City Looking to New Taxes and Revenues to Help Solve Long Term Budget Issues

Last Tuesday the Los Angeles City Council held it’s annual “Revenue Day”, wherein the Council discusses potential revenue options that the City Council might consider in order to address the City's Budget situation. As a part of its “Revenue Day” discussion (Council File 11-1357-S1) the City Council received reports on various revenue options from both the CAO (.pdf) and the CLA (.pdf), as well as a power point presentation (.pdf) on the same from the CAO.

Generally speaking, the reports from the CAO and CLA both push strongly for new revenues to help solve the City’s structural deficit. The City’s four year budget outlook, as shown in the chart below, is better than in past years, but is still grim. Of note, for those keeping score, is that 70% of City’s discretionary funds go to public safety (LAPD and LAFD).

From the CLA report (emphasis mine):

“We believe strongly that the City must pursue voter approval of additional ongoing general tax revenues on the March 2013 Municipal Election. The City has made great strides in addressing our structural deficits over the last several years. General Fund civilian staff is now 5,000 fewer than just a few years ago and at lower levels than it was 20 years ago. Additionally, with creative ideas and strong cooperation from our employees and their representatives, the City has been able to reduce pension and retiree healthcare obligations as well as healthcare costs for active employees. However, our service levels are reaching a point where simply continuing to cut costs will result in unacceptable service levels and significantly impact the quality of life in the City.”

From the CAO Report (emphasis mine):

“Despite the City's efforts to reduce expenditures and increase revenue, a structural imbalance of expenditures and revenues remains. Permanent solutions are required to maintain City services for those who live in, do business in, or visit our City. While the City has exhausted many of its most workable options, several opportunities for reducing the deficit were addressed in this Office's report on the Four-Year Budget Outlook and Update to the Three-Year Plan to Fiscal Sustainability. The most significant solutions available to the City will require additional support of City residents.”

At the end of “Revenue Day” the Council Council voted to move forward with further analysis on increases on the (1) documentary transfer tax and (2) the parking occupancy tax. Ultimately, if these tax increases are to move forward, both measures would need to be placed on the ballot (either in March 2013 or in May 2013) and approved by voters.

Of note, the CAO pointed out that even if the tax increases on the documentary transfer tax and parking occupancy taxes are approved by voters, the City would still face a significant budget deficit next fiscal year (Fiscal Year 2013-2014) and would need to look for additional solutions to close the anticipated budget gap. 

The next couple of months should be interesting. The City only has until October 31st to decide if it is going to put these two proposed tax increases on the March 2013 ballot, so there is not much time for the Council to dawdle.