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Compton disputes ranking as state’s most financially distressed city

Mayor Aja Brown in downtown Compton. The city recently was ranked by a nonpartisan think tank as the most financially distressed city in California.
(Allen J. Schaben / Los Angeles Times)

Compton leaders disputed the results of a think tank’s study released Thursday that concluded the city is the most financially distressed in California.

Two other Southern California cities, Maywood and San Fernando, also had the dubious distinction of making the list, ranked by the nonpartisan California Policy Center and Civic Partner, a firm that collects and analyzes municipal financial data.

Compton was on the brink of bankruptcy three years ago and is ranked No. 1 on the list that includes Maywood as the state’s fifth-most distressed and San Fernando as its 11th.

In 2011, Compton’s general fund had a $40-million deficit because for years officials used the city’s water, sewer and retirement funds when the general fund ran short on cash, the report said.

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Compton leaders took issue with the finding, saying it relied on outdated information and secondhand sources. City Manager G. Harold Duffey said the center ranked Compton at the top of the list to “grab headlines by using a city with a recognizable name.”

“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.”

Duffey said the think tank never reached out to the city, and that he turned over the report to the city attorney to review.

Marc Joffe, one of the report’s authors, said the study should simply serve as a “warning bell” for residents, though it does not offer any suggestions on how cities can improve their footing.

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“There’s a lot of cities that have revenue challenges that don’t have a problem,” he said. “This gives you a chance to look at your peers and say ‘What did they do right? What can I do right?’”

In Maywood’s case, by the time the recession took hold in 2008, the city was already in a dire financial situation. Maywood had dissolved its Police Department and outsourced its city services — some to the city of Bell — moves that initially “appeared to be a brilliant solution,” according to the report.

But the services were canceled when Bell became embroiled in a corruption scandal, and Maywood has been trying to recover ever since. It may have a budget surplus by 2015, the report said.

The center’s rankings were based on each city’s general fund balance and surplus or deficit, its cash flow and long-term debt and pension obligations, and its most recent audited financial documents, Joffe said.

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The 26-page report details perceived missteps of 13 unstable cities that could potentially go into default if the economy were to collapse as it did in 2007 and 2008. Because the report focuses on cities that might be sitting on the edge of a fiscal cliff — not ones that have already gone over — cities that have declared bankruptcy, such as Stockton and San Bernardino, were not included.

“We want to create awareness around the fiscal stability of cities so that citizens can do something about problems before they get out of control,” Joffe said. “It’s really a matter of fiscal fitness and becoming aware of what the risk factors are.”

joseph.serna@latimes.com

Twitter: @JosephSerna

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angel.jennings@latimes.com

Twitter: @LATangel


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