Breaking: L.A. City To Run Out Of Money By May 5 (Updated)
Los Angeles City Controller Wendy Greuel said Monday that the city will be run out of money by May 5 partly as a result of the Department of Water and Power's refusal to hand over a promised payment to the general fund of $73 million.
"The question I have been asked most often during the budget crisis is, 'When will the city run out of money?'" she states. "Unfortunately, we finally have the answer. Without the full power revenue transfer I now project that if the city remains on its current path, the city's general fund will be out of money - in fact it will be negative $10 million - on May 5th, 2010."
Greuel asked the City Council to transfer $90 million from the city's reserve funds to the general fund or else face the prospect of having employees unpaid. "This is the most urgent fiscal crisis that the city has faced in recent history, and it is imperative that you act now," she stated.
"Without the full power revenue transfer, the city might not have enough money to balance the budget and the reserve fund balance could be anywhere from $0 to negative $43 million on June 30th, 2010, which would leave us no room to cover any additional shortfalls or unexpected emergencies," Greuel added.
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In a letter to Greuel Monday DWP interim general manager S. David Freeman said the promised $73 million was not going to happen because the department could not state a "declaration of surplus" necessary to give the city excess cash.
The lack of surplus is tied to the City Council's rejection last week of a proposed DWP rate hike for electricity customers.
The city faces a budget deficit of nearly $700 million come July 1. City Hall knew about possible budget problems as early as 2007 and not only failed to take action but actually expanded L.A.'s workforce, gave out raises to DWP employees as recently as late 2009, and padded retirement benefits.
Mayor Antonio Villaraigosa then proposed massive DWP rate hikes as high as 28 percent for some customers as a way to reduce the city's dependence on coal-based power. However, as the City Council resisted the plan, the mayor warned that the money was actually needed so the cash-strapped city could get through the crisis without declaring bankruptcy (a word he had boasted was not in his vocabulary).
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