April 17 (Bloomberg) -- A rebounding Southern California economy will increase revenue to Los Angeles by 5.1 percent next year, though locked-in employee costs are growing even faster, City Administrative Officer Miguel Santana said.

In an analysis of Mayor Eric Garcetti’s budget proposal, Santana predicted that expenditures would exceed revenues through 2018, requiring the second-largest U.S. city to rely on one-time measures, such as transfers from a parking revenue fund, to balance its budget.

Garcetti, a 43-year-old Democrat who took office last year, proposed a $5.1 billion budget for the year beginning July 1 that maintains a $61.9 million reserve while increasing spending on sidewalk and road repairs. The mayor postponed his plans to phase out the city’s business tax until next year.

“In the context of a steady economic recovery, the mayor’s proposed 2014-15 budget stays the course by complying with the city’s responsible fiscal policies and moving toward eliminating the structural deficit by 2018-19,” Santana wrote.

Costs for employee salaries, benefits and pensions will increase by $192 million, or more than 10 percent, the city’s top budget official said. Lowering the investment return forecast for the city’s police and fire pension fund by 0.25 percentage point, which is under discussion, would require an additional $80 million contribution from Los Angeles’ general fund, Santana calculated.

The city’s credit is rated third-highest by Moody’s Investors Service at Aa2, and fourth-highest by Standard & Poor’s and Fitch Ratings at AA-

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Employee costs drive L.A. deficits through 2018, official says

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