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Is L.A.'s budget crisis over? The homeless spending plan signals it is

 Is L.A.'s budget crisis over? The homeless spending plan signals it is
A homeless person sleeps on grass at City Hall as elected leaders announce a plan to declare homelessness in L.A. an emergency and commit $100 million toward the problem. (Irfan Khan / Los Angeles Times)

Question: How do you know when the budget crisis is officially over at Los Angeles City Hall?

Answer: When eight politicians announce a new $100-million spending initiative, one with few details and almost no hand-wringing over where the money will come from.

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Seven council members announced last week that they plan to put that amount into a fresh bid to combat homelessness, just as tents and encampments have spread to nearly every neighborhood. Mayor Eric Garcetti went further, saying he would like to have that sum available every year.

The statements were the clearest sign yet that the city's politicians have abandoned their recession-era approach to governing, which led them to hold the line on employee raises and big spending increases. The shift was a bit jarring for those who have followed City Hall in recent years, a period marked by a major economic crisis and multiple rounds of cost-cutting.

Richard Close, president of the Sherman Oaks Homeowners Assn., said he agrees that city leaders need to address the rise in homelessness. But he said residents have been waiting years for the restoration of other services, including tree trimming and street repairs.

"There are limited funds with many unfulfilled priorities," Close said. "And coming up with $100 million out of thin air, when there are so many other uses for that money — there needs to be discussion [of that] before press conferences."

The city's elected officials have given different explanations for how they chose the $100-million figure. Garcetti spokeswoman Connie Llanos said the number is an estimate of how much will be needed to ramp up key programs, including new facilities for the homeless to bathe and store their belongings and the construction of affordable housing. Council members Mike Bonin and Jose Huizar said the number was chosen because that's what budget officials think the city will be able to afford in the coming months.

"I think $100 million is what we've got," Bonin said. "I think the need is much greater."

Bonin, who represents coastal neighborhoods, said the fact that there is so much money available shows that the city was successful in digging out of its financial crisis. He also signaled the city's top priority for expanding services right now is assisting the homeless.

Much of the money for those programs, Bonin said, is likely to come from the city's reserve fund, which was created to help the city cope with emergencies. The council could tap $60 million to $70 million for homeless initiatives and still have a reserve equal to 6% of the budget for basic services, assuming financial conditions don't change, city officials said.

That's a far cry from the situation the city faced in 2010, when declining revenue and growing personnel costs spurred the mayor and council to eliminate thousands of jobs.

Confronted with multiple years of major budget shortfalls, the council approved early retirement for 2,400 workers and moved another 1,000 into agencies not affected by the financial downturn, such as the Department of Water and Power. About 360 were laid off outright.

When those reductions were underway, some — including former Mayor Richard Riordan — went so far as to warn that the city might need to file for bankruptcy protection. But the city's fortunes gradually recovered, and last year, the Kroll Bond Rating Agency concluded that L.A. was in strong financial health, making the chances of a bankruptcy filing "remote."

City Administrative Officer Miguel Santana, a top budget official, said L.A. is in its best financial position in years. But he warned that the city still has a structural deficit, spending more than it takes in. The plan for finding new money for homeless programs, which is expected by the end of the year, will come with an explanation of the trade-offs involved, he said.

"By stating that homelessness is a priority, they're also stating that it's a priority above other things," he said.

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L.A.'s homeless population has risen 12% since 2013, the year Garcetti took office. Garcetti aides are putting together a strategy for tackling the issue, one that would include facilities that offer clean restrooms, shower facilities, laundry machines and property storage.

Paying for such initiatives may require the city to reprioritize its spending decisions, said Llanos, Garcetti's spokeswoman. She said it's too soon to say what programs the mayor would scale back to accomplish those goals.

Even with surging tax revenues, it's far from clear whether the city will have the ability to put $100 million into homeless initiatives on a yearly basis, something sought by Garcetti and Bonin over the long term. A legal settlement reached this year will require the city to spend at least $31 million annually on sidewalk repairs. Meanwhile, the mayor's plan for cutting the city's business tax is expected to remove another $45 million in yearly revenue by 2018.

The city currently spends more than $100 million a year on problems stemming from homelessness, according to a report Santana issued in April. Although much of it is spent by the Los Angeles Police Department, officials who deal with trash pickup, park maintenance, paramedic services and libraries are also facing an additional burden.

Councilman Paul Krekorian, who heads the powerful budget committee, said he hopes that as more people make their way into housing, the LAPD and other city agencies will spend less dealing with problems that stem from having homeless encampments on sidewalks, in alleys and within flood-control channels.

Krekorian signed on to the idea of spending up to $100 million to reduce homelessness. But he sounded hesitant about relying so much on the city's fund for emergencies. As city leaders work to determine the cost of tackling the crisis, they will need to look at securing new sources of revenue, he said.

"A comprehensive solution ... would almost certainly cost more than $100 million," Krekorian said. "And that's not a commitment we can make on an ongoing basis while we're still facing a structural deficit."

ALSO

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