West Covina has the 17th highest fiscal risk of almost all cities across California, according to data released by the California State Auditor on Thursday.
The State Auditor’s Office launched its online dashboard that ranks 471 of the state’s 482 cities based on detailed information about their fiscal health Tuesday. The ranking and dashboard are part of the Auditor’s High-Risk Local Government Audit Program.
While the dashboard does not offer detailed information about each city, it does list risk level for several financial categories. West Covina is at high risk in several pension-related categories, including pension obligations, pension funding, pension costs, future pension costs, and OPEB — post-employment benefits other than pensions — funding, according to the dashboard.
West Covina is at moderate risk for debt burden, general fund reserves, revenue trends and OPEB obligations. The only category the city enjoys a low risk in is liquidity.
Mayor Lloyd Johnson said the State Auditor’s assessment provides further evidence that approval of a proposed three-quarter percent sales tax increase is necessary. The estimated $9 million the proposed tax increase is estimated to raise annually could help pay down the city’s more-than $190-million unfunded pension liability.
“If we’re responsible with it, we can pay down the unfunded liability and free up money in the general fund to pay for other needs,” Johnson said. “If we squander the money, we won’t be in any better shape than we are now.”
Residents and members of the city’s police officer and firefighter unions have gathered signatures to place a sales tax hike on the ballot. The city is in the process of verifying the signatures, needing about 5,200 from registered voters to make the March ballot.
City Manager David Carmany said the city is beginning to right the ship: The city passed a balanced budget this year, although it took privatizing some city services and several layoffs to get there. But digging itself out of the fiscal hole will take time, he said.
The city will look to use pension obligation bonds to reduce its unfunded liability, Carmany said, as well as other cost-saving measures, such as more privatization of city services.
“The fiscal crisis is real, and we’re taking it very seriously,” Carmany said.
Despite the fact that police officers will receive a 12% pay increase as a result of a newly approved contract with the city, West Covina can afford it this fiscal year because of the current 13 police officer vacancies, Carmany said.
Johnson had wanted the City Council to place the sales tax increase on the March ballot itself, but his proposal did not receive support from fellow council members. Besides increasing the tax on goods purchased locally, Johnson’s proposal would have changed the structure of the city’s finance and audit committee and earmarked some or all of the increased tax revenue specifically for paying down unfunded pension liability.
If the voter-initiated tax increase is approved, it will be incumbent on the City Council to ensure the increased tax revenue, which would go directly into the city’s general fund, is used responsibly, Johnson said.
“I hope the council will realize that most of the money raised by this tax has to be used to pay down the unfunded liability,” Johnson said. “We’ll figure the rest out, including hiring more police officers and firefighters, but we have to get this unfunded pension liability down.”