L.A. Reports City's Finances Worse than Previously Thought Due to COVID-19

LOS ANGELES (CNS) - City Administrative Officer Richard Llewellyn today issued a grim report on the city's financial forecast, which showed Los Angeles could lose as much as $600 million in revenue this year due to the COVID-19 pandemic.

“Based on the September receipts and other confirmed shortfalls that will be realized in the months ahead, our prior year-end revenue gap estimate of $200 million to $400 million has shifted upward by $200 million,'' Llewellyn said in his first-quarter financial status report for 2020-2021. “Our revised year-end revenue gap estimate range is now $400 million to $600 million.''

Llewellyn, whose office oversees a great portion of the city's finances, said in June when this fiscal year's budget was introduced that revenues for 2021 are currently difficult to forecast due to the pandemic.

The CAO said in his latest report that for every month that COVID-19 health protocols affect local businesses and city services, revenue projections will continue to fall short.

“Without federal assistance, it's clear that the budget impact of the COVID-19 pandemic will cause catastrophic service cuts,'' Alex Comisar, a spokesman for Mayor Eric Garcetti's office, told City News Service. “The mayor is addressing this shortfall with a variety of cost-saving measures and has directed departments to prepare for layoffs. But this report shows that we, along with cities and states across the country, need Washington to step up, and we need that help now.''

A federal stimulus package that could be coming to cities has been stalled in Congress and may not be authorized until after the Nov. 3 election.

“The magnitude of this revised year-end revenue gap cannot be understated,'' Llewellyn stated. “A $400 million revenue gap is equal to 6% 2020-21 budget and would exhaust all but $14 million of the city's total reserves, inclusive of the Reserve Fund, Unappropriated Balance Reserve for Mid-Year Adjustments, and Budget Stabilization Fund.''

The city's reserves entering the 2020-21 fiscal year were about $243 million in total, about 3.9% of the general fund budget.

This is still well below the city's aspirations of having 5% in reserves across the board, and lower than the almost 8% it had prior to the pandemic.

Llewllyn said no Los Angeles department should be spared in cutting spending to make up what the city will need to handle a possible financial reckoning.

“Absent increased or new sources of funds ... the city will only be able to address this revenue challenge by aggressively reducing costs and services in the coming months, using all available fiscal-restraint tools,'' Llewellyn stated.

Los Angeles also came in more than $195 million short of its revised expectation of $6.46 billion in revenue from last fiscal year, which ended in July.

City Controller Ron Galperin last week released a set of recommendations in his Preliminary Financial Report for Los Angeles to try to reduce as much of its projected losses as possible.

“The CAO's new revenue estimates for this year are in line with the projections my office made in April,'' Galperin said. “While we can all agreethat we're in for a tough period ahead, there are things that can be done to steady the situation.''

Galperin said that while tourism-related revenues have dropped, Los Angeles must work harder to collect from its other revenue streams and collaborate with stakeholders to prevent further spending increases.

Los Angeles could leverage its properties and special funds, as it owns hundreds of unused or underutilized properties and has billions of dollars in special funds. Policymakers should determine whether either can be used to improve the city's financial position and help local residents, Galperin stated.

Infrastructure programs could also be expanded to create jobs, including street and sidewalk repair and information technology modernization, he said.

Galperin also said the city's reserve funds must be replenished as soon as possible.

The controller said efforts should be concentrated in areas of Los Angeles most affected by COVID-19 and historically disadvantaged communities to achieve greater equity throughout the city.

Photo: Getty Images

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