State auditors have named the city of Compton as the riskiest city in the state. Compton has earned this designation for the last three years. The city faults the untimely filing of the City’s audited financial statements, which has occurred dating back to 2011.
Under the previous administration, the city failed to file audited financial statements which caused their credit ratings to be suspended.
Standard & Poor’s Ratings Services suspended its long-term and underlying rating on lease revenue, water and sewer bonds issued by Compton due to the lack of an opinion on the city’s 2011 audit.
S&P said in a statement it is also suspending its long-term and underlying ratings on the Los Angeles-area city’s redevelopment agency tax allocation debt.
“In addition, the auditors declined to provide an opinion on the city’s redevelopment agency’s audit,” S&P said. “The independent auditors wrote that due to allegations of waste, fraud, and abuse of public monies, as well as a lack of city responses to the auditors’ inquiries, the scope of their work did not enable them to express an opinion.”
The firm Mayer Hoffman McCann resigned rather than sign off on the 2011 financial statement.
Compton hasn’t had a credit rating since.
The city was forced to deflect assertions of the city’s shaky financial condition in 2014 when a think tank declared Compton the states most “distressed” city.
At the time, former City Manager Harold Duffey claimed sensationalism would affect the city’s credit worthiness.
“The most significant issue is that this sensationalized information out there could impact the city’s creditworthiness,” Duffey said. “The City Council has worked diligently to return the city from this financial black eye. The city is in a much better position than it was years ago.”
Under the current administration of Mayor Aja Brown, who took office in early 2013, the city’s finances have fared no better.
The city awarded Eadie + Payne an auditing contract of $850,000 in January of 2018, however, the firm failed to render an opinion on audits they have performed, specifically in the area of internal controls.
By March 2018 State Controller Betty Yee blasted the city for being nearly 90% deficient in internal and administrative controls.
“At the start of FY 2007-08 the city had a General Fund surplus of $22.4 million and three years later the surplus became a $42.7 million deficit due to overspending at an average of $16.3 million a year above budgeted expenditures,” said Controller Yee.
The report also discussed the city’s failure to comply with the charter when it came to their salary while current City Manager Craig Cornwell served as the city’s attorney.
“While violating the city’s charter and continually overpaying themselves, the city council’s brazen overspending contributed to the city’s financial hardship. Clearly, the city council needs to right the ship and make deficit spending a part of its past by exercising meaningful oversight of the city’s duties,” said Yee.
The audit also referenced millions embezzled under City Treasurer Doug Sanders, high turnover of staff and continued failure to file timely audits with the state, between 2012-2018, which has occurred annually since Mayor Brown assumed office.
The city released a statement about the November 2020 report listing Compton as the riskiest city stating they are preparing to publicly release its 2019 financial statements and have restructured the organization due to the COVID-19 pandemic which included laying off nearly 50 employees.
“The City recognizes that timely financial statements are vital for accountability and transparency. The steps being taken to hire more staff and the creation of new policies and procedures around reporting will equip the City with the resources it needs to produce timely and accurate financial reports and statements. The Mayor and City Council members are dedicated to the continued improvement and growth of the City’s financial health and fiscal sustainability for the betterment of the residents and businesses we serve.”
Despite the city’s inability to stabilize the city’s finances, some elected officials requested a pay increase.
During the regular city council meeting held November 24, City Attorney Damon Brown, City Clerk Alita Godwin and Treasurer Doug Sanders, all requested pay increases citing “increased duties”. All requests failed due to a lack of motion to discuss.
The city cited they are still in a position to provide essential services to residents, pointing to Measure P which brings in $10 million annually towards vital city services (police and fire), parks and recreation and street repair.
“On recommendation of City Manager Craig Cornwell, Council just voted to layoff entire city departments because of revenue shortfalls,” said Skyy Fisher, former Compton Unified Board member.
The city will hold a public hearing December 15 to discuss a new bond to front load the street repairs at a faster pace.
“Measure M, Measure R and Proposition C, which are county sales tax revenue and the city receives nearly $4.5 million per year and we are proposing a portion of that revenue be used to obtain a much larger size funding opportunity to address infrastructure needs,” said City Manager Craig Cornwell. “This is not a request to add to resident’s property tax or add to sales tax, but a request from funds that are coming into the city annually and want to propose a percentage to fund a larger infrastructure rehabilitation program.”
Residents are still skeptical that the city will pay higher fees, on the bond, due to the city lacking a credit rating.
“If the city can’t afford to keep employees to provide basic services to residents, how do they expect to make good on payments to cover the bond debt?” asked Fisher.
Other residents wonder where all the money is going from property tax revenue and is adamantly against the bond, in any form.
“I’m opposed to any city of Compton municipal bond at this time because my question is what have they done with the property and sales tax increase funds they’ve received over the last four years,” said Charles Davis, the city’s longest serving elected official. “Gateway Plaza owner spent $12 million to build the center and sold for $25-$30 million about three years ago so that’s a huge increase in property tax value and with the Brickyard up and running as a distribution center, where is that sale tax revenue?”