaster. Here are my thoughts.'... And nobody disagreed with me. Nobody."

But apparently it wasn't just the McKinleyville Chamber and Senior Center Kirk was listening to. In 1994 gravel operators contributed $13,800 to his campaign for supervisor; builders, building suppliers and real estate interests chipped in another $15,590 -- about half of the total of $60,000 he raised to finance his campaign. Many of the same companies contributed heavily to Rodoni's successful 1996 campaign and backed Neely in her supervisor races and her unsuccessful bid for state Assembly last year.

Kirk denied he was responding to pressure from developers. "No one jerks my chain," he told The Journal.

But according to Arnold, certain developers and gravel operators were in and out of the board offices often during the early months of this year and the most frequent visitors were Tom Dinsmore, a Eureka contractor, and Bill O'Neill, owner of Arcata Redimix

Kirk "was under incredible political pressure," Arnold said.

On the afternoon of that Monday, the day Arnold received her ultimatum, Kirk had among his visitors O'Neill and Vic Guynup, owner of Eureka Forest Products and Guynup Enterprises. Everyone left the meeting but Guynup remained behind.

Kirk insisted that he and Guynup talked only about the harbor district's proposed assessment that day. But Guynup said it was at that private meeting that Kirk told him he was ready to join Neely and Rodoni to oust the CAO and planning director.



"Yeah, I helped that along," Guynup boasted with a laugh. "Everywhere I went, why you'd be surprised how many people congratulate me. The whole county knew it -- developers, builders, people in every phase of life."

Did he promise Kirk at that meeting that he would help finance his reelection campaign next year? "Naw, I didn't say it," Guynup replied. "He knows that if he didn't do better, I wouldn't be supporting him. "We have three supervisors who are on the ball. The idea was just to get them working together.

"At first he was against it," Guynup continued. "He said, 'I'm not sure those people should be changed so I'll give them until June (through the current budget hearings).'

"I said, 'All that will do is come back to haunt you. They'll lay off a few peons and they'll say the reason they can't get the work done is because you cut them back on help,'" Guynup said, adding, "You'll be the goat in the end."

Guynup's political activism goes back decades but is often little publicized. In the early 1970s, he said he helped a young Democratic state assemblyman, Doug Bosco, defeat the 24-year veteran Congressman Don Clausen. (Bosco later became his son-in-law.) Most recently, Guynup was instrumental in the massive show of industry force that derailed the harbor district assessment.

Although the new board majority is all Republican (Dixon and Woolley are Democrats), Guynup said it is a person's attitude toward business -- not politics -- that guides him.

Guynup's lobbying effort with the supervisors began after last November's election. In a Dec. 12 letter to the board, Guynup called for downsizing the Public Works Department and privatizing most road repairs and other functions. And he wrote, "You cannot ignore the ... Planning Department's problems. I have met with the Board of Supervisors individually in the past and know that you agree." He said he continued to telephone Neely frequently and visited Rodoni and Kirk often during the next two months.

John Murray photoNeil Prince photo

The Humboldt County Board of Supervisors appointed Public Works Director John Murray, left,
as acting county administrative officer and shifted budget preparation duties
back to Auditor/Controller Neil Prince, reversing its order of 1994.


In early March the supervisors scrambled to fill the two vacancies left by Arnold and Conlon, the most immediate being the CAO. In closed sessions they developed a list of local private industry leaders to approach as candidates. Controversial names were deleted and those the supervisors could all agree on were contacted by the county's Personnel Department. On the short list -- among others -- were Pacific Gas & Electric District Manager Craig Porter and Dave Kaney, former vice president and general manager for Simpson Timber.

They declined, and the board turned to Public Works Director John Murray, an engineer by training.

Murray was a popular choice, not only with the five supervisors but with other county department heads. One described him as "action-oriented and no-nonsense." Another said he was a good delegator.

When supervisors began looking for an interim planning director, they sought advice -- again in closed session -- from their legal department and several staff from planning. Then on April 3, the board also invited "two (people) from the outside," according to Supervisor Kirk. The two were Planning Review Committee Chairman Tom Sutton and Tom Dinsmore, former chair of the Surface Mining Advisory Committee and a gravel operator. Sutton was unable to attend, but Dinsmore did.

"We asked them specific questions. 'Help us out. Let's work as a team,'" Kirk said. "They ... gave us suggestions and ideas. We felt it important to have a lot of dialogue and a lot of discussion."

For acting planning director, the supervisors tapped Steve Nielson, former attorney to the board. Nielson has continued to work for the county under contract. He most recently drafted an ordinance to regulate gravel operators. The board agreed to pay Nielson at his contract rate of $85 an hour for a 20-hour work week, the equivalent of $88,400 a year for half-time. Conlon's full-time salary was approximately $60,000 a year.



With an interim CAO and planning director on board, the supervisors are turning their attention to the biggest challenge yet -- the 1997-98 budget.

According to the most recent outside audit, the county's financial position worsened significantly the last few years. In 1995 the county's general fund -- the equivalent of a family's checkbook -- was down $4.5 million. It would have been worse had the county not received a $1.2 million credit from PERS, the public employees retirement system. In 1996 the ending balance improved slightly but only because the county used other one-time sources -- $2.6 million from a self insurance fund.

This year the county's checkbook is projected to be in the red $2.6 million even after using other one-time-only money -- $2.1 million from the motor pool reserve and $600,000 from several other reserves.

The report, issued in February, projected that by June 30 the county reserves -- that pot of money needed for emergencies -- will be at minus $5.7 million.

Members of the county's Budget Oversight Committee formed in November are well aware of this gloomy picture. In January, the supervisors made a mid-year reduction of about 5 percent in every county department drawing dollars from the general fund just to get through this year. The departments are now being asked to cut 20 or 30 percent more from the 1997-98 budget.

How this will effect services will vary by department. Some are luckier than others.

Murray said the budget for the county administrative office, for instance, is all personnel so there is no other place to cut. Layoff notices are being prepared for two senior analysts. The Probation Department may lose six from its staff.

"I've asked Aviation to come in with zero (demand on the general fund)," Murray said, because that department is actually making money for the county by selling fuel.

Auditor/Controller Neil Prince said some departments, like Social Services and Mental Health, are almost 100 percent funded by state and federal money, "so when they have to do a reduction, it's not much."

In fact both Social Services and Mental Health have increasing revenues so will actually be hiring new employees into positions that are paid directly from the state. Those programs have no impact on the county's fragile general fund.

One department that is more dependent on the general fund is Health. "If they have to cut $120,000, that's a big problem because it represents a lot of programs," Prince said.

Cuts in the Sheriff Department, too, are always painful and controversial. The sheriff may be unable to cut jail staff because of contract obligations with the new jail. That means the cuts will have to come from within his other budget units including officers in the field.

Chris Arnold photoTom Conlon photo

County Administrative Officer Chris Arnold, left, said she was planning to resign anyway
later in the spring, but Planning Director Tom Conlon said he was definitely caught by surprise.


"The problem is not one that occurred in the last six or 12 months," said John Fullerton, a CPA and budget committee member. "It's a problem that has been growing in the last six or eight years." All 58 counties took a hit in the early '90s when the state shifted $2.6 billion per year away from counties and special districts to schools.

( "A shell game," said Don Peterson, a Sacramento lobbyist and former Humboldt County supervisor. "The state shifted the source of money for schools but there was no net increase for schools." That lost revenue, which increases every year as property increases in value, was particularly hard on counties like Humboldt, "probably among the bottom 10 financially challenged counties in the state," Peterson added.)

But according to Fullerton, "That was a reason for having fiscal problems back then. It's not a reason today."

He said the real problem is that county supervisors "have been sticking their heads in the sand and solving each year's budget crisis with one-time fixes. Money would come in that could have been used more wisely was used to just plug the deficit for that year."

In the meantime the county also has some new obligations. The supervisors committed $180,000 last year to operate the new county library. And they have to make annual payments of more than $1.5 million to service the debt on the new jail and library buildings.

John Goff, an accountant with David L. Mooney & Assoc., the company that reviews the county's books each year, is particularly concerned with the debt service. He noted that the county now owes $20 million on those two buildings (and a juvenile correction center yet to be built).

Although the county must trim the $5 million before adopting the new budget, supervisors must also address other long-term financial issues. Each of the last three years Goff's firm has recommended that the board establish an emergency reserve of 3 percent, a goal that has yet to be met. In addition, Goff said it is critical to monitor the budget on a more timely basis, and to fix responsibility for budgets.

"Who's in charge of what accounts has to be clear," Goff said.



There really were mistakes and budget surprises -- surpluses and shortfalls -- even in the old days.

Auditor Prince said he can recall one year in the mid-1980s when revenue projections were miscalculated by $1.5 million. Danny Walsh was 4th District supervisor then and he went ballistic.

"There was $900,000 that year that one of the guys in the CAO's office thought sure was going to come in by June 30," Prince said. "It didn't. It came in the next fiscal year and everything was OK. (But) Danny had his vacation all set and he had to cancel it in order to cut the budget."

"Departments pretty much know what their expenses are going to be," said Goff, who has been looking at the county's books since 1992. "The problem is projecting revenue."

And if the county budget is off -- say, half a percent of its $155 million total -- that's three-quarters of a million dollars.

"You want to come in at zero, income balanced against outgo. It's like trying to hit a bull's-eye," Goff said.

In the not-so-lean times, mistakes in revenue projection -- and just plain mistakes -- could be fixed and forgiven more easily. Not today.

Remember last year's public row between Arnold and Prince over a $1.6 million error? Who's fault was it really?

Although many -- including current Board Chair Neely and even the Grand Jury -- pointed to Arnold, the answer is that it really was a Bermuda Triangle of errors. The first occurred in Prince's office when an employee changed a fund number for three accounts and in doing so wiped out some critical historical data from the computer.

Across the street, data processing performed a computer run on the county's mainframe computer to restore the lost data and in doing so, the computer restored the old reference number for the three accounts.

Finally, an employee in Arnold's office entered data in those accounts on a computer that -- unbelievably -- did not show the fund number on the screen. Arnold said they had been entering data into and out of that fund successfully all along and had no reason to suspect the fund number had changed.



The new majority has already acted to return budget responsibility to the auditor/controller reversing its order of 1994. Ironically at that time the board moved it from Prince's office to Arnold's hoping to reduce errors and public embarrassment, the very same reasoning they are using today.

But this year there is a new budgeting process that supervisors hope will help. Last fall, frustrated by her deteriorating relationship with Prince and Neely, Arnold suggested that the board bring up the CAO and auditor from Sonoma County for advice. The two met with the budget oversight committee, which includes Kirk, and the committee liked what it saw.

"What we have now in place is the Sonoma process modified for this county," Kirk said. Key to the process is giving primary responsibility for budget monitoring to department heads.

The auditor's new computer system, which is being tested at this time, should be fully operational July 1 and should improve monitoring. Anyone with access to a screen on the new system should have instant budget updates without bothering the county's aging mainframe computer.



In an interview after leaving the county, Arnold said one of her biggest frustration was authority over department heads.

"It clearly states (in the county's job description) that the CAO is the manager on a daily basis over all department heads in the county." But she quickly added, "all appointed department heads."

Elected department heads include the auditor, tax collector, assessor, district attorney, sheriff, coroner and recorder. Although they have their budget regulated by the Board of Supervisors, they are ultimately answerable only to the voters.

"But when it comes to management administration and the policies of those departments, they go through the CAO to the board. That's the coordination point of the county," Arnold said.

On a number of occasions Arnold said she was stymied in her efforts to manage and coordinate department heads -- elected and appointed -- who often lobby the supervisors directly. For instance, when a previous budget committee, and the outside auditor, and the grand jury all recommended studying the idea of replacing two elected officials (treasurer/tax collector and auditor/controller) with one finance department, Arnold put the matter on the board's agenda and alienated Treasurer Steve Strawn who felt his position might be in jeopardy.

Arnold and Administrative Services Director Lindsey McWilliams also were involved in a number of skirmishes with Court Operations Officer Charles Cliver. McWilliams and Arnold accused Cliver of making unauthorized purchases, which he denied. Cliver accused the administrators of hampering his efforts to modernize court services. The result was a blizzard of memos between the court and the CAO's office.

"The court is not a department of the county. We are a separate branch of government with our budget controlled in part by the state Legislature and in part by the Board of Supervisors," said Superior Court Judge J. Michael Brown. "We don't need to be micromanaged by the CAO."

And Arnold said supervisors have yet to resolve a dispute that broke out last year between Social Services Director John Frank and the California Welfare Directors Association, a statewide lobbying group.

In 1990 and 1994 the CWDA held conferences in Eureka organized by Frank and county staff. With revenue from the first conference, Frank purchased new furniture for his office. And in 1994 the net proceeds of both conferences -- $25,000 -- went into a trust fund in the name of Frank's father, administered by the Elks Club, to purchase items for a children's shelter.

The CWDA last year sent a letter to the Board of Supervisors demanding that the money be returned. The board told Frank to reply directly to the CWDA. In a Dec. 10 letter, Frank again refused to return the funds. The Humboldt County Grand Jury is reportedly looking into the dispute.



When the supervisors finish wrestling with the budget, there are other potential problems ahead. The Grand Jury report for 1996-97, due in July, usually highlights trouble spots. One perennial area is child abuse which has been examined by eight grand juries since 1983.

Last year's report noted that Child Welfare Services had been "critically understaffed and unable to respond to reported abuses in a significant number of cases." A Child Death Review Team that had examined 65 cases of fetal, infant and child deaths occurring between 1991 and 1994 found that 83 percent of those cases had some previous contact with CWS. The review team also pointed to Humboldt County's high death rate -- more than twice that of the state -- for Sudden Infant Death Syndrome (SIDS).

Another ongoing problem area, according to Arnold and others, is information services. The county continues to pay $100,000 a year to maintain a mainframe computer that has limited storage capacity and requires costly, time-consuming reel-to-reel backup.

The board hired a consultant in 1995 to map paper and electronic data throughout the county and prepare a report on how to proceed. The report recommended selling the county's current mainframe by June 1996 (before lease prepayments were due) and switching to a Windows NT system with four primary superservers. The superservers were to provide data storage grouped around primary county functions: judicial, law enforcement, administration and public service. The report estimated the county could save $600,000 the first year and "millions of dollars over the first five years."

"Some employees thought their jobs were being threatened," said the consultant, Gary Copeland of Epicenter Research. They lobbied the board directly and the board never implemented the plan.

Brad Walden, head of information services, said he and McWilliams were not comfortable with the report's financial or timeframe projections but supported the overall concept.

"We are working on a plan to pursue it," Walden said. Many applications have already been moved off the mainframe including voter registration, elections, accounts receivable and the Recorder's Office data.



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