Skip Repetitive Navigation Links

Poor Management Has Contributed to Its Financial Instability and Led to Its Failure to Comply With State Law

Report Number: 2018-803

Figure 1

Lynwood Operated With a Structural Deficit During Fiscal Years 2013–14 Through 2016–17, Which It Will Likely Experience Again in Fiscal Year 2019–20

Figure 1 is a line chart displaying annual operating revenue and expenditures for Lynwood’s general fund from fiscal years 2012-13 through 2019-20. The amounts presented for fiscal years 2012-13 through 2016-17 represent actual revenue and expenditures as reported in its comprehensive annual financial reports. The amounts presented for fiscal years 2017-18 and 2018-19 represent budgeted revenue and expenditures as reported in its proposed budgets. The amounts presented for fiscal year 2019-20 are identical to the previous year, but with adjustments to reflect the loss of a one-time revenue source realized in fiscal year 2018-19 and two expenditures the city manager identified he could eliminate in future years.

The chart shows that Lynwood operated with a general fund structural deficit in fiscal years 2013-14 through 2016-17. Operating revenue is projected to exceed operating expenditures in fiscal years 2017-18 and 2018-19, although only by $100,000 in fiscal year 2018-19. The chart shows that operating expenditures and projected to exceed operating revenue in fiscal year 2019-20, which would result in a potential structural deficit of $425,000. The sources for this figure are the city’s comprehensive annual financial reports for fiscal years 2012-13 through 2016-17 and its proposed budget for fiscal year 2018-19.
Go back to Figure 1

Figure 2

Lynwood’s Estimates of Its Fiscal Year 2016–17 Ending General Fund Balance Have Fluctuated Wildly

Figure 2 is a bar chart that shows estimates that Lynwood made at four different points in time from July 2016 through March 2018 of its fiscal year 2016-17 ending general fund balance. The figure also includes a line showing Lynwood’s actual year-end general fund balance based on its fiscal year 2016-17 comprehensive annual financial report. As referenced in its budget documents, Lynwood’s estimates have fluctuated wildly. Its estimates from July 2016 and June 2017 were each significantly higher than the actual balance by more than $1 million, while its estimates from April 2017 and March 2018 were each substantially lower than the actual balance by more than $1.5 million. The sources for this figure include Lynwood’s budget documents, mid-year budget updates, and fiscal year 2016-17 comprehensive annual financial report.

Go back to Figure 2

Figure 3

Lynwood’s City Council Continued to Approve Increased Personnel Expenditures Despite the City's
Ongoing Fiscal Problems

Figure 3 is a timeline that summarizes actions taken by the city council from July 2016 through August 2018 that resulted in increases to the city’s personnel expenditures despite the city’s ongoing fiscal problems. The timeline shows that the city council declared a fiscal emergency in July 2016 and enacted a hiring freeze that lasted through June 2017. In July 2017, the city council approved an increase of 25 staff for a total of 190.5 staff. The city council then approved salary increases for a total of 146 staff over a six-month period from September 2017 to February 2018. The timeline also illustrates that the city council imposed another hiring freeze in March 2018 that lasted through June 2018, this time focusing on nonrevenue-generating positions in light of dwindling general fund reserves. In July 2018, the city council once again approved an increase of 21 staff for a total of 211.5 staff. Furthermore, the city council approved salary increases for 11 additional staff in April 2018 and August 2018. The sources for this figure include an analysis of Lynwood’s city council resolutions, adopted budgets, and mid-year financial reviews. Staff numbers represent full-time-equivalent positions.

Go back to Figure 3

Figure 4

Lynwood Performed a Salary Survey Using 67 Cities of Which Many Were Not Comparable

Figure 4 is a graphic presented in a table format that summarizes characteristics of many cities that Lynwood used as comparison entities when conducting its salary survey. The graphic identifies that 20 of the 67 cities had populations at least two times greater than Lynwood’s population. It also shows that 27 of the cities had total expenditures at least three times greater than Lynwood’s expenditures. Finally, the graphic illustrates that 23 cities had geographic sizes at least five times greater than Lynwood’s geographic size. The sources for the figure are the comprehensive annual financial reports for the various cities and data from the U.S. Census Bureau.

Go back to Figure 4

Figure 5

The Structure of the Utility Authority Lease Agreement Allows Lynwood to Lease Its Water and Sewer Infrastructure From Itself

Figure 5 is a graphic illustrating the lessor/lessee relationship between the city of Lynwood and the Lynwood utility authority. It shows that the city of Lynwood has an agreement with the utility authority to lease its water and sewer infrastructure to the utility authority. However, the utility authority is currently comprised solely of the city of Lynwood. The utility authority was formerly comprised of Lynwood and its redevelopment agency. However, with the dissolution of redevelopment, the city assumed the role of successor agency to the redevelopment agency. The graphic identifies that through the utility authority, Lynwood is able to make lease payments to itself using surplus revenue generated primarily from water and sewer user fees and charges. Nevertheless, state law requires that revenue derived from user fees and charges in the jurisdiction not exceed the amount required to provide the service. The sources for the figure are our analysis of Lynwood’s utility authority lease agreement and relevant city council resolutions.

Go back to Figure 5

Figure 6

Even After Recent Increases, Lynwood’s Current Staffing Is Not at the Level It Was in Fiscal Year 2009–10

Figure 6 is a bar chart that shows Lynwood’s annual staffing level from fiscal years 2009-10 through 2018-19. The chart shows the city’s staffing level declining from a high of 229 full-time-equivalent staff members in fiscal year 2009-10 to a low of 165.5 full-time equivalent staff members in fiscal year 2016-17. Lynwood’s staffing increased by more than 20 full-time equivalent staff members during each of the two subsequent fiscal years, reaching 211.5 full-time equivalent staff members in fiscal year 2018-19. The sources for this figure are Lynwood budget documents.

Figure 7

Lynwood Has Experienced Significant Turnover In Recent Years Among Its Key Leadership Positions

Figure 7 is a timeline showing the tenure and turnover of individuals serving in key leadership positions in Lynwood from July 2014 through September 2018. The timeline shows blocks of time when positions were filled with permanent employees and temporary employees, including brief transition periods when positions may have been vacant. As conveyed on the timeline. The positions of city manager, human resources director, finance director, public works director, and redevelopment/community development director were each filled with at least four different individuals during this period. The four director positions were filled with temporary employees at various times. In particular, the redevelopment/community development director position was filled in succession by five different temporary employees. In contrast, the recreation/community services director position was filled during the entire period by single permanent employee and the technology and media support services director position was filled by a single permanent employee from the time that the respective department was established in fiscal year 2016-17. The sources for the figure are Lynwood’s personnel forms and city council resolutions.

Go back to Figure 6