The City’s finances will receive an additional boost of $30 million because of a higher than expected increase in the assessed value of the City’s real estate.
According to the County Assessor, property values surged 4.25% (versus a projected 1.7%) as a result of a higher than anticipated home sales and rising prices, resulting in an additional $10 billion increase in taxable property.
Coupled with the $325 million increase in revenues from the 2012-13 budget and a $50 million savings in pension contributions, this $400 million windfall allowed the City to pass a budget that resulted in no layoffs or furloughs and provided for an increase in the City’s reserves and a number of one time investments.
This euphoria is accentuated by a projected 15% return on the pension fund assets which will most likely result in lower pension fund contributions in the following years.
However, one or two flush years does not mean that the City is out of the woods.
Over the next four years, the City is projecting a cumulative deficit of $800 million. This assumes that the City’s civilian unions will not accept Villaraigosa’s suggestion that their members forego a contracted 5.5% raise in January and contribute 10% of the cost of their very generous health care plan.
The Villaraigosa swan song budget also assumes that the campaign funding union bosses will agree to no raises for the City’s 32,000 employees over the next four years.
Mayor Villaraigosa failed to address the sorry state of our streets, sidewalks, and the rest of our failing infrastructure that will cost more than $10 billion over the next ten years to repair.
Instead of developing a comprehensive plan to repair and maintain our 6,500 miles of streets and 800 miles of alleys, City Hall is contemplating a Street Repair Plan that would address the one-third of streets that are in “failed” or “near failed” condition. While the $3 billion in General Obligation bonds used to finance this Plan over the next ten years could be serviced by the huge increase in current and projected revenues, City Hall wants to impose a new real estate tax that would increase our property taxes by up to 6%, or $250 million.
Mayor Villaraigosa also punted on reforming the City’s two pension plans that are underfunded by about $15 to $20 billion based on realistic investment rate assumptions recommended by Warren Buffett (Berkshire Hathaway) and Wilshire Associates.
There are also several other skunks in the woodpile that have not been considered. These include the $750 million Ardon class action law suit involving the illegal collection of the Telephone Users Tax between 2005 and 2008 and several civil lawsuits that claim that a substantial portion of our 10,750 miles of sidewalks violate the American with Disabilities Act.
While the modest economic recovery has allowed the City some breathing room, the City still has major league financial problems and cannot rely on the very remote chance that the economy and the stock market will bail the City out of its financial quagmire.
For Mayor Garcetti and the City Council (and its seven new members) to achieve their various goals, the City cannot afford to continue to “kick the can down the road” to insolvency. That is why it needs to develop a solid financial plan to regain the trust and confidence of the voters who were lied to by the City Hall establishment and their cronies during their unscrupulous efforts to pass Proposition A, the permanent half cent increase in our sales tax.
One of the primary goals of our new City government must be to place on the ballot a LIVE WITHIN ITS MEANS charter amendment. This would require the City to develop and adhere to a Five Year Financial Plan, to pass two year balanced budgets based on Generally Accepted Accounting Principles, and over the next 10 to 15 years, to fix our streets, sidewalks, and the rest of our deteriorating infrastructure, and to fully fund our pension plans.
Happy Days for prudent Angelenos includes budget reform, without which the City’s skeptical and lied-to voters will not approve any new taxes, no matter how big the lies.
Crossposted on City Watch