California Auditor Ranks Anaheim at High Risk of Financial Distress, Mayor Disputes

By Jack Bradley
Jack Bradley
Jack Bradley
Jack Bradley is a daily news reporter for The Epoch Times based in Southern California.
September 1, 2021 Updated: September 1, 2021

Mayor of Anaheim Harry Sidhu criticized a state economic report that claimed Anaheim is among the cities with the highest overall risk of financial distress in the state.

“Our city has emerged from the challenge of our time with economic recovery underway and a bright future ahead,” Sidhu wrote in an Aug. 26 statement. “You wouldn’t know it from a recent report on California cities that ranked Anaheim alongside El Cerrito and Calexico.”

California State Auditor Elaine M. Howle’s office released an online tool that ranks California cities based on financial indicators that are calculated using the most current audited financial reports.

Anaheim ranked eighth-worst city in the state in terms of fiscal health in fiscal year 2019–20, with the worst being Compton and the best being Calimesa.

According to the state auditor’s website, this ranking means that Anaheim “is at risk of financial hardship and must immediately evaluate and respond to its weak financial position to prevent the reduction of city services.”

“Residents may experience reductions in key services the city provides, such as fire, police, road maintenance, and parks.”

The city’s population is just over 350,000 and had an 11 percent unemployment rate, according to the state’s 2019–20 data.

Anaheim’s long-term debt obligations (excluding retirement obligations) were over $2 billion for the last fiscal year, while the government-wide revenue was nearly $1.25 billion.

“[Anaheim] may have insufficient reserves to cover its expenses in the event of a fiscal emergency, such as an economic recession,” as the city’s general fund expenditures and transfers out was nearly $440 million in fiscal year 2019–20, according to the state’s website.

“[Anaheim] has only enough cash and investments to cover 80 percent of its unpaid bills at year-end,” but a city “should have enough cash and investments to pay 150 percent of its bills” to be considered low risk.

“Rather than increasing, this city’s general fund revenues have decreased, on average, by 1 percent over the last few years. This may constrain the city’s ability to respond to economic changes and pay rising costs of services,” according to the state’s website.

Anaheim’s projected pension obligations to the California Public Employees Retirement System “in fiscal year 2027–28 are significant compared to its current total government revenues.”

Sidhu called out the state auditor’s office report, saying they “got it wrong.”

“No one takes fiscal health more seriously than I do. I welcome discussion of Anaheim’s budget, pensions and debt. But I take issue with the report’s methodology and characterization of our city,” Sidhu wrote.

Sidhu said Anaheim typically sees more than 25 million visitors to its theme parks, convention center, and sports and entertainment venues.

“Our economy is the envy of the cities called out by the auditor,” Sidhu wrote.

“Like nearly all cities, we have pensions and debt. That should not surprise anyone. As a fiscally conservative city, we take on obligations knowing we can meet them.”

Sidhu said that about 70 percent of the state’s pension obligations are now funded and are on track to be fully funded as new, more cost-effective plans come to fruition.

The city’s debt is in part due to the $510 million borrowed for the Anaheim Resort expansion.

“Part of the Anaheim Resort debt was retired in 2019 with the potential to pay off the balance by the end of this decade, years ahead of schedule,” freeing up about $100 million annually for the city’s general fund, Sidhu said.

Sidhu said the state auditor didn’t mention Anaheim’s handling of the COVID-19 pandemic.

“The pandemic hit Anaheim about as hard as any city. That is not mismanagement, just bad luck,” he wrote.

Anaheim borrowed $139 million to fill the remaining gaps in the budget, Sidhu wrote, adding that “we faced an impossible choice—borrow or cut the bone. The alternative? Delayed public safety response times, closed libraries and decimated services for the neediest in our community, including those living in homelessness.”

“We took on this new obligation knowing what the state auditor does not—Anaheim is attracting billions in investment that will create new revenue for our city for years to come.”

California State Auditor spokeswoman Margarita Fernández told The Epoch Times via email that the “rankings were based on the risk indicators that were calculated using the information from their most recent audited financial reports (from fiscal year 2019-20).”

The audited financial reports for fiscal year 2020–21 are not yet available; however, the state studied how cities are faring during the pandemic considering that federal funds have been increasing city revenue.

The state projected that 18 cities didn’t receive enough stimulus funds to cover their COVID-19 related revenue losses; Anaheim wasn’t one of the listed cities.

Jack Bradley
Jack Bradley is a daily news reporter for The Epoch Times based in Southern California.