Despite rosy predictions yesterday that a spike in tax revenue and thousands of early retirements have helped the city's ailing budget dodge a bullet, a financial status report issued Friday states that Los Angeles' municipal deficit actually grew from about $212 million to $222 million in the past few months. The deficit grew as the City Council and Mayor Antonio Villaraigosa debated short cuts, including a utility rate hike, thousands of layoffs that weren't legally possible, and a shortened work week.
Still, City Hall leaders are putting the best possible spin on the revelation, saying that if the Department of Water and Power comes through with a promised transfer of $73.5 million to the city's general coffers, L.A. could actually be $113 million in the black by the end of the fiscal year June 30. That cash, however, includes woefully underfunded reserves.
If the DWP cash doesn't come through, the city will be left with a paltry $40 million in reserves (enough to hire a few dozen police recruits), and it's facing another $485 million shortfall come July 1. What we have here is some serious gamesmanship with the numbers (reserves were previously left out of the equation). And the DWP handover is, as we've been telling you, no sure thing.
City Hall also plans to issue more bonds, despite the credit downgrades it has received in recent months.
-With reporting from Weekly wire services. Got news? Email us.