National experts are again casting a skeptical eye on Fresno’s financial health.
The Wall Street Journal recently reported that City Hall’s small general fund reserve and precarious cash-flow situation do not bode well for the future.
The Journal, citing data provided to it by Merritt Research Services, reported that Fresno last year ranked almost dead last for cash-on-hand among the nation’s 250 largest cities.
The data showed how much money was left in the till when the cities closed their books on the fiscal year ending June 30, 2012. The unit of comparative measurement was how many days each city could operate just on available cash.
The median was 81.1 days. Fresno was at one-tenth of one day. Only Pomona and Charleston, S.C. ranked lower.
“Cash on hand is a key metric analysts use to flag fiscally stressed cities,” The Journal reported.
The Journal also noted that Fresno currently has just $1.5 million in its general fund reserve, far less than what experts in municipal finance recommend for a city of more than 500,000 people.
None of this is earth-shaking news to Wall Street analysts, auditors and Fresnans.
In July 2012, Vikram Rai, strategist with Citigroup Inc., said bond investors were increasingly asking about Fresno’s financial strength. Rai said investors worried Fresno would head to bankruptcy court and force them to take a painful shave on their investments.
In April 2013, the city’s finance department delivered the city’s 2011-2012 Comprehensive Annual Financial Report (CAFR) to the City Council. The CAFR was written by city staff and audited by Macias Gini & O’Connell LLP. The report contained a “going concern” paragraph. Staff and auditors said they’d found “substantial doubt” about the city’s “ability to continue as a going concern.”
But while The Wall Street Journal report doesn’t break fundamentally new ground, it does shine a bright national spotlight on a huge divide in Fresno and at City Hall.
A lot of people, many with immense power, think all the numbers pointing to financial danger are utter nonsense.
Fresno just went through an unprecedented year-long debate on home trash service that looked into every nook and cranny of the city’s budget — and, in the process, drove home this point.
Mayor Ashley Swearengin repeatedly said outsourcing of the trash service would lower consumer rates and bring to the general fund a net $2.5 million a year in franchise fees from Mid Valley Disposal. Then-City Manager Mark Scott said the city’s cash-flow was so fragile that he might miss payroll in the spring.
Opponents of outsourcing, including several City Council members and city union leaders, said the promised rate-reductions were a lie and city finances were much better than the Swearengin Administration was portraying.
Swearengin’s opponents prevailed in the June 4 Measure G referendum when voters rejected outsourcing and the mayor’s pessimistic budget analysis.
More than 500 days have passed since June 30, 2012. Fresno has not gone the way of Stockton and San Bernardino by declaring bankruptcy.
Scott and his successor, Bruce Rudd, have not missed payroll.
Property tax revenues came in better than expected this year.
It’s clear from recent meetings that some on the City Council want to resume spending. They think the budget crisis — exaggerated in the past year by the Swearengin administration for political purposes — is gone. Lee Brand and Steve Brandau are vocal exceptions to this sentiment.
This year’s budget was balanced with a $14 million loan from the water department and assumed union contract concessions that have yet to materialize.
Maybe tightwads Brand and Brandau are wrong. Maybe the spenders are right. I don’t know.
But I’ll bet a Kit Kat that The Wall Street Journal is planning a follow-up story on Fresno’s finances.