Thursday, April 8, 2010

Watching Los Angeles Government Crash

Los Angeles Mayor Antonio Villaraigosa announced Tuesday that he was going to furlough about 22,000 city employees two days a week because the city will run out of cash next month. That plan has now been halted after LA's city council screamed and yelled and Bob Schoonover, president of the Service Employees International Union Local 721 (The SEIU is run by Andy Stein, who in the first half of 2009 was the visitor who was most frequently recorded visiting the President at the White House) said the city  would be violating labor contracts, which stipulate no furloughs. Local 721 represents about 10,000 people.

What's a mayor to do?

It's politically difficult to raise taxes or cut spending. The City Council wants to force the Mayor to force the Department of Public Works to provide the city with $20 million they have tucked away. The DPW doesn't want to send the money unless they get rate hikes. The rate hikes are likely to come. If the DPW actually sends the money to the city after the rate hikes is an open question.

After the council approved a smaller rate hike to cover increased costs of coal and natural gas, the DWP reneged on a previous promise to transfer $73 million to the city's general fund, saying without even higher rate hikes, it could not afford to give the money.
So, if you live in L.A., you won't be impacted by a new tax. Hell, you won't be impacted at all, unless you shower and use lighting. Clever, very clever.  If the DWP actually does send the money to the city this time, it would only be a stop gap measure. L.A. budget problems are much bigger than this.

Controller Wendy Greuel says that the city will not be able to make payroll May 5 and requested the council transfer $90 million from the city's reserves to see it through the end of the fiscal year. Using that money, however, would drain the city's contingency fund.

Stay tuned.

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