Page 6 - FY 2021-22 Supporting Information

The Outlook makes several assumptions that, if not met, would change future year
projections. The Outlook assumes that the pandemic conditions will lessen by the end of July 2021,
and the economy will begin to strengthen at that time. If this does not occur, revenue growth could
fall short of projections and there could be unanticipated COVID-19 response spending.

Finally, the Outlook assumes that revenues will continue to grow consistent with historical
averages and that expenditures will remain consistent, with growth dedicated to maintaining
current service levels. It assumes no further employee compensation adjustments following the
expiration of the current employee agreements over the next couple of years. There has yet to be
a final decision on costs associated with pursuing the Civic Center Master Plan, the Los Angeles
Convention Center Expansion Project, or the Los Angeles River Revitalization Master Plan. As
such, the Outlook does not include the costs of these major construction projects whether as debt
service payments or availability payments.

Areas of Concern

It is customary for my Office to identify the areas of concern with the Proposed Budget that
we believe may require attention and/or solutions during the course of 2021-22. The single greatest
risk to the Budget is whether the U.S. Department of Treasury’s guidance related to the use of the
American Rescue Plan funds enables the City to use those funds as envisioned. The Budget
assumes wide discretion for the use of these funds, including as revenue replacement to sustain
general government purposes. If the guidance does not support this approach, the City will have
to significantly revise the Proposed Budget. Also, as noted, the future of the pandemic itself
presents a major challenge.

I look forward to discussing these issues and any others that may arise as you work to
adopt a fiscally responsible, balanced budget for 2021-22.

Sincerely,

Richard H. Llewellyn, Jr.
City Administrative Officer