Greuel warns city runs out of money on May 5

In a day of bad news on City Hall's financial crisis, Controller Wendy Greuel grabbed the biggest headline, warning in an "urgent cash flow update" to Mayor Villaraigosa and the City Council that "this is the most urgent fiscal crisis that the City has faced in recent history, and it is imperative that you act now."

  • Unless the DWP forks over $73 million that was already budgeted, Greuel said the city's general fund would be broke on May 5. "The question I have been asked most often during the budget crisis is 'When will the City run out of money?' Unfortunately, we finally have the answer."
  • S. David Freeman, Villaraigosa's acting DWP chief, told Greuel in a letter Monday morning that he would advise the DWP board to withhold the $73 million in the wake of the City Council refusing to authorize a hike in electric rates. Without the rate hike, Freeman asserted, the DWP would have no surplus cash to send to the city's general fund.
  • City Council members accused Freeman of trying to get even with the council for rejecting the rate hike, with council president Eric Garcetti saying of the DWP: "It seems they are holding the whole city of Los Angeles hostage."
  • Greuel demanded the immediate transfer of $90 million in reserve funds and other steps to keep the city going until June 30.
  • Fitch Ratings withdrew its AA- rating on $720 million of bonds the department planned to sell this month, saying the rating was based on the rate hike being approved.
  • Villaraigosa tonight instructed city general managers to carry out strict spending cuts he had previously ordered.
  • Media coverage: LAT, Business Week, DN, LA Weekly, Fox 11

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