In recent weeks, numerous outlets have reported that the COVID-19 crisis has decimated the finances of cities in Southern California and across the country. Los Angeles will be no exception, according to City Controller Ron Galperin.
A revised revenue forecast released on April 15 by the Controller's office predicts a $231 million decline in revenue for this fiscal year, and as much as a $598 million decline in next year.
During the current fiscal year, which ends on June 30, anticipated city revenue is now $6.38 billion - a 3.5 percent decline from the Controller's March 1 estimate of $6.61 billion.
For Fiscal Year 2021, the decline in revenue could range between $194 million and $598 million, depending on the length of the shutdown and strength of subsequent economic recovery.
Transient occupancy tax revenue - which accrues from hotel stays and home sharing - is expected to drop by $61 million during this year, and by up to $80 million in the next.
Likewise, business and sales tax revenue is also expected to drop with stores and restaurants shuttered due to the citywide safer at home order. The effect is expected to worsen next year, with many businesses potentially closing permanently. Galperin predicts that revenue could dip by as much as $150 million in Fiscal Year 2021.
However, Galperin does not expect that Los Angeles will face a cash flow crisis, and predicts that federal and state relief funds will likely allow the city to achieve 2.3 percent growth over the previous year's general fund receipts.
"The City is facing an unprecedented crisis due to the coronavirus pandemic, and our revenue outlook is much darker than it was even a month ago,” said Galperin in a news release. “While these struggles are not unique to Los Angeles, our City is in a better position than most municipalities because of the diversity of our revenue streams and healthy Reserve Fund balance.”
Nonetheless, he predicts that expenses will outpace revenue growth during this year as a result of increasing employee salaries and benefits, as well as the City's response to the COVID-19 pandemic.
"[R]eductions in projected General Fund receipts will strain the ability to provide high quality services and necessitate difficult budgeting decisions next fiscal year and, potentially, for the foreseeable future."
Los Angeles County officials are bracing for similar impacts.
The Los Angeles Times reports that the County see a $1-billion decline in sales tax revenue this fiscal year, and a decline of $2 billion by the end of fiscal year 2021.