The City of Compton, California, home to just over 96,000 residents, is part of the “South Side” of Los Angeles County. It is a diverse, young city – the majority of residents are Latino and the median age is 25. Although its name became synonymous with gang culture and crime in the popular hip hop music of the 1990s, new businesses and middle-class residents began to move into the infamous city in recent years due in part to relatively affordable housing and declining crime rates. But that “renaissance,” as it was called, has since been reversed. From the Los Angeles Times, October 31 2011:

While cities in California have been hit hard by the recession, Compton is in a small class of cities that have ended up in critical condition. [Proposed budget] cuts [are coming] at a bad time, with unemployment in the working-class community already at 20 percent.

Among the financial concerns plaguing the city:

  • Compton has accumulated $369,000 in late fees through 2011 because it could not afford to pay its policing contract with the Los Angeles County Sheriff’s Department on a timely basis; and
  • The city anticipates an impending deficit of $39 million, which is a figure that embodies about 80% of Compton’s general fund.

S&P has lowered ratings on several of Compton’s outstanding bonds to slightly above junk status. Approximately 15% of Compton’s public workforce has been laid off, with an estimated 90 more layoffs forthcoming. Many programs and events have been cut from the budget, including a popular annual gospel concert.

But these issues were more or less avoidable. Blamed in large part for the city’s mounting deficit is a recent contentious effort to re-launch a city police department:

Last June, when the City Council voted to move forward with a $19.5-million venture to revive the municipal police force, the city’s reserves were already used up and its general fund nearly $15 million in the red [...] The city had disbanded its department in 2000 in part as a cost-savings measure, bringing in the L.A. Sheriff’s Department to patrol the city. The Sheriff’s Department has won praise as violent crime in Compton has declined sharply in the last few years.

The Govistics database shows the steep drop in the number of Compton City employees due to that shift in 2000:

Not to mention the cost savings reflected on their payroll:

And the savings reflected on Compton’s balance sheets after they shifted from paying their own force to paying a fixed contract fee to Los Angeles County:

Despite those savings, the Govistics database shows that in FY 2008, spending outpaced revenues in Compton City $121 million to $110 million. In many spending categories, the city wasn’t tightening its belt. In revenue categories such as property taxes and – especially – state and federal aid, the city wasn’t collecting as much as it had previously:

Proponents of the move to reinstate Compton’s police department claimed that they didn’t know the city’s financial issues were growing increasingly severe:

“At that time, we were being told that we were stable, that we had to be cautious, but we were stable,” said Councilwoman Yvonne Arceneaux, who nevertheless voted against the project last year, citing concerns about costs.

Unlike their counterparts in Harrisburg, PA, city officials in Compton have vowed not to file for bankruptcy and instead are banking on a line of credit or short-term loan to get through the year. In Harrisburg, the case is in the hands of a bankruptcy judge as the state contests city leaders’ decision to file for Chapter 9. That city faces a debt five times its general-fund budget because of an overhaul and expansion of an incinerator.

Stories about cities and other municipalities making drastic moves to improve precarious financial situations have become common in the present economic climate, but such stories about cities of Compton’s and Harrisburg’s size and stature are a newer trend. The CGR Govistics team is keeping an ear to the ground and we’ll keep you in the loop.

Compton isn't "welcoming" many new residents and businesses these days as the city faces a budget deficit that's almost 80% of the size of its general fund.