Los Angeles Controller Ron Galperin estimated Wednesday that the city will fall about $231 million short in projected revenue this year and as much as $598 million next fiscal year due to the effects of the coronavirus pandemic.
“The city is facing an unprecedented crisis due to the coronavirus pandemic, and our revenue outlook is much darker than it was even a month ago,” Galperin said. “While these struggles are not unique to Los Angeles, our city is in a better position than most municipalities because of the diversity of our revenue streams and healthy reserve fund balance.”
Galperin said the reductions will strain the city’s ability to provide services and will require “some very difficult budgeting decisions” this year and in the future.
Deliberations will begin after Mayor Eric Garcetti releases his 2021 budget proposal on Monday, the controller said.
Councilman Paul Krekorian, who chairs the panel’s Budget and Finance Committee, told City News Service that he and his colleagues are still trying to work out how this year’s budget process will commence once the mayor’s proposal is released.
Krekorian said it won’t be possible to conduct typical budget committee hearings that can take some time to complete, and he said people may need to prepare for the budget process to continue “well into” the next fiscal year.
“Regardless of process, I think it’s safe to say this is going to be an exceedingly difficult budget year, and it’s going to be difficult because our revenues will likely be incredibly impacted by COVID-19 crisis and all the economic impacts that came with it,” Krekorian told CNS.
The councilman said that since 2010, the city has been working to increase its overall reserves and had saved up to 8% of department budgets for this fiscal year, which will allow the city to reduce economic effects of the pandemic going into the next year.
“I’m really proud of the fact that we … the council and two mayors now, have spent so much time and energy developing that reserve fund so that we would be prepared for a rainy day,” Krekorian said. “And it is very stormy right now.”
Los Angeles is now estimated to receive $6.38 billion in revenue this year, a $231 million decrease from the previous March 1 estimate of $6.61 billion.
Galperin said even with this revision, Los Angeles is not facing a cash-flow crisis and is still projected to see 2.3% growth over last year.
The controller also said Los Angeles will likely receive state and federal funds due to the pandemic.
As for the next fiscal year, the revenue decline is estimated by the controller’s office to be between $194 million and $598 million, depending on the length of the current stay-at-home orders and how long it takes for the economy to recover from the crisis.
Travel and tourism revenue is expected to fall by 70% in the final quarter of this fiscal year, and taxes from hotels and home-sharing could drop by $61 million this year and up to $80 million in 2021.
Galperin said the forecasts are still behind as tax revenue is collected for April, and businesses both large and small have since closed their doors in an attempt to slow the spread of COVID-19.
For the next fiscal year, business tax revenue could drop by as much as $85 million next year and sales tax could take a $67 million hit.
Expenses will eclipse revenue growth this year due to the increased cost of employee salaries and benefits, with additional short-term expenses for the city’s response to COVID-19, according to Galperin.
The fiscal year runs from July 1-June 30.