Audit Finds City’s Overall Financial Health Remains Strong
Independent Auditor Gives San Diego’s Finances Top Rankings Compared to Similar Cities Over Past Decade
Thursday, June 21, 2018 - NEWS RELEASE
San Diego – The City’s overall financial condition has stabilized over the past decade with steady improvement each year and is strong when compared to other cities of similar population size, according to a new audit released this week by independent City Auditor Eduardo Luna.
The Performance Audit of the City’s Financial Condition also concluded that the results are a testament to the discipline of City leaders – including Mayor Kevin L. Faulconer and the City Council – through the implementation of strong fiscal policies, practices and controls.
“We have come a long way over the last decade to get San Diego’s finances back on the right track,” Mayor Faulconer said. “I remain committed to the fiscal reforms that have resulted in a significant increase in core neighborhood services, a record pace for road repairs and the largest infrastructure investment in our city’s history.”
The auditor analyzed 10 financial metrics designed to assess performance in four areas: financial position, revenues, debt and capital assets. The test included both short-term and long-term aspects of financial well-being and relied on audited financial data published in cities’ Comprehensive Annual Financial Reports.
The audit, which focused on activity and balances through Fiscal Year 2016, found that San Diego's financial condition scored first or second in nearly every category, and first overall for the last five years, compared to similarly sized cities including Phoenix, Philadelphia, San Antonio, Dallas, San Jose and Austin.
“The City of San Diego’s financial health is subject of continuous scrutiny by the public, news media and policymakers,” City Auditor Luna said. “For most City residents, independently assessing the City’s financial health is a daunting task requiring detailed analysis of highly technical and complex financial reports. We used financial ratios and comparisons to our peer cities to draw meaning and thus give a voice to the City’s financial statements. Our analysis revealed that the 10-year trend from 2007 to 2016 is positive for all the City’s financial ratios, however, we identified some short-term changes that management should consider monitoring more closely.”
San Diego’s highest scores for the 10-year period were related to debt and primary government revenues, while the lowest scores were in solvency and capital assets – areas where the auditor recommended closer scrutiny. The low scores were due to the City’s pension liability now being included in financial statements – a new national accounting standard to increase government transparency – and the historic underinvestment in infrastructure by past City leaders. Mayor Faulconer’s Fiscal Year 2019 Budget, which begins July 1, has a record $559 million going toward infrastructure projects throughout the city.
“I applaud the Mayor and Council for exercising fiscal discipline. We have achieved a good financial bill of health while we continue to invest more and more in street repair and neighborhood improvements for our residents,” said City Councilmember Lorie Zapf, Chair of the Audit Committee.
Recent actions under Mayor Faulconer that have contributed to the City’s continued good financial health include increasing reserves for the General Fund from 14 percent to 16.7 percent and establishing a new pension stabilization reserve to reduce the impact of unanticipated increases to the City’s annual pension payment. Reserves continue to be funded each year at increased levels in accordance with the City’s reserve policy.
“The Mayor and Council have consistently adhered to strong financial policies and practices, allowing the City to continue to build upon its firm financial standing,” said Rolando Charvel, the City’s Chief Financial Officer. “In addition to maintaining cash reserves to protect the City from economic downturns and unforeseen events, the City has adopted a structurally balanced budget each year, maintained strong expenditure controls, conducted long-term financial planning and has adhered to responsible and equitable debt practices.”
In 2017, the City’s credit rating was upgraded by Fitch Ratings which said the City’s “exceptionally strong gap closing capacity and satisfactory reserves [that] result from the City’s strong general fund revenue performance, solid expenditure flexibility, healthy economy and tax base, conservative financial management policies, and strong financial planning and disclosure practices.” In May 2018, Standard & Poor’s placed the City on a positive outlook.
CONTACT: Greg Block at 619-227-3752 or [email protected]