Budget warnings went unheeded in Compton

As Compton’s budget deficit ballooned over the last year, the city was moving forward with an expensive and controversial venture to install a new Compton Police Department.

Last June, when the City Council voted to move forward with a $19.5-million venture to revive the municipal police force, the city’s reserves were already used up and its general fund nearly $15 million in the red.

Over the next 10 months, the city spent at least $1.7 million on preparations to set up a department: more than $1 million on radio equipment, and hundreds of thousands of dollars on consultants who helped the city search for a police chief and plan the logistics.

The spending continued, and even ramped up, as the city’s budget situation became increasingly apparent early this year.

The council finally killed the project in April, and late Thursday it outlined plans for sharp cutbacks.

The city, which has a population of about 96,000, has undergone economic and demographic transitions over the last decade. Historically a black stronghold, the population, although not the elected officials, has become majority Latino. Gang violence of the past has subsided and new businesses have moved in, adding to the sense that when the nationwide economic downturn hit three years ago, Compton would weather the storm.

That optimism has withered.

Compton has no reserves, and a $25-million general fund deficit accrued over the last three years. An independent auditing firm has questioned the city’s ability to continue operating, although its officials said it can avoid insolvency through deep cuts. The City Council voted last week to authorize layoffs in preparation for slashing the general fund’s budget by nearly one quarter from the current $58 million.

City officials outlined a proposal Thursday that would cut 181 positions, half of them vacant and half filled by workers who would lose their jobs. The proposed layoffs include department heads as well as low-level workers, but the exact jobs to be cut are still being negotiated. Even with that proposal, City Manager Willie Norfleet said, the city still needs to find $7.1 million more in cuts for the coming year’s budget.

Some in the city have questioned why the city focused so much time and so many resources trying to build its own police department when it faced such a severe budget crisis.

The city had disbanded its department in 2000 in part as a cost-savings measure, bringing in the L.A. Sheriff’s Department to patrol the city. The Sheriff’s Department has won praise as violent crime in Compton has declined sharply in the last few years.

Council members said that when they started looking into reviving the department, they didn’t realize the city’s financial situation was so precarious.

“At that time, we were being told that we were stable, that we had to be cautious, but we were stable,” said Councilwoman Yvonne Arceneaux, who nevertheless voted against the project last year, citing concerns about costs.

But according to records and interviews, there have been strong warning signs.

The city’s previous audit firm warned about Compton’s cash management practices more than a year ago, noting that “the city advances cash to funds with a deficit by using cash from other funds, including some restricted funds to cover shortages in cash.”

In March 2010, Norfleet, then city controller, wrote in a memo to council members that the city had no reserves and that its cash flow might not support the project.

“The city will have one fiscal year to change its business culture,” he wrote. He went on to warn that if Compton continued to fall behind on payments on its contract with the Sheriff’s Department, it might not be able to keep up with the payroll costs of its own police force. The memo was not made public.

Other warnings came from the city treasurer, Douglas Sanders, who said in monthly investment reports to the council that the city might not have enough cash to pay six months’ worth of bills.

Sanders said he had warned the city three years ago, when it increased hiring at the onset of the recession, that it was a bad idea. At Thursday’s budget hearing, he told the council, “I hate to say it: I told you so.”

Mayor Eric Perrodin, the strongest proponent of the return of the police department, said that although there had been warnings, he had no idea until the last several months that the deficit situation had grown so dire. But even now, he said, he believed completing the police project would have been in the city’s best interest.

“I think even more so now, you should have your own police department, because you can control things” like the number of officers on staff and other departmental costs, he said, rather than being locked into the Sheriff’s Department contract, currently budgeted at $17.5 million a year.

In December, Arceneaux and Councilman Willie O. Jones blocked a budget amendment that would have allocated about $2 million from the general fund to hire a chief and police officers by the end of the fiscal year. But even after that, the spending on equipment and consultants continued.

The same day the council voted not to hire police officers, the city issued a purchase order for more than $1 million in police-related radio and communications equipment from Motorola. And bills from the city’s contractors show that the search for a police chief and officers continued in January and February.

Norfleet said the project had gathered momentum that was hard to halt.

The money spent on department start-up costs came from bond proceeds that were reallocated from other projects so the effort did not directly contribute to the budget deficit. But the general fund would have been responsible for funding the paychecks of the new employees and the ongoing department costs.

Those who opposed the department project were quick to point out that the budget issues should not have come as a surprise.

“This bus did not magically appear in a ditch,” said William Kemp, a community activist and political opponent of Perrodin. “They drove it into a ditch.”

abby.sewell@latimes.com