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Budget swings leave a city dizzy

Los Angeles Mayor Antonio Villaraigosa on Tuesday laid out his rescue plan for a city mired in its worst fiscal crisis in a generation -- an austerity budget that would cut library hours, scale back pothole repairs, freeze the hiring of firefighters and shut the agency that oversees neighborhood councils.

But after weeks in which he and other city officials had warned that 3,000 to 4,000 city workers could lose their jobs to close a $485-million shortfall, the mayor’s budget plan would target fewer than 750.

Instead, the budget bets heavily that an economic upswing and the auctioning of city assets will help replenish the treasury.

The shift left members of the city workforce and some residents feeling whipsawed.

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Some questioned the credibility of the city’s leadership, citing the gap between the current forecast and the dire recent predictions that Los Angeles was within a few weeks of running out of cash.

“When the information is that confusing and that contradictory, the public doesn’t know what to believe -- except to distrust anything they’re told,” said Mike Eveloff, an alternate on the Westside Neighborhood Council and president of the Tract 7260 Homeowners Assn.

For the last couple of months, as he has sought to navigate the city’s fiscal crisis, Villaraigosa has been required to steer a difficult course, said Dan Schnur, director of the Jesse Unruh Institute at USC.

He has needed to emphasize the city’s problems enough to get cooperation from other powerful municipal players, but not so much as to cause panic, Schnur said.

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Villaraigosa’s effort to steer that middle ground was not always successful, he said.

Some of Villaraigosa’s budget pronouncements have been aimed at the leaders of the city’s unionized workforce, urging them to offer financial concessions, such as furlough days and pay cuts.

Layoffs would follow if the unions declined to come to the table, he repeatedly said. Other statements were aimed at the City Council, where at least three members have spoken repeatedly against layoffs.

That rhetorical effort so far has done little to persuade the Coalition of L.A. City Unions, which offered its own draft budget last week -- one that assumes that none of their 22,000 members will be forced out of their jobs.

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Instead, the repeated predictions of dire peril rattled the Wall Street bond rating agencies that rule on the city’s credit. By last week, worry about Los Angeles’ finances had become a topic of international discussion.

During a reception at the Getty Center, German Chancellor Angela Merkel let the mayor’s team know that she had heard about the city’s financial problems and those of its Department of Water and Power.

“She said, ‘I understand your utility is going bankrupt and your city with it,’ ” said First Deputy Mayor Austin Beutner, who also is interim general manager of the DWP.

City officials insist that bankruptcy has never been a serious possibility. But Villaraigosa alluded to the protracted fight over electric rates -- and its connection to the budget -- during his State of the City speech Tuesday.

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“Over the last several weeks, we have allowed darkness to cloud our optimism,” he said. " I think that you could even say that we have allowed the strain of the challenges we face to undermine civic unity.”

Merkel’s confusion on the issue of bankruptcy is not surprising given the tone of City Hall discussions for the last several weeks.

City Controller Wendy Greuel, for example, announced earlier this month that Los Angeles was weeks away from running out of cash, only to learn days later that the city had been buoyed by an influx of unexpected property tax revenue.

During a standoff with the council over the DWP’s finances, the mayor proposed a two-day-per-week shutdown of nonessential services, only to backtrack within 48 hours.

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And the statements were widely publicized. Councilman Bernard C. Parks, the head of the Budget and Finance Committee, discussed the city’s financial woes on Fox News Channel. Greuel appeared on video with Bloomberg News.

Villaraigosa showed up on CNN and NBC Nightly News, even as his backers privately questioned the wisdom of having him appear on television as a “bankruptcy” crawl ran across the bottom of the screen.

Villaraigosa Deputy Chief of Staff Matt Szabo defended the statements by Greuel and the mayor, saying both were dealing with “rapidly fluctuating assessments” of the city’s financial health.

With so much uncertainty, the mayor had to be willing to endorse painful proposals to keep the city solvent, he said.

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Last fall, the city’s elected leaders believed that they had coped with the economic downturn by pushing through an early retirement program that shed 2,400 of the city’s oldest employees from the payroll.

But in mid-January, after tax revenues came in lower than expected, Villaraigosa and the council’s leaders called for the elimination of 1,000 additional jobs.

A week later, City Administrative Officer Miguel Santana, the city’s top budget official, said he was preparing a list of another possible 500 job reductions.

And when the mayor appeared at the Los Angeles Area Chamber of Commerce in mid-February, he warned that he would probably need to eliminate between 2,200 and 3,000 positions at City Hall -- on top of those already heading out the door as part of early retirement plans.

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The council offered its own doomsday plan, deciding in a closed-door meeting to instruct department heads to eliminate 4,000 positions “by any means necessary, including layoffs.”

In Tuesday’s budget, by contrast, the mayor said there would be no more than 850 layoffs this calendar year -- and quite possibly fewer. Some of the positions to be eliminated may, in fact, be vacant, according to a letter Villaraigosa sent to council members.

With thousands of layoffs now seemingly off the table, Szabo insisted that the mayor’s actions had worked as desired.

“Our goal has never been to lay off 3,000 workers. Our goal has been to balance the budget.

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“What has changed is that the budget-balancing measures that were taken have actually been effective,” he said.

Councilman Herb Wesson, one of the mayor’s closest allies, acknowledged that the city’s budget outlook has been a “moving target” and called for city officials to work more closely in the coming weeks.

“We need a more consistent message,” he said.

Parks and others, however, questioned whether Tuesday’s budget, for the fiscal year starting July 1, was any more accurate than past projections.

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The budget expects as much as $200 million from a series of financial strategies for leasing parking structures and borrowing against the city’s parking meters.

Parks, one of the council’s biggest budget hawks, questioned the validity of the mayor’s layoff number, saying it seemed too low.

He also warned that the mayor should not assume such a large windfall from the city’s parking assets.

“You can’t count on it until it’s there,” he said.

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david.zahniser@latimes.com

phil.willon@latimes.com

maeve.reston@latimes.com


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