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L.A. controller warns against using reserve fund to patch budget gap

January 26, 2010 |  1:35 pm
Los Angeles City Controller Wendy Greuel issued a new warning today about the city’s finances, saying the City Council would incur huge risks if it tries to patch a nearly $200-million budget gap by using the city's emergency reserve fund.

In a letter to Mayor Antonio Villaraigosa and the council, Greuel said a decision to deplete the reserve – which currently stands at $189 million -- would make it difficult for the city to borrow money to pay its ongoing bills. By dramatically shrinking the reserve fund, the city could wind up “increasing the cost of borrowing, or, worse yet, jeopardizing our ability to obtain the loan in the first place,” Greuel wrote.

The city issues Tax Revenue Anticipation Notes twice a year to ensure that it has enough cash to cover ongoing expenses.

The controller’s letter went out hours before the council went behind closed doors to discuss negotiations with various employee unions. On the table is a proposal  to eliminate 1,000 jobs by July 1, part of a larger effort to balance the budget.

The Coalition of L.A. City Unions, which represents roughly 22,000 workers, said in a letter today that the council does not have the authority to seek new concessions. City Administrative Officer Miguel Santana, the top budget adviser, disagreed.

-- David Zahniser at Los Angeles City Hall