Cities Ready for 1986-87 Budgetary Balancing Act

After months of pencil-sharpening and number-crunching, city officials throughout the South Bay soon will gather for a yearly ritual: approving a budget.

Most budget proposals for next year contain few major surprises, with services and programs, for the most part, remaining at this year’s levels. And in several cities, revenue losses in one area are expected to be offset by gains in another.

For example, in Redondo Beach, where city officials predict that the decline in oil and natural gas prices will take a heavy toll in royalties and franchise fees, much of the loss will be made up in tax money generated by the South Bay Galleria and the Sheraton hotel, which is scheduled to open in January.

The bleakest prediction for the forthcoming year came from Hermosa Beach, where City Manager Gregory T. Meyer, in his budget message, termed the city’s financial position as “precarious.”

And in Torrance, the South Bay’s largest city, officials say that unexpected expenditures and lower-than-expected revenue mean the city will have to increase some taxes and fees in the coming year to maintain the level of services.

Perhaps the cheeriest note was sounded by Manhattan Beach City Manager David J. Thompson, who said that community’s budget calls for a 35% increase in spending over this year. Most of the increase is the result of an ambitious list of capital improvements funded largely by bonds.

A common thread running through the cities’ budget deliberations is the expected loss in general revenue-sharing funds from the federal government. Cities have received the funds since the early 1970s, but the program is scheduled to expire next year. Unlike other federal grants, cities are able to spend revenue-sharing funds as they please and typically have used them for a variety of purposes.

“We anticipated the loss and have been able to plan for it,” Gardena City Manager Ken Landau said. “But more important, the economy has been very good. With the increase in property and sales taxes in particular, we have been able to make up for the loss.”

Most cities adopt new budgets by July 1, the beginning of the fiscal year. Before approving a budget, cities hold public hearings to receive comment from residents.

Here, briefly, are outlines of the proposed budgets for each South Bay city except El Segundo, which does not plan to adopt a budget until August, and Lomita, whose proposed budget was not available.

Torrance

After several years of adding new programs and personnel, Torrance will have to do some belt-tightening and increase taxes next year just to maintain this year’s level of service.

In his budget report to the City Council, City Manager LeRoy Jackson said unexpected expenditures in the current year coupled with lower-than-expected revenue and new debt accumulated this year will result in one of the city’s tightest financial years ever.

Under Jackson’s proposed budget, the city will spend $72.5 million in fiscal 1986-87, a 3.5% increase over this year, on expected general fund revenue of $73.9 million.

(The city also maintains separate enterprise budgets for its water, airport and transit departments, for a total of $15.7 million in expenditures on revenue of $16.8 million.)

A surplus of $3.2 million from this year’s general fund will be carried over for a total of $4.6 million in reserves. However, $2 million of that surplus will be used for self-insurance, and the remaining $2.6 million will be used for salary adjustments still to be negotiated. Depending on contract negotiations with the employee groups, the city could use up its entire reserve.

For example, if all employees were given a 1% raise, it would cost the city an additional $500,000, said Albert Ng, assistant to the city manager.

City officials last summer got the idea that 1986-87 would be a tough year when a change in federal labor laws forced the city to pay its firefighters an additional $300,000 in overtime. The city also paid the Torrance Unified School District $700,000, the first of three payments, for its purchase of the Greenwood School site.

The city came up about $560,000 short in expected revenue this year, primarily because it took in less revenue than expected from the sales tax and the utility users tax, which together provide half of the city’s general fund.

Jackson said the opening of the South Bay Galleria in Redondo Beach affected sales at the Del Amo Fashion Center, and lower natural gas rates and less consumer consumption because of milder-than-usual weather contributed to the drop in utility user revenue.

While revenue is dropping, expenditures will increase next fiscal year. The city will make the second payment ($700,000) on the Greenwood School, make the first payment ($1.7 million) for the new city yard and fire station and pay a full year of overtime for the firefighters ($600,000).

The city hopes to add an additional $1.6 million to its general fund by raising some local taxes (the per-unit tax on apartments from $9 to $10), fees (residential rubbish from $7.25 to $8 a month), fines (parking tickets from $13 to $18) and contributions (an additional $116,000 from the airport fund).

Jackson is also proposing saving $174,000 by deferring for six months the activation of a new paramedic unit.

A public hearing on the proposed budget will be held June 11.

Inglewood

Cutbacks in federal funding and increased insurance costs will force Inglewood officials to dip into the city’s reserves to balance the 1986-87 budget to avoid a cutback of municipal services.

The city’s general fund expenditures, which is supported by tax revenue and fees, accounts for $38,402,067 of the total budget. The combined budget for the city, its redevelopment agency, its housing authority and all special fund operations is $82,578,905--up 2.7% from this year.

City officials say that the increase is modest considering the loss of $1.7 million in federal revenue sharing money and a $350,000 increase in insurance premiums.

Those two changes sent shock waves through the city’s budget and prompted City Manager Paul Eckles to recommend that the city not only spend $250,000 from its reserves, but also allocate about $300,000 that normally would go into reserves to pay for services such as tree trimming and park maintenance.

Eckles said, however, that increases of $200,000 in construction-related revenue and $700,000 in bed-tax revenue from the Days Inn Hotel and sales-tax receipts from the Price Club department store will prevent cuts in city services or a deeper dip into the reserves.

The city also gets significant sales tax revenue from admission and parking at the Forum and from concessions sold at the Hollywood Park race track.

Few personnel or program changes are proposed for the coming year. Under the new budget, residents will face slight hikes in water bills and in rates at city-owned parking garages.

With a $19-million allocation, the Inglewood Police Department gets the lion’s share of the proposed budget to cover the addition of three narcotics officers, a criminal investigations clerk and a new patrol vehicle.

The City Council will hold a public hearing to discuss the budget at 1:30 p.m. Tuesday. The council is expected to approve the 1986-87 budget at an evening council meeting June 24.

Carson

The cost of Carson city government and the size of its staff is expected to remain about the same as this year in the 1986-87 fiscal year.

The city administration has proposed a budget of $24.7 million, up 1.1% from this year’s budget. The number of employees will drop by one position, to 289, under the proposal.

Because the city is now negotiating with employee groups, increases in salary and fringe benefits were left out of the tentative budget. To pay for any increases, tentative budget expenditures have been figured at $934,000 less than projected revenue.

The city’s largest source of revenue is the sales tax, projected at $12.5 million for the coming year, about $900,000 more than was expected this year.

City franchise taxes are projected to raise $2.3 million, up $100,000; revenue from building permits $1.25 million, up $100,000; interest $1.25 million, unchanged; motor vehicle license fees $2.6 million, up $208,000.

The federal Gramm-Rudman deficit reduction law is expected to reduce federal revenue-sharing money from $1.4 million to $1.1 million, although the full impact of the bill will not be felt for another year.

A budget hearing is scheduled for 5 p.m. Monday at City Hall.

Redondo Beach

The dramatic drop in the price of oil and natural gas during 1986 is expected to cost the city about $1.5 million in royalties and franchise fees in the coming fiscal year, but city officials project in their proposed 1986-87 budget that the loss will not require reductions in city services.

The drop in oil-related revenue, however, will prevent the city from transferring large amounts of money from the general fund to the capital projects fund, which the city has been building up in recent years to help pay for improvements to public parks and buildings and for possible new projects.

This year, the city transferred about $1.3 million into the capital projects fund, while the proposed budget calls for just $390,000 in transfers in 1986-87.

No capital improvement projects are included in the proposed budget, but they will be submitted later to the City Council in a separate report.

The proposed $39-million budget, which calls for an 8.8% increase in spending, projects increased tax receipts from the first full year of operation at the South Bay Galleria and from the Sheraton hotel, which is scheduled to open in January.

The proposed budget projects about $1 million in sales tax revenue from the Galleria and $220,000 from the hotel.

“We view the Galleria and the Sheraton as insurance against the volatility of the franchise payments,” City Manager Tim Casey said. “Franchise fee revenues are unpredictable.”

The budget also projects an undetermined increase in residential refuse collection rates. The current rate, $6.10 per month per unit, has been in effect for two years and is up for renegotiation with Western Waste Industries.

The large drop in franchise-fee revenue is the result of lower prices Southern California Edison must pay for natural gas at its power plant on Harbor Drive.

Because of falling oil prices, the Southern California Gas Co. has been forced to lower its price for natural gas to remain competitive. The city collects 1% of all natural gas sales within the city, and with lower prices, the city projects it will collect $1 million less next year than this year.

The proposed budget calls for some expansion of services, most of which would be funded by grants or other sources outside the city. The city will begin a dial-a-ride program, re-establish the children’s library program that was eliminated in the wake of Proposition 13 and add two police officers to patrol the transit terminal to be built at the Galleria this fall.

A public hearing on the budget will be held at 7:30 p.m. on Tuesday at City Hall.

Hawthorne

Hawthorne’s tentative budget for fiscal 1986-87 has been figured at $36.5 million, up 9% from this year, with no new major programs planned.

Details of proposed spending are sketchy because the city administration declined to provide a detailed look at the budget proposal until it is presented to City Council members.

The city’s largest source of revenue is the sales tax, which is estimated to bring in $5.6 million, a decline of $700,000 caused by the transfer of a Hewlett Packard facility out of the city.

Other major revenue sources are the utility users tax, estimated to bring in $2.4 million; the property tax, estimated at $2.2 million; the state motor vehicles and cigarette tax, $2.2 million; airport and water fees, $3.7 million, including an $800,000 federal grant for airport improvement; trash fees, $5 million; the Hawthorne Mall parking structure lease, $1.8 million; federal highway money, $1.2 million; traffic fines and forfeitures; $1.1 million, and licenses and permits, $611,000.

Federal revenue-sharing, which was about $600,000 in 1985-86, is projected at $225,000 for 1986-87.

Officials hope to hold a hearing on the budget in July but have not decided on a date. For 1985-86, the council approved the budget in October when they settled salary negotiations with employee groups. The city is currently in the midst of its annual wage negotiations.

Gardena

City Council members are expected to approve a $28.6-million budget--a 2.9% increase over this year.

City Manager Kenneth Landau said that although the city anticipates losing $750,000 in federal revenue-sharing money, the loss is expected to be made up through increased sales- and property-tax revenue.

The city expects to take in $250,000 alone in taxes from the Home Club, a home-improvement store that opened in Gardena last November, and additional commercial development planned for this year should further boost tax revenue, Landau said.

The major source of city revenue is the sales tax, which accounts for about $5 million of the total budget. Property and utility-user taxes, as well as card club revenue, are the city’s other chief revenue sources.

Landau said that while the 1986-87 budget reflects a decision to postpone spending on some items, such as city vehicles, no cuts have been made in services or programs. The city has budgeted $2.7 million for capital improvements, most of which will be spent for street projects.

The budget reflects a trend away from city’s past dependence on card clubs as a primary source of money. Ten years ago, club revenue accounted for 25% of the city’s budget. Such revenue now accounts for less than 10%.

The City Council is expected to approve the budget Tuesday night.

Rancho Palos Verdes

The City Council last September adopted a two-year budget that carries the city through the 1986-87 fiscal year. Total spending next year is set at $7 million, which is only slightly more than the current year.

City Manager Donald F. Guluzzy said he does not know what budget adjustments will be proposed to the City Council for the following year.

The council already has taken steps to increase revenue, approving a controversial utility users tax that Guluzzy said will bring in $1.8 million a year. All but $350,000 of this money is to be used for streets and storm drains.

Manhattan Beach

In what City Manager David J. Thompson calls a “bonanza” year for the city, nearly $10 million in new capital projects have been proposed for the 1986-87 budget.

A $5-million face-lift for the downtown business district, acquisition of the Santa Fe Railway right of way, creation of the city’s first underground utility district and completion of the new Marine Avenue Park are the major components of the capital expansion.

The proposed budget of $29.7 million calls for a 34% increase in spending over this year, with most of the increase resulting from the capital expenditures. The proposed operating budget, which does not include the capital projects, calls for a 9.2% spending increase.

“It is a bonanza year for us in terms of projects,” Thompson said. “And the revenue picture looks good, too.”

To pay for the new projects, the city will take about $1.9 million from its reserve fund, bringing that fund down to $6.9 million. The city also projects that it will collect more than $1 million in taxes and other revenue from the new Radisson Plaza Hotel, scheduled to open early next month, and several hundred thousand dollars over last year in sales tax and property tax from other businesses and residences in the city.

In addition, the city will sell about $3.5 million in bonds, to be repaid through parking revenue, for the downtown “Streetscape” renovation.

Thompson said the proposed 1986-87 budget marks the third year that the city has been on sound financial ground, having rebounded from the shock of Proposition 13 in large part because of the the development of 187 acres east of Sepulveda Boulevard that belonged to the Chevron Land and Development Co. That land includes the Manhattan Village Mall and the new Radisson.

A public hearing on the proposed budget will be held at 7 p.m. on June 24 at City Hall.

Lawndale

The proposed budget for 1986-87 is $6.8 million, a 17.2% increase over the city’s previous budget.

The bulk of the $4.3-million general fund in the new fiscal year will come from sales taxes ($1.65 million), motor vehicle fees ($770,000) and interest on investments ($330,0009). Lawndale gets no property tax revenue.

The major sources for a separate $2.5-million fund are the state gasoline tax, federal revenue sharing, federal Urban Development Action Grants, federal Community Development Block Grants and Proposition A sales-tax funding for transit projects.

The proposed budget includes few major changes.

The cost of the city’s contract with the Sheriff’s Department for providing police protection is budgeted at $172,000, up 9%, to reflect pay increases.

The only increase in personnel is a full-time position added to the city clerk’s office.

Replacing four worn-out city vehicles increased that budget category from $24,000 to $45,000.

The budget process in Lawndale usually takes one or two hearings and generally is completed by June 30.

Last year, some residents questioned city funding of the Lawndale Chamber of Commerce, which received $45,000. The 1986-87 budget proposes a subsidy of $33,600, funded by a 25% surcharge on business license fees.

A public hearing on the proposed budget is scheduled June 16.

Hermosa Beach

A projected 15% increase in sales tax revenue fueled by the new Plaza Hermosa shopping center and $900,000 from the first full year of the city’s utility users tax are expected to help keep the proposed 1986-87 budget afloat, but the financially strapped city continues to face tough economic times and ongoing austerity measures.

“The city is in a financially precarious position,” City Manager Gregory T. Meyer said in his budget message, repeating a warning he made during budget discussions last year. “The financial side of the budget continues to be bleak.”

In preparing the proposed budget, Meyer said he instructed city staff to reduce costs by 5% when possible and to look for new ways to save money. In keeping with a policy established several years ago, the budget proposes contracting for some services previously performed by city employees, including some custodial services and grounds maintenance.

The proposed budget for next year calls for $7.38 million in expenditures from the general fund, which is the daily operating fund for the city. This year, the general fund expenditures were budgeted at $7.31 million. The total budget, which includes other funds such as the sewer fund and parking fund, is projected to be $11.5 million in 1986-87. This year, the total budget was set at $11.8 million.

The budget calls for some changes in city operations, the most significant being the consolidation of the jobs of the fire chief and police chief into a public safety director position. The change is expected to save more than $50,000 a year.

The proposed budget is based on some revisions to the business license fees, which would account for about $30,000 in additional revenue, and a 6% utility users tax, which was approved last month by the City Council.

Meyer also suggested in his budget message that the council consider increasing the utility users tax (each percentage-point increase yields about $150,000), increasing parking enforcement (each parking enforcement employee brings in about $36,000 a year above his salary and benefits), and increasing the fees developers contribute to help the city buy open space and parkland.

The proposed city budget does not include capital projects, which will be submitted to the City Council later in a separate report. There are about $3.7 million in capital projects, both new and old, in that report, Meyer said.

A public hearing on the proposed budget is scheduled for 8 p.m. on Tuesday at City Hall.

Palos Verdes Estates

While he has not completed his 1986-87 budget proposal, City Manager Gordon Siebert said that it probably will total about $10 million, which is 10% more than this year.

“It is the largest budget in the city’s history,” said Siebert, explaining that the city is in the midst of some long-delayed capital improvement projects, including repair of streets and storm drains that were installed many years ago.

“It will be a difficult budget year,” he said. “We’ve identified a great number of needs in the community, but we’ve not identified how we’ll pay for them.”

Although the current budget contains $3 million for capital improvements, the city did not spend the money, and the projects will be carried over into next year. However, Siebert said he also will propose two new items: $2.5 million to reconstruct the dangerous intersection of Palos Verdes Drive West and North near Malaga Cove and $1 million to reconnect a stretch of Paseo del Mar that was undermined by water with Palos Verdes Drive West in the Bluff Cove area.

“These may be put in the budget, and we could defer the old ones,” said Siebert, adding that the City Council will decide priorities.

Siebert said hearings will be held as soon as the council gets the budget, possibly next week. Adoption is expected by Sept. 1.

Although the level of city services will remain the same, the biggest change in the budget is elimination of the local Fire Department and the inclusion of a $1.2-million contract for fire services through Los Angeles County.

While county services will be more economical in the long run, Siebert said there will be no saving during the first year because of “significant termination costs” involving firefighters, who will transfer to the county system.

The Police Department will remain the city’s costliest service, at $2 million a year. Siebert is recommending the addition of one officer to the 22-member force.

A bedroom community with little retail business--the sales tax accounts for only 2% of the budget--Palos Verdes Estates will receive its largest revenue next year from the property tax and utility users tax, which Siebert said will total $1.3 million.

Another $1.3 million is anticipated from two voter-approved taxes, one for police-paramedic services and the other to maintain open space.Rolling Hills Estates

“Realistic and conservative” is how City Manager Ray Taylor describes his proposed 1986-87 budget of $3.2 million, which is 2% below this year’s figure while maintaining essentially the same level of service.

Taylor said the spending cuts stem from “reducing costs wherever possible” and a desire to increase “slim” city reserves. Total city revenue is projected at $3.2 million, which would leave a $475,000 reserve at the end of the fiscal year.

To save money next year, the city will cut back on tree trimming, for a savings of $30,000, and will scale down street maintenance. This will save $25,000. There also will be a $41,000 decrease for employee benefits because of reductions in retirement and unemployment costs. Capital improvements will be deferred, except for those previously budgeted or paid for by special grants.

Sales tax, the largest single revenue source, is expected to total $1.4 million, a 4% increase which Taylor called disappointing for a source that has been increasing 10% a year since construction of the Courtyard Mall in 1981. Taylor said growth rates for retail businesses, concentrated largely in the Peninsula Center area, have leveled off, and that there are not many new businesses opening.

Other major revenue sources are motor vehicle license fees, totaling $235,545, and $217,000 in business license taxes.

There will be an overall 6% increase in general fund revenue, which is estimated at $2.6 million for the next fiscal year.

While the level of police service provided under a contract with the Los Angeles County SheriffIs Department will stay the same, the cost next year is projected to increase by up to 9%, to a total of $800,988. Taylor said the city has complained to the county about the increase and may have to reduce services next year if it the cost continues to grow. “With inflation running at 3%, a 9% increase is out of line with what we expect,” he said.

Three capital improvement programs are being carried over from this year: traffic signal and guardrail improvements on several streets, including the busy intersection of Palos Verdes Drive North and Hawthorne Boulevard, and construction of a bicycle path along Rolling Hills Road and a horse trail around the Metropolitan Water District reservoir at the intersection of Palos Verdes drives North and East.

The City Council will hold a budget workshop on Tuesday. A public hearing and budget adoption are scheduled for June 24.

Avalon

Avalon will operate in fiscal 1986-87 on virtually the same budget as this year. City Manager John Longley said this year’s $4.82-million budget, including $1.9 million in the general fund, is less than a 1% increase.

The city expects $5 million in revenue, the main sources being tourist related taxes (transit, $490,000; wharfage, $800,000; and harbor service charges, $675,000). Using a set formula, revenue from those different sources is spread among more than 30 separate funds, including general administration, harbor, sewer and salt water. The general fund will have a reserve of $900,000.

The loss of federal revenue sharing funds, expected to be eliminated this fall, reflects the biggest drop in revenue. After receiving more than $40,000 this fiscal year, the city anticipates getting only $8,000 next year. The city had been using that money to pay firefighters’ salaries. Longley said the money will now have to come from another sources.

Rolling Hills

City Manager Terrence L. Belanger has proposed a general government budget of $367,452 for fiscal 1986-87 for this small, private residential city, which is a 5% increase over last year.

City services will remain at the same level except for an increase in traffic enforcement by the Los Angeles County Sheriff’s Department, which polices the city under contract. Belanger is calling for a $10,000 increase over this year’s spending of $80,000 for police.

“We have to maintain the safety of the roads,” he said. “There are a lot of curves and hills, and we need to keep the speed down and make sure we don’t have young people driving too fast or under the influence.”

Belanger’s budget also proposes expenditures from several special funds. These include $322,358 for refuse collection, which is paid for by users; $3,000 for signs and other traffic safety devices; $4,600 to maintain tennis courts and riding rings and $28,000 for self-insurance.

Rolling Hills’ major general fund revenue, estimated at $516,200 for 1986-87, comes from property, real estate and cigarette taxes, interest in investments and city property rentals, a portion of state auto registration fees and fees charged for permits and services.

The City Council will hold a budget hearing on Monday and is scheduled to vote on adoption on June 23.