L.A. Controller Advises Against Quick Fixes

LOS ANGELES — Los Angeles Controller Wendy Greuel has released an economic forecast projecting a $200 million deficit next year and recommending that the city focus on structural budgetary changes instead of relying on one-time revenues and expenditure deferrals.

“One-time solutions intended as a bridge to better times may prove to be a bridge to nowhere if a full economic recovery does not rapidly materialize,” Greuel said in the forecast, released Friday.

Mayor Antonio Villaraigosa is expected to submit his budget to the City Council in April.

Officials had anticipated a return to the 3.5% growth rates that the city experienced from 2006 to 2009, but Greuel’s report indicates that 1% growth is a more likely scenario.

General fund revenue growth of only 1.1% for both fiscal 2011-12 and 2012-13 is projected with revenues of $4.33 billion in 2012 and $4.38 billion in 2013.

The city will need to sell $400 million of tax and revenue anticipation notes next year. It has $167.2 million in debt service payments for general obligation bonds due next year.

Greuel criticized Los Angeles’ policy of allowing employees to accrue banked overtime and then cash out, because cash-outs have nearly doubled in recent years to $83 million, creating a liability for the city.

The city’s economic experts said in 2008 that they did not expect revenues to return to peak levels for 10 years, which is problematic because the government has built-in annual increases for employees, Natalie Brill, the city’s chief of debt management, said during a Women in Public Finance lunch held Friday in downtown Los Angeles.

Officials have been meeting with the unions to try to strike agreements that deal with salary and pension issues without unduly impacting core city services, Brill said.

An ongoing issue is in defining what core services the city should be providing  and what services can be privatized. Officials have sought request for proposals on privatizing parking garages, the city zoo and parking meters, but they have yet to move forward on them.

The public unions have fought most privatization efforts.

“Los Angeles is unique in that it is the largest municipal government that runs its own zoo,” Brill said. “One of the problems we have is that we can’t raise money through donations, because no one wants to donate money to the city.”

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