A proposed independent city of East Los Angeles would not generate sufficient revenues to cover its costs unless residents and businesses pay higher utility taxes to help close the budget gap, according to a long-awaited financial analysis released today. The report that will be used to help determine whether cityhood gets put to a vote estimates that the new city’s general fund could start off with an annual short fall of $11 million and that municipal financial reserves could be exhausted within four years unless new sources of revenue are found. The financial analysis by Economic & Planning Systems Inc. said that increasing the utility tax rate from 4.5% to 10% would raise an estimated $6.7 million a year to help cover city expenses. However, the increase in the Utility User Tax (UUT) would need to be approved by voters. Said the report:
ELA cityhood would only succeed if both votes (cityhood and the UUT increase) were approved by a majority of ELA voters.
The prospect of having residents of East Los Angeles, which would be home to more than 126,000 residents, vote on both cityhood and a tax increase poses an additional challenge for cityhood proponents.
Cityhood for East L.A., the group working to form a city, issued this statement in response to today’s report:
“We remain committed to this fair and transparent process, and look forward to understanding the true economic health of East Los Angeles. The CFA helps identify the preliminary financial needs as options and solutions will be brought to the table. Long-term viability is key to having a complete picture of our local economy, and we look forward to reviewing the numbers with the L.A. County as we move one step further to preserve the culture and history of East L.A.
The financial analysis was commissioned by the Local Agency Formation Commission for the County of Los Angeles, the agency that reviews the proposed creation of new cities and boundary changes, to help it decides if cityhood for East Los Angeles is financially feasible. The formation commission has said it will hold a community meeting to review the report at the end of July. If the commission determines a new city is feasible, East Los Angeles residents would vote on the issue in June 2012.
Three previous efforts to incorporate East Los Angeles, now governed by the County of Los Angeles, into a city have failed. The last attempt was in 1974.
- Is East L.A. ready to be a city? EGP News