Los Angeles Deficit May Grow Sixfold If Parking Garage Lease Plan Falters

Los Angeles should take steps such as forcing workers to take more unpaid days off to close a budget gap that may grow more than sixfold if it fails to lease nine parking garages, two city officials said in a memo.

Entire departments in the second most-populous U.S. city may be closed for a day each week under the furlough plan recommended by City Administrative Officer Miguel Santana and Chief Legislative Analyst Gerry Miller. The actions were outlined by the officials in a memo to Mayor Antonio Villaraigosa that was released yesterday.

Santana expects to present bids from private operators to manage nine city-owned garages in March, the officials said in the memo. The city included $53.2 million in revenue from the lease in its budget for the current fiscal year, according to the memo. If the plan falls through, the deficit will grow from $9.5 million to $62.7 million this year through June, they said.

“The magnitude of this loss cannot be understated,” they said in the memo, referring to the possibility that the lease plan may fail. With the fiscal year half over, “the city will need to implement drastic solutions to address the revenue shortfall” that the plan’s failure would create, the memo said.

If the proposal fails, Santana and Miller recommended further cuts of $9.9 million in departments including police, which may force the dismissal of some employees, they said in the memo. They said the city should impose an additional 10 unpaid days off for some workers to help cut about $52.8 million in spending by the end of June, even if the lease plan proceeds.

“We need to start making reductions now,” Santana said yesterday by telephone.

Maintaining Subsidies

The proposed lease may be adjusted to maintain subsidized parking rates at two garages, the memo said. At one, a 3,000- space structure in Hollywood, the discount costs the city almost $4 million a year in lost revenue. That adjustment may in turn reduce lease payments to the city.

“Every time we take away revenue, we reduce the value of the concession,” Santana said. “I can’t guarantee we’ll get the price we anticipate.”

The Hollywood garage is less than half full, on average, according to the memo. Santana said the validation program that provides discounts to patrons of local shops is in disarray.

“No one knows who has a validation stamp,” he said. “We know that there are over a dozen unauthorized types of stamps in use.”

Little Use

Two of the nine garages are less than 20 percent full, on average, Santana and Miller said in the memo, citing limited marketing and lack of conveniences such as automated payment systems. About half the total 8,200 spaces in the garages are used, on average, they said.

The city has already closed a $490 million deficit this year, in part by including the anticipated lease revenue, the memo said. Santana said most city workers are already being forced to take 26 days off without pay in the current fiscal year. Next year’s projected deficit is $350 million.

Miller didn’t respond to a telephone message left yesterday after normal business hours.

To contact the reporters on this story: Christopher Palmeri in Los Angeles at cpalmeri1@bloomberg.net.

To contact the editor responsible for this story: Mark Tannenbaum at mtannen@bloomberg.net

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