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REPORT

L.A. Controller Ron Galperin releases the Comprehensive Annual Financial Report (AFR) each January to provide a complete picture of the City’s finances. On this page, you will find the Popular Annual Financial Report, a summary of the AFR that presents the information in a more accessible format, along with charts and graphs measuring how the City serves residents.

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Fellow Angelenos:

Ron Galperin 1764 x 2321

As City Controller, I serve as chief auditor, accountant and watchdog over the City’s finances and operations. Each year, my office produces the Annual Financial Report, which gives a complete financial picture of the City, including revenues, expenditures, assets and liabilities. The AFR, along with the City’s Annual Budget and the City Administrative Officer’s financial status reports, is fundamental to understanding the City’s financial opportunities and challenges. On this page is the more accessible version of the report, the Popular Annual Financial Report, which presents the data in an easier-to-read format so that everyone can understand the finances of the City.

Here’s a snapshot of the City’s finances for Fiscal Year 2020 (FY20):

  • Overall City revenues decreased by 4% to $17.5 billion, in contrast with FY19 when L.A. experienced 13.7% revenue growth. The change is attributable to the pandemic and its immediate impact on trade, tourism and tax revenues.
  • The story was slightly different looking just at the General Fund, the City’s main operating fund, which saw a 1.9% increase over the year prior. However, General Fund revenues in the first six months of the current fiscal year are down 10.8% or $254 million — significantly lower than the same period in FY20. How much they will continue to suffer depends on how quickly the economy can begin to reopen safely and recover.
  • Overall City expenses shot up by 9.9% to $16.5 billion, with General Fund expenses up by 7.3%. The cost of salaries and benefits increased by $253 million and retirement contributions by $88 million over FY19. The City’s three pension systems saw just a 3% return in FY20, but are collectively 85% funded. The trend of rising expenses has continued in the first six months of the current fiscal year, with General Fund expenditures up 1.4% or $43 million over FY20, largely due to COVID-19 response activities, some of which are eligible for reimbursement.
  • The City’s net position is $24.1 billion, a 3.9% increase over the year prior.

Until the fourth quarter of FY20, the City had experienced nearly eight consecutive years of relatively strong economic growth and an uptick in revenues. The rapid onset of the COVID-19 pandemic halted that trend almost immediately — which is reflected in the precipitous drop in some economically sensitive revenue streams for that quarter.

What actions should Los Angeles take to stabilize its finances? Here are some that would help:

  • Pursue federal and state funding: The City should vigorously pursue additional federal and state funding to protect core services and assist with ongoing pandemic response efforts, while seeking to maximize the effectiveness of the outside assistance already received, but not yet spent.
  • Use special funds to lessen pandemic pain: The City relies on 700+ special purpose funds to maintain parks, build affordable housing, pick up trash and more. The balance of these funds has grown to $5.1 billion and the City should do more to utilize the funds that are sitting idle or rarely used. Millions could be repurposed to bolster the City’s bottom line and meet community needs.
  • Focus on revenue and limit spending: While tourism-related revenues dropped, the City must work harder to collect from its other revenue streams and continue working with stakeholders to defer expenses where possible.
  • Rebuild the Reserve Fund: To balance the FY20 budget, the City transferred nearly $200 million from its reserves to the General Fund. With plans already being made to further deplete the Reserve Fund to balance the current budget, the task of rebuilding it will become even more critical.

In keeping with my commitment to transparency and accountability, this report also features charts and graphs that measure the performance of City departments and functions, which help elucidate how well Los Angeles is using its finances to serve the public year over year.

Our goals are to educate Angelenos on City finances and empower them to be better advocates for their communities. Please read through this report and let us know how we’re doing: controller.galperin@lacity.org or on Facebook, Instagram or Twitter.

Sincerely,

Ron Galperin
City Controller

The City and its surrounding metropolitan region feature incredible diversity in terms of both population and the economy. Tourism and hospitality, professional and business services, international trade, entertainment production, and wholesale trade and logistics all contribute significantly to local employment. The Port of Los Angeles handles the largest volume of containerized cargo of all U.S. ports and is top in cargo value for U.S. waterborne foreign traffic. Los Angeles International Airport (LAX) is the third busiest airport in the world in terms of total number of passengers, and is 13th in the world in air cargo tonnage.

The City’s economy was thrust into recession in March 2020, along with the rest of the nation and much of the world, due to the COVID-19 virus and the various orders intended to slow the spread of the virus. Large sectors of the economy were severely curtailed, with the biggest reduction coming in tourism and hospitality. After falling to 4.3 percent in the first half of the fiscal year, the unemployment rate in Los Angeles County jumped to 21.1 percent by May 2020. Since that time, unemployment has slowly decreased, down to 11 percent in November 2020.

City government has initiated a number of programs aimed at mitigating the economic damage the pandemic has caused, including emergency rental assistance, meal distribution, expansion of temporary living facilities for chronically homeless residents, small business loans and grants, free childcare, and other services.

Widespread vaccine administration began in January 2021, giving the economy has reason for hope. However, recent trends with the virus have resulted in increased restrictions and restricted economic activity. The balance of these two trends will determine the direction of the economy over the next six to 12 months.

Fast facts about the City of Los Angeles:

    • Population: 4 million residents; 1.3 million households (defined as people living in the same house, apartment or living quarters)
    • Ethnic makeup: 48.6% Latino, 28.5% white, 11.8% Asian/Pacific Islander, 9% Black, 1.4% American Indian/Others
    • Size: 468.7 square miles of land
    • Median household income: $58,385

The City operates under a Mayor-Council form of government. The Mayor supervises the administrative processes of the City and works with the City Council in matters relating to legislation, budget and finance. The 15-member City Council enacts ordinances, levies taxes, authorizes contracts and public improvements, adopts zoning and other land use contracts, and provides necessary resources for the budgetary departments and offices of the City. The City Controller and City Attorney are independently elected citywide.

The City has 45 departments, bureaus, commissions and offices, 38 of which have their operating funds annually budgeted by the City Council. The Department of Water and Power (DWP), Harbor Department, and the Department of Airports are publicly-owned entities under the control of boards appointed by the Mayor and confirmed by the City Council. Several other departments are fiscally independent or under the control of independent boards.

Public services provided by the City include police, fire and paramedics, residential refuse collection and disposal, wastewater collection and treatment, street maintenance and traffic management, enforcement of building safety laws, libraries, recreation and parks, community development, housing and services for seniors, planning; two airports, harbor, power and water services, and the convention center. Performance data on some of these services is collected below in the “City Activities” section of this page.

For the fiscal year that ended on June 30, 2020, total City revenues were $17.5 billion, a decrease of 4% from the prior year.

Expenses were $16.5 billion, 9.9% more than the prior year.

Fiscal Year 2020 Total City Revenues: $17.5 billion

Fiscal Year 2020 Total City Expenditures: $16.5 billion


Governmental Activities

Total revenues of governmental activities were $8.8 billion, while total expenses were $8.7 billion. Of the $8.7 billion total expenses, 59% was funded by taxes and other general revenues, and the remaining 41.0% was funded by program revenues and available net position. Program revenues are resources obtained from parties outside of the City and charges for services between the governmental and business-type activities.

Total expenses increased by $1.3 billion or 18.2% above fiscal year 2019. Increased expenses were due to increased salaries and benefits of $458.6 million, increased pension and OPEB costs of $491.9 million, and a contracts, equipment, and supplies increase of $354.2 million.

Business-Type Activities

The $8.7 billion combined operating revenues of the City’s six business-type activities were $787.4 million more than the $7.9 billion combined operating costs.

Business-Type Activities: Change in Net Position

Enterprise funds are used to report the functions presented as business-type activities in the government-wide financial statements, they are generally used to account for services for which the City charges customers – either outside customers or other departments/funds of the City. All of the City’s enterprise funds, except the convention center, are considered major funds. The operating results of the City’s six enterprise funds are reflected in the change in net position statement below.

Bonded Debt and Long-Term Notes Payable: $31.9 billion, 1.4% increase from Fiscal Year 2019

Ratings of the City’s Debts by Rating Agencies

The City has established guidelines for the structure and management of the City’s debt, which include target and ceiling levels for certain debt ratios to be used for financial planning purposes and restrictions on the types of items that can be financed, limiting financing only to those items with a useful life of six years or more. In accordance with this policy, the ratio of annual debt payments cannot exceed 15% of General Fund revenues for voter-approved and non-voter approved debt overall, and cannot exceed 6% of General Fund revenues for non-voter approved debt alone. The 6% ceiling for non-voter approved debt may be exceeded only if there is a guaranteed new revenue stream for the debt payments and the additional debt will not cause the ratio to exceed 7.5%, or there is no guaranteed revenue stream but the 6% ceiling shall not be exceeded for more than one year.

Of the $31.9 billion long-term bonds and notes payable, $751.0 million were General Obligation bonds.

The net position is the financial position of the City – assets and deferred outflows of resources minus liabilities and deferred inflows of resources.

Total City Assets: $73 billion. Deferred Outflows of Resources: $4.1 billion. Total: $77.1 billion.

Assets represent what the City owns:
• Cash and pooled investments
• Receivables
• Capital assets (land, buildings and infrastructure)

Total City Liabilities: $50.9 billion. Deferred Inflows of Resources: $2 billion. Total: $52.9 billion.

Liabilities represent what the City owes:
• Bonds and notes
• Claims and judgments
• Unearned revenue
• Accounts payable and accrued expenses

Net Position: $24.1 billion, $1 billion (3.9%) increase from FY19

The net position of $24.1 billion consisted of:

  • Net investment in capital assets: $21.3 billion, including land, building, infrastructure and equipment, less accumulated depreciation and outstanding debt related to acquisition, construction or improvements ($6.1 billion in governmental activities and $15.2 billion in business-type activities). This is an increase of $889.3 million from fiscal year 2019.
  • Restricted net position: $6.3 billion, which represents external restrictions imposed by creditors, grantors, contributors, laws of other governments, constitutional provisions or enabling legislation ($4.1 billion in governmental activities and $2.2 billion in business-type activities). This is an increase of $650.1 million from fiscal year 2019.
  • Unrestricted Net position: $3.5 billion deficit due to the City’s pensions and other long-term obligations (-$7.4 billion in governmental activities and +$4.1 billion in business-type activities). The deficit increased by $637.8 million from fiscal year 2019.

The City’s net position is illustrated in the table below.

The General Fund is the general operating fund of the City and includes transactions of the Reserve Fund and other accounts that have General Fund type activity for generally accepted accounting principles reporting purposes.

On June 30, 2020, the General Fund reported a total fund balance of $992.1 million, composed of $62.9 million nonspendable; $37.4 million committed; $20.8 million in advances to other funds; $356.2 million assigned for general government purposes; and $535.6 million unassigned. View the Management’s Discussion and Analysis section for more information about Governmental and Business-Type Activities.

In fiscal year 2020, General Fund revenues exceeded expenditures by $280 million.

Revenues

FY20 Total General Fund Revenues: $5.7 billion, 1.9% increase from FY19

Tax revenues increased by $57.1 million or 1.2% from fiscal year 2019 as a result of the sustained growth in the economy. Taxes accounted for $4.7 billion (81.5%) of General Fund revenue.

Property taxes, which represent 38.5% of General Fund revenue, increased by $138.1 million (6.7%), primarily due to higher current secured property tax receipts of $120.7 million.

Economy-sensitive revenues showed mixed results as a previously strong economy was confronted by the pandemic in the fourth quarter of the fiscal year. Sales tax fell by $60.1 million (10.1%) while business tax grew by $50.9 million (8.2%) due to growth in the local economy and new recreational cannabis retail activity.

Utility users’ tax revenues posted a net increase of $37.2 million (6.1%), primarily due to an increase of Electrical Users’ Tax receipts of $52.8 million.

Other tax revenues fell by $109 million or 14.9%, primarily due to the fourth quarter collapse in Transient Occupancy Tax and Parking Users Tax receipts due to stay at home orders and travel restrictions associated with the pandemic.

Licenses and permits revenues increased by $842 thousand (2.5%), due to fee increases, offset by reduced activity associated with the pandemic.

Charges for services increased by $45.5 million (14.9%), primarily due to new Fire Department reimbursements and increased revenue associated with transit policing.

Net investment earnings increased by $15 million (17.8%), due to higher account balances and increases in the fair market value of investments.

Expenditures

FY20 General Fund Expenditures: $5.5 billion,  7.3% increase from FY19

Salaries and Benefits increased by $253.3 million (7.4%), due to new labor agreements that included retroactive salary increases and increases in health care subsidies for civilian and sworn employees.

Retirement contributions increased by $88.3 million (7.5%), primarily due to the higher payroll.

Expenditures for contractual services, operating equipment, and supplies went up by $248.4 million (34.8%), primarily attributed to coronavirus response activities such as testing kit purchases.

CITY ACTIVITIES

The interactive chart below contains years of performance data about specific activities that impact residents. Use the pull-down menu to see the data for a particular City department or function.