LOS ANGELES — The Los Angeles economy is improving, but the city still anticipates a $242 million deficit for fiscal 2014-15, according to presentations made at the city's investor conference Wednesday at Universal Studios in Hollywood.
"We have a couple more difficult years, but the fundamentals are all there," City Administrative Officer Miguel Santana said in an interview. "The economy has continued to thrive, we have healthy reserve funds and the city has never pursued pension obligation bonds."
A similar deficit was anticipated for the $7.2 billion current fiscal year budget, but the city's finance team managed to carve that down partly because anticipated revenues exceeded projections by $116.7 million, according to the presentation.
City projections show deficits slowly declining each year to a projected $83 million in fiscal 2017-18, according to Santana's presentation.
If revenues continue to grow at the conservative 3% projected annually for the city, L.A. leaders said they envision a day when deficits aren't anticipated.
The city has $400 million of reserve funds totaling 8.2% of general funds, which is above the required 5%, Los Angeles Mayor Eric Garcetti said in his speech.
Santana said the smartest recommendation he has given city leaders was to not be the successor agency for the city's redevelopment agency.
Most California cities took on that responsibility when the state eliminated redevelopment in 2012.
The city has benefited from additional property tax revenue split among local governments after the agencies were shut without being responsible for any of the agency's liabilities, he said.
The city's finance team, lauded by Garcetti in his speech, has helped negotiate reductions in retiree health funds in addition to keeping wage increases flat.
Last year, the city raised the retirement age to 65 and created a new tier for future employees with decreased benefits. Existing employees are contributing higher amounts to their pension and retiree healthcare benefits.
The mayor will introduce a balanced budget, as he does every year, but his budget presentation is the beginning of the process, Santana said.
For his part, Garcetti said during his speech that he is bullish on the city.
He joked that when people ask how the city recruits good talent they just invite people to interview in January and February when it is snowing in places like Chicago and New York.
"But, I wasn't elected to take credit for what happens naturally, but to take action," Garcetti said. "I wanted to do two things: make City Hall work for the people, and also take action to move the economy forward."
His actions include a proposal to eliminate the gross receipts tax on businesses that brings in $400 million annually, but has been cited by businesses that have left the city as a factor for leaving, and to create what he calls a performance-based budget.
He has been hosting town hall meetings presenting this idea to constituents.
"This process doesn't just shave an equal amount off each budget to achieve savings," Garcetti said.
During the recession, he said the primary method for reducing deficits was to ask each department head to reduce their budget by a certain percentage. The mayor said he wants costs to be reduced in the future by focusing more on determining what services the city should be providing and funding them.
A thrust of his administration has also been to create a system that requires more accountability for city department heads.
After he took office in July, he began conducting interviews with the heads of all 37 of the city's departments.
"There were no metrics to judge if they were doing a good job, so we are now creating them," Garcetti said.
Several department heads have left since Garcetti took office. Among them are Geraldine Knatz, former head of the Port of Los Angeles, who retired in November, and Ron Nichols, head of the Los Angeles Department of Water and Power, who resigned at the end of January.
