L.A. council considers two tax increases and a pension change

Despite years of raising fees, slashing the city workforce and cutting back on everything from swimming pools to sidewalk repairs, Los Angeles officials warn that the city’s budget shortfall could top a quarter of a billion dollars next year without additional tax hikes and belt-tightening.

For months, analysts and elected officials have been signaling that both tax increases and an overhaul of the employee pension system will be needed to keep the city afloat.

On Tuesday, faced with the latest deficit forecasts, the City Council moved toward putting two tax increases on the March ballot and raising the retirement age for new employees, among other changes to the pension formula.

Budget officials said the proposals, if approved, would help protect the Police Department from cuts. But each action drew attacks — one from business leaders and the other from organized labor.

Union leaders vowed political repercussions if council members move forward with the pension changes. And business groups slammed a proposal to double a city tax on property sales, saying it would drive companies out of the city and further batter a depressed real estate market.

James Ward Litz of the Beverly Hills/Greater Los Angeles Assn. of Realtors said the change would lead to higher home prices and would put L.A. at a “competitive disadvantage” with other cities.

The city’s so-called documentary transfer tax would increase to $9 for every $1,000 of the property’s sale value, or $4,500 on a $500,000 home.

The tax increase would generate an estimated $100 million for the city. It would give Los Angeles the highest such tax in the region, far surpassing the 55-cents-per-$1,000 rate charged in Glendale, West Hollywood, Burbank and Beverly Hills.

The council voted 12 to 1 to explore the increase, along with another ballot measure proposal to raise the parking occupancy tax from 10% to 15%.

Councilman Paul Krekorian, chairman of the Budget and Finance Committee, said that without new revenue, the Police and Fire departments would have to be cut back.

He acknowledged that raising taxes is politically difficult, particularly in a year when more than half of the council members are seeking reelection or another political office.

Another proposed ballot measure pushed in recent days would empower voters — instead of lawmakers — to decide how much non-sworn city employees should collect in retirement. Voters already decide Police and Fire department pension changes.

Former Mayor Richard Riordan and other business leaders have called for a freeze on firefighter and police officer pay if their retirement costs exceed 25% of their salaries. But the council opted for a proposal that would apply only to new city employees.

City Administrative Officer Miguel Santana said council members directed him to explore the feasibility of additional pension changes similar to those being sought by Mayor Antonio Villaraigosa. Those include raising the retirement age for newly hired civilian employees to 67 (workers currently retire at 60 -- or at 55 if they have worked for the city for at least 30 years) and capping pensions for new civilian employees at 75% of their salary. The plan would save $3 billion over 30 years, Santana said.

Union leaders say their members agreed to raise retirement contributions, among other concessions, and will not give more.

“We don’t deal with threats,” said James Johnson of Service Employees International Union Local 721. “You got resources, brother, we got resources too. If you want a war we did not start, let’s get it on.”

kate.linthicum@latimes.com