Councilmember Cole Requests Further Review of Financial Reports Amid Fiscal Concerns

Councilmember Rick Cole called on the City Council to take a deeper dive into comprehensive final reports submitted to the City Council for review on Monday.

“I think it’s prudent to be strategic and to give some real thought and consideration to the numbers here,” Cole said. “When we look forward, we look at our unfunded capital needs and the significant pension debt that we don’t have solutions for.”

Cole emphasized the importance of thoroughly evaluating the city’s fiscal health, especially in light of pressing challenges such as climate change, increasing pension liabilities, and an estimated $2 billion in unfunded capital needs. He pointed out a notable increase of $20 million in the city’s pension liabilities and expressed concern over the $79 million profit made by the city’s power utility last year while utility rates continue to rise.

Last year, the city saw its revenues increase by just 0.6%, while expenses rose by 13.8%. Cole argued that such trends, if continued, could lead to unsustainable fiscal practices and urged that the council give more attention to these issues before the upcoming budget season. Cole also noted that City Manager Miguel Márquez had been put on written notice that the Trump Administration may tie the City’s $60 million in annual Federal funding to cooperation on immigration enforcement.

The City Council discusses the City’s finances during public budget workshops every year in City Council subcommittees and a public hearing before the full City Council.

“Sometimes it seems like we’re always in a budget process and that’s as it should be, but it’s going to be February this week and we will start probably in a matter of weeks, the budget process,” said Councilmember Steve Madison.

Others also agreed that the budgetary process was the time to review the numbers.

“I don’t want anyone to be left with the impression that this entire body is not carefully reviewing the finances,” said Councilmember Jason Lyon. “What we’re receiving here is an audit report, which is primarily about the strength of our internal controls. So this is not really a deep dive in the numbers beneath that, but into our system of financing and making sure that of analyzing our finances and making sure it’s strong. And we have done that here … The time for looking at the appropriateness of the numbers is during the budget process.”

Mayor Victor Gordo, defended the report’s role as a financial audit. They argued that the purpose of the audit was to ensure compliance with accounting standards and assess the city’s financial processes, not to make decisions on future budget allocations.

“We’re not second-guessing how we spent last year’s money,” Gordo said. “This is a financial review of last year’s expenditures and ensuring we followed the appropriate accounting practices.”

Finance Director Matt Hawksworth clarified that the audit was focused on compliance and internal controls rather than program effectiveness. However, he acknowledged the report highlighted one “significant deficiency” in accounting related to government accounting standards, specifically regarding lease transactions. He assured the council that steps were being taken to improve these processes moving forward.

Ultimately, the City Council voted 7-1 to file the report and send it to the Finance Committee for further discussion which will provide the opportunity for a more in-depth discussion of the city’s fiscal priorities and potential adjustments to the upcoming budget. Council members agreed that a better understanding of past financial performance would inform more strategic decision-making for the future.

Cole is a member of that committee along with Gene Masuda, Tyron Hampton and Mayor Gordo, who chairs the committee. Cole serves as the Chief Deputy Controller for the City of Los Angeles and previously served as Deputy Mayor for Budget. He’s a member of the Government Finance Officers Association with twenty five years of executive experience in municipal finance.