Victorville, California Has Net Asset Deficiencies, Liquidity Concerns - June 30, 2010 CAFR

General Fund Balance 2010 vs. 2009 (CAFR)
MUNI UPDATE: Victorville, CA released its Fiscal Year June 30, 2010 CAFR; here is a quote from the city's independent auditor, Mayer Hoffman McCann:
"The accompanying financial statements have been prepared assuming that the City will continue as a going concern. As discussed in Note 21 to the financial statements, the City has suffered recurring losses in its General Fund, the Southern California Logistics Airport Authority Enterprise Fund and the Municipal Utilities Enterprise Fund, and those funds have a lack of liquidity and net asset deficiencies that raise substantial doubt about the City's ability to continue as a going concern. Management's plans in regards to these matters are also described in Note 21. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the City be unable to continue as a going concern."

General Fund information:
"General Fund of the City of Victorville, (Continued)

The City’s general fund has incurred an excess of expenses over revenues and estimated fund deficit (unaudited) of approximately 4.5 million through January 31, 2011. Management has estimated an excess of expenses over revenues for the fiscal year ended June 30, 2011 for the City’s General Fund of approximately 5.3 million. Management is estimating general fund balance at June 30, 2011 of approximately $2.2 million.

The General Fund will have liquidity problems during the year and will need to borrow cash from other funds. This liquidity problem occurs because of the nature of collection of revenues for the General Fund. Revenues from Sales Tax lag approximately two months, Property Tax payments are largely disbursed in January and May, electric and gas franchise fees are also collected in April. These revenues do not match the expenditures which are approximately 1/12 of the annual budget each month."

Read Note 21 to see information on the Southern California Logistics Airport Authority (SCLAA) operating deficit, SCLAA annual debt service payments, Victorville Municipal Utilities Services (VMUS) deficit balance, General Electric Purchase Contract and Variable Rate Lease Revenue Bonds ($83,770,000).

Victorville has $50.7 million of long-term "governmental" liabilities outstanding (p.55) and $433.1 million of long-term "business-type" liabilities (p. 62).

City management's turnaround plans:
"The City of Victorville has steadily cut the budget over the last three fiscal years in order to bring expenditures in line with revenues. This has been accomplished through layoffs, furloughs, retirements, reorganization, and deep cuts in benefits. There are over 200 less employees than 24 months ago. Victorville has also relied on the use of reserves to help ease the budget strain and maintain services where possible. On June 1, 2010, the City Council adopted a reserve policy with a target of 15% of the General Fund and a floor of 5%. This policy gives management needed direction as we continue to balance cuts with the measured use of reserves while waiting for the economy to improve. Sales tax receipts recently showed an increase of 5%, quarter over quarter, for the first time in four years and informal reporting of car sales have also shown recent period gains as well. While this may signal a final upturn in the local economy, even if it continues, management anticipates additional cuts will still be necessary for FY 2011-2012 in order to balance expenditures and revenues. There are no plans for additional revenue measures."

The articles below are good reads. The SEC is investigating their bond sales.

*Victorville, California, Faces Insolvency - Bond Buyer

*Auditor says Victorville near insolvency - Contra Costa Times

*With About $500 Million in Outstanding Debt, Victorville Nears Insolvency, Says Auditor - Kcet.org

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