July 3 (Bloomberg) -- Los Angeles taxpayers spent almost $15 million last year to subsidize the city zoo, enough to pay 300 rookie cops. Expenses included $2,000 to clear up the bladder infection of a guinea pig named Sophia.
After a decade of deficits, leaders of the second-largest city by population are considering turning over zoo management to a private nonprofit to unburden themselves of responsibility for 1,100 animals and 209 employees.
From Dallas to Milwaukee, cities struggling to maintain services in the face of rising pension and health-care costs three years after the end of the recession have transferred zoos to private operators or are doing so. Los Angeles is looking to trim expenses as officials anticipate spending $1.2 billion on pensions in fiscal 2016, from $867 million last fiscal year.
“The dollars we’re paying to feed an elephant are competing with the dollars we’re paying a police officer,” said Miguel Santana, the city’s administrative officer, who has led the push. “We don’t have one silver bullet to resolve our fiscal situation. It’s going to take multiple solutions.”
The city of 3.8 million, which sold about $1.3 billion of short-term notes last month at a smaller relative borrowing cost than two years ago, is negotiating with the Greater Los Angeles Zoo Association.
The nonprofit, which already handles concessions and organizes volunteers, would take over zoo operations, including a program to reintroduce condors into the wild, Santana said in an interview at City Hall. Officials also are considering keeping the current structure.
Officials plan to decide in the next few months. If the city picks the nonprofit, the change would take place next year, Santana said. The goal is to wean the zoo off most of its subsidy, he said.
Local governments have reduced what they consider nonessential services such as libraries and zoos amid diminished tax revenue from sources including retail sales. Localities cut payrolls in May to the lowest since 2005.
North Carolina lawmakers have been considering a private operator for the state zoo to shrink a $10.8 million annual subsidy. After Tulsa, Oklahoma’s zoo went private in 2010, officials were able to expand a staff reduced by budget cuts. Dallas transferred management of its animals and employees to the nonprofit Dallas Zoological Society in 2009 with the goal of saving $1.5 million a year.
In 2011, 57 percent of municipal finance officers said their cities were less able to meet fiscal needs than in the previous year, according to a survey by the National League of Cities.
In Los Angeles, the zoo’s $18.3 million city subsidy for the year beginning July 1 accounts for about 0.3 percent of the city budget, according to a summary document. City officials estimated last year that the subsidy would need to grow to $20.8 million in 2015-16.
The city sold one-year tax-exempt notes last month to yield 0.22 percent, the same as other top-rated debt, data compiled by Bloomberg show. When it issued notes of that maturity in 2010 the difference above benchmark debt was 0.53 percentage points.
Los Angeles projects debt service this year will cost $3 million for $18.5 million in borrowings for zoo facilities remaining from general-obligation issues in 1999, 2001 and 2002, according to Natalie Brill, the city’s chief of debt management.
The bonds helped fund exhibits including for orangutans and Asian elephants, according to a fact sheet.
The city would still own the land, enclosures and animals even if it turns over management, Santana said. The association would be responsible for employees hired after the handover, including pensions and other benefits, and would pay them using revenue including admission fees.
The venue, which opened in 1966, is located northwest of downtown Los Angeles. It charges adults $16 for admission and attracted 1.5 million visitors last year, according to its website. The San Diego Zoo, operated by a private nonprofit, charges adults $42 and receives more than 5 million visitors annually, according to its website.
Switching to a private operator for Los Angeles may reduce pay and benefits for employees, diminish emphasis on conservation and animal-rehabilitation and raise admission fees, said animal-rights activists and consultants.
“My main concern is that it would become more like an amusement park,” said Laura Goldman, a Los Angeles native and animal-rights activist who circulated an online petition last year opposing the move. “It would be more about entertainment than learning.”
As a city entity, the zoo is hampered by rules on hiring and procurement and can’t promote itself as freely as a private operation, Zoo Director John Lewis said in an interview in his office.
“Right now I have a city department that I manage that tries to be a zoo,” he said. “I’d like to have a zoo that manages itself as a zoo.”
Under Lewis, Los Angeles zoo veterinarians rarely have to consider the cost of treatment, said Curtis Eng, chief veterinarian. In one case, veterinarians spent $2,000 to save Sophia the guinea pig from a bladder infection and other maladies even though a similar animal would cost $10 in a pet store, he said. The rodent has since died.
The zoo’s condor recovery facility epitomizes the park’s conservation mission.
The zoo operates two compounds for breeding condors, which are on the federal endangered-species list, and reintroducing them into the wild. It spends $565,000 yearly on condor-related expenses.
“How do you put a price on saving something from extinction?” said Jason Jacobs, a spokesman.
The Greater Los Angeles Zoo Association would maintain the conservation mission, said Connie Morgan, its executive director.
“We really want to make sure we maintain and sustain the zoo as a place of experiencing the wilderness in our city,” she said. “Conservation is important to us.”
Nonprofits and private companies benefit from being unshackled by civil-service rules, said David Towne, a former Seattle zoo director who has consulted for Los Angeles on its plan.
In Los Angeles, animal keepers earn from $44,892 to $62,496 annually, according to information on the city controller’s website. Ten zoo employees make $100,000 or more.
Like other non-safety city workers, zoo employees with 30 years of experience may retire at age 55 with a full pension. The city also subsidizes retirees’ health care.
“There’s not a private industry that can afford the kind of benefits that L.A. provides their employees,” Towne said.
Following are pending sales:
OAKLAND, California, plans to offer about $211 million of taxable pension-obligation bonds as soon as next week, according to data compiled by Bloomberg. The issuance will help boost the funding ratio to about 70 percent for the city’s Police and Fire Retirement System, from about 38 percent, according to an official statement. Moody’s Investors Service rates the securities Aa3, fourth-highest. (Added July 3)
COLUMBUS, Ohio, plans to sell about $447 million of general-obligation bonds through a competitive sale as soon as July 10, according to data compiled by Bloomberg. Proceeds will be used for capital projects, according to a Fitch Ratings report. (Updated July 3)
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