City of Compton: Moving Forward

Report National Resource Network Compton, California February 9, 2016 Finance + Operation

In 2015, the National Resource Network partnered with the City of Compton, California, to assess they city’s current financial trajectory, identify major financial concerns, evaluate the city’s organizational capacity, and make recommendations to improve the city’s financial and organizational condition moving forward.

Like many other cities around the country, Compton faced financial challenges rooted in rising healthcare and retiree costs and stagnant or declining revenues. Compton’s unemployment rate was twice the California and national averages; and its poverty rate was nearly 60% higher than state and national averages. Compared to regional peer cities, Compton also faced high violent and property crime rates. All of these factors – combined with limits on Compton’s ability to raise taxes – created challenges for the city in attracting retailers and job centers and, subsequently, generating revenue.

The Network’s analysis showed that, without corrective action, Compton would experience annual deficits starting in FY16 and continuing over each of the next five years, culminating in an annual structural deficit of nearly $3 million and a negative fund balance of $9.4 million by the end of FY21.

To address this structural budget deficit, the Network made several suggestions tailored to the city’s circumstances, assets, and opportunities. A key part of the Network’s recommendations were based on revenue generation and cost savings opportunities. Additionally, the Network team provided suggestions to improve its overall budget and management processes by implementing strategies such as a quarterly financial monitoring process that allows the city to take corrective action when revenues or expenditures deviate from the adopted budget.

The Network also assessed the city’s organizational structure and made several recommendations to clarify and streamline management and encourage strong departmental performance. A key recommendation was to consolidate financial management of the city from three separate departments (The elected Treasurer, the Controller appointed by the City Council, and the City Manager) into the City Manager’s office. As part of this analysis, the Network provided the additional department-specific assessment and recommendations to better serve Compton residents and help the city achieve its financial goals. The overall thrust of these recommendations was for the city to simplify, prioritize, and measure provision of its services.

The Network’s engagement team in Compton was led by Network consortium member PFM.

City of Compton: Moving Forward