L.A. lags behind other big cities on spending of federal stimulus funds

When the federal stimulus program was launched in early 2009, the city of Los Angeles was in dire straits, facing a shortfall of $427 million and the possibility of mass layoffs. City officials scrambled at the new source of funds, ultimately netting more than $630 million in stimulus grants.

But nearly two years later, the city has spent only about a quarter of that money, a rate of spending that trails that of New York, Chicago and several other large California cities. Though the bulk of L.A.’s stimulus money was awarded by last March, the city had completed only eight of its 108 projects by mid-October.

L.A. officials say they have been hampered by a painful irony. As millions of federal stimulus dollars flowed in the door, the city was reeling from cost-cutting measures that led to the exodus of 2,400 experienced workers through an early retirement program and more than 360 layoffs. On top of that, many city workers, including some who are handling stimulus projects, are forced to be on furlough 16 to 26 days a year.

“We saw the retirement of some of the most competent people in the city’s workforce happen just overnight,” said City Administrative Officer Miguel Santana. “So that’s been the challenge, not just with the stimulus but in everything we do.”

The effect of the unprecedented reduction of the city’s staff, officials said, was compounded by initial confusion about the stimulus program’s rules, conflicting interpretations from state and federal officials about how the money could be spent, and the snags that come with launching new programs from scratch.

“What’s happening here is happening everywhere, not just in California, but around the country,” Santana said.

Yet other local governments under strain have dealt more swiftly with stimulus dollars, suggesting that at least part of the problem is the slow — and in some cases dysfunctional — city bureaucracy that has frustrated residents and business leaders for years.

In one instance uncovered in an audit by City Controller Wendy Greuel, four transportation projects that were supposed to be “shovel-ready” — including the installation of 85 left-turn signals and 25 new traffic lights — were not put out to bid for seven months after they were approved by state and federal officials in the summer of 2009. A contract to finish the signal projects was finalized this month and the work should be done in a year.

Outgoing state Inspector General Laura Chick estimated that only about half of the state’s $50-billion share of stimulus money — officially called the American Recovery and Reinvestment Act — has been spent so far. A complicating factor, she said, was that the “typical M.O.” for cities like Los Angeles was to apply for every source of stimulus funding they could get — often without well-laid plans for spending it.

“You hear this expression ‘shovel ready projects’ — there is no such thing,” Chick said. “So in terms of judging the impact of the Recovery Act, it’s not over yet.”

Though the stimulus program was always intended to stretch over several years, one of President Obama’s goals was to launch projects quickly to get unemployed Americans back to work and stave off job losses. The pace in municipalities like L.A. could have political consequences for Obama when he runs for reelection in 2012: The longer the projects drag out, the harder it may be for voters to discern the role that his hallmark plan has played in any economic recovery.

Chick, whose job was eliminated by Gov.-elect Jerry Brown last week, said she has watched some of California’s cities and state agencies struggle to spend their stimulus money quickly:

“Right in the middle of the crisis, government is being asked to operate better and faster. It’s not reality based,” said Chick, who examined many of L.A.’s problems as the city’s controller. “How do you move projects quickly so that they turn into jobs on the street when there are 20,000 hoops to jump through?”

Although L.A. officials expect their stimulus spending to peak in mid to late 2011, progress in other cities and counties has varied. In October, L.A. officials compared the city’s spending on selected programs to sums spent by other cities on similar projects. They found that L.A. had spent 13.3% of its money, while New York had spent 25%, Chicago 47%, Minneapolis 23.4%. Philadelphia’s rate trailed L.A.’s at 9.6%.

Officials in Los Angeles County and the joint city-county of San Francisco say they have spent more than 60% of their share of stimulus money, much funneled out quickly through existing health, social services and employment programs. L.A. County also has made significant strides on its construction projects. Sixteen of the 20 stimulus projects that are being overseen by the county’s public works department — $54 million worth of road and bike trail improvements, as well as traffic signal upgrades — were completed by this month.

The city of Long Beach has spent about 43% of its money, finishing several water quality and storm water drainage projects this year. As of October, San Jose had spent about 39% of its $109 million, and officials hope to wrap up other major projects within a few months.

The $630 million awarded to the city of Los Angeles is just one slice of more than $6.6 billion spread across Los Angeles County to school districts, universities, nonprofits, private firms and municipalities, according to the state’s stimulus tracking website. Among the few projects completed in the city by the end of September were an $18.3-million program providing summer jobs for 9,416 youths, $900,000 worth of sidewalk and gutter improvements in Tujunga and a $1.8-million rainwater irrigation project in Mar Vista.

Greuel found that a number of the city’s larger projects had become snared in the city’s bureaucratic maze and lengthy contracting processes, which officials say can take as long as a year to work through.

Besides the seven-month delay she uncovered in the traffic signal program, Greuel found it took eight months to finalize contracts for a smaller project that made roadway grates safe for bikes.

Paving projects that will ultimately repair more than 100 miles of city streets were slowed, city budget officials said, because of conflicting advice from federal and state officials about whether city workers, rather than outside contractors, could do the work. (Those projects are expected to be completed by city workers in June of 2012).

For Greuel, who is weighing a run for mayor, the pace has been disappointing: “Seven months to get out a bid was just criminal to me when we had a 12.5% unemployment rate and we were beginning to lay off people,” she said recently.

“We should have looked at this as an opportunity to streamline the process.”

Transportation officials said they followed the city’s normal contracting process and that time frame was lengthened in the case of the traffic projects because of a need to comply with federal regulations and a discussion of whether to wrap two similar transportation projects together.

A number of stimulus-financed projects are on their way to completion in Los Angeles. The Department of Water and Power is more than halfway through two major pipeline projects totaling $25 million, as well as a $10-million water-quality project covering the Santa Ynez Reservoir in Pacific Palisades. But city officials say some of the largest stimulus projects are still in the early stages: Hiring has begun for a $100-million program to purchase foreclosed homes, fix them up and sell them.

Despite delays, city officials say none of the programs risks losing its funding. Rushmore Cervantes, who is heading a team in the mayor’s office to clear any future roadblocks, noted that the city has been warned that the stimulus spending may be scrutinized more closely than any previous federal grant program.

“On the one hand we’re being told that we’re going to be monitored, on the other hand there’s pressure to spend the money,” he said. “We know that, but we also want to do it in a thoughtful manner, and that’s what the city is doing.”

maeve.reston@latimes.com