Is L.A. Rebounding?

By ALLYSIA FINLEY

Last week Los Angeles Mayor Antonio Villaraigosa warned that sequestration represented a "fiscal calamity" that would "imperil our nation's recovery." Oh, and if voters didn't approve a half-cent sales tax hike on Tuesday's ballot, city hall would have to lay off 500 police officers. But he's changed his tune since voters rejected the tax increase. Sunny days are here again in the L.A. basin.

Mr. Villaraigosa announced Thursday that a rebounding economy would cut the city's deficit by more than half to about $100 million, and thus he doesn't anticipate "draconian cuts." Voters might have liked to know that before they voted on the measure to increase the city's sales tax to 9.5%.

Anyway, Mr. Villaraigosa's happy announcement is raising some skepticism in addition to cynicism, since economists have been sounding bearish about the city. UCLA economist William Yu told the Los Angeles Times last month that the city's recovery has been weak and that "the economy is not healthy at all."

The region's unemployment rate sits at 10.2%—which is higher than the state's 9.8%—while job growth has averaged just 1.8% over the past year. The one bright spot has been an 8% year-over-year increase in housing prices, but this is due in large part to investors rushing into the southland to buy properties on the cheap. (Home prices are up by 20% to 25% in many areas of the Inland Empire).

At any rate, it's not unusual for revenues to miraculously appear after Democratic efforts to raise taxes fail. After Republicans in Sacramento refused to hike taxes in 2011, Gov. Jerry Brown trotted out a budget that papered over the state's deficit with a projected $12 billion revenue windfall, about half of which never materialized. Hence, the ballot campaign to raise taxes last fall.

Mr. Villaraigosa, who's term-limited in June, needn't worry if his revenue forecast is off. That will be a problem for his successor, who no doubt will take Mr. Villaraigosa's cue and blame the missing money on the "fiscal calamity" that is the sequester. In the meantime, the mayor can avoid making cuts to public safety—or extracting concessions from labor unions that would prevent them.