The monumental task of creating Stockton’s yearly budget — worth nearly $1 billion last year — is underway.
But the city has no chief financial officer to lead it.
In February, Stockton parted ways with two of its top finance managers, interim Chief Financial Officer and Deputy City Manager Jay Kapoor, and Assistant Chief Financial Officer Queen Gray, Stocktonia confirmed.
Interim City Manager Steve Colangelo, in comments during a council audit committee meeting last month, confirmed he had fired two staffers whose job descriptions matched Kapoor’s and Gray’s. He did not identify the two staffers by name, and neither the city nor Colangelo has fully explained why Kapoor and Gray left their jobs.
Now, with no CFO, the city’s planned approach to designing a healthy budget by the May deadline is unclear.
Steven Falk, who previously served as city manager of Lafayette for almost 30 years, says the CFO is usually busy in March through May, working with city staff to prepare the annual budget.
“If there is no finance director in place, it raises the question, who will be prepping the annual budget?” Falk told Stocktonia.
Kapoor’s and Gray’s apparent firings follow another high-profile firing: Harry Black, Stockton’s city manager of five years, resigned Jan. 9 when the City Council threatened to fire him without cause.
For now, the hiring and firing power of most city employees remains in Colangelo’s hands. He was appointed interim city manager Feb. 4 in a contentious 4-3 City Council vote, in which the dissenting council members said they lacked information about his educational background and experience.
A longtime event planner and rental manager, Colangelo has no prior experience with city budgets, according to his resume. And while he did serve roughly two years as CEO of the San Joaquin County Fairgrounds, a 2020 state audit found sweeping financial accountability issues at the fairground, including during a large swath of Colangelo’s tenure.
The problems included a lax approach to giving out contracts, sloppy or missing rental agreements, missing expense receipts and more.
The interim city manager did not respond to multiple calls and emails with questions about the fairgrounds’ financial problems and about his qualifications. The fairgrounds also did not respond to requests for comment regarding Colangelo’s tenure when he was hired by the city in February.
Mayor Christina Fugazi credited Colangelo with “(turning) around a struggling institution through decisive leadership” in a statement announcing his confirmation as interim city manager. Stocktonia has not yet been able independently to verify the claim.
The fair’s latest annual budget was roughly $2 million, according to its current CEO. Stockton’s annual budget was $956 million last year.
A highly qualified city manager could get a budget done without a CFO, according to Falk. “It may be the case that this interim city manager is a former budget director, and is competent to prepare and deliver a budget that is approved by the City Council,” he said.
“And if that’s true, that’s great news for Stockton.”
What happened to the city’s CFO
Colangelo confirmed at a Feb. 26 audit committee meeting the ousting of the deputy city manager and another top business official amid comments by District 6 Councilmember Jason Lee about possible problems with the city’s payroll system.
“My day two on the job, I made immediate changes (…) by dismissing the Deputy City Manager, and also the person that was in charge of the payroll,” Colangelo told the City Council Audit Committee.
City records show that Deputy City Manager Kapoor and Assistant CFO Gray “separated” from the city on Feb. 14, though no additional information was provided as to why.
Kapoor, who worked for the city of Stockton for five years, was previously a budget manager for California’s Department of Finance before joining the city, according to his LinkedIn profile. Gray, whose Stockton tenure lasted nearly eight years, was a bank manager and held other business roles at the city before becoming assistant CFO. For the city, Gray said, she directed “all financial operations including budgeting, payroll, debt management, procurement, revenue and audit processes.”
Attempts to reach Kapoor and Gray were unsuccessful.
Colangelo, in his comments to the audit committee last month, did not explain how he made the decision to fire two top finance staffers.
Pat Martel, West Coast regional director of the International City/County Management Association and former city manager of Daly City for over a decade, told Stocktonia that interim city managers don’t typically fire people.
“Especially for someone walking in who doesn’t necessarily know the personnel history of whoever they’re firing immediately, it would be difficult for them to make a decision like that without knowing more, unless there was some long history with the employee in question,” she said.
The city has not yet hired a new chief financial officer, a city spokesperson said. And as of Monday Colangelo had not responded to emailed questions about the city’s progress in hiring a CFO or about who is leading this year’s budget process.
How a city prepares its budget
Crafting a city budget is a daunting task that typically kicks off in January and doesn’t usually let up until May, experts say. Whether this work will be successful without a CFO rests on the state of the overall budget team.
Although “you’re under the gun a little bit” to find a CFO, according to Government Finance Officers Association budget expert Katie Ludwig, things can go smoothly if the rest of the budget team is intact.
“Assuming the relationship between the budget team and the city manager’s office is good, then it could work very well without having” a CFO, she said.
Under Stockton’s city charter, the city manager must bring the City Council a proposed budget by May 15. The council reviews it and ultimately votes on it in June, in time for the state’s June 30 deadline for cities to pass balanced budgets.
The whole process starts at the beginning of the year, Falk said, with a city manager first instructing the head of every department to submit a desired budget for the next fiscal year, which runs from July 1 to June 30.
Next, the CFO or city budget officer will combine the departments’ proposed budgets and create a big-picture summary. That summary will explain if the city can afford the costs and services department heads proposed, according to Falk.
Then, the city manager reviews and shapes the proposed budget. The city manager is responsible for ensuring the budget is balanced — that the city isn’t planning to spend more than it takes in — and that it reflects the council’s priorities, Falk said.
The whole process isn’t often linear. Finance officials, the city manager and department heads remain in dialogue to hammer out the final budget they will propose to their city council, Ludwig said.
The stakes for getting the budget right are high. At the extreme, unsustainable budgets can result in catastrophe, such as Stockton’s 2012 bankruptcy. If a city council fails to pass a budget, that means city departments can’t legally spend on public services until a budget passes, according to Falk. Since the budget spells out debt repayment plans, failure to pass it can also slash a city’s credit rating, he said.
“It’s somewhere between imperative and critical that the new budget be approved,” Falk said.
For now, it’s unclear who Colangelo and the city council can look to for expert financial leadership as Stockton awaits a new CFO. That absence has been stark in recent City Council meetings, such as a Feb. 18 session where Councilmember Lee chastised a city finance staffer for not having a specific funding figure on-hand.
“Somebody in this building right now knows how much money went to District 6,” Lee said.
Colangelo said nothing. The staffer responded, “the person that might’ve known was released from the city just last week.”
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