Gardena audit shows clean opinion; city flags CalPERS, county fire costs and casino litigation as fiscal risks

The City of Gardena received an unmodified (clean) audit opinion for the fiscal year ended June 30, 2024, city auditors told the City Council Tuesday, and staff used the report to outline long‑term financial risks and mitigation options.

"The city of Gardena received no findings regarding the financial statements," said Ron Lopez, managing partner at Gruber & Lopez Inc., the contracted audit firm. The auditor reported general fund revenue of about $86.8 million, expenditures near $85.9 million and an increase in net assets of roughly $947,000 for the year. Staff said the general fund reserve ended near $33.4 million, about 39% of annual expenditures.

City leaders used a follow‑up presentation to highlight three threats that could erode the city’s fiscal position: growth in CalPERS unfunded accrued liabilities (UAL), a newly raised LA County request to reclaim a 20% fire‑service subsidy, and litigation tied to state Senate Bill 549 affecting private card‑room gaming.

On pensions, the city manager explained CalPERS’ discount‑rate mechanics and how investment shortfalls are amortized over 20 years. The city noted it issued a pension obligation bond in 2020 and adopted a UAL funding policy to limit future budget shocks; staff said the POB produced significant long‑term savings but cautioned Gardena remains exposed to CalPERS’ performance.

The city manager described a new county fire‑service issue as immediate. Gardena participates in a county service arrangement that had included a roughly 20% subsidy; LA County is seeking to recover that amount, which staff estimated could add about $1.7 million per year to Gardena’s costs and push the city toward a structural deficit if not mitigated.

On gaming, staff showed a briefing about SB 549 — signed by the governor on Sept. 28, 2024 — which permits tribes to bring legal claims against privately owned gambling halls and could curtail non‑poker gaming operations nationwide. "We are looking at a potential loss of $8,000,000 per year or 8% of the general fund if both casinos operate only poker games," the city manager said while reviewing a worst‑case scenario timetable that could include years of litigation and appeals.

Council members pressed staff on available actions. Options outlined by the city included updating user fees, recapturing a previously county‑levied 0.25% sales tax that is set to sunset (staff estimated the recapture could bring roughly $4.5 million annually), pursuing solar and other energy savings, considering charter city conversion for certain tax advantages, and, if necessary, placing a parcel tax before voters to cover fire protections.

City staff characterized the reserve projections as a scenario, not a forecast, and emphasized that the city has taken steps over the past decade to reduce reliance on casino revenues (from a prior 16% of general fund down to about 8%). The council received and filed the audit report; no formal policy decisions were made at the meeting.

What’s next: staff said it will continue negotiating with LA County on fire costs, complete the federal single audit in February and present communication letters with housekeeping recommendations following the single audit findings.