LA WATCHDOG - Over the next four years, the growth in City expenditures is now projected to exceed revenues by $372 million, an 80% increase from the June 2011 General Fund Budget Outlook of only $206 million.
The cumulative deficit over this same period is expected to approach $1.4 billion, a 50% increase from the June 2011 estimated cumulative budget gap of slightly more than $900 million.
Now the Mayor, the Controller, and Wesson led City Council will say this divergence in expenditures and revenues explains the City’s “Structural Deficit.” But in reality, stripping aside all the political baloney and rhetoric, this disastrous scenario of accelerating losses is a high speed fiscal train wreck that threatens the City’s very solvency and its ability to deliver core services, including public safety.
And these projections do not even include adequate funding for the repair and maintenance of our deteriorating infrastructure such as our lunar cratered streets, our crumbing sidewalks and curbs, our overgrown and often closed parks, and our Stone Age computer systems.
Nor do these numbers provide for the proper funding of the City’s two pension plans that have an unfunded liability approaching $10 billion, and that assumes overly optimistic returns on their investment portfolio.
Underlying this high speed fiscal train wreck is the four year increase in personnel costs of $828 million, including a $350 million bump in employee compensation, $338 million in higher contributions to the City’s two underfunded pension plans (including an incredible $266 million to the Fire and Police Pension Plans), almost $100 million more for very generous medical benefits, and more than $40 million in higher workers’ compensation expense.
At the same time, General Fund revenues are only increasing $504 million. And this projection may be an overly optimistic given the sorry shape of the City’s business unfriendly economy.
In his thoughtful and constructive April 6 report (“Four Year Budget Outlook and Update to the Three-Year Plan to Fiscal Sustainability”), Miguel Santana, the City Administrative Officer, and his staff outlined a balanced plan to achieve fiscal sustainability over the next four years by eliminating employee raises, increasing employees’ share of their healthcare premium by 10%, and increasing the documentary transfer and parking taxes.
The proposed doubling of documentary tax to $9.00 for every $1,000 of value would generate an additional $100 million in on-going revenues. So upon the sale of a $500,000 home, the owners would be required to pay the City $4,500, up from $2,250.
Unfortunately, this new rate would be triple Santa Monica’s rate and more than eight times the County’s default rate.
As for the parking tax, an increase from 10% to 15% would raise an estimated $40 million a year, a rate that is higher than the surrounding jurisdictions, but certainly not over the top like the documentary transfer tax.
One interesting question is whether the City will attempt to “securitize” parking revenues, another Chicago style rip off where revenues are accelerated into the present at the expense of the future. It is very similar to deferring expenses, such as police overtime and civilian raises, once again benefitting the present, the future be damned.
But the odds of these two tax increases are slim because Angelenos do not trust the fiscally irresponsible Mayor, Controller, and members of the City Council who gave away the store to the campaign funding municipal union bosses.
And, as such, we are not prepared to reward bad behavior with new tax increases unless we have absolute assurances that the City is prepared to renounce its evil ways and engage in real structural reform of its finances and operations.
And this starts with a “Live Within Its Means” charter amendment that mandates that City develop and adhere to a Five Year Financial Plan that calls for multiyear balanced budgets based on Generally Accepted Accounting Principles, that funds the repair and maintenance of our failing infrastructure over the next ten years, that reins in the out of control increases in salaries, benefits, and pensions, and that requires designated funding to cover any increases in spending (such as increases in wages or benefits) or decreases in revenues (such as the repeal of the gross receipts tax on businesses).
So are the candidates for Mayor, Controller, City Attorney, and City Council willing to endorse true budget and fiscal reform to save the City? Or are our Elected Elite willing to allow the City to go broke by pandering to the vociferous, campaign funding union bosses?
We have eleven months to find out.
(Jack Humphreville writes LA Watchdog for CityWatch He is the President of the DWP Advocacy Committee and the Ratepayer Advocate for the Greater Wilshire Neighborhood Council. Humphreville is the publisher of the Recycler -- www.recycler.com. He can be reached at: [email protected]) –cw
Tags: Jack Humphreville, LA Watchdog, General Fund, City Budget, Los Angeles, City Council, City Hall
CityWatch
Vol 10 Issue 29
Pub: Apr 10, 2012
