Los Angeles Controller Wendy Greuel on Monday said she expects the city’s general fund “will be out of money” by May 5 and that L.A. will likely deplete its reserve funds and be in the red by June 30.
Greuel alerted Mayor Antonio Villaraigosa and the City Council of the city’s dire financial situation after the head of the Department of Water and Power stated he would oppose sending $73.5 million in utility revenue to the city treasury. Interim General Manager S. David Freeman said the council’s vote to block a proposed electricity rate hike last week threatens to put the utility in a deficit.
Greuel urged the council and mayor to immediately tap the city’s reserve funds so that city has enough cash to cover payroll.
“This is the most urgent fiscal crisis that the city has faced in recent history, and it is imperative that you act now. That is why I am asking you to immediately transfer $90 million from the city’s reserve fund to the general fund so I can continue to pay the city’s bills, and to ensure the fiscal solvency of the city,” Greuel said.
Councilman Greig Smith said the decision by the DWP had put the city in a “very risky” situation.
“Our reserve fund was already very marginal to begin with. This could push it over the edge,” Smith said. “That would mean we would have nothing in the tank on June 30,” at the end of the fiscal year.
Smith said he could not envision a scenario in which the city could recoup that much money before July 1. Even additional layoffs could not be processed that quickly.
“The question is what are we going to do next? That I don’t know,” Smith said.
[Updated at 2:43 p.m.: An earlier version of this post incorrectly stated that the general fund would be depleted by May 10. The fund is expected to run out by May 5.]
— Phil Willon and Maeve Reston at Los Angeles City Hall
April 5, 2010 | 1:42 pm
Source: The Los Angeles Times