Each year, in accordance with City Charter Section 311(c), my office submits a Revenue Forecast Report, which includes information gathered from City departments, recent regional economic reports and meetings with local economists. This report covers updated revenue estimates for the remainder of the current fiscal year, ending June 30, 2023, and projections for fiscal year 2024. Although forecasts inherently involve uncertainty, this report offers our best estimates and seeks to promote responsible budgeting in the fiscal year ahead. Also included in the report are the estimated requirements for debt service and General Fund cash flow borrowing.
Click here to read the full FY 2024 Revenue Forecast Report
Explore actual receipts for fiscal year 2022, projected revenues and their sources for fiscal years 2023 and 2024, and compare last year’s revenues to the estimates for this and next fiscal year.
Effective April 1, 2023, a new transfer tax, United to House LA (Measure ULA) will be imposed on residential and commercial real-property sales and transfers within the City of Los Angeles where the consideration or value is greater than $5 million. The new tax, which is in addition to the current transfer tax, imposes a 4.00% tax on real property sales or transfers at over $5 million but less than $10 million, and a 5.5% tax on real property sales and transfers valued at $10 million or more. Revenue generated by the new tax is intended to be used to fund affordable housing and tenant assistance programs, including development, construction, acquisition, rehabilitation, and operation of housing.
While the voters overwhelmingly passed Measure ULA in November 2022 election, the constitutionality of the Measure is currently being challenged in court. At this point, my office cannot predict the litigation outcome or estimate ULA revenue. It is also unclear at this point what impact (if any) the measure will have on the overall real estate market in the City of Los Angeles, and the existing General Fund documentary transfer tax revenue.
The future remains uncertain, and it is difficult to predict the direction of the economy. Economists differ on the likelihood of a recession during fiscal 2024. Continuing strong employment and consumer spending have led many to alter their forecasts to suggest a potential “soft landing” without a recession or only a mild one. Much depends on whether inflation continues to abate and how harshly the Fed reacts. Our projection for the upcoming year assumes that the economy will slow down in fiscal year 2024, but no recession.
Although we expect a slight growth of 0.8% for fiscal year 2024, as of the date of this report, the perception of where the federal monetary policy is headed as well as the potential impact on national economy continue to change every day. Should the economy fall into a recession within the next fiscal year, the City may realize less General Fund revenue than we estimate as most economically sensitive revenues would be impacted.
Expenses are on track to increase considerably next fiscal year. The scope of Mayor Bass' homeless emergency efforts to fund temporary housing and spur construction of additional permanent housing is unknown, but will undoubtedly require major funding. The City continues to operate with chronically high levels of staff vacancies. While this mitigates expenses, it is unsustainable across nearly every one of the City's mission critical services Failure to invest in the skills and effectiveness of the workforce will further degrade efficiency and effectiveness of city services to the community.
Existing deferred commitments to staff compensation as well as upcoming contract negotiations taking place in an inflationary job market put increased pressure on the City's ability to live within its means. Moreover, the poor performance of pension investments in the current economic climate will trigger ongoing increases in pension obligations, which already consume fully 15% of the City's General Fund budget.
Finally, the City of Los Angeles has for decades deferred maintenance and investment in vital infrastructure. The results are increasingly visible in our streets, sidewalks, and parks, while silent decay is taking its toll on the support systems that will come under increased pressure from climate change. Postponing capital investment will only mean higher costs (and risks) in the future.
These four pressures: funding new priorities, restoring staff capacity, negotiating sustainable compensation levels and investing in 21st Century infrastructure cannot be solved in a single budget year. They will require long-term strategic collaboration between the Mayor, Council, labor and the people of Los Angeles. The Controller's Office pledges our commitment to link arms to make the City's budget more transparent and help frame the needed community dialogue to ensure it more effectively reflects the vital priorities of a changing city.
The estimated debt service requirement for 2023-24 on the City's long-term debt is $553.5 million, which is $3.3 million more than 2022-23 due to new General Obligation Bonds, Series 2022-A. A total of $138.0 million of this sum is for principal and interest payments on the City's $1.0 billion in outstanding General Obligation Bonds (GOB). The remaining debt service covers the Municipal Improvement Corporation of Los Angeles (MICLA), the Wastewater system, the Solid Waste Resources Programs, and Site-Specific Tax Revenue Debt. In total, debt service is projected to be 4.01 percent of projected 2023-24 General Fund receipts, well under the 15 percent limit set by the City’s Debt Policy.