By Ben Baeder - San Gabriel Valley Tribune
Many of the county's charter cities lack strategic planning, have spotty financial controls and have few methods of measuring whether they are reaching goals, according to a recently released 2011-12 Los Angeles County Civil Grand Jury report.
The county has 25 charter cities, including Arcadia, Temple City, Whittier, Pasadena, Irwindale, Alhambra and Industry.
Three of the four California cities that have taken steps toward bankruptcy recently - San Bernardino, Compton and Stockton - have charters.
And scandals in the charter cities of Temple City, Bell and Vernon led to criminal convictions of city officials.
In light of the investigations, the Grand Jury conducted a year-long analysis of the county's charter cities.
Of the 22 small-to-medium-size cities analyzed in the Grand Jury report, only five had balanced budgets in the 2009-10 fiscal year. Others had dangerously low asset-to-debt ratios. Still others had few checks to make sure their city had sound loads of debt relative to income.
Charter cities can take more risks than General Law cities, according to Bob Stern, a consultant who was formerly the director of the Center for Governmental Studies and a longtime watchdog of government finance.
"There is a big difference between the two types of cities," he said. "Charter cities have more leeway. They can take more risks. But they also can get more benefits."
Charter cities are more likely to run utilities and to pursue riskier investment strategies, Stern said.
Of area cities covered in the Civil Grand Jury Report, only Industry had an asset-to-debt ratio low enough to worry the Grand Jury. The city in 2010 had $1.34 billion in assets and about $755 million in debt, according to the report. Its 1.72 asset-to-liability ratio was dangerously low, according to the Grand Jury. Cities should not have ratios lower than two, the report stated.
Industry City Manager Kevin Radecki did not return calls for comment on this story.
The Grand Jury report found Industry also was lacking several checks on abuse, such as a way for employees to report fraud. Arcadia also was deemed deficient in several controls, such as a mechanism for reporting fraud, a rule about having at least two months of reserves and a procedure for negotiating good prices for the city from contractors, the Grand Jury report stated.
Even without the checks, Arcadia was one of the most fiscally sound charter cities, according to data from the study. Temple City also scored well for its fiscal health.
Arcadia Councilman Bob Harbricht was councilman in Duarte in the 1970s before he moved to Arcadia. Duarte was governed by General Law, and Arcadia has a charter.
Harbricht said he saw almost no difference between how the two communities operate.
"I can't recall any cases where I felt constrained in Duarte because we were a General Law city and where I felt more free in Arcadia," he said.
The key to running a good city is to refrain from taking drastic action in good times or in bad, he said.
"If you have programs that are ongoing and then you have a big drop in city income, you don't tear everything apart and then put it all back together again when times are good," Harbricht said. "Arcadia is a smooth-running city. We just don't rock the boat much."
Like Harbricht, other local elected officials say they don't see a relationship between operating under a charter and the wave of scandals and proposed bankruptcies affecting charter cities.
"It could be bad, or it could be good," said Joe Vinatieri, a Whittier councilman who works as a municipal tax law attorney. "It gives you more flexibility, but it depends on how the City Council uses that flexibility."
He said he prefers the charter city model, saying it gives a city the latitude to quickly change course during tough times.
A General Law city uses a governing template outlined by the state legislature. In Los Angeles County, 72 percent of cities operate under General Law.
Charter cities customize their laws, giving officials more flexibility.
Charter cities can more easily borrow money, pay city officials more, give the mayor more power, or more easily form special districts, among other things.
Municipal finance experts said that a charter in itself is not a bad thing.
The model they feared most was the "strong mayor" arrangement, which gives a city's mayor decision-making power independent of the City Council.
One area finance director, who requested anonymity for fear of losing his job, said it was unwise to put that much power in the hands of one person, especially if that person is not familiar with how government finance works.
San Bernardino and Stockton both have "strong mayor" governments.
In every San Gabriel Valley and Whittier-area city, a mayor's vote counts the same as the rest of the City Council.
Although the Grand Jury's report did not find obvious red flags in area cities, it did find a lack of measurable goals that residents could use to hold a city accountable.
Arcadia, Industry, and Temple City had no measures of performance, the Grand Jury found.
And while other cities claimed to have goals, they were unable to produce documents that outlined the goals or showed whether the city was reaching them. Without goals, the public cannot measure if a city is performing as promised, the report found.
The Grand Jury also said that many charter cities didn't have competitive bidding for contracted services. Others had no requirements that the city use a different accountant for its audit than it used for other accounting services.
The study also dinged communities for failing to establish an audit committee to periodically check up on city finances.
Alhambra, Arcadia, Industry, Irwindale, Temple City and Whittier did not have audit committees, according to the report. And nearly every city used the same outside auditor again and again, which could lead to complacency or collusion, according to government experts.
It may be an old theme, but an involved, well-informed electorate is the secret to maintaining an honest City Hall, said Owen Newcomer, a Whittier councilman and former political science professor at Rio Hondo College.
"The key is you need people making right decisions for the right reasons," he said. "I don't know how you make a rule requiring that."
If a city were to put in all the checks and balances recommended by the Grand Jury, cities would spend a lot of time and money, he said.
"It would be costly," Newcomer said. "We would have to go through recommendation by recommendation, and find if the benefit is worth the cost."
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