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 [ LA WATCHDOG ](https://www.citywatchla.com/index.php?option=com_content&view=category&id=12)

#  City Hall’s Fiscal Fire Storm

January 09 2025

Written by Jack Humphreville.

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LA WATCHDOG - The Palisades Fire and the billions in losses will place an enormous strain on the City’s precarious financial condition, forcing the Mayor and City Council to make some very tough decisions that have been kicked down the road for years.

In October, the editorial board of the Los Angeles Times declared that LA is broke, teetering on the edge of a financial crisis, is not living within its means, and needs to develop a plan to stabilize its finances. After reviewing the first two Financial Status Reports issued by the City Administrative Officer, it appears that the City is looking at a budget shortfall of over $250 million for the next fiscal year that begins on July 1st.

Furthermore, the Reserve Fund had assets of $320 million at the beginning of December, $80 million below the minimum level of $400 million (5% of General Fund revenues) dictated by the City’s financial policies. This is down from $650 million in June of 2023 because of the need to finance budget busting labor agreements, overly optimistic revenue projections, and out of control spending. The reality is that after adjusting for additional liability claims and over-expenditures, the Reserve Fund will be reduced to around $100 million (1.25% of General Fund revenue).

This balance may be increased by transferring over $200 million from the Budget Stabilization Fund and the issuance of $80 million in Judgment Obligation Bonds. But even then, will there be enough resources to cover the budget shortfall and the need for funds to address the devastating Palisades Fire that turned the community into a bombed-out wasteland?

While the federal government may cover some or all of the costs related to the fire, this will probably not cover the expenses to upgrade the City’s neglected infrastructure and properly fund the Fire Department that has been shortchanged for years.

While we can make many wild ass guesses about how the City will balance the budget, strengthen the Reserve Fund, and address the impact of the Palisades Fire, Mayor Bass and Budget and Finance Chair Yaroslavsky need to provide Angelenos with updated information in the near future and not wait until April 20th when the Mayor submits her budget to the City Council for its review, analysis, and recommendations.

*(Jack Humphreville writes LA Watchdog for CityWatch. He is the President of the DWP Advocacy Committee, the Budget and DWP representative for the Greater Wilshire Neighborhood Council, and a Neighborhood Council Budget Advocate. He can be reached at: <lajack@gmail.com>. )*

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