City of Inglewood called out for debt management issues

The OC Register’s Tony Saavedra is reporting four Southern California cities have been identified among the worst in the state for managing debt in an annual financial report conducted by an Orange County lawmaker. The Daily Breeze has called the city out for questionable actions taken to cover up a deficit.

Related: How Inglewood sidestepped voters when it took on millions in debt to cover up a deficit, then gave raises for executives

The study by state Sen. John Moorlach, R-Costa Mesa, lists Inglewood — with its soon-to-open football stadium and AA credit rating — as the fifth worst city in the state per capita with more than 50,000 population.

In June 2018, Inglewood — with a population of roughly 110,000 — had an unrestricted net deficit of $388.7 million, amounting to $3,423 in debt for every person who calls the city home.

Inglewood Mayor James T. Butts Jr. considers Moorlach’s analysis without merit.

“Using this as an indicator of financial health is like going to the doctor to get a checkup and ignoring blood pressure, cholesterol and blood chemistry and making an assessment (based) on the length of your hair,” Butts said.

But some financial experts say Moorlach’s analysis is a very real way of determining whether a city is kicking the can on its long-term debt.

“The problem I see is how are you going to undo this (debt)?” said Gary Caporicci, senior partner with the Santa Ana accounting firm The Pun Group. “The answer is you’re not going to be able to turn this around.”

There’s little doubt that Inglewood has roped itself a sports cash cow that the mayor predicts will pump $10 billion worth of revenue into the city by 2024. SoFi Stadium, a $5 billion complex that will be home to the Los Angeles Rams and Chargers, opens this summer. Additionally, the L.A. Clippers hope to build a new arena in Inglewood by 2024. Both represent a revenue boom for Inglewood.

But the city’s handling of its unrestricted net assets tells a story less rosy.

“If your unrestricted net asset is above zero, you’re financially sound. If your assets are below zero, you gotta start working a plan,” said Moorlach, who predicted Orange County’s bankruptcy in 1994.

Butts counters that Moorlach’s analysis is overly simplistic.

“All that really matters is if you are able to pay at present your obligation,” the mayor said. Inglewood’s finances are robust, with more highways being laid, trees being trimmed, officers being hired, he said.

“Are your sources of revenue growing or diminishing?” Butts asked.

Inglewood this fiscal year has general fund revenues of $125 million.

Butts noted that the city of Stockton, which filed for bankruptcy in 2013, is now listed by Moorlach as one of the best in California for managing debt. Stockton also topped another list of well-run cities by national watchdog group “Truth in Accounting” in 2018.

“The easiest way not to owe money is to go bankrupt,” Butts quipped.

In 2017, Inglewood danced around a law restricting the use of pension obligation bonds for anything but pensions. It did that by designating two-thirds of the $53 million bond proceeds a reimbursement for general fund payments it had already made to the California Public Employee Retirement System in 2016 and 2017.