The City of Willits is facing a financial reckoning after years of fiscal mismanagement and lack of oversight, city leaders revealed during a public meeting last week.
Finance Director Manny Orozco reported that the city faced a $4.2 million* budget shortfall over the past year. (See note below). As of last week's meeting, the general fund held just $32,000.
Orozco attributed the crisis to a lack of financial leadership dating back to 2020, when the city’s finance director position was left vacant and its finance department was effectively dismantled.
“The city did not have a finance director since 2020 and the audits had not been done since 2018–2019,” Orozco said. “Pretty much everyone was gone except for a student worker that was taking over the cash receipting.”
Without trained staff, the city’s general ledger became disorganized, he added. Checks were run through a process that routed funds incorrectly "scrambling everything," Orozco said. Separate and incompatible software systems for payroll and revenue made accurate accounting nearly impossible.
Meanwhile, sales tax revenues have dropped an average of 9% annually since 2021, he said. The city is also awaiting reimbursement of roughly $2 million from agencies including Rails to Trails, MCOG, Clean California and FEMA for infrastructure projects.
The tipping point came last fall when the city didn’t have enough cash on hand to meet payroll. At that time, city officials withdrew money from the Local Agency Investment Fund (LAIF) to cover expenses, draining the long-term account from $4.7 million to just over $543,000.
Councilmember Bruce Burton noted the fund is not intended for day-to-day use. “It’s where you store money that is sitting there for a while—not your first reserve,” he said.
In response to community questions about possible criminal misappropriation, Mayor Tom Allman said he has seen no evidence of wrongdoing.
“If I had an indication there was theft, I would certainly be preaching a forensic audit,” Allman said. “The money was spent on public projects, consultants, payroll and staffing.”
Still, Allman acknowledged the financial outlook is grim. “There’s no black-and-white plan that says this is how we’re going to get $4.2 million back,” he said. “But the more we talk about it, the closer we get to a solution.”
Councilmembers questioned the $1.8 million spent on consultants and criticized the previous council for drawing down the investment account while Measure K funds remained available. Measure K authorized an additional 0.75% sales tax for essential city services.
“You decided to spend $4 million of LAIF money instead of the Measure K money that was in your doggone checking account,” Burton said.
Councilmember Gerry Gonzalez, who served on the prior council, responded, “I think we needed more information that we weren’t getting.”
The council voted to transfer $712,670 from the Measure K account into the general fund.
*Technically, expenses exceeded revenues by $4,266,166 and so we should round this up to $4.3 million, but the council repeatedly referred to this as $4.2 million. Based on the discussion at the meeting, it was unclear what period of time this referred to and the degree it included upfront payments for which the city is awaiting reimbursement,