L.A. controller warns that city could exhaust general fund next month [Updated]

Los Angeles Controller Wendy Greuel on Monday said she expects the city’s general fund “will be out of money" by May 5 and that L.A. will likely deplete its reserve funds and be in the red by June 30.

Greuel alerted Mayor Antonio Villaraigosa and the City Council of the city’s dire financial situation after the head of the Department of Water and Power stated he would oppose sending $73.5 million in utility revenue to the city treasury. Interim General Manager S. David Freeman said the council’s vote to block a proposed electricity rate hike last week threatens to put the utility in a deficit.

Greuel urged the council and mayor to immediately tap the city’s reserve funds so that city has enough cash to cover payroll.

“This is the most urgent fiscal crisis that the city has faced in recent history, and it is imperative that you act now. That is why I am asking you to immediately transfer $90 million from the city’s reserve fund to the general fund so I can continue to pay the city’s bills, and to ensure the fiscal solvency of the city,” Greuel said.

Councilman Greig Smith said the decision by the DWP had put the city in a “very risky” situation.

“Our reserve fund was already very marginal to begin with.  This could push it over the edge,” Smith said. “That would mean we would have nothing in the tank on June 30,” at the end of the fiscal year.
 
Smith said he could not envision a scenario in which the city could recoup that much money before July 1. Even additional layoffs could not be processed that quickly.
 

“The question is what are we going to do next? That I don’t know,” Smith said.

[Updated at 2:43 p.m.: An earlier version of this post incorrectly stated that the general fund would be depleted by May 10. The fund is expected to run out by May 5.]

-- Phil Willon and Maeve Reston at Los Angeles City Hall

Photo: Los Angeles Times

Comments

[My opinon means nothing]

I find it amazing that an utility can hold a city hostage like this. This is blackmail.

[Lee]

“The question is what are we going to do next? That I don’t know,” Smith said.

I guess once the reserves are gone, you'll be DECLARING BANKRUPTCY!

[Maddmax]

Why doesn't the Federal Government give some of that funny money they are giving to Wall Street and Iraq/Afganistan, and give it to the city and states that need it??? Federal Government seems to be more interested in promoting World War 3 then trying to save their own people. Time to replace it with something that works.

[Tom Marier]

This is what happens when you just keeping spending and spending like there's no tomorrow.

[Ervin O. Raab]

Seems like the Mayor of Los Angeles Antonio Villaraigosa solution to everything is to raise taxes...maybe a Subway to the Sea when we really need one(rolls eyes)?

Now we have nearly a 10% tax on EVERYTHING, after were paying 40-50 payroll taxes...

NICE!!!

Ervin Raab

[jbduron]

Now with this amount of pressure being applied by all the elected officials, one can only imagine the amount of political compaign contributions by business interests and IBEW Local 18 are involed for this QUID PRO QUO.
With out only looking at employee payroll of the lowest paid unions in the city, these highest paid elected officials in the nation the Corrupt Political Machine has to cut spending on all of its pet pork barrel projects in each council district.

[pasadena jag]

Oh great! Mayor Antonio Villaraigosa who couldn't pass the bar four times is leading the city into oblivion. You elected this political hack. Good luck!

[H. Craig Bradley]

ROAD TO RUIN
>

Well Councilman Smith, you should have thought of that (LA running out of money in reserve fund) a year ago when you saw the "writing on the wall". Water and Power must continue operations as normal, including periodic upgrades, or the reliable source of electicity could deterorate.
>

If that happens, you risk becoming an industrial machine on the scale of the Republic of Botswana in Africa where one big thunderstorm knocks-out all power for days. Sure, hospitals and grocery stores have their own emergency generators, but not most businesses or residences. If you start diverting revenue from LA W&P to the General fund, then pretty soon, this is the new policy road you are on, by default.
>

So, consider other options before May 10, including an extended Cinco de Mayo Holiday (Furlough) for all non- emergency workers from May 11- June 29, 2010. There are no pleasant (easy) fiscal options left for heavily indebted states or cities in America anymore. We are all bankrupt. As it is, future taxes will have to go way up to pay for it.

[Katarina]

Take the money from the DWP. The holding the city hostage to rate hikes is criminal

[Ryan]

Like no one saw that coming? "Even additional layoffs could not be processed that quickly." Which is why they should have been laid off earlier.

[blah]

if the city would stop wasting funds on tryin to close marijuana dispenseries and taxe them like they should they wouldnt have this problem.... stupid old hacks get out of politics an make way for younger people. retire already!!!!

[scu79]

What's the big deal with a measly 28% raise in DPW electric rates? Just think how good you all will feel.

[Rick]

When homeowners can no longer pay the mortgage or property taxes they are removed from the property and it is then managed by the bank. The same should hold true for those in charge of governments. In this case a special election should take place to remove the derelicts from office.

[KF Stewart]

You juveniles in California who want and want without having the ability or responsibility to pay for it , including your liberal governor and mayor, deserve what you get. The problem is you negatively affect the rest of the USA. Grow up and get responsible fast so we don't have to bail you out.

[Hoot]

Let's begin with paycuts at DWP.

[FEDUPTAXPAYER]

The time to trim the bloated union payroll and cut retirement benfits is long past. Quit screwing around Tony and do what needs to be done.

[Two Cents]

Gotta love the DWP strong arm tactics...first, they are given generous raises, bonuses, etc., by the City Council...then they turn around and want to raise rates. Now, they're threatening to mess with the City because they don't get their way...and you residents of LA complain about the Police and Fire Department unions tactics?

[Alvin]

I suggest that we urge Angelenos to donate $10 per person (those who earn more should donate more)..

[ev]

Sounds like a spending problem, not a revenue one. Fact is the City shouldn't be using the LADWP as a revenue source, it means the residents are paying more in utility rates than they should. The fleecing of the American taxpayer is alive and well in the City of Angels. Why doesn't the LADWP stop sending money to the city, use that money to pay for the renewable power investment, and not raise rates instead. Makes too much sense?

[Jwm_in_sb]

What a bunch of morons. Yes, lets extrapolate budget revenues based on a housing bubble and continue to hope that we can continue to sell bonds to paper over the short fall in tax revenues.

I applied for a job at LAWA two years ago. Got an interview. Whole process to several months. 18 months ago these geniuses had the said same budget problem and what does the mayor do instead of laying people off? Oh, he transfers the losers to the Enterprise funds instead because you know, they actually have to make money and be accountable. Guess what, I didn't get that job despite having a high score.

You clowns in Govt....your days are numbered. No more debt sales for you without high interest rates.

[gunee]

layoff the thousands of completely useless money grabbing whore union workers immediately.
hire scabs full time, dump the unions completely, they are the #1 reason for the city, (and State) financial ruin.

[mike]

I'm new to LA, only been here since November of 2009. Can someone explain why the DWP is required to send anything to the city's general fund? I thought they were supposed to act as an independent utility and not a slush fund for the city council to tap anytime they needed extra money.

[Valley Girl]

So now what, Mayor Tony?????? You'd better talk to your "hand-picked" board members at the DWP. What a racket you all have going on. And all at the expense of the taxpayers.

[Carl Gonzalez]

What a surprisse. Big government does not work. Eventually you run out of other people's money. I am tapped out as much as the next tax payer.

[Carl Gonzalez]

Antonio Villarigosa should do what Obama and his team are doing, strong arm and bully big business for more money. Leave us little guys alone.