Approximately six months ago (November 2007) Los Angeles voters were being asked to approve a new telecommunications tax known as Proposition “S.” At that time we were told that Los Angeles was facing a deficit approaching $150 million for the fiscal year 2007-2008 and, that if voters didn’t approve Proposition “S” the looming deficit would increase by $270 million to a total in excess of $400 million. The voters, concerned about the potential loss of emergency services, listened to the proponents of the Proposition and voted to pass the measure. On April 24, 2008, the Los Angeles Daily News reported that Los Angeles is now facing a deficit of $406 million for the fiscal year 2008-2009, an amount that is similar to the amount of deficit we were told would occur for fiscal 2007-2008 if we didn’t pass Proposition “S.” What happened? Does this mean that if Proposition “S” didn’t pass in November we would now be facing a deficit for fiscal 2008-2009 of almost $700,000, or more than 55% greater than that of fiscal 2007-2008? Another question that arises is: Do we actually have a revenue problem? Or, is it really a spending problem? Are further cuts possible? For example, while researching material for my previous column opposing Proposition “S,” I found that one of the potential cuts included in a memo from the office of the City Administrative Officer (in the event that the Proposition failed) was to reduce the elected officials’ budgets by approximately $24 million (representing 20% of their total budgets). I don’t know how many elected officials these budgets cover but if 20% equals $24 million, the total budgets for these officials amount to $120 million. On its face, this looks like a very large amount. Currently the Mayor and City Council are considering the implementation of numerous fees and taxes to eliminate a deficit amount that seems questionable. Perhaps before adding fees that might include: setting regular street-sweeping schedules on streets that do not have currently established sweeping plans in an effort to raise $20 million per year from parking fines; increasing the city sales tax by up to 1 percent to raise an estimated $400 million per year; increasing parking-meter fees and expanding hours when people need to pay to park (potentially confusing people, who are accustomed to paying for lesser time periods, into receiving fines) to potentially raise $16 million per year; adding a $125 “user fee” on traffic violations to generate $30 million; etc., I think that it would be appropriate for an independent party to verify the amount of the deficit. Look for alternatives If the independent verification idea doesn’t gain traction we should at least consider alternatives before raising fees and taxes that will be sure to exacerbate the existing problem of businesses leaving Los Angeles in favor of surrounding cities such as Burbank or San Fernando to escape the current high costs of doing business in L.A. Recently, the Valley Industry & Commerce Association (VICA) presented a list to city officials of 50 ways to raise revenues and cut expenses to balance the budget without adding additional fees or taxes. Here is a partial list of those ideas: collect a significant portion of the $500 million in uncollected debt currently owed to the City; lease surplus City property (instead of selling) to create long-term revenue streams; mandate that City departments explore opportunities for public-private partnerships to capture greater revenue for services provided; increase revenues through advertising placement on City real estate and at City parks and provide opportunities for sponsorship of City facilities; sell DWP services and non-emergency services of the Los Angeles Police and Fire Departments to jurisdictions outside the City of Los Angeles; establish liability training programs for most City agencies to reduce the cost of litigation and settlement fees the City pays out annually; reduce the City’s worker compensation costs through the same preventative training programs that other employers have successfully implemented; etc. I believe that the current deficit situation provides a great opportunity for City officials to work together with business groups to accomplish a major goal for the common good. It is clear that there are many ways to solve the problem without jumping to raise fees and/or taxes and that people who have spent time in the trenches with their own business challenges are a solid source for information and ideas. Gregory N. Lippe, CPA, is Managing Partner of the Woodland Hills-based CPA Firm of Lippe, Hellie, Hoffer & Allison, LLP, Chairman of the Valley Industry and Commerce Association (VICA) and a Director of First Commerce Bank.
