L.A. mayor boasts of city’s economic strength in budget reveal


Los Angeles Mayor Eric Garcetti said the city’s efforts to grow its economy have created the fiscal strength that allowed him to propose a balanced $10.6 billion budget for fiscal 2020.

The mayor emphasized funding for infrastructure and homeless programs in his budget unveil as well as discussing the city’s economic strengths.

“Today Los Angeles is financially strong — but don’t take it from me, both Fitch Ratings and Kroll [Bond Rating Agency] both upgraded us,” said Los Angeles Mayor Eric Garcetti.

Brian Tumulty, The Bond Buyer

“When I was a councilman in 2008, I swore I would never be there again where we were forced to lay off employees and do budget cuts,” Garcetti said during a budget press conferences Thursday. “Today Los Angeles is financially strong — but don’t take it from me, both Fitch Ratings and Kroll [Bond Rating Agency] both upgraded us.”

The city put a several-year structural budget deficit, partly a hangover from the 2008 recession, behind it over the last few years.

“In the last five years, Los Angeles has outpaced New York, Chicago and the country as a whole in economic growth,” Garcetti said.

The mayor referenced the recent analysis by Bloomberg that found that the city’s economy is outperforming New York and Chicago and the rest of the U.S. on the basis of several economic indicators including home prices, global trade and transportation.

For the first time since the recession, reserves exceed 8% at $399 million, which makes Los Angeles fiscally resilient and better able to weather an economic downturn, according to city staff.

The city did not have an economic stabilization fund prior to the 2008 recession, according to city staff.

The proposed budget calls for $940 million to improve and update infrastructure, a $140 million increase from the prior year. That includes $348 million for street repairs and maintenance, and $117 million for Vision Zero and traffic and pedestrian safety projects and $38 million in Measure W funds going toward clean water infrastructure, and $3 million for the City’s innovative Cool Pavement Program and investments in tree planting.

It allocated $457 million in programs for the homeless including permanent housing, temporary shelter and services. The budget anticipates spending $36 million of roughly $86 million in Homeless Emergency Aid Program funds received from the state last year. The city plans to spend $281 million from Prop. HHH bond measure approved in 2017 on 27 new permanent supportive housing and affordable housing projects providing more than 2,126 units.

The mayor said that 7,000 units of such housing are currently in various states of development and should begin opening in the next two years.

The local economy is approaching its 10th year of extended growth since the last recession, according to the city budget, which also reported unemployment declined slightly to 4.6% in February over last year.

The mayor’s proposed budget assumes total general fund revenues of $6.53 billion, up from $6.19 billion in general fund revenues in the 2018-19 budget.

The city budget assumes stable growth at the 3.6% level in coming years.

“The city will continue to strengthen its position,” Garcetti said.

He attributed the city’s success in achieving a structurally balanced budget to efforts to keep costs down and grow the economy.

He pointed to the $14 billion in projects at the Los Angeles International Airport, which he said has a multiplier effect.

“We have done responsible budgeting in terms of what we pay our people and implemented responsible cost controls,” Garcetti said. “We have changed how we hire people. These things pay off over time.”

Pension costs, raised as concerns in both the Fitch and Kroll reports, eat up one-fifth of the city’s general fund budget.

Garcetti said he is concerned about the level at which pensions are unfunded despite pension reform enacted several years ago that doubled the amount that employees contribute to their pension funds.

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