Page 459 - 2020-21 Budget Summary

Concerns to consider

The report also raises a number of concerns, the most pressing of which is the high likelihood that
revenue growth will be eclipsed by climbing expenditures this year due to the increased cost of employee
salaries and benefits. Short-term fixes and small adjustments can bolster the City’s bottom line now, but
any unanticipated economic stress in the future would put L.A. in a far more precarious financial situation.
The City’s reliance on economically sensitive revenue sources to fund neighborhood services
underscores this worry.

Additionally, due to the roll-out of the City's home-sharing ordinance enforcement, listings across all
hosting platforms in Los Angeles have decreased by approximately 49 percent. While it is too early to fully
anticipate the impacts to TOT revenue, it is necessary for the City to closely monitor TOT receipts as
there could be future negative impacts to TOT revenue growth.

Special fund revenue growth

My report also raises the issue of special purpose funds, as detailed in our 2019 report. This fiscal year,
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special fund revenue is estimated to be $3.20 billion, $347 million higher than last year, spurred by large
increases in Sewer Service Charges, Stormwater Pollution Abatement Charges and Street Damage
Restoration Fees (SDRF). For fiscal year 2021, we project that special fund revenue will continue to grow
by $143 million to $3.34 billion overall, led by Proposition A and Gas Tax revenues.

The SDRF Fund was the subject of a 2014 audit by my office. Because of fee changes accomplished
through our partnership with the City Council, SDRF receipts are projected to grow from a historical
average of less than $10 million to $54 million this year.

Overall, special fund receipts have increased faster than General Fund receipts in recent years, giving the
City an opportunity to address some of its most pressing priorities using special funds. My office will
continue to work with the Mayor and City Council to help the City better manage these funds and bring
more of them into the yearly budget process.

While we project overall revenue growth for the City in the coming year, spending increases are certain.
The City must exercise budgetary restraint to ensure that Angelenos receive the services they demand
and deserve.

Explore the Revenue Forecast Report online at lacontroller.org/revenueforecast2021.
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Sincerely,

RON GALPERIN
L.A. Controller

cc: Sharon M. Tso, Chief Legislative Analyst
Richard H. Llewellyn, City Administrative Officer

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