Saying they can avert a partial shutdown of Los Angeles government, city officials announced Thursday they had found an additional $30 million in revenue and savings to help pay their bills through the next two months.
They plan to combine the newfound money with a $90 million transfer from the city reserve fund that officials said would allow them to make payroll - but leave the city dangerously short in the event of an emergency.
City Controller Wendy Greuel said she is concerned the city will end the fiscal year with only $30 million left in reserve.
"I don't think a $30 million reserve fund is a good financial situation for a city with a $7 billion budget," Greuel said.
"We will get by these next few months, but it is not a good policy to have to borrow from your reserve fund to pay your bills. We have never had to do that before."
Greuel said the reserve fund is designed to show lenders the city has the ability to pay back loans and have money available for an emergency. It should normally be about 5 percent of the budget, or $350 million, city officials say.
The $30 million windfall was the result of updated revenue projections that show the city is collecting more in taxes and fees than expected this quarter, combined with expenses that were reduced through efficiency measures and cuts made in recent months.
Interim City Administrative Officer Raymond P. Ciranna said the quarterly financial status report that his office is completing now should show a general improvement in tax revenue.
"I think we're crawling out of the rabbit hole," Councilman Paul Koretz said after a two-and-a-half hour meeting Thursday between council members and Mayor Antonio Villaraigosa. "We are coming back to reality."
The comment referred to a barb fired at Villaraigosa this week by other council members, who said the mayor's shutdown solution amounted to an "Alice in Wonderland" plan.
Council members also pledged to continue pressing the Department of Water and Power to provide the final $73 million transfer of a promised $220 million to help balance this year's budget.
The DWP refused Monday to make the transfer, exacerbating the city's financial crisis as Greuel predicted City Hall would run out of cash by May 5 and Moody's Investor Services downgraded the city's credit rating. The DWP refusal followed a rejection last week by the City Council of a hike in power rates.
Villaraigosa said the meeting Thursday of the Executive Employee Relations Committee was productive in allowing city officials to look at the financial problems.
"We agreed we need to establish a contingency plan here to deal with future emergencies," Villaraigosa said. "We instructed the City Administrative Officer to develop plans that we can consider... on furloughs."
Villaraigosa had initially proposed shutting down non-essential city services for two days a week to save money. But with the newfound $30 million and the $90 million reserve transfer, they said the worst and most immediate threat has passed.
"We will make the payroll of April, May and June," Council President Eric Garcetti said. "Our employees and the public should be assured there will be no immediate shutdown."
Garcetti said the issue of raising DWP rates was not considered during the meeting with the mayor.
However, it remains on the table as Garcetti and Councilwoman Jan Perry - in a letter that also included Councilmen Bernard Parks and Dennis Zine - urged the DWP to approve the $73 million transfer.
"It seems the department is holding the city taxpayers hostage in asserting that fulfilling your commitment to the city will assuredly result in a bond rating downgrade," the letter said. "This is not a foregone conclusion."
To accomplish the transfer would require approval of the Board of Water and Power Commissioners. They have no meeting scheduled until April 20.
Villaraigosa sent his own letter to the DWP on Wednesday asking it to reconsider the transfer to see if it can be made.
"I have done what I can," Villaraigosa said. "I cannot force the DWP to make the transfer."
