New L.A. Mayor Garcetti Confronts Deficits Through 2017

Photographer: Kevork Djansezian/Getty Images

Candidate in the Los Angeles City mayoral race, Councilman Eric Garcetti celebrates with supporters at an election night party in Los Angeles, California. Close

Candidate in the Los Angeles City mayoral race, Councilman Eric Garcetti celebrates... Read More

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Photographer: Kevork Djansezian/Getty Images

Candidate in the Los Angeles City mayoral race, Councilman Eric Garcetti celebrates with supporters at an election night party in Los Angeles, California.

Los Angeles voters elected Councilman Eric Garcetti as mayor of the second-largest U.S. city, replacing Antonio Villaraigosa and inheriting a budget that relies on city unions to forgo 5.5 percent raises next year and uses about three-quarters of a reserve fund.

Garcetti defeated City Controller Wendy Greuel, 54 percent to 46 percent, according to results posted on the Los Angeles City Clerk’s website early today.

Garcetti, 42, who takes office July 1, will step in as general-fund revenue is forecast to grow 7.1 percent in fiscal 2014. As a result, the city won’t need to declare a fiscal emergency, a first since 2008.

Garcetti and fellow Democrat Greuel, 51, raised more than $15 million combined for the nonpartisan campaign and attracted almost $10 million in independent expenditures, according to City Ethics Commission data.

The Service Employees International Union, the International Brotherhood of Electrical Workers and other city unions supported Greuel, while the International Brotherhood of Teamsters and other non-municipal labor groups backed Garcetti.

Both Garcetti and Greuel said during the campaign that they would consider seeking more concessions from the unions. Neither offered specific proposals to reduce spending on wages and benefits for 32,000 municipal workers.

Greuel worked as an executive at Dreamworks Animation SKG Inc. (DWA) before winning a seat on the City Council representing part of the San Fernando Valley in 2002. She was elected controller, which audits municipal departments and writes financial reports, in 2009.

Hollywood Seat

Garcetti, the son of former Los Angeles County District Attorney Gil Garcetti, was elected to a Hollywood-area council seat in 2001. The holder of degrees from Columbia and Oxford Universities is of mixed Mexican and Italian heritage and served as council president for six years. He will be the first practicing Jew elected to lead the city.

Villaraigosa, modern Los Angeles’s first Latino mayor, didn’t endorse any of the candidates to succeed him. The election came more than two months after Garcetti received the most votes on the primary-election ballot, with Greuel second.

Los Angeles is in a “great place” financially, Villaraigosa, 60, said yesterday. The City Council raised the minimum age for full retirement to 65 from 55 for municipal workers and cut pension benefits last year. That’s projected to save as much as $4.3 billion over 30 years.

“Tell me another city that almost doubled the employee contribution for retirement,” Villaraigosa, a Democrat, said as he prepared to vote. “I’m very proud of it. It’s dramatically better than it was during the crisis.”

Budget Deficits

Los Angeles has dealt with $1.6 billion in deficits over the past four fiscal years, which begin each July 1. For 2014, Villaraigosa proposed a $7.7 billion budget that relies in part on one-time moves such as transferring $53.5 million from a budget-stabilization reserve, leaving $16 million, according to a memo from City Administrative Officer Miguel Santana.

Villaraigosa’s budget also counts on city employees to go without pay raises through 2017, even though most civilian workers are owed a 5.5 percent increase on Jan. 1, under contracts negotiated in 2007, according to the city manager.

Villaraigosa, who couldn’t seek re-election because of term limits, said yesterday that increasing pay rates was a “mistake” and that workers must make concessions.

“We all agreed that we’ve got to really encourage our unions to become better partners here and to help us,” he said outside a church that doubles as a polling place.

Moody’s Investors Service raised its rating for the city of 3.8 million residents to Aa2 in January, its third-highest level and the first increase in two decades, citing rising property-tax receipts. Standard & Poor’s rates Los Angeles AA-, its fourth-highest grade.

To contact the reporter on this story: James Nash in Los Angeles at jnash24@bloomberg.net

To contact the editor responsible for this story: Stephen Merelman at smerelman@bloomberg.net

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