Villaraigosa's Fiscal Folly
In a remarkable lesson in hindsight versus foresight among the city’s power brokers, Mayor Antonio Villaraigosa and the 15-member City Council are mired in a panicky fiscal disaster, while just three blocks away, the equally influential five-member L.A. County Board of Supervisors is placidly reviewing its untouched rainy-day fund and solid fiscal health.
A nervous, ashen-faced Villaraigosa in 2009 faces an almost overnight $300 million to $400 million deficit that has observers wagging about his administration’s bizarre decision several weeks ago to lay off just one unnamed worker from a 48,000-employee force, and his continuing penchant even during Wall Street’s meltdown for taking out-of-town trips to attend fund-raisers — for himself.
On October 1, without discussion, the City Council voted to raise money selling “surplus city property” — abandoned fire stations, old animal shelters and empty parcels — that the council had stubbornly refused to sell because individual council members wanted to control half of the money instead of letting it go to the General Fund. Now, taxpayers, who actually own these properties, will lose millions selling badly devalued land the city was urged to sell during the housing bubble.
Angry City Council gadflies estimate that Los Angeles City Hall is spending $800,000 an hour to run its departments and services, even as city officials prepare to revive ideas such as charging homeowners to fix the public sidewalks themselves — often at a cost of up to $8,000 per home.
Against this backdrop, Villaraigosa’s fiscal policies could not offer a greater contrast to what’s unfolding just west of City Hall. There, in the relatively obscure County Hall of Administration — where five elected supervisors oversee a $22 billion budget that pays for such big-ticket items as indigent health care, food stamps and welfare, among the nation’s biggest sheriff and fire departments, huge jail and public hospital systems, property tax assessing and elections — all is calm.
Chief Executive Officer Bill Fujioka, the top fiscal boss for L.A. County, who left the same city job under Villaraigosa and recently started work for the Board of Supervisors, explains that, “Because the county [board] requires strict compliance with its own financial policies, we saved some of the money from previous increases in property taxes and socked it away like your aunt might do.”
Key among the county’s efforts has been a strict, bipartisan push by the three Democrats, Zev Yaroslavsky, Gloria Molina and Yvonne Burke, and two Republicans, Mike Antonovich and Don Knabe, to continuously set aside county revenue, regardless of economic booms or busts. That money is untouched, creating a permanent rainy-day fund. In addition, the board has embraced a policy against spending “temporary” revenue on permanent programs or long-term costs. Instead, temporary money goes to one-time costs like constructing a building.
No similar effort is under way at City Hall, where Villaraigosa a year ago surprised some economic experts by very quickly agreeing to unexpectedly large, multiple-year raises for 22,000 city employees, funded in large part by city revenues from a housing boom that was already dead.
Those raises are taking a massive bite that will reach $255 million in a few years. Moreover, the raises, which were intended to bring the mayor labor peace, are now working strategically against him, as he was warned, inspiring a probable springtime revolt by police and fire unions — who want the same generous deals.
Fujioka, who was the city’s finance czar for more than a decade before leaving, says simply, “If I went back to the city, I would start from the ground up.”
There’s little chance of that, with City Hall in disaster mode. In this side-by-side lesson, the county board is the ant from Aesop’s Fables, who saved ears of corn for the winter, while the dung beetle — that would be Villaraigosa and the council, led by President Eric Garcetti — busied itself but didn’t set aside anything for bad times, then starved when all that nutritious dung — the housing-bubble-related revenues — vanished.
Amid the Wall Street crisis, Villaraigosa has announced a fast-track effort to prioritize the most crucial spending to protect such items as garbage pickup and policing, and begin cutting nonessential services.
At the Hall of Administration, the supervisors are undertaking the same basic task without any sense of panic, in case the economy gets far more sour in the coming months. By contrast, at City Hall, the mayor has publicly conceded, there’s no time left.
Despite all this, on Thursday, October 8, the mayor was not focused on these fiscal troubles. Instead, he was pursuing his usual flurry of PR events, photo-ops, out-of-state travel and fund-raising, as delineated by L.A. Weekly’s Patrick McDonald in his September 11, 2008, investigative cover story, “The All-About-Me Mayor: Antonio Villaraigosa’s Frenetic Self-Promotion Leaves Little Time for His Job.”
As huge U.S. companies teetered, the markets plunged again, and Governor Arnold Schwarzenegger and state leaders considered calling the 120-member legislature to a special session to avert their own statehouse disaster, City News Service in Los Angeles reported on October 8:
Villaraigosa Trip — Mayor Antonio Villaraigosa is scheduled to make a whirlwind trip to San Antonio today for a re-election fund-raiser, then return to Los Angeles tonight.
Villaraigosa is scheduled to attend a morning news conference on improving South Los Angeles, then fly to San Antonio in his second out-of-state trip in two weeks. Villaraigosa was in Palm Beach, Fla., last week to attend the U.S. Conference of Mayors 2008 fall leadership meeting.
The $100 to $1,000 per person fund-raiser is hosted by former Housing and Urban Development Secretary Henry Cisneros and AT&T executive John T. Montford, a former Texas state senator.
That news was preceded a week earlier by a Los Angeles Daily News report about City Hall’s fire sale of public land, which began with the words, “If you’re in the market for some good deals on fire stations, animal shelters and vacant land, the city of Los Angeles would like to talk.”
The San Fernando Valley–based daily called City Hall’s move, in a devastated real estate market with still-collapsing land values, “a key feature of Mayor Antonio Villaraigosa’s bid to balance the city’s $7.1 billion budget.” But now, the $14 million to $22 million Villaraigosa expects to raise — if the surplus land is sold before values tank further — looks like a drop in the bucket.
On Saturday, Villaraigosa showed up in a pink shirt, sans necktie, for a carefully choreographed event in the ornate City Council chambers. The “Budget Day” meeting of the Neighborhood Council movement took on a propagandist feel, as a security guard in the outer hallway barked at two other guards: “Get as many people in there as possible. The mayor is not going to enter until there’s a large crowd. Hurry up!”
After Villaraigosa entered, he boasted to the roughly 300 neighborhood activists that he’d spent 22 hours at the Metrolink crash site and had filled many potholes citywide. Then he got to his real news: that earlier estimates of a $297 million city deficit may be far too low. “I frankly think the number could be as high as $400 [million],” Villaraigosa said. “To weather this storm, we’re going to have to change course.”
The erratic route he’s taken so far could not be more starkly different than the fiscal caution exercized by the Board of Supervisors. At the county board, Supervisor Zev Yaroslavsky says, “We have already decided to defer all new ongoing programs not mandated by the courts or involving public safety. The City of Los Angeles can do these things too. But to do that you have to be able to say no — no to yourself.” Joel Bellman, spokesman for Yaroslavsky, says county government learned a terrible lesson in 1994 and 1995, when it faced fiscal collapse from the skyrocketing costs of providing free health care for poor people, a key county duty. A Clinton administration bailout of $1.3 billion averted a disaster some experts thought might eclipse the Orange County bankruptcy fiasco of the same year, brought on by bad investments made by infamously risk-taking Orange County tax assessor Robert Citron.
Comparing Los Angeles County government to the Villaraigosa administration, Bellman said, “I know this sounds self-serving, but we are just better off despite [suffering] the same economic times.”
He adds, “We have avoided massive new expansion of programs and massive new building campaigns, and the county payroll has grown very, very modestly over 10 years, from about 90,000 to 100,000. We have been very, very cautious: If you look at the raises the county unions have gotten and what the city unions have gotten, it is apples and oranges. The city has been far more generous. We have been planning for uncertainties.”
Jill Stewart contributed to this article.