FINAL REPORT - San Bernardino Superior Court

Section 1: Financial Condition
Cash Balance
As of June 30, 2011, the City’s cash and investments were $88,306. While there is no specific
standard for how much a City should have in cash and investments, the amount is very low when
compared to the City’s rate of expenditures of approximately $4,000,000 per month, resulting in
a cash flow risk for the City.
There are three ways in which cities typically address cash flow issues. The first is to resolve low
cash balances through inter-fund loans. However, as previously discussed, the City’s ability for
the General Fund to engage in inter-fund borrowing has diminished because of long-term lending
and the poor financial condition of other funds. Secondly, cities can borrow from Internal
Service Funds on a temporary basis, yet the City of Victorville does not have any Internal
Service Funds. Finally, through the California Statewide Communities Development Authority
(CCDA or California Communities), 3 cities can finance short-term cash flow deficits through
Tax and Revenue Anticipation Notes (TRANs). However, the maximum maturity of TRANs
issued by CCDA is 13 months and State law requires that funds be set aside for the repayment of
TRANs from current fiscal year revenues, or the fiscal year in which the TRANs was actually
issued. Based on the City’s track record of setting aside cash, applying for TRANs may not be a
viable option for the City either.
The City should develop a plan to replenish the General Fund reserves to the recommended level
of two months annual revenue or expenditures. By doing so, the City would be eligible for
TRANs should the City have major cash flow risks in the future. Such a plan should include
further reducing expenditures and identifying additional sources of revenue while the economy
improves and major sources of revenue—sales tax, property tax, and franchise tax—increase.
Additionally, the City should avoid inter-fund loans and transfers from the General Fund to other
City funds.
Other Entities are in Poor Financial Condition
Three entities for which the City has fiduciary responsibility have been operating at a deficit over
the past four fiscal years (operating expenditures exceeded operating revenues). These entities
are the Southern California Logistics Airport Authority (SCLAA), Victorville Municipal Utility
Services (VMUS), and the City Golf Course. Additional factors, such as significant debt for
SCLAA and VMUS, contribute to these entities’ poor financial condition. As previously noted,
the General Fund has had to transfer funds to support some of these operations.
3 The California Statewide Communities Development Authority is a joint powers authority sponsored by the
California State Association of Counties and the League of California Cities. Its mission is to provide local
governments and private entities access to low-cost, tax-exempt financing for projects.
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