City employees are challenging Deputy City Manager Mike Letcher's statements that he was never told about the long-term deficit in Tucson's self-insurance fund, which pays lawsuits and workers compensation claims.
City Risk Manager Joel Peterson said it's "not true" Letcher was never told, adding that the deficit is "memorialized" every year in the city's Comprehensive Annual Financial Report or CAFR.
The self-insurance fund is currently $17 million in deficit because city departments haven't been putting enough money in to cover their losses.
Peterson said numerous budget and finance directors have asked city management to address the issue since the fund went into the red in 2001. He said he brought it to the attention of the City Manager's Office more than five years ago and has asked for it to be addressed since.
People are also reading…
"I take exception to Mr. Letcher's statement and will not have my reputation, my family's name and my work record besmirched with fictitious statements," Peterson said in an e-mail to city employees.
Other officials supported Peterson's statement.
Joyce Garland, the city's interim budget administrator, said she has known about the deficit since 2001. "Management knew about it," Garland said.
Letcher said he normally talks only with the finance director, so he wouldn't have known if those under the finance director were raising questions about the deficit.
If the deficit was such a big problem for some employees, Letcher questioned why they didn't go over his head to City Manager Mike Hein. Hein did not return Arizona Daily Star telephone calls.
Accounting Administrator Mike Mason said he can't speak to whether top management knew, but the shortage has been recorded in the city's financial statement since 2001.
"The deficit has been there for quite a while," Mason said, "It's in the CAFR, I'll tell you that."
The Star first reported the deficit last week in a story about the city considering transferring $25 million worth of bonds and cash out of the self-insurance fund to prop up its general fund reserves, which were being depleted to offset a growing budget shortfall.
The move would push the self-insurance deficit to $42 million.
State law would require the city to buy a surety bond, guaranteeing payment of any lawsuits or claims. The bond would cost $500,000, and the city would still have to pay any liabilities. The bond just guarantees payment.
Letcher also sent a reply to Peterson saying he wished Peterson had discussed the issue with him before sending the e-mail, adding his comments in the Star were not directed at blaming anyone for the self-insurance deficit.
In it, Letcher took responsibility for not recognizing the deficit in the financial reports, while noting at no time did anyone from the Finance Department tell him about the "specific" deficit and the need to address it until former Finance Director Frank Abeyta made it clear something needed to be done.
Abeyta quit with no notice on Jan. 30 and has declined to say exactly why, although he opposed the $25 million transfer before leaving.
Councilman Steve Leal questioned what Letcher meant about a "specific" deficit.
Letcher said he contacted former finance directors Jim Cameron and David Cormier, both of whom Letcher said confirmed they "never discussed in detail the deficit or plans to address it."
Letcher said Cormier agreed they had talked about deficits in several funds, and the need to increase workers compensation contributions, but "not in great detail." Cormier, however, could not be reached for comment.
Cameron, who retired in 2008, told the Star the deficit was a well-known problem and was discussed many times by the manager's office while he was budget director. He said he never brought it up during his year as budget director because it "wasn't anything new."
Councilwoman Karin Uhlich said she asked Hein personally to bring the issue before the council.
Leal sent a memo to the manager's office about the reserves, asking several questions, including whether auditors had raised the issue, and the city's response to those concerns.
Leal said Letcher told him the auditors never raised the issue because they were told every year the city had a plan to address the problem. But Leal said the city hasn't had any such plan, until it recently began one.
"You can't have a plan to make a plan," Leal said. "I'm concerned about it."
"I take exception to Mr. Letcher's statement and will not have my reputation, my family's name and my work record besmirched with fictitious statements."
Joel Peterson, city risk manager
