Redevelopment in Compton, for example, contributed about $5 million a year to the general fund. The city “deliberately” did so because of “cash flow concerns,” the audit found.īeyond accounting practices, many of these cities have been beset by ugly politics and heavy turnover among city administrators.Īt the same time, many cities in California also saw holes blown in their budgets by the state last year when it eliminated redevelopment agencies. Department of Housing and Urban Development, seeking reimbursements for expenses the city had yet to pay for. James Penman made the controversial statement last week that budget documents had been “falsified” for 13 of the last 16 years, although other city officials said the reporting issues appeared to be the result of sloppiness, not fraud.Īn annual audit of San Bernardino’s finances in 2010 found that the redevelopment agency had improperly billed the U.S. San Bernardino officials said budget reports had not been reconciled with audited financial statements, further muddying the city’s financial picture. Every type of restricted fund, we have borrowed from it at some point to balance the budget,” said Councilwoman Christina Cortez. “We borrowed money from all over the place, from all sorts of restricted funds. Montebello officials said they are not close to bankruptcy but acknowledged that accounting problems were serious. “It appears that the City moved money wherever it wanted, whenever it wanted, regardless of the law or the intended purpose of those taxpayer dollars,” Controller John Chiang said in a statement. In Montebello, state auditors last year said they were troubled to learn that the city regularly used money designed for specific purposes to balance its budget - in apparent violation of the law. The inter-agency borrowing was so questionable - with $69 million sloshing around City Hall as of June 2011 - that the Securities and Exchange Commission launched an investigation, which is ongoing. Those included dipping into sanitation funds to help keep the city’s treasury afloat, loaning water agency funds to bail out the city’s electric utility and siphoning $2 million in airport bond funds to buy land for a city library. In many cases cities resorted to these measures because they could not balance their books or raise revenues but were loath to make cuts.Ī recent grand jury report found that the High Desert city of Victorville used a series of disparate, possibly illegal measures to stave off insolvency. While ballooning public pensions and falling property tax revenues have hit many cities hard, bad accounting practices and improper use of funds have also taken a toll. The state of these cities underscores the complexity of the fiscal crisis roiling California municipalities this year, with Stockton and Mammoth Lakes already in Chapter 9 bankruptcy. Many of those cities relied on restricted funds to balance their books, obscuring their financial troubles. The situation is similar in other beleaguered cities, including San Bernardino, which voted last week to authorize a bankruptcy filing. Compton will have to pay the money back at a time when it has no reserves and has been frantically cutting costs. Compton this week became the latest city in California to find itself on the brink of bankruptcy, and as with others in crisis, much of the blame lies with questionable financial practices.Ĭity officials announced that Compton could run out of money by summer’s end, with $3 million in the bank and more than $5 million in bills due.Ī longer-term problem is a $43-million deficit that the city amassed after years of improperly using money from water, sewer and retirement funds to balance its general fund.
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