Greuel’s budget draws ridicule

City Controller Wendy Greuel has tried to set herself apart from rivals in the Los Angeles mayor’s race by casting herself as a frugal budget expert well qualified to lead the city’s recovery from chronic cash shortfalls.

But her plans for major expansions of the police and fire departments, along with her pledge to abolish the city’s business tax, set her apart in a different way: Her agenda would cost Los Angeles far more than anything proposed by her opponents.

It would also make it harder to restore recent cuts in sidewalk repairs, tree trimming and other services, or to weather the next economic downturn, experts say. One of the next mayor’s toughest tasks will be to close deficits projected to range from $216 million to $327 million a year.

The cost of Greuel’s plans has drawn attacks from rivals who ridicule them as unrealistic. Independent analysts have also cast doubt on Greuel’s numbers, as well as those of one of her rivals, City Councilman Eric Garcetti. He too supports eliminating the business tax. Neither candidate has a plan to offset the more than $400 million in revenue that would be lost, other than a hoped-for rise in tax receipts as new businesses move to Los Angeles.

“When you put all of these things together, instead of a $200-million problem, you could have a $1-billion problem,� said Keith Comrie, a retired city administrative officer who oversaw Los Angeles finances for 19 years.

Los Angeles County Supervisor Zev Yaroslavsky, who as a council member years ago chaired the city’s budget committee and pondered a run for mayor this year, said Greuel’s plan to expand the police force to 12,000 officers was “totally impossible without eviscerating other city services, including other emergency services� -- especially with the tax elimination.

“At some point, reasonable voters will ask, ‘Is this serious or is this just political rhetoric?’ and I think people will figure it out for themselves,� he told The Times. “It’s not doable. It’s not real. It’s an arithmetic problem, to quote Bill Clinton, and the arithmetic does not add up.�

Yaroslavsky, who criticized Greuel’s opponents for also failing to provide a blueprint for fiscal stability, is remaining neutral in the March 5 primary. He said he has not decided whether to back anyone in the May 21 runoff.

Two debate moderators -- Larry Mantle of KPCC-FM (89.3) and former Deputy Mayor Austin Beutner -- increased pressure on all the candidates last week to say how they would rein in soaring salary and pension costs. Beutner, who also considered a run for mayor, said deficits would otherwise persist.

Greuel’s job as the city’s chief accountant lends itself to shaping a political profile as a “tough fiscal watchdog,� as she often puts it, but her call for higher spending and lower taxes threatens to jeopardize that image.

“There’s a risk that if she goes too far, she could blow that credibility,� said David O. Sears, a political science professor at UCLA.

Questions about the cost of Greuel’s agenda come as Garcetti is trying to discredit her assertion that she has uncovered $160 million in “waste, fraud and abuse� at City Hall. Greuel says she would stop waste and “use the savings for job creation, better schools and faster emergency response.� Garcetti mocked her vows last week as unicorns and rainbows.

A Times review found that more than half of the $160 million came from two audits. In one, Greuel merely identified money she thought should be shifted from one city fund to another. In the other, she relied on projected revenue that the audit conceded was “unrealistic.�

Before her election as controller in 2009, Greuel served on the City Council for seven years. In 2007, she joined Garcetti and another mayoral hopeful, Councilwoman Jan Perry, in approving large pay hikes for city workers. Another mayoral contender, entertainment lawyer Kevin James, has portrayed the pay package as reckless, given the deficits projected at the time. As part of the deal, more than 13,000 clerks, librarians and other city workers will get a 5.5% raise on Jan. 1, 2014.

Also clashing with Greuel’s pledge of fiscal restraint is her posture toward public employee unions as she seeks their support in the mayoral race. In a recent private meeting with union members, she took swipes at Garcetti for backing layoffs and furloughs when the recession triggered a sharp drop in tax collections. Garcetti has sought to turn the unions’ tilt toward Greuel to his advantage, saying he made tough decisions to cut the workforce and reduce health and pension costs while others “stood on the sidelines.�

Like all of the top mayoral candidates, Greuel opposes a March 5 ballot measure to raise the sales tax by half a cent to generate $200 million a year. If voters reject it, budget officials say, more layoffs are inevitable, along with broad cuts in police and other services.

If voters pass the tax hike, Greuel’s new spending would require all of that money and more. She has promised to hire 2,125 new police officers and 726 new firefighters and paramedics by 2020, as long as the budget is balanced and tax collections are growing. She declined to say how much the plan would cost, but city officials say starting salaries and benefits, on today’s pay scale, would run $242 million a year.

Greuel also refused to specify the cost of her proposal to expand crime prevention programs.

“If we talked about goals and priorities limited by dollar signs, half of the things Los Angeles has been able to achieve would not have been done,� she said in a written response to Times questions on her public safety plan. “The plan is based on increased revenue projections, and I am confident that with efficiencies in government that I plan to implement, pension reform, and job growth, the plan will be balanced, and we will have opportunities to expand public safety.�

For both Greuel and Garcetti, elimination of the business tax is a centerpiece of their plans to create jobs, a major concern of voters in a city where the unemployment rate in November was 10.9%, well above the 4.9% rate in 2006.

Both candidates support a plan to phase out the tax over 15 years, as long as other tax revenue continues to rise. But the city’s top budget officials, City Administrative Officer Miguel Santana and Chief Legislative Analyst Gerry Miller, called plans to abolish the tax “poor public policy� and warned that the city would need to offset a loss of more than $400 million in revenue, even if ending the levy draws new businesses to Los Angeles.

“It would increase the tax burden on residents or result in decreased city services, which would make Los Angeles a less-desirable place to do business,� they told a council committee in a 2009 memo.

Garcetti and businesses lobbying to abolish the tax often cite a USC study saying the proposal would pay for itself as newly arrived businesses pay other taxes and spin off jobs, but city budget officials and independent economists say that assumption is unsound.

“Candidly, it’s a preposterous idea from top to bottom,� said Christopher Thornberg, founder of the Beacon Economics research firm and a former economist at UCLA Anderson Forecast. “I’ve never been a big fan of the business tax, but I recognize it’s not the business killer that we pretend it is.�

Perry has made her opposition to eliminating the business tax a main point of contrast with Greuel and Garcetti. She said she could not support getting rid of it until the city finds ways to offset the lost revenue.

To Yaroslavsky, talk of wiping out the tax and expanding the city payroll reflect a pattern in the mayoral race of candidates making promises that can’t be kept.

“I understand why people make proposals the way they do during a campaign, but I think the voters are looking for intellectual consistency and honesty,� he said. “You can’t promise everything to everybody and not explain how you are going to pay for it.�

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