The City of Los Angeles and Los Angeles County will have to front the costs of wildfire recovery on their own, with no immediate financial relief from state or federal agencies, officials said on Friday, Feb 7.
The damage estimate, currently set at $358 million for the city, comes as L.A. struggles with ongoing budget deficits. While FEMA and the state will eventually cover some costs, including debris removal and emergency response, the city and county must figure out how to pay for repairs now—without knowing how much of the cost will ultimately fall on taxpayers.
Los Angeles Councilmember Monica Rodriguez, who sits on the city’s Budget and Finance Committee, said the lack of direct aid puts immediate financial pressure on the city.
“ I think the most salient part of it is the City of Los Angeles has not been the recipient of any direct infusion of either federal or state funds to help us address the financial impacts associated with fighting the fires, nor the recovery,” Rodriguez said on Friday. “So we have to advance those resources and then wait for eligible FEMA reimbursements associated with that work.”
What the federal and state governments cover
Brandi Richard Thompson, a public affairs officer for FEMA Region 9, said the agency will fully cover debris removal and emergency response efforts for six months under a presidential declaration issued before the end of the Biden administration.
“Typically, the federal government or FEMA funds 75% and the state of California is responsible for the other 25%,” she said. “But for those particular categories of public assistance, debris removal and emergency protective measures, we are going to pay the full cost for six months, or 180 days.”
But rebuilding roads, bridges, and other public infrastructure won’t be fully covered. Local governments can apply for FEMA funding under the public assistance program, but they will still have to pay a significant share of the cost.
There is also a caveat: Federal emergency funds are not immediate—and they don’t cover everything.
While the city and county will eventually receive some reimbursements, federal rules require local governments to pay for disaster recovery first and seek reimbursement later—a process that can be delayed by months or even years.
“The amount that the county or the city is spending right now, they’re going to have to do some work to pull all that information together. … We’ll either approve or deny that, and then that money will be obligated and available to them,” said Thompson, speaking for FEMA. “But right now, they’re actually paying for that themselves and we’re going to reimburse them for it later.”
Beyond FEMA’s reimbursement delays, the state is not providing direct financial assistance to the city for wildfire recovery, further complicating efforts to pay for repairs.
Rodriguez said that while Governor Gavin Newsom announced a $2.5 billion wildfire relief package, none of that money is directly allocated to Los Angeles for its own recovery efforts.
She explained that $1 billion of the funds are being used to cover the costs incurred by state agencies—such as Cal OES and Cal Fire—for sending personnel and resources to fight the fire.
The remaining $1.5 billion comes from Proposition 4, a recently passed statewide resiliency bond measure, which includes funding for water quality and wildfire prevention efforts. But the state legislature has not yet decided how the money will be distributed, meaning Los Angeles has no guarantee of receiving any of those funds for wildfire recovery.
“ That’s not a check that’s just coming to us, for us to decide what that is,” Rodriguez said. “The state Legislature will meet and determine which programs or efforts they will fund, and then we’ll know what it covers, if anything, for each of our respective areas.”
What is the cost of the wildfires to the city?
With no guarantee of state funding, Los Angeles is left to shoulder the financial burden of wildfire recovery—an effort that is expected to cost the city at least $358 million, a figure expected to rise, according to initial estimates from Los Angeles City Administrative Officer Matt Szabo.
The estimate accounts for damages from Jan. 7 to Jan. 10, with $350 million tied to infrastructure and city properties, $6.6 million for emergency response, and $1.2 million for debris removal, primarily from wind damage.
Szabo said that additional costs from Jan. 7 to Jan. 17 could add at least $24 million, largely for staffing and overtime.
The wildfire costs hit as Los Angeles faces an escalating budget crisis.
Just a third of the way through its fiscal year, the city had already overspent its budget by nearly $300 million as of December.
In the Annual Comprehensive Financial Report (ACFR) for the fiscal year ending June 30, 2024, City Controller Kenneth Mejia warned that Los Angeles had ended the year in deficit, forcing officials to draw down nearly half of the city’s General Fund reserves.
“Given the devastating damage and disruptions from the firestorm disaster, the fiscal stress could not come at a worse time,” Mejia wrote. “We’ve gone from record levels of General Fund reserves 18 months ago to the brink of needing to officially declare a ‘fiscal emergency’.”
He added that costs are still mounting, from disaster response and lost tax revenue to long-term rebuilding efforts, all while the city prepares for the 2028 Olympic and Paralympic Games.
While the city has released a preliminary $358 million damage estimate, county officials have yet to determine their total financial burden, saying assessments are still ongoing.
However, a recent UCLA report suggests the economic toll could be far greater. That study estimates that total property and capital losses across Los Angeles County could range from $95 billion to $164 billion, with insured losses alone reaching $75 billion.
If accurate, this would make the wildfires the second-costliest natural disaster in U.S. history, trailing only Hurricane Katrina, which caused $200 billion in damages — adjusted for inflation — according to the National Oceanic and Atmospheric Administration (NOAA).
The report, written by UCLA economists Zhiyun Li and William Yu, warns that the wildfires’ impact extends beyond property losses. They estimate the disaster will shrink Los Angeles’ GDP by $4.6 billion (0.5%) in 2025 and lead to $297 million in lost wages for businesses and workers in affected areas.
Without significant wildfire mitigation and long-term investments, economists warn that California homeowners will face rising insurance premiums, deteriorating air quality, and growing health risks from wildfire pollution. In Los Angeles, the disaster is expected to tighten rental markets further, worsening the region’s housing shortage.
While estimates vary, experts agree that the financial impact of the wildfires will be significant—though some believe the projections may be overblown, while others warn of long-term consequences for the city’s budget.
Chris Thornberg of Beacon Economics estimates that losses could reach $20 billion, factoring in infrastructure damage, fire suppression costs and insurance payouts for private homes.
However, 95% of single-family homes in L.A. County are insured, meaning most rebuilding costs for homeowners won’t fall on the city or county, Thornberg said.
“Yes, the city has budget problems, there’s no doubt about it. … But look, it’s a big city. They do have resources and surely there’s going to be some relief money coming from the state and the feds,” Thornberg said. “So I think it’s a little early at this point in time to suggest this is going to create a major disruption in the city finances.”
While Thornberg downplayed the long-term financial risk to the city, saying it has the resources to recover, other experts warn that the economic fallout could extend far beyond direct rebuilding costs.
“You have domino effects,” Lucio Soibelman, a professor of civil and environmental engineering at USC.
“We can imagine that if a restaurant is being demolished or burned down, it’s going to take two years to rebuild it,” Soibelman added. “It’s two years that that restaurant is not paying taxes, it’s two years that people that work at that restaurant are not working, it’s two years that the suppliers that would sell meat and vegetables to the restaurant are not selling. … It’s what you call a domino effect.”
He said that federal aid, particularly from FEMA, is crucial not just for rebuilding infrastructure, but for stabilizing the local economy.
“If this money doesn’t come, then the consequences of a fire like this would be terrible for the local economy,” he said.
If FEMA or the state doesn’t cover those costs—or if reimbursements are delayed—who ends up paying the bills?
“Everyone,” Soibelman said.
Pacific Palisades fire:
Total acreage burned: 23,707
Structures destroyed: 6,837 (homes: 5,419; commercial: 158)
Schools affected: 100
Churches affected: 13
Estimated cleanup and recovery costs: $385 million based on a preliminary city estimate
Timeline: EPA will complete hazardous debris removal process by end of February. Then the U.S. Army Corps of Engineers are expected to complete their debris removal within a year.
Eaton fire:
Total acreage burned: 14,021
Structures destroyed: 9,418 (homes: 6,011; commercial: 154)
Schools affected: At least seven schools severely damaged or destroyed, including five Pasadena Unified school campuses and at least two private schools: St. Mark’s School in Altadena and Pasadena Waldorf School.
Churches affected: at least 10
Estimated cleanup and recovery costs: unknown
Timeline: EPA will complete hazardous debris removal process by end of February. Then the US Army Corps of Engineers are expected to complete their debris removal within a year.