Yaroslavsky Says L.A. Faces Financial Crisis

Already financially strapped, Los Angeles is heading for a severe economic crisis because of problems in the Middle East and an unanticipated downturn in the local economy, City Councilman Zev Yaroslavsky said Tuesday.

Only six weeks into the new fiscal year, the city’s reserve fund already is down to $10 million, substantially lower than the $45 million available at the same time last year, the councilman said.

As chairman of the council’s Budget and Finance Committee, Yaroslavsky has asked city administrators to come up with a contingency plan to address the shortfalls. A continued city hiring freeze is certain, he said, and layoffs are possible.

“We need to cut back now,” Yaroslavsky said. “We’re still spending more than we’re taking in.”

At Yaroslavsky’s insistence, the City Council already has forced city department heads to drastically cut back their requests for money for the 1990-91 fiscal year, which began July 1.

But the city’s financial position has deteriorated further in the three months since that budget was approved, Yaroslavsky said, and further cuts will be necessary to head off a budget deficit that could reach $100 million.

As an initial measure, Yaroslavsky said, he will ask the City Council to delay indefinitely the proposed purchase of $27 million in equipment that is to be considered at today’s council meeting. The money had been earmarked for the Fire and Police departments as well as the Department of General Services.

Mayor Tom Bradley agrees with Yaroslavsky’s proposal to delay the equipment purchases, but issued no statement Tuesday about the city’s overall budget outlook, said Vallee Bunting, a spokeswoman.

When Bradley first proposed the current $3.6-billion budget last April, he said the city was on a financial tightrope that made necessary an array of new and increased taxes.

Yaroslavsky, in a letter to City Administrative Officer Keith Comrie, said this week that that budget was adopted “with the expectation that our national and regional economies would continue to grow at a modest rate.” The budget now appears optimistic, he said.

City tax revenues have been declining because of continuing layoffs and plant closures in the aerospace industry, lagging retail sales and decreased tourism.

The crisis in the Middle East has driven up gasoline prices and greatly increased costs to the city, which is a major purchaser of fuel, he said.

Further, officials have been slow to begin collecting a new 10% city parking tax, which was to have brought in $22.5 million this year, he said. The actual revenue from the tax will be far lower, he said.

“We are faced with a situation where our revenue prospects are shrinking, our expenses are growing and our reserve fund is inadequate,” he said.

The settlement of just three or four substantial lawsuits against the city could wipe out the fund entirely, he added.