By JOSE HERRERA

City News Service

Three months into the fiscal year, the Los Angeles City Council on Wednesday approved a plan to address a projected budget gap of $263 million caused by unexpected spending in several city departments and other costs.

In a unanimous vote, the council authorized the allocation of $14.19 million to cover immediate expenses, such as $1.36 million for outside counsel through December, and nearly $6 million for costs related to cleanup of fire debris and repairs to stormwater infrastructure. Top city officials further identified $169.41 million in possible actions to reduce year-end overspending down to an estimated $80 million.

Last week, the council’s five-member Budget and Finance Committee advanced the recommendations as detailed in the First Financial Status Report, which covers the first three months of fiscal year 2025-26.

“Currently, the city is in a manageable financial position, which is an improvement compared to this same period last year,” City Administrative Officer Matt Szabo said during the Nov. 4 meeting. “However, we are facing multiple pressures and risks that could cause increased challenges as the year progresses.”

While city officials look to reduce overspending, incoming revenues or tax dollars are $80 million above planned levels. Szabo said it’s too early to make any conclusions as to how year-end revenue will head.

Taxes on sales, properties, businesses, utilities and real estate are above estimates through September. However, officials noted that the amount of property taxes coming into the city this year may fluctuate as a result of the Palisades Fire.

The city’s hotel tax, or Transient Occupancy Tax, remains underperforming, falling $3.3 million short of revised estimates, with officials citing a downward trend in international tourism, specifically from China and Canada.

The city is expected to transfer $10 million into its reserve fund, which began the fiscal year at $401.9 million. The account stood at 4.91% of the general fund, short of the city’s 5%. Reserve funds are split between emergencies and contingencies.

“We are looking not just to manage this current fiscal year and this budget, but as we prepare for fiscal year 2026-27, it is essential that we control spending this year,” Szabo said.

The deficit is largely due to unexpected spending in the Los Angeles Fire Department, with $87.6 million, the City Attorney’s Office with $34.2 million, and the Los Angeles Police Department with $27.7 million. Additionally, city officials will allocate $30.09 million for trash collection services due to a delay in implementing new rates for the program.

Szabo urged committee members to instruct departments to refrain from submitting interim budget requests or reserve fund loans, noting that his office received a list of 29 pending requests totaling an additional $130.4 million.

The LAPD’s hiring pace is another major driver. Of the department’s $27.7 million in overspending, about $3.56 million is due to projected hiring. Trina Unzicker, chief financial officer of LAPD’s Fiscal Group, said the department was hiring up to 410 recruits by summer 2026, which is 170 above the approved 240 sworn officers in the adopted budget. City officials have not identified additional funding sources to support those hiring goals.

Committee members recognized that in any other year the rate of LAPD hiring would be great news. But elected officials emphasized that budget constraints would now allow such growth without cutting services or spending in other areas. The only options would be to stop hiring midyear or lay off other staff.

“At some point we’re going to have to stop hiring,” said Councilwoman Katy Yaroslavsky, who chairs the budget committee. “That’s all I’m going to say. If we can’t find the money, we have to stop the hiring once we hit the 240 that’s budgeted for in this year’s budget.”

Councilman Tim McOsker echoed Yaroslavsky’s concerns, adding, “We have to be grown up here. Every dollar only has 100 pennies, and the budget has to mean something.”

Councilwoman Eunisses Hernandez called on the LAPD to review its internal spending and see if the department could cover the hiring expense.

Mayor Karen Bass has made it a priority to increase the LAPD’s ranks of sworn officers as the city prepares to host a World Cup, another Super Bowl and the 2028 Olympic Games.

The Los Angeles Police Protective League, the union representing LAPD personnel of lieutenants and below, told the Los Angeles Times that it supports Bass’ efforts to increase sworn hiring. The union’s board of directors said members were “confident” that Bass and the City Council will find the money to support hiring additional police officers.

“We have every confidence that city leaders will act with the same sense of urgency to identify funds for additional officers … as they recently did to protect other city workers from layoffs,” the statement said.