Nero, they say, fiddled while Rome burned. Are Los Angeles officials doing the same?
Civic leaders and columnists are lashing out at inaction by the city in the face of record deficits. The current deficit is over $200-million with a $485-million deficit forecast for the next fiscal year. Bond rating agencies have notified city officials L.A. bond ratings are on the verge of tumbling down if no action is taken to deal with the problem.
Mayor Antonio Villaraigosa called for 1,000 city jobs to be eliminated. The City Council put off action on job cuts for 30 days. The delay was imposed not to examine if these particular job cuts are the right ones to make but to stall making the cuts at all. And, what of these proposed job cuts? Is the mayor going after only public employees not covered by a recently negotiated contract? Are the cuts real or are some workers simply being moved to agencies funded by Special Funds instead of the General Fund?
With the crisis ready to boil over, the mayor attended an extraordinary session of the City Council in which he told the council members they cannot wait to take action to solve the city’s fiscal problem.
During the two-hour session in which he took questions from council members, Villaraigosa said: “We can’t continue to say no to everything. We can’t say no to layoffs, no to furloughs, no to department elimination, no to parking meters, no to parking structures, no to the zoo, no to the convention center. We can’t sustain this business model.”
His reference to parking structures, the zoo, and convention center was to turn over these functions to private operators.
While the mayor’s right that the current business model is unsustainable, what’s the new business model for Los Angeles? In crisis there is opportunity. Now is the perfect time to put out that new business model.
Hanging over the need to respond to the deficit dilemma is the cloud of bankruptcy. City officials say it won’t happen. However, the mayor hinted at the possibility when he told the council, “If we don’t make the decisions here, there will be others who make the decisions for us.”
Even more startling is the notion some Los Angeles civic leaders might embrace the idea of declaring bankruptcy.
David Abel, an involved Los Angeles businessman and community leader, told me he was surprised to learn from many private sector civic leaders they have reached the conclusion that the city should go bankrupt. He said the message he is hearing from people knowledgeable about the city and its governance is that bankruptcy is the only way to deal with the city’s structural deficit and the equally bankrupt political culture at city hall.
Bankruptcy would take the decision-making authority away from city officials. A judge could dictate how the city will deal with debt. Contracts might be nullified and even more workers than the 1,000 the mayor talked about could lose their jobs.
A bankrupt Los Angeles would be a black eye not only for the city but also for the state. Raising the bankruptcy flag in America’s second largest city would send shock waves around the world.
Investors would pull back not only from Los Angeles, but also other California cities and the state as well. It would stall the mayor’s heralded business initiative to bring new business to the city. Even the effort to build the police force could be compromised. In fact, bankruptcy and the resulting national news stories could dampen L.A. as a tourist destination and deeply bruise the city’s image.
It would take years to recover.
No one wants to talk about bankruptcy. Even talking about it makes investors nervous. But, raising the specter of bankruptcy may also spur city officials into making the hard choices necessary to avoid a calamity. If private civic leaders are acknowledging bankruptcy as an answer to the city’s problems then the public leaders better make those hard choices quickly.
Los Angeles is burning. It’s time to put away the fiddles and go to work dousing the fiscal flames.