Written by Chelsea Cody for OurLA, 20 January 2010

Evidently, the LA Times editorial staff doesn’t think the city of Los Angeles faces an imminent fiscal meltdown worthy of bankruptcy.

In fact, a recent editorial called “A bankrupt L.A.? No way” clearly states that the city filing for chapter 11 is not an option.

From the start the article makes this clear, stating:

The city of Los Angeles is not on the brink of bankruptcy, and prudent action now by city leaders can keep the city solvent. As surprising as it may sound, that’s disappointing to some people.

We can make allowances for the city’s occasional self-esteem crises. You know the saying: “To start a conversation in San Francisco, say something bad about Los Angeles. To start a conversation in Los Angeles, say something bad about Los Angeles.”

But civic mood swings aside, there is something unseemly about how readily some inside City Hall have begun to use the “b-word,” not because they view it as likely but perhaps because they view it as easy. Why work through what departments to cut, which employees to lay off, which city services to deem unaffordable luxuries? That’s hard work. It makes people mad. It’s so much simpler to just drift into insolvency and let the courts sort everything out.

Let’s give the b-broachers the benefit of the doubt and assume that their talk is meant to provoke a needed sense of urgency and to startle elected officials, managers and unions into action. Because although bankruptcy is not around the corner, it could soon be — if city officials pretend that they can continue spending without regard to short-term revenue dips and long-term structural challenges.

Speaking of provoking a sense of urgency meant to startle people to action, Citywatch LA has also (on numerous occasions – far more consistently than the LA Times) tackled the question of LA’s potential insolvency.

In his LA Watchdog column, Citywatch writer Jack Humphreville also begs the question, “LA: On Its Way to Bankruptcy in 2010?”

Giving some serious thought to the “b-word” Humphreville writes:

The City’s finances are an absolute disaster: a four year Budget Gap of over $3 billion, an unfunded pension liability of $11.5 billion, and a crumbling infrastructure that needs an investment of at least $10 billion.

All this makes the 2009 Budget Gap of $98 million look like chump change.

Actually, next year’s structural Budget Gap is considerably larger because the City once again relied on “one off” solutions to lower the deficit…

There are no reserves.  The City’s Reserve Fund is dangerously low. It has been depleted to fund the negative operational cash flow…

There is no light at the end of the tunnel other than the freight train barreling down the tracks.

He then closes with:

The Budget Gap is projected to increase to $725 million in 2011-12, to $878 million in 2012-13, and tops the $1 billion level in 2013-14.

…while City Hall schemes and refuses to face the reality that the City’s operations and finances need to be restructured, the financial realities will become more apparent as the credit rating agencies downgrade the City’s credit ratings.

The City can no doubt play all sorts of games to “balance” the budget and raise cash. But delaying the inevitable only compounds the problem. The $3 billion budget is just not going to disappear. Nor is the $11.5 billion pension liability or the $10 billion + of deferred infrastructure maintenance.

2010 is the year to cure Reality Deficit Disorder and address the long range operational, financial, and political problems in a rational manner.  If not, someone else … or circumstances …  will.

And speaking of making sacrifices the Daily News also chimes in on the city’s financial situation, here.

So what say you Angelenos, Bankruptcy for LA, Yay or Nay?