Controller Warns Mayor of City’s Growing Debt

Like a yuppie living off credit cards when his salary has been cut, the city of Los Angeles has been plunging ever deeper into debt while its revenues have slipped, according to a report released Thursday.

The city has more than doubled its debt over the last six years and plans to borrow more, the city controller’s report revealed. At the same time, the report forecast another dip in funds for the coming budget year.

In the budget year that begins July 1, the city must pay almost $291 million in principal and interest on debt incurred for such projects as building police stations, buying cars and firetrucks and strengthening municipal buildings against earthquakes.

About $27 million of that amount will go to help pay a court judgment. The case involved a dispute over business license taxes that the city charged to banks and savings and loans. When it lost the court battle in 1991, it traded what had been a source of revenue for another drain on its treasury.

Although Los Angeles remains well below its legal debt limit, borrows less than comparable cities and still enjoys high credit ratings, the warning signs are there, Controller Rick Tuttle said.

“It is necessary and prudent to carefully watch this trend,” Tuttle said in a letter transmitting his annual revenue estimates report to Mayor Richard Riordan.

Riordan and his staff are preparing the mayor’s yearly budget proposal, due April 20. They are struggling to close a projected deficit of $200 million, which must be resolved by the time the mayor turns over his spending proposal to the City Council.

The controller estimated that the city will take in $3.1 billion, plus an additional $471 million in property taxes, in 1995-96. That is about $120 million less than is coming to the city this year. However, it does not include money the city might be able to tap from other municipal agencies, as it did this year; nor does it reflect the $54 million in airport funds the city got permission to take Wednesday.

“The latest revenue figures are consistent with our own findings,” Riordan said Thursday, adding that he is cautiously optimistic that the city’s revenue picture will be a bit brighter than the controller’s admittedly conservative estimates.