City of Blythe
March 4, 2021
Elaine M. Howle, CPA
California State Auditor
621 Capitol Mall, Suite 1200
Sacramento, CA 95814
Re: Response to State Auditor’s Draft Report Titled “City of Blythe: Inadequate Planning and Other Ineffective Management Practices Hinder Its Ability to Provide Needed Services to Its Residents”
Dear Ms. Howle:
Thank you for the opportunity to respond to the above-referenced Draft Audit Report prepared as part of the State’s Local High-Risk program and provided to the City of Blythe on February 26, 2021. Although we appreciate the time the State’s audit team dedicated to preparing this report, we do not believe it does enough to illustrate how far the City has come over the past 12 years to ensure needed services will continue to be provided to residents. During that time, a substantial amount of work was undertaken to improve the financial health of the City. That work will continue until all issues have been addressed and/or corrected.
In 2008, the City faced a $3.4 million deficit in the General Fund. There were additional funds in a deficit position as well. From that time on, City staff, prior City Councils and the current City Council have worked tirelessly to correct these issues, most likely avoiding bankruptcy, and instead putting the City on a path to solvency. It should be highlighted that most of the City’s deficit funds were corrected during the worst recession since the Great Depression.
① As the City faced a number of challenges, priorities had to be set. The City could not afford to correct everything at once. The City made significant expenditure reductions, but revenue adjustments were prioritized based on the community’s willingness and ability to pay increased taxes and/or fees for service. During this time, the City adjusted utility fees, user fees and added additional sales tax and cannabis tax revenue. Cannabis was a new industry the City championed to spur economic development in the City. The report does not reflect two additional attempts the City made to increase revenue through a Transient Occupancy Tax Ballot Measure in 2009 and Transient Occupancy Tax and Sales Tax Ballot Measures in 2014. The voters did not approve any of these proposed ballot measures.
② While the City worked to improve its financial health, there was little ability to do long-term planning. The City was in survival mode. As the financial condition improved, the City began long term planning efforts. In 2019, the City Council adopted a Reserve Policy to allocate budget surpluses to unfunded pension liabilities, future capital purchases, address natural disasters, and have three months of operating reserve on hand to weather revenue shortfalls. City staff is currently working on a five-year plan to replace aging equipment and infrastructure and address deferred maintenance. Although a formal plan may not be in place, it does not mean efforts have not been made to plan for the City’s future.
③ ④ ⑤ The report alludes that an increase in crime is tied to Police Department funding. The report states that the Police Department’s budget was reduced by $730,000 between Fiscal Year 2014-15 and Fiscal Year 2020-21. This was not due to reductions in staffing levels or the level of service provided to the community, which remain unchanged. This was due to changes in pension budgeting and the loss of grant funding, which give the appearance that City expenditures are less. The report states violent crimes in the City have increased nearly 50% since 2017. Although we have seen increases in certain violent crimes, other violent crimes such as rapes and assaults have decreased, per the FBI’s Uniform Crime Reporting Statistics. During this reporting period, there was only one homicide in the City, which occurred in 2018. The City of Blythe remains a safe place to live. Suggesting there was an overall increase in crime of 50% is misleading when the actual number of crimes committed remains low.
⑥ The report states that the City’s contract management practices rely too heavily on institutional knowledge, increasing the risk of fraud, waste, and improper payments. However, during the audit, no instance of fraud or improper payments was found. In fact, the auditors found the City generally adhered to GFOA’s best practices for budgeting and internal controls and that the City’s methods for tracking restricted funds were reasonable. This is an important finding we would like to highlight.
The City intends to further address the concerns of the State Auditor’s Office in the corrective action plan. The City will address each recommendation and provide a response, with the ultimate goal of eliminating the “High Risk” designation.
Should you have any questions or wish to discuss this further, do not hesitate to contact me at (760) 922-6161.
Interim City Manager
City of Blythe
California State Auditor's Comments on the Response From the City of Blythe
To provide clarity and perspective, we are commenting on Blythe’s response to the audit. The numbers below correspond to the numbers we have placed in the margin of Blythe’s response.
① The city notes its attempts to improve its financial condition through tax ballot measures in 2009 and 2014, which voters rejected. Although we included some historical information in the report, we focused on more recent years and on the city’s successes in adopting cannabis and sales taxes, which voters approved.
③ The city states that we are implying a connection between higher crime and reduced police funding. In fact, here we clearly state that we are not suggesting that the decreases in police department funding caused crime increases. Rather, we state that the city may have to commit additional resources to address recent increases in violent crimes.
④ The city states that the decrease in funding for its police department since fiscal year 2014–15 was the result of changes to pension budgeting and the loss of grant funding, not staffing reductions. Although we note that the city budget for police officers did drop from 21 to 20 full-time positions during that time, we generally agree with the city’s statement. Thus, to provide greater clarity, we added a sentence here to note that these budget reductions for the time period in question were generally made without staffing reductions.
⑤ The city objects to our use of aggregate statistics for violent crime in the city and states that our statistics are misleading. However, the crime statistics we present in the audit report are accurate. The FBI’s Uniform Crime Reporting Statistics show an overall increase in violent crimes for Blythe of nearly 50 percent. This does not mean that certain types of violent crimes have not decreased or remained relatively constant, but rather that the city will need to address this overall trend of increasing crime and that doing so may require additional resources.
⑥ Although the city is correct that we found no instances of fraud or improper payments, the city’s lack of adequate policies and procedures related to contract management—a condition we describe in this section of the report—increases the risk of fraud.