Los Angeles Hits the Right Note

Miguel Santana, Los Angeles’ City Administrative Officer, talks about the city's upcoming $1.44 billion sale of tax and revenue anticipation notes on June 21. He highlight's the city's steady economic progress and looks forward to seeing substantial savings coming from the note deal.

SANTANA: What we do is after the budget is approved, we do a five-year forecast. We evaluate how expenditures are matching up to revenues. We assume an average growth rate of about three point three percent in revenue growth which is what it generally has been over the last 20 years. We evaluate what obligations we have on the expenditure side to ensure that we're projecting out accurately. What we could tell you is that over the next five years, while we still anticipate deficits. They hover initially around 100 million. Then, by the end of the next five years, pretty much are eliminated.

So what this represents is the city has made steady progress and is strengthening its financial standing and is moving forward on eliminating the structural deficit. When the crisis first hit the city, we took on pension reform in all of our three systems and that meant a couple of things. The first is that we adopted new pension tiers for each one of our systems, the water, and police system, the sworn as well as civilian on the city side. While there was some initial challenge to those reforms, all of those challenges have been settled.

So any new employee that is hired, now falls under the new pension system that's been approved by the council. Beyond that, our employees are now paying for retiree health care. Civilians are paying four percent of their salary for a benefit that we used to receive for free and sworn are paying about two percent. Together, with those reforms, as well as changes that the pension systems have adopted themselves, we're actually seeing our pension liabilities start to stabilize. There was a period in time that they were dramatically growing. Now as we project out in the future, they're plateauing.

When the crisis first hit, we were in a situation where we couldn't meet any of our financial policies. We have a policy, for example, to set aside one percent of our general fund toward capital improvements. We have now exceeded that. We're now nearly 90 million dollars investing in our capital infrastructure exceeding our one percent to one point six percent. We had a policy of having a minimum reserve fund that represented five percent of the general fund. When you combined all of our reserves, we far exceed it now well above eight percent of the overall reserves close to 400 million dollars.

We also had a policy pertaining to the use of one-time revenue. Our objective has been to spend one-time revenue on one-time activities. Initially, we had to rely on one-time revenue to meet some of our structural deficit. This year we're actually sticking to that policy, one-time revenue is going to fund one-time costs. When you think about all of our policies, they were -- During the crisis, they were certainly very difficult to meet. Today we're actually meeting and exceeding every one of them.