Avalon is at low risk for “financial distress” overall, according to the California State Auditor’s office.
The state agency recently ranked California cities by financial risk. (Details are available online and the report includes an interactive, color-coded map.) Avalon ranked 411th in the state for financial risk, putting Avalon among the cities classified as “low risk” for financial trouble. That’s actually good. In this case, the higher up your city is in the rankings, the worse off your city is. For example, Compton ranked no. 1 out of 471 cities.
“I believe that the CA State Auditor’s Fiscal Health Analysis and overall low risk designation is a great accomplishment for the City of Avalon,” wrote Avalon Finance Director Matthew Baker in an Oct. 31 email to the Islander.
“The City strives to be fiscally responsible and the designation provides validation. However, while I am pleased with the City’s overall ranking, it is important to recognize that the score was based on FY16 audited financials,” Baker said.
“For future year rankings, other factors such as budgeted draws on fund balance and debt issuance (e.g. Joe Machado Field) may impact our overall standing if measured today,” Baker wrote.
“The City remains committed to sound fiscal policies and recognizes the need to build fund reserves and proactively manage post-employment benefits to mitigate fiscal risk, as evidenced by the establishment of an OPEB prefunding trust, revenue generating discussions and ballot proposals,” Baker wrote.
The State Auditor assessed California cities based on liquidity (having enough cash to pay its bills) a city’s debt burden versus its income, financial reserves, revenue trends, and retirement obligations, among other criteria.
More fine print: the State Auditor’s study considered pension costs, but not operating costs. In July 2019, Finance Director Matthew Baker pointed out that Avalon’s operating costs were outpacing projected revenues (“Council talks about raising revenue,” Catalina Islander, Friday, July 26, 2019.)
The Auditor’s study ranked cities by individual category as well as overall financial position. Details below.
For liquidity, Avalon ranked 91st. (The State Auditor put Avalon among the cities at low financial risk in the “liquidity” category. “This designation indicates that a city’s general fund has cash and investments at fiscal year-end in an amount that substantially exceeds its short-term liabilities,” according to the State Auditor’s website.) Avalon was among 410 cities (out of 471) at “low risk” in this area.
For debt burden, Avalon ranked 341st.
For General Fund reserves, Avalon ranked 340th.
For revenue trends, Avalon ranked 458th.
For pension obligations, Avalon ranked 353.
For pension funding, Avalon ranked 266th. (The State Auditor ranked Avalon’s pension funding at “moderate risk.” “This designation indicates that a city’s pension plan(s) is not fully funded but has enough assets to fund a moderate portion of the pension benefits earned by its employees,” according to the website.)
For pension costs, Avalon ranked 376th.
For future pension costs, Avalon ranked 314th. (Avalon’s future pension costs placed the city among 121 California cities at “moderate risk” for financial problems. “This designation indicates that a city’s future projected pension costs constitute a moderate portion of its current revenues and may strain its financial resources,” according to the State Auditor’s website.)
For more information, visit https://www.bsa.ca.gov/bsa/cities_risk_index
