News

At the direction of the Joint Legislative Audit Committee, the California State Auditor, with assistance from Analysis Group, conducted a comprehensive review of the management and finances of the city and its power department. The recently released California State Auditor’s report, “City of Vernon: Although Reform Is Ongoing, Past Poor Decision Making Threatens Its Financial Stability” (June 28, 2012), contains recommendations ranging from addressing the structural deficit of the city’s general fund, to improving transparency in the city’s budgeting process and contract oversight.

The Analysis Group team, led by Managing Principal Mark Egland, and including Principal Marnie Moore, Vice Presidents Kevin Gold and Robert Earle, and Senior Analyst Kara Schmutte, assisted in evaluating the major financial and energy-related transactions that the city entered into since 2003. These transactions have contributed heavily to the city’s present financial woes. The report states that the city could not demonstrate that it assessed the risks of the 15-year $430 million prepaid purchase of natural gas and various interest rate swap transactions prior to entering into them. Further, the city has lacked a clear energy strategy, exemplified by the city selling its electrical power plant shortly after construction was complete and less than two years after it purchased a 15-year prepaid supply of natural gas to fuel the power plant. The California State Auditor recommends that, in order to alleviate future financial issues, the city “establish a debt management policy to guide [the city council’s] decisions and to ensure that it issues debt for purposes that are consistent with its long term goals” and “develop an integrated energy strategy that examines all elements of its energy needs, sources, and objectives.”

Read the full report