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LA WATCHDOG - The City’s budget shortfalls worsened in June as voters rejected two tax increases. This was further compounded when the Los Angeles City Employment Retirement System lowered its investment return assumption and the City Council voted to place a measure on the November ballot to increase the charter mandated funding for the Department of Recreation and Parks.
The June primary ballot included a measure to increase the transient occupancy tax from 14% to 16% that would have provided the City with an additional $45 million. But 53% of the voters nixed this increase, much to the surprise of City Hall.
Last week, the Bureau of Street Lighting announced that 80% of voting property owners rejected a proposed $80 million increase in the Street Lighting Assessment. This raises the question of how the City will fund the repair and replacement of 60,000 streetlights, including solar powered street lights. The City is once again considering dumping this $200 million project on the Department of Water and Power and its Ratepayers.
These rejections sent a clear message to City Hall that voters will not be receptive to future tax increases. Maybe this is why the City is not placing any tax increases on the November ballot. Until recently, the City was considering new tax increases that would have raised hundreds of millions a year.
Last week, the Commissioners of the $27 billion Los Angeles City Employees’ Retirement System voted to lower the investment rate assumption to 6.75% from 7%, an action long overdue. This will require the City to increase its annual required contribution by over $100 million.
This raises the question of when will the Commissioners of the $34 billion Los Angeles Fire and Police Pensions lower its investment rate assumption.
The City Council also voted to place on the November ballot a measure to double the charter mandated funding for the Department of Recreation and Parks, from 0.0325% of the Assessed Value of the almost City’s 800,000 parcels to 0.065%. This increase will be phased in over the next ten years, which will require the City to determine where it will find $35 million next year to fund this obligation, assuming voters approve of this increase.
Overall, this is swing of $250 million, adding to the ever-increasing Structural Deficit which is expected to exceed $500 million in 2031. Maybe the fiscally irresponsible City Council will finally get the message that it is time to embrace real budget and financial reform. Otherwise, Angelenos will continue to reject future tax increases that are used to fund budget busting labor agreements and the City’s inefficient and bloated work force.
(Jack Humphreville writes the LA Watchdog column for CityWatch, where he covers city finances, utilities, and accountability at City Hall. He is President of the DWP Advocacy Committee, serves as the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and is a longtime Neighborhood Council Budget Advocate. With a sharp focus on fiscal responsibility and transparency, Jack brings an informed and independent voice to Los Angeles civic affairs. He can be reached at [email protected].)
