SAN FRANCISCO (Reuters) - Nearly all Los Angeles city offices would close for two days a week starting April 12 and lasting through the end of June under a plan proposed on Tuesday by the mayor of the second biggest U.S. city, which is running dangerously short on cash.
Police, other public safety agencies and departments that generate revenue for the city would be exempt under Mayor Antonio Villaraigosa’s plan, which comes a day after City Controller Wendy Greuel said Los Angeles is in an “urgent fiscal crisis” and just over four weeks away from being unable to pay its bills.
Greuel also said Los Angeles, California’s biggest city, would have to begin tapping $90 million from its $191 million in reserves, which could pull its credit rating lower.
Standard & Poor’s Ratings Services cut its rating on Los Angeles’ general obligation in February by a notch to AA-minus with a stable outlook, from AA with a stable outlook, amid concerns that city officials could drain reserves to help close a budget gap of more than $200 million.
Ian Carroll, a director with S&P’s state and local governments group in San Francisco, said Greuel’s warning and Villaraigosa’s plan underscore the fragility of Los Angeles’ finances and that officials face a serious challenge in balancing the city’s books.
Los Angeles and many other local governments across California have suffered steep declines in revenue because of declining property values, weak consumer spending and high unemployment.
The financial condition of Los Angeles, has reached a critical point, said Carroll.
“The decisions about where to make the cuts and where to get the revenue to close that gap are just getting tougher,” Carroll said.
A spokeswoman for Villaraigosa said city officials were working on an estimate of savings from closing city offices while the mayor time presses a skeptical city council to support increasing electricity rates charged by the city’s Department of Water and Power.
Fitch Ratings on Monday withdrew its AA-minus rating on $720 million of bonds the department planned to sell this month, noting that rate increases assumed in a March 18 rating affirmation had not been implemented.
Fitch also said its expects to review its ratings on the department’s outstanding power revenue bonds in the next few weeks.
Reporting by Jim Christie; Editing by Leslie Adler