Page 2 - 2020-21 Supporting Information Book_Revised

CITY OF LOS ANGELES

Richard H. Llewellyn, Jr. CALIFORNIA ASSISTANT
CITY ADMINISTRATIVE OFFICERS
CITY ADMINISTRATIVE OFFICER PATRICIA J. HUBER
BEN CEJA
YOLANDA CHAVEZ

ERIC GARCETTI
MAYOR
April 20, 2020

Honorable Members of the City Council:

The 2020-21 Proposed Budget reflects the deep challenges that the City is facing
as we respond to the COVID-19 pandemic. In the last month, Angelenos’ lives have
changed and the City has led efforts to protect our residents’ safety and health. These
efforts are the core of the City’s responsibilities, and they have been essential and critical.

The broad budgetary impacts of the City’s response are clear. Our unanticipated,
emergency spending in 2019-20 will drive the Reserve Fund below the 5 percent policy
level for the first time in many years. Citywide and nationwide social distancing measures
have slowed the economy and reduced the City’s revenues. The magnitude and duration
of these budgetary impacts, however, are unknown.

While budgets always include a level of uncertainty since they are built upon
projections and assumptions, the COVID-19 pandemic has elevated the degree of
uncertainty relative to revenues and expenditures. This Proposed Budget, therefore,
includes contingencies to enable the City to react as the full fiscal impact of the City’s
response becomes clearer in the coming months.

The projected General Fund revenues take into account the limited available data
from the first several weeks following the Safer at Home order as well as a review of
revenue losses during other recent economic downturns. In case these revenues are too
optimistic, it is essential that the Proposed Budget preserve the City’s reserves, which we
already must access to address emergency expenditures and lost revenue in 2019-20.

The impacts of the COVID-19 response also will hurt many revenue sources for the
City’s special funds. For example, El Pueblo and the Zoo, which are supported by
attendance-based revenues, are closed. Cultural Affairs receives funds based on transient
occupancy taxes; hotels, however, are operating well below capacity. Many of our public
works funds receive sales or gas taxes that have been negatively impacted by the closure
of nonessential businesses. The Proposed Budget addresses the uncertainty regarding
the extent of the revenue losses by, for example, including an appropriation to cover losses
at El Pueblo and the Zoo, and by identifying certain public works projects as contingent
upon the receipt of revenues.

473-7500