L.A. Controller Reports Clear Financial Skies, Urges More Saving for a Rainy Day
LOS ANGELES — Controller Ron Galperin today released the 2019 Preliminary Financial Report, a snapshot of the City’s balance sheet for the most recent fiscal year that ended on June 30. He found that the City brought in record revenues, but advised fiscal restraint and urged building up L.A.’s rainy day funds to protect taxpayers in the event of a possible economic downturn.
“The City is on solid economic footing, but we have to be careful as spending is rising year after year,” said Controller Galperin. “To protect taxpayers and improve neighborhood services, City leaders should exercise restraint and put more money into reserves in case an economic slowdown comes our way.”
Galperin’s report highlighted record revenues in the City of Los Angeles:
- Revenues overall were up by 8.6% over the year prior to $9.08 billion.
- General Fund revenues grew by 7.2% to $6.23 billion.
- Special fund revenues grew by 11.6% to $2.85 billion.
- The City realized all-time high receipts from property, business, sales and transient occupancy (hotel and short-term rental) taxes.
- Los Angeles also collected more than $70 million in cannabis business and sales taxes, a number that should increase going forward.
But total spending increased as well:
- Spending grew 4.5% over the year prior to $8.23 billion overall.
- 75% of the spending increase was attributable to employee salaries and benefits.
- Retirement costs jumped by 9.1 percent to $1.2 billion.
- The City’s new home-sharing rules, which impose limits on short term rentals, could impact transient occupancy tax receipts in the current fiscal year.
In recent years, L.A.’s economy has experienced growth in trade, tourism, manufacturing and other key economic sectors, but federal trade policies could put at least some of those gains at risk. If the local economy slows, City revenues will inevitably be impacted, which is a cause for concern, said Galperin, because L.A.’s total expenditures are set to climb over the next few years with newly adopted employee salary, health care and retirement obligations. Higher costs could put constraints on the City’s ability to expand neighborhood services, especially if revenues do not keep pace.
The report also pointed out that the City’s ratio of debt service to General Fund receipts was at 5.5 percent of General Fund revenues, significantly below the 15 percent policy limit. While this is positive, debt financing can also be used to tackle large infrastructure projects, like street and sidewalk repair and replacement.
To supplement his Preliminary Financial Report, Galperin created interactive tools to allow users to explore the City’s revenues, spending, assets and liabilities: lacontroller.org/pfr2019. His Comprehensive Annual Financial Report for the last fiscal year will be issued in January 2020.