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L.A.'s next mayor will face stark budget problems

Whoever is elected will have to decide whether to seek new revenues, new employee concessions or new ways to run vital programs.

February 24, 2013|By David Zahniser, Jessica Garrison and Ralph Vartabedian, Los Angeles Times
  • "Every place I used to go as a kid, it's tired; it's old; it's beaten up," says Brad Smith, who out of frustration made a losing run for City Council two years ago. He's seen here at a Granada Hills pool and park that has fallen into disrepair. "Other cities manage to maintain older facilities. I'm not really certain why Los Angeles can't do a better job."
"Every place I used to go as a kid, it's tired; it's old;… (Michael Robinson Chavez,…)

Brad Smith used to consider himself a Los Angeles booster. But lately, the 48-year-old grows melancholy when he drives around the San Fernando Valley where he grew up.

The parks look worn-out. The sidewalks are broken. Street trees go untended. And don't even get him started on the sorry state of the Granada Hills pool.

"Every place I used to go as a kid, it's tired, it's old, it's beaten up," said Smith, a project manager at an engineering firm who made a losing run for City Council two years ago out of frustration. "Other cities manage to maintain older facilities. I'm not really certain why Los Angeles can't do a better job."

As Los Angeles voters head to the polls to pick a successor to Mayor Antonio Villaraigosa, Smith's question, or some version of it, is being asked over and over again in neighborhoods across the city.

Here's the short answer: To stay afloat financially, the city cut hundreds of millions of dollars out of everyday services and ongoing maintenance.

But the deeper causes are more complex, and include costly, ill-timed spending commitments at City Hall and a failure to adjust to the region's weakening economic foundation.

A Times review of the city's finances found:

• Just before the recession hit, city leaders agreed to add hundreds of police officers to the payroll and give much of the city's civilian workforce 25% raises over five years. The twin decisions — supported by mayoral candidates Eric Garcetti, Jan Perry and Wendy Greuel — added major stress to the budget as the downturn began.

• Over the next five years, officials slashed 5,300 positions, or nearly 15% of the city workforce, and scaled back services ranging from sidewalk repairs to 911 rescue units. Despite the cuts and additional concessions by employee unions, the city's salary costs remain the same as when the economic crisis began: $2.7 billion a year.

• The city faces even more service cuts if it fails to achieve what critics say are optimistic predictions of pension investment returns in coming years.

The next mayor will have to confront how and whether to restore services and keep police staffing at a historic high. Paying for it all will require either new revenues, or new concessions from city employees, or new approaches to running vital city programs.

The top mayoral candidates tend to sidestep specifics on these questions, describing "growing the economy" as their primary solution. Other city leaders are hoping for passage a half-cent sales tax increase. That tax is warranted after so many tough decisions, said Miguel Santana, the top budget official at City Hall.

"We can see the light at the end of the tunnel," he said.

Community activists say the next mayor needs to break the cycle of decreasing services and raising fees, fines and taxes to offset rising personnel costs. "What the city has done for the last five years is ... tread water," said San Pedro resident Doug Epperhart, a city commissioner overseeing Los Angeles' network of neighborhood councils.

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Underlying Los Angeles' current troubles, according to many economists, are well-documented, long-term shifts in the region's economy.

After half a century as one of the nation's wealthiest and most technologically important cities, the Los Angeles area began to falter after the end of the Cold War. Since 1990, the nation's total employment has grown 23%, while the number of local jobs has shrunk 7%, according to the UCLA Anderson Forecast, which tracks economic trends.

The situation appears to have worsened recently, UCLA economist William Yu said. The great recession hit Los Angeles especially hard and since then, its recovery has been weaker. "The economy is not healthy at all," Yu added.

Over the past two decades, Los Angeles lost almost every sector that mattered to the middle class: automobiles, steel, shipbuilding and, of course, aerospace. In all, 56% of manufacturing jobs, or nearly half a million positions, have disappeared.

The change is reflected in income statistics for that period. Nationally, personal income has increased by 2.4% per year, adjusted for inflation. Locally, it grew at half that rate.

As long as the city's economy was growing strongly, it was a lot easier for City Hall to stay in the black. From 1980 to 1990, the city's budget, adjusted for inflation, rose 4.8% on a compounded annual basis, according to figures compiled by The Times. But between 1990 and 2010, the budget was increasing by 1.2% annually.

Some city officials and municipal union leaders continue to believe the economy is fundamentally strong. Villaraigosa spokesman Peter Sanders said the decrease in manufacturing in Los Angeles has coincided with similar declines nationwide. One strong spot, he said, is Los Angeles' fashion and apparel industries. "We've focused on developing a diverse economy that will be able to withstand the ebbs and flow of economy," Sanders added.

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