Bonds

Los Angeles Mayor Karen Bass’ fiscal year 2024 budget would tap reserves to help fund the hiring of 400 police officers and for $1.3 billion in spending to lessen the city’s homelessness crisis.

She proposed a $13.1 billion budget Tuesday, a 5.6% increase in general fund spending from the prior year. The package now heads to the City Council, which has until May 31 to review, amend and approve it.

The increased spending will be funded in part by a $115 million transfer from the reserve fund, leaving a July 1 balance of $562 million equal to 7.14% of the general fund. The city is required to retain at least 5% of the general fund in its reserve fund. Revenues came in $100.5 million above what was projected in the fiscal 2022-23 budget, allowing for the transfer.

“With 40,000 homeless people and the police force possibly dropping to 2002 levels, there are no quick fixes and I won’t engage in Band-Aid budgeting,” Bass said. “This is a bold and a responsible budget. It charts a course to a new Los Angeles, one that is stronger, happier, healthier and safer.”

The city plans to use only $150 million of the up to $1 billion it expects annually from Measure ULA, which was approved by voters in November. ULA enacted a 4% real estate transfer tax on properties that sell for more than $5 million and a 5.5% tax on properties that sell for more than $10 million.

The city is holding off, because the measure has been challenged in court by the anti-tax Howard Jarvis Taxpayers Association. If ULA is overturned, and the city is unable to use those funds, it will tap $270 million in Federal Emergency Management Agency grant reimbursements, Bass said.

The city holds ratings of Aa2, AA, AA-plus and AAA from Moody’s Investors Service, S&P Global Ratings, Kroll Bond Rating Agency and Fitch Ratings on its general obligation bonds. It has an AA issuer default rating from Fitch, but Fitch bases the AAA on the city’s GOs on the application of California’s statutory lien that applies to voter-approved local general obligation bonds.

Several mayors prior to Bass had set a goal for the Los Angeles Police Department to reach 10,000 sworn officers, which it did in 2013, but the number dipped below that figure in 2020, and continued dropping to the current figure near 9,000, Bass said.

Her plan involves rehiring 200 recently retired police officers, who would work for up to 12 months, while the city hires and trains 400 police officers with the aim of hitting 9,450 sworn officers. The department has lost around 1,000 officers since 2019.

The budget would also create an Office of Community Safety to bolster the city’s efforts to send out social workers, rather than sworn police officers on mental health calls.

No major bond programs were announced as part of the budget, but the city issues $1 billion to $2 billion in tax-revenue anticipation notes each summer to prepay pension obligations for savings. Los Angeles International Airports also expects to spend $11.7 billion on capital projects between 2023 and 2026, according to the city’s annual comprehensive financial report for fiscal year 2022, which was released in February.

The city has issued $964 million of the $1.2 billion Proposition HHH bonds approved by voters in November 2016 to build housing for the chronically homeless, according to the ACFR. Of that amount, it has spent more than $599 million, but the entire amount has been awarded to projects. The city has completed 36 housing projects with 2,239 units, it has 68 projects with 4,415 units under construction and 26 projects in the predevelopment state, according to the ACFR.

Bass, elected in November, declared a homelessness state of emergency on Dec. 12, her first day in office, simultaneously creating Inside Safe a housing-focused program to get people off the streets. The declaration allows for a faster permitting process to speed up construction of affordable housing units.

Bass said her budget “invests” in public safety and will bring homeless people inside, saving the city money in the long run.

The budget allocates $1.3 billion to ease homelessness, of which $250 million will be dedicated to Bass’ Inside Safe program. This amount tops even the historically high $1 billion allocated in former Mayor Eric Garcetti’s fiscal 2021 budget.

“With no more pandemic money available, this represents a big city funding increase,” Bass said. “We are scaling up Inside Safe to address more encampments within our city.”

The city had a $238.1 million surplus in fiscal 2021, because it received $317 million in American Rescue Plan Act funds, according to the ACFR.

Va Lecia Adams Kellum, who was appointed CEO of the Los Angeles Homeless Services Authority in January, created Inside Safe, in partnership with the City Council, based on lessons learned housing people during the pandemic, Bass said.

The program has put homelessness people in hotel and motel rooms, but will look to purchase the hotels and motels to save the cost of paying nightly rents, she said.

The city would tap $24.5 million from the tobacco and opioid settlements — roughly equal amounts from each settlement — to pay for substance abuse treatment beds for the unhoused.

“If someone is ready to be clean, we want to make sure treatment is available when they are ready,” she said.

In Monday’s State of the City address, Bass said there is an increased urgency at City Hall, and a clarity of purpose to focus on city residents’ most pressing challenges.

“We are removing the barriers that have been in place for far too long — and as a result, we have finally dispelled the myth that people do not want to come inside,” Bass said.

Her Inside Safe initiative resulted in 1,000 unhoused residents moving inside, she said, a number that will grow with the purchase of hotels and motels.

Through executive directive number 3, she said, city staff are also reviewing more than 3,000 city-owned properties to identify those that can be used for housing. She is also working with the city attorney on purchasing 2,000 units of housing owned by the Skid Row Housing Trust that went into receivership.

“With more than 4,000 unhoused people living in Skid Row, failure is just not an option,” Bass said. “But we also know that many unhoused people suffer from substance abuse and mental illness. There must be real and sustained treatment available for substance abuse and mental illness for the unhoused.”

Bass, who has described her approach as collaborative, demonstrated that with the State of the City speech, typically delivered solely by the mayor. Bass had City Council President Paul Krekorian and County Supervisor Janice Hahn, who chairs that body, speak as well.

“The mayor understands how vital the partnership with the City Council, the county and the federal government is in tackling all of our policy challenges,” Krekorian said. “She brings the same air of collaboration she employed in the State Assembly and as a U.S. Representative.”

During the 10 years Hahn spent as a City Council member, she said, the work at city hall seemed miles away from the work of the county, though the buildings are only located a few blocks away.

“When things went poorly — especially when it came to homelessness, it was too easy to blame each other,” Hahn said. “But Mayor Bass has said it’s time to stop pointing fingers and start locking arms to solve this problem.”

Like the mayor, Hahn has served in the U.S. House of Representatives. She noted their offices in Washington, D.C., were adjacent.

“She invited me to join her on day one of her administration when she declared a homelessness state of emergency,” Hahn said. “We are still in the early days, but there is a rare sense of hope and urgency.”

The city and county are now partners, “who will meet this moment and solve this crisis,” Hahn said.

The county allocated $692 million for homeless services in its $43 billion proposed budget released Tuesday. The money would come from Measure H, a voter-approved sales tax to fund homeless programs. The county’s role has been to provide ancillary services, like drug rehabilitation, mental health services and job training, while the city’s focus is on building housing.

The county supervisors declared a homelessness state of emergency in January, roughly a month after Bass.

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