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Los Angeles Mines Cash in ‘Crevices of Your Couch’ as Gap Looms

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March 18 (Bloomberg) -- Proposals to close Los Angeles’s $54 million deficit this year and $1.86 billion of budget gaps through 2015 will be made public today at City Hall.

A report by City Administrative Officer Miguel Santana to Mayor Antonio Villaraigosa and the City Council also will suggest ways the second-most-populous U.S. city can eliminate municipal services or hire contractors for them to help curb future budget imbalances. The current fiscal year ends in June.

“It’s basically the equivalent of going between the crevices of your couch and trying to find any kind of revenue you can,” Santana said at a luncheon meeting yesterday.

The city of about 3.8 million has reduced costs by cutting 4,000 jobs, renegotiating labor contracts and creating a tier of lower pension benefits for newly hired police officers and firefighters, Santana said. Los Angeles has 34,300 employees.

Personnel costs, including salary and benefit increases, are driving the deficits, Santana said. Contributions to city pension plans are expected to surge 48 percent to $1.29 billion from 2012 to 2015, according to information he distributed at the meeting of the Central City Association of Los Angeles, a business-advocacy group.

“The city has essentially a ghost workforce that’s the same size as the existing workforce,” Santana said. “We have about 30,000 retirees and that population continues to grow, primarily because people keep living longer.”

Santana made the comments during a panel discussion on the fiscal outlook for Los Angeles.

‘Not Bankrupt’

“The good news is we’re not bankrupt,” Santana said. “The bad news is we continue to face unprecedented challenges.”

Labor leaders will work with the city to find ways to bridge the gaps, said Julie Butcher, regional director of the Service Employees International Union, during the discussion. Her organization represents 11,000 Los Angeles employees.

“This is not like a business that closes its doors,” she said. “The workers of Los Angeles are going to help figure out how to save the city.”

A proposal to lease nine city-owned garages to private operators for 50 years, raising $300 million in upfront payments to cover current budget deficits, was rejected last month by the City Council. Residents opposed the step, on concern that it might jeopardize subsidized parking rates.

The city could still pursue a garage-management contract with a private operator apart from a long-term lease, Gerry Miller, Los Angeles’s chief legislative analyst, said during the panel discussion.

The Los Angeles Zoo and municipal computer systems are two areas that may be better managed by contractors, Santana said.

Today’s report “is really about asking what kind of things we aren’t going to be doing anymore or what kind of things we’re going to be doing differently,” Santana said.

To contact the reporter 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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