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Layoffs are likely in Compton as auditor questions city's solvency

An independent auditor reports 'substantial doubt' about whether Compton can remain solvent. The council approves layoffs to combat budget deficit.

May 26, 2011|By Abby Sewell, Los Angeles Times

An independent auditing firm has concluded that Compton's budget crisis is so dire that it's an open question whether the city can remain solvent.

The auditor's report was made public as the Compton City Council struggles to deal with a fiscal crisis, voting this week to lay off employees. Though city officials did not say how many layoffs would occur, union representatives said they had heard estimates of between 97 and 120. The city budgeted for 575 employees in the current year.

In a strongly worded report accompanying the city's newly released financial statements from last year, the auditing firm said there was "substantial doubt about the city's ability to continue as a going concern" because of the swelling deficit.

The city's surplus, which three years ago totaled $11.8 million, has been drained. And the city faces a total general fund deficit of $25 million — $9 million of that accrued in the current fiscal year — with no reserves.

Additionally, the city has run up a $19-million deficit in its liability fund, which has been borrowing from the general fund. The council voted Tuesday to use redevelopment funds to pay down 40% of the debt.

Outside experts said Compton's situation appears grim.

"We're not only underwater; we're below the pool.... This is uncharted territory," said Steve Erie, a UC San Diego political science professor with a specialty in local government.

But City Manager Willie Norfleet said it's premature to believe the city will go bankrupt, adding that he hopes cutbacks can keep the city afloat.

"When one says, 'We question if you'll make it,' that's only if you don't do anything," Norfleet said.

The city plans to slash its budget to $44 million next year, from $58 million. At that level, Norfleet said, projected revenues will support expenditures. He also anticipated that revenues will pick up in June, the last month of the fiscal year.

Employees will probably be hit first. In a move to pave the way for the drastic cuts, the Compton City Council on Tuesday authorized the city manager to go forward with an unspecified number of job cuts, with layoff slips likely to be issued by June 1. Managers have been meeting with the unions representing city employees to explore alternatives to cutting jobs, but Norfleet said that with personnel costs making up 44% of the general fund budget, he saw no way to avoid layoffs.

Councilwoman Barbara Calhoun, who cast the sole dissenting vote, said she had not been given enough information about alternative cost-cutting measures brought forward by the unions.

"I understand about the deficit, I understand that we need money, but I'm just saying it bothers me about the layoffs when nothing has been given to me about what has been worked out with the unions," she said during the council meeting.

Workers expressed a feeling of betrayal over the city's slide into crisis. Just a couple of years ago, they said, city leaders were touting City Hall's financial boom. Employees were called to mandatory meetings at which they were told how well the city was doing.

"It's amazing to me what happened. What went wrong?" said Daniel Gomez, a captain with the Compton Fire Department and vice president of the International Assn. of Fire Fighters Local 2216.

The increasingly ominous financial situation went largely unnoticed until recent months.

As the city descended toward potential insolvency, a debate over plans to bring back the Compton Police Department drew most of the public's attention over the past year. The City Council put a halt to the plan last month, but not before spending $1.7 million in bond proceeds on preparations, including buying communications equipment, hiring consultants and searching for a police chief.

Despite the council's vote to shelve those plans, a group led by former city clerk Charles Davis, with financial backing from the deputies union, submitted a petition Wednesday that would put a measure on the ballot that would force the city to keep its contract with the Sheriff's Department unless voters approve a change.

abby.sewell@latimes.com

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