In LA's financial crisis, don't mention the B-word (Feature)

By Andy Goldberg Apr 16, 2010, 4:02 GMT

Los Angeles - The B-word is back in vogue in Tinseltown, and it's not a reference to the aggressive ego-centric women who are so prominent in the capital of the US entertainment industry.

Rather, the new B-word is something far more scary to most residents of Los Angeles than the usual misogynist insult, signifying as it does not only the city's huge financial problems, but the deeper economic problems that will make any attempts to reform the national US economy such a daunting task.

Bankrupt. Broke. Bust. Those are the B-words that are causing residents of the City of Angels to lose sleep at night.

Hampered by the national recession, the backlash of the region's huge run up in housing prices, a drop in jobs and tax revenues, and most importantly a huge increase in the cost of benefits to government workers, Los Angeles may have little option but to declare bankruptcy in the next few months, a growing number of experts believe.

The crisis reached a peak last week when Mayor Antonio Villaraigosa announced that the city would be unable to pay its bills starting in May as it grappled with an unfunded 212-million-dollar deficit. His proposal of a two-day per week city shutdown was only averted when it transpired that the city enjoyed higher than expected tax revenue and an injection of funds from the city-owned utility company.

But that still leaves Los Angeles with a structural imbalance that all agree is unsustainable in the long run, despite plans to slash 4,000 municipal jobs.

The budget crisis has also meant a wholesale slashing of overtime hours for the city's police force, which has been left so short handed that it is hardly able to conduct more than cursory investigations into murders, according to the Los Angeles Times.

'It has a serious impact on our ability to respond to some of the large, violent incidents we've been experiencing lately,' said Los Angeles Police Department Chief Charlie Beck. 'That is especially true of homicide investigations because of the long hours they demand.'

Most observers agree that generous benefits and pensions wrested from the city by powerful unions are one of the major causes of city's budget crisis. According to the Los Angeles Times, the city will need to come up with 423 million dollars this year to cover unfunded pensions, rising to 1 billion in another five years.

Such huge shortfalls can only be dealt with by the city declaring bankruptcy, which would allow Los Angeles to renegotiate its pension agreements to more reasonable levels, argues former mayor Richard Riordan.

'The city, the way it is going, is unsustainable. If they don't do it this year, they are going to have to do it in the next four or five years,' he told the Los Angeles Daily News.

But Villaraigosa says that day will never come, saying it will be disastrous for the city's economy and its image as a world-leading metropolis.

'We're never going into bankruptcy,' Villaraigosa said last week. 'I am duty bound to make sure the city continues to operate and that we not go that route. It is not going to happen.'

Jack Kyser, chief economist for the Los Angeles County Economic Development Corp agrees that the B-word would be a disaster. 'We need to sit back and take a deep breath. Declaring bankruptcy would be horrible for the city, horrible for LA County and horrible for all of Southern California. The rest of the world would be looking at us and say, 'Those people are out of control.''