LOS ANGELES (CNS) - The Los Angeles City Council Tuesday prepared for the third allocation of funding for the Inside Safe initiative, while one council member continued to warn of an anticipated budget deficit in the 2024- 25 fiscal year.
Council members Tuesday voted 11-0 to note and file a communication from the chief legislative analyst that notified city leaders that a third transfer of $25 million to the Homeless Emergency Account is set to occur within the next two weeks.
Council members Monica Rodriguez, Hugo Soto-Martinez, Paul Krekorian and Imelda Padilla were absent during the vote.
Last year, the council and Mayor Karen Bass approved $250 million to fund the mayor's Inside Safe Initiative. An initial allocation of $65.7 million was approved, with the remaining balance placed in the Inside Safe Reserve Fund account.
If the HEA account is set to fall below $25 million, city officials notify one another with a 14-day notice and then request the city controller to refill the pot with an additional $25 million. This process will continue until the $184.3 million has been fully allocated to HEA.
After the HEA account was anticipated to fall below $25 million, a first transfer was completed on Nov. 30, 2023, and a second transfer was recently made on Feb. 27.
Prior to Tuesday's vote, Councilman Bob Blumenfield, who chairs the Budget, Innovation and Finance Committee, took a moment to "pause to level set for next year's budget."
He highlighted that the $250 million has funded Inside Safe Program and allowed the city to buy the Mayfair Hotel as a permanent interim site -- with plans to build a community clinic at the location.
"Inside Safe also availed more motels to act as interim sites, which have benefited all of us," Blumenfield said. "In my district, Inside Safe hotels have helped people at our most entrenched encampments come indoors after months of being offered tiny home shared housing and Bridge Home as different housing options."
The councilman stated that motels will be needed to build out the city's interim housing, yet hotels are expensive.
"In order to meet our (L.A.) Alliance settlement obligations we need to make sure that we continue to build more interim, permanent, modular, shared housing, and ADUs (accessory dwelling units)," Blumenfield said. "We need to build it all."
However, the city may have to chart a new path forward, the councilman noted, as there is a "real possibility" that the city may be below 5% in its reserve fund -- the account used to defend the city against unbudgeted or unforeseen events that may result in a budget deficit.
As of March 18, the city's reserve balance is $492 million, or 6.2% of the fiscal year (2023-24) General Fund revenue, according to city documents. The city has a policy that establishes the reserve fund must be kept at or above a 5% minimum.
The city had been able to build up the reserve up to 11% under the tenure of Krekorian, when he chaired the budget committee. That healthy reserve helped the city cover acquisition of Home Key sites, save the Skid Row Housing Trust properties and deal with other emergency expenses, Blumenfield said.
During Wednesday's budget committee, members are set to hear the Third (Mid-Year) Financial Status Report. For some time now, the CLA and the city administrative officer have warned of a budget shortfall in the 2024-25 fiscal year as a result of overspending and new labor contracts.
In January, the City Council approved a plan to potentially eliminate thousands of "non-critical" city positions that are currently vacant, in an effort to balance the budget. Vacant jobs designated as "critical" or "high- priority" would not be affected, such as positions in maintaining the health and safety of residents.
"The challenges with revenues and rising costs is very real," Blumenfield said. "The city will be looking very closely at every expense to see where we can save and be more impactful with the investments that we're making."
He added that the city may have to cut down on the number of motels it was set on acquiring and begin a path to offload General Fund expenses for federal and state grants.
In efforts to prepare the city and address key issues ahead of the 2028 Olympic and Paralympic Games, and the 2026 FIFA World Cup, Bass and council members have traveled to the state and federal capitals to lobby for more funding.
Blumenfield also emphasized the need to offset services related to homelessness by getting the county of L.A. to step up and cover them. He also encouraged audits to help the city "gain greater clarity" into the gaps in the system.
In prior months, some council members have expressed frustration with the lack of understanding regarding what services the city should be paying versus what the county should be paying.
Additionally, there has been a growing tension between the city and the Los Angeles Homeless Services Authority, the city-county entity tasked with addressing homelessness across the L.A. region.
"It's where our dollars are going and what we're actually getting out of it," Blumenfield said. "We know LAHSA's budget is very opaque."
The councilman emphasized the city will need to look at developing a strategic plan on homelessness and three-year housing plan, as well to meet future deadlines.
"Spending money like it's an emergency is not indefinitely sustainable," Blumenfield said. "This council as a body will need to continue setting policies, especially as we look to transition the various pilot programs we have."