Auditor Ranks California Cities by Fiscal Health in New Report

SACRAMENTO, Calif. (CN) – California may be operating on its largest budget in state history thanks to an estimated $19 billion reserve fund, but some major cities including Oakland and Richmond face serious financial risks, the state auditor said Thursday.

This screenshot of the California state auditor’s website shows the fiscal health of San Francisco Bay Area cities, with fiscally sound cities in green and at-risk cities in red.

In a checkup of 470 California cities, State Auditor Elaine Howle says 18 face high-risk financial woes due to factors like high debt, spiking pension liabilities and lack of rainy-day savings.

Cities from the San Francisco Bay Area, Los Angeles and the Central Valley earned the dubious honor of landing on Howle’s first-ever ranking of local governments’ finances.  The ranking is part of an interactive state website Howle hopes will help cities identity and manage looming risks.

“For the first time Californians will be able to go online and see a fiscal health ranking for more than 470 cities based across the state,” Howle said of the website that launched Thursday. “This new transparent interface for the public, state and local policy makers and other interested parties is intended to identify cities that could be facing significant fiscal challenges.”

The database focuses on information from fiscal year 2016-17 and places cities in three color-coded categories from serious to low risk. The state auditor determined city rankings based on 10 factors such as cash position, debt burden, reserves, revenue trends and retirement obligations.

Howle said the study uses publicly available information and was developed with the help of experts from places like the Public Policy Institute of California, S&P Global Rating Services and the League of California Cities. The website allows users to check on individual cities and see how they performed in the various financial categories.

According to the study, Compton and Atwater face the highest financial risk of any California city. Others in the top 18 include San Fernando at 6, Richmond at 12, Oakland at 13 and West Covina at 17.

As for other major California cities, San Jose was ranked 23rd, Los Angeles 32nd, Sacramento 51st, San Diego 61st and San Francisco 152nd.

While it says it “fully supports transparency,” the League of California Cities wasn’t happy with the auditor’s findings and urged the public not to jump to conclusions.

“However, when you look at the state auditor’s recently released dashboard, we are essentially seeing a data dump that is void of any context or analysis, and this can be very misleading,” said the league’s communications director Jill Oviatt in an email.

“For instance, this dashboard is based on 2016-17 data and does not take into account new revenue streams or policies that may have been enacted over the last three years that could make the fiscal outlook of a city very different than it appears in this web tool.”

California cities such as Stockton, Vallejo and San Bernardino filed for bankruptcy protection in the aftermath of the Great Recession, largely citing ballooning unfunded pension liabilities as a root cause.

The information will be updated regularly and Howle says her office will use it when deciding whether to conduct individual audits going forward.

“We are confident that our assessment will help distressed cities get in front of impending challenges,” Howle said in a statement.

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