Editor’s Note: City Controller Wendy Greuel released a grim city economic forecast for the next fiscal year (3-1-11 2011-12 City Economic Forecast.pdf) and called on the Mayor and City Council to act quickly to take dramatic steps to reduce spending, not one-time temporary solutions. She warned that “city government will look dramatically different in five years, both in its size and scope of the services provided.” Here is her press release:
CITY CONTROLLER WENDY GREUEL RELEASES CITY’S ECONOMIC FORECAST FOR 2011-2012
Local Unemployment Projected to Drop to 11.7%. City’s General Fund Revenues To Be the Lowest Since 2006-07
With the City of Los Angeles facing a $350 million budget deficit next year, the City’s chief accountant, City Controller Wendy Greuel, released the economic forecast for the City of Los Angeles for the upcoming fiscal year 2010-11.
“I’m pleased that our local unemployment rate is projected to drop from 12.4% to 11.7%, however there are still far too many Angelenos out of work and we project that the City’s economic growth with be slow and sluggish in the coming year,” said City Controller Greuel. “Overall, we expect the City to receive $6.336 billion in revenue next year, which is $130 million less than the $6.466 billion the City is expected to receive during the current fiscal year. Additionally, the City’s General Fund is projected to receive $4.25 billion in revenues, a decrease of $126 million since 2006-07.”
The Controller provides this economic forecast to the Mayor and City Council each year so they can have all of the relevant fiscal information as they create the City’s budget for the following year. Every year the Controller meets with leading local economists, reviews the economic forecasts of UCLA, the State Department of Finance, the State Legislative Analyst Office and the Los Angeles County Economic Development Corporation to compile a projected economic forecast for the coming year.
“The Mayor and City Council cannot – and should not – count on an increase in tax revenue to help balance the City’s massive budget deficit for next year,” said City Controller Greuel. “While we anticipate tax revenue for the current year to be dramatically lower in almost every category, we project that 4 of the 7 tax revenue streams will actually increase next year. Unfortunately the anticipated decrease in property tax will outweigh any other revenue increase.”
With the City already facing a $54 million budget deficit this year and a projected $350 million deficit next year, the Controller urged the Mayor and City Council to act quickly, but strategically as they make the necessary cuts to balance the City’s budget.
“I know that the cuts that the Mayor and City Council will be making in the coming weeks and months will be difficult and drastic. City government will look dramatically different in five years, both in its size and scope of the services provided,” said City Controller Greuel. “The City needs to first identify which specific core functions it plans on providing to Angelenos and then shift our resources to meet those needs, not the other way around. For instance, furloughing or laying off employees in revenue generating positions seems counter-productive as the City explores opportunities to generate additional revenue. The services provided by City government should not be driven by what positions employees were able to transfer into, but by a clear policy on the City’s priorities given the current – and looming – budget deficits.”
Some of the highlights of the report include:
· For fiscal year 2011-12, the Controller anticipates that property tax receipts are expected to decrease by $24 million.
· The Controller also projects that business tax and licenses permits and fess will decrease, while sales tax, utility users tax and transient occupancy tax will increase.
· Additionally, for the fiscal year 2011-12, the Controller projects that the City will receive a decrease in various transfers from other funds, including Special Parking Revenue Fund – $10 million, Power Revenue Fund – $4.8 million and Telecommunications Development Account – $4 million.
· The Controller anticipates the City needing to borrow $450 million in Tax and Revenue Anticipation Notes (TRANs) next year to cover cash flow.
· The City will be required to pay $628 million in debt service next year.