LOS ANGELES— Expenses outpaced revenues in Los Angeles by 1.2% forcing the city to dip into reserves, according to a preliminary financial report for fiscal year 2017 from City Controller Ron Galperin.

The preliminary financial report, which provides a snapshot of the recently concluded fiscal year, said that the city’s revenues increased by 4% over the prior fiscal year as expenses ticked up 5.2%.

“This is a time for the city to take stock and make sure to not overextend itself,” Galperin said. “The city needs a budget that is based on actual revenues and that builds rather than depletes hard-earned reserves. Otherwise, we risk being unable to weather an economic downturn without cuts in services.”

Los Angeles City Controller Ron Galperin
“This is a time for the city to take stock and make sure to not overextend itself,” said Los Angeles Controller Ron Galperin.

The city balanced its books, in part, by dipping into reserves with reserve funds dropping to $450 million, or just under 8% of the 2017-18 general fund budget compared to 10% in 2015, Galperin said.

From 2009 to 2015, the City built its reserves (including the Reserve Fund and the Budget Stabilization Fund) up to almost 10% of the adopted General Fund Budget from 3.4%, according to the controller's report.

Los Angeles City Councilman Paul Krekorian, who chairs the council’s budget and finance committee, said the city’s finances are in good shape right now and he sees no immediate threat to the health of the city’s reserves.

“For the past three years, the Mayor and the City Council have kept our reserves at the highest point they’ve been in decades, including starting this fiscal year funded well above our own policy guidelines and despite being faced with other important spending priorities across the city,” Krekorian said.

“As chair of the Budget and Finance Committee, my goal is to preserve our unprecedented reserves, increase revenues and also reduce legal liabilities going forward, which is something I'm actively working on with the City Attorney's office and other departments through our new Risk Management Task Force,” the councilman said.

General Fund revenues grew by 6% over the prior year to $5.6 billion, but General Fund spending grew by 6.4%. Special Fund revenues totaling $2.5 billion were up 3.6%, while spending from these accounts increased by 2.8% over the prior year.

The Controller’s financial review showed that many categories of tax revenue, including property, business, sales and hotel taxes, along with building permit fees, reached all-time highs. However, liability claims payouts exceeded $200 million, driven by the settlement of a large class-action lawsuit and a number of sizable liability cases.

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