Los Angeles Mayor Offers $4.4B Budget With Eye on $530M Gap

SAN FRANCISCO - Los Angeles Mayor Antonio Villaraigosa on Monday proposed a $4.4 billion general fund budget that cuts spending by 2.2% from last year's budget to close a projected $530 million deficit for the upcoming year.

The nation's second-largest city would issue $302 million of new general government debt in fiscal 2009-2010 under Villaraigosa's plan.

Los Angeles faced a $530 million gap in the current-services budget for the upcoming fiscal year because labor contracts call for automatic raises even though revenue is expected to decline.

Villaraigosa is asking employees to take $231 million in compensation cuts to help balance the budget. He's calling for $110 million of service reductions, $105 million of fund transfers, and an $80 million public-private partnership for city parking garages to close the rest of the gap.

"The need for shared sacrifice is not just rhetoric," the mayor said. "It is reality."

Villaraigosa, a Democrat and former labor organizer, told the city's 50,000 workers that they face the choice between layoffs of up to 2,800 workers and taking pay cuts. His budget calls for reductions in labor costs, but it leaves the exact form open to negotiations with labor and the City Council.

He said the layoffs could be averted and city services maintained if each worker agreed to take off one unpaid hour a week, forego scheduled raises next year, and pay 2% more into their retirement plans.

Villaraigosa also plans to contract out the management and operation of six city parking garages in a public-private partnership modeled on P3 programs in Chicago.

City-owned lots and garages include 8,600 parking spaces, and Los Angeles has about $120 million of outstanding debt for parking facilities. The lots don't provide enough revenue to cover costs and debt service, which drains money from the general fund. His administration expects the city to net $80 million from the program this year.

Los Angeles would eliminate 1,000 open positions, reduce most department budgets, and consolidate small agencies to save $110 million under the mayor's plan.

Villaraigosa plans to reduce the capital expenditure program budget by 12.7% to $255 million. That doesn't include capital spending by enterprise departments, such as the city's airports or water and power utility.

The mayor's proposed $302 million of new general government borrowing includes $175 million of storm water general obligation bonds, $17.9 million of judgment obligation bonds, and $109 million of lease obligations. The city would also sell $677 million of revenue anticipation notes next year, up from $661 million in the current fiscal year. Los Angeles has about $3.3 billion of general fund debt outstanding.

The city is facing an austerity budget because the weak economy is reducing receipts in almost every category of revenue. Property taxes, the biggest revenue source, are forecast to decline 4% next year from the levels in the adopted fiscal 2008-2009 budget, while license, fee, and permit revenue, the second-biggest source of funds, falls 12%.

Los Angeles is also expecting steep declines in real estate transfer taxes, vehicle license fees, sales taxes, and interest revenue.

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