LOS ANGELES — Los Angeles revenues are forecast to be $170 million less than anticipated in the fiscal 2015-16 budget, according to the city's controller.
The city may have to borrow and/or transfer funds from its reserve accounts in order to meet its obligations, said Controller Ron Galperin.
"Though there may be many competing demands on the treasury in the coming months, we should proceed carefully in order to ensure that we are both fulfilling our commitments and continuing to maintain healthy reserves," he said in a prepared statement.
Galperin released his forecast and the city's fiscal year 2014-15 comprehensive annual financial report on the heels of the mid-year financial status report produced by City Administrative Officer Miguel Santana.
Galperin's financial forecast predicts that General Fund receipts for FY 2015-16 will come in at $5.2 billion, up to $169.7 million less than anticipated by the city budget the City Council adopted in May 2015. The total budget — excluding the City's three proprietary departments — is $8.6 billion, including special funds, debt service and other expenses.
The projected General Fund revenue shortfall is largely the result of lower than expected revenues from "property tax in-lieu of sales tax" receipts, money the city receives from the State of California under a decade-old mechanism affecting state and local finances, according to Galperin's report.
The City is expected to receive $36.7 million this year from that revenue source, which is $90.6 million less than what it expected to receive. However, $63.6 million of that amount is expected to be remitted to the city by the State in fiscal year 2016-17.
The CAO projected a revenue shortfall of $119 million along with recommendations to the city about how to close the gap. But Galperin said his forecast projects the shortfall will be roughly $50 million more.
Los Angeles Mayor Eric Garcetti is due to present his fiscal year 2016-17 budget in April.
The controller prepares its annual Financial Forecast Report to help guide policymakers as they prepare the city's budget, Galperin said.
While revenue receipts are below projections, some revenue sources including department license permits, fees and fines are currently ahead of plan, according to a CAO spokesman.
Santana recommended the City Council make $114.3 million in appropriations, department transfers, and other budgetary adjustments to close the gap.
The reserve fund balance remains above its policy threshold of 5% at 7.06%, and the CAO's office has identified potential solutions to ensure the balance remains above 5% even if it must be used to offset the known revenue shortfalls, according to the CAO's report.
The city's CAFR also now includes pension liabilities on the city's balance sheet for the first time.
"This is an important step toward increasing transparency with respect to the City's finances," Galperin said. "The numbers we're reporting this year more accurately reflect the City's financial reality."
The city's liabilities grew to $35 billion in fiscal 2014-15 from $26.5 billion the previous year, because of the inclusion of pension liabilities, Galperin said.