L.A.’s Financial Prognosis

Ron Galperin holds the office of Controller of the City of Los Angeles, a post to which he was first elected in 2013 and re-elected in 2017. As controller, he is the paymaster, auditor and chief accounting officer for the City of Los Angeles. He earned a law degree from the LMU Loyola Law School in 1993 and was the first Neighborhood Council member to be elected to citywide office in Los Angeles. Galperin was interviewed by email by Editor Joseph Wakelee-Lynch about the impact of the COVID-19 crisis on the financial health and future of Los Angeles.

Looking back at the FY19 Comprehensive Annual Financial Report, how does 2.2 percent for health and sanitation compare to other years?
My job as Los Angeles City Controller is to monitor the city’s financial well-being and report on how municipal dollars are being spent. Each year, my office releases an annual financial report, which is a comprehensive look at how the city is spending public funds. City spending increased last year on a number of fronts, including for health and sanitation services, and revenue grew overall as well. In fact, even though Los Angeles is currently taking a big financial hit because of the coronavirus pandemic, city revenues will still increase by about 2.3 percent this year over the year prior.

How big should that pie piece be if it’s going to prepare us for the next pandemic?
Our best bet is to budget wisely and sock away as much money as possible in the city’s reserve fund. This has been my advice since I was elected city controller in 2013 and, fortunately, has been heeded in large part by the mayor and city council in recent years, which is why our reserves are healthy and far larger than they were a decade ago. While we have already seen some spending of reserve fund dollars, building up this fund is even more important today than it has been in a long time.

In the not-too-distant future, when we look back to examine how the city spent its money during this crisis, we will have a better picture as to whether spending priorities need to shift in any significant way. I also plan to review this terrible crisis to determine what measures Los Angeles should take to be better prepared for another pandemic and to see whether the city can more effectively use technology in its daily operations.

What is COVID-19 going to cost L.A., and would that cost have been lower if the federal government had recognized the severity of the outbreak and planned accordingly?
The costs to the city’s financial coffers will be significant in the coming years. My office just released a revised revenue forecast for this fiscal year and the next that estimates that revenues this fiscal year will be $231 million less than we previously predicted and may come in as much as $598 million lower than predicted next year. These reductions will likely impact the city’s ability to provide at least some neighborhood services and will result in several years of very difficult budgeting decisions.

The impact of the federal government’s actions during this crisis is hard to calculate in dollars. But I do think that because our state and local leaders swiftly recognized that we had to take dramatic measures to keep people safe and alive, California is in a better position than many other states and prevented what could have been an even more catastrophic impact on our people and economy. I am proud that we, as city officials, made protecting and preserving the health and safety of Angelenos our top priority.

Which revenue stream will suffer the most as a result of the COVID-19 crisis?
Nearly every revenue source will be impacted to some degree. Some revenue sources are already being impacted — like the taxes L.A. receives from hotels, home sharing and permits — and others will decline more slowly, like property taxes.

The greatest sources of the decrease this fiscal year are Transient Occupancy Tax and Licenses, Permits, Fees and Fines, which together are reduced by $110 million, as the travel and tourism industry has fallen by more than 70 percent and city office operations have been largely closed during the crisis. Revenues reflecting economic activity, such as business tax and sales tax, will also come in lower, but not as much because both are lagging indicators that will be impacted much more heavily in the coming year. Property taxes won’t decline much this year but likely will suffer in the coming year if the economic shutdown continues, as home sales and values will decrease.

What is your day-to-day role in the city’s crisis response?
The Controller’s Office has a regular role at the city’s Emergency Operations Center — the physical location where departments gather to monitor the city’s response to the COVID-19 crisis. Our role there is to ensure the financial well-being of the city, which we do on a daily basis. That goes along with my elected role as L.A.’s chief accounting officer. We also carefully review how efficient our operations are, which our auditing team is doing.

In addition, my office also serves the essential function of making sure all city employees and vendors continue to get paid correctly and on time, and we have created a way for city departments to make emergency purchases more efficiently.

Do you expect that the coronavirus’ impact on L.A.’s homeless population will completely overwhelm homelessness spending that the city has approved?
Homelessness is an issue that will not get solved during this crisis; likely, things will get worse for Angelenos living on our streets. That said, the crisis has forced the city to take emergency measures for which I’ve long advocated, including exploring the creation of safe camping locations, doing more outreach remotely and moving more people inside and out of the elements quickly. It shouldn’t have taken a crisis for these things to be tested, and short-term strategies must be turned into longer-term solutions as we come out of this. But I am hopeful that the city will move forward thoughtfully and with real urgency to meet this other glaring crisis in Los Angeles.

What will be the lasting impact of the COVID-19 crisis on L.A. — your most optimistic answer and most pessimistic?
This is a very difficult trial for everyone in Los Angeles, but especially for working and poor families. Those of us with the ability to effect change at the citywide level need to keep working to alleviate the challenges faced by people in need. That is something that we should always work toward, but the needs are likely to be greater as we come out of the COVID-19 era in the City of Angels, and so must our resolve to meet them.

Ultimately, although it is hard to imagine something so terrible as the coronavirus doing so, I think this crisis will bring our city closer together, will root our neighborhoods even more firmly in the spirit of togetherness and solidarity, and will help us all find a deeper understanding of and appreciation for our friends and those who are different from us. We all are Angelenos, we are all in this together and we will come out of this stronger than before.

What do you love about this city?
I love just about everything. This crisis has allowed me to think more about the little things that I might take for granted in my day-to-day life, but that I cherish nonetheless: the small businesses that inject life into the city, the diversity of the people who live here, the art in our parks, streets and museums, the gift of fatherhood and so much more.

What has COVID-19 made you appreciate?
My family, friends and co-workers have always meant so much to me, but I appreciate the wonderful people they are and what they do even more now. I also appreciate the sacrifice of tens of thousands of city workers, those emergency workers on the front lines and those who continue to show up day in and day out, in person and remotely, to keep our city running. My own Controller’s Office staff inspires me daily. Many are telecommuting and trying to juggle working from home with caring for family members, but all are working and carrying out critical tasks for the city. They are truly everyday heroes and exemplify what public service is all about.

Once the Safe at Home order is lifted and we get our city back, what’s the first thing you’re going to do?
Working from home has its benefits — I get to see my lovely young twins and my wonderful husband, Zach, more often — but I thrive on face-to-face interactions at the workplace, and I absolutely adore going around the city to visit with neighborhood organizations, business leaders and other organizations. It will be a wonderful day when I am able to go speak to my constituents and answer their questions face to face. Maybe elbow bumps will replace handshakes and maybe we’ll need to all be six feet or more apart, but there is something about in-person meetings that cannot ever be replaced.

This article was posted on April 17, 2020.