Making Do With Less : Area Cities Caught in Budget Squeeze as Revenue-Sharing Money Dries Up
Living with less has become a way of life for most Southeast-and Long Beach-area cities, and fiscal 1987-88 has proven even tougher with the end of the federal government’s revenue-sharing program.
From South Gate to La Mirada to Long Beach, the cut-and-paste approach to budget planning has become commonplace, as officials scramble to make ends meet with a minimum of trimming services or laying off workers.
The annual check from Uncle Sam--in some cases more than $1 million--helped local cities pay for a host of needs. La Mirada, Bellflower and Maywood had poured their shares into police equipment and salaries. Signal Hill overhauled parts of its aging water system. And Whittier bought office computers and city vehicles.
But Congress voted to begin phasing out federal revenue sharing last year, and it ended Wednesday, the first day of fiscal 1987-88.
‘Nice While It Lasted’
“It was nice while it lasted, but now it’s over,” lamented South Gate City Manager Bruce Spragg, whose own city received as much as $1.2 million a year in federal money, but now must draw heavily on its reserves to make up the difference this year. “For some of us, it’s going to be real, real tough to recoup those loses.”
Boosting sales tax revenues through new commercial development is one way many cities are trying to keep pace with escalating employee, insurance and program costs. Other methods included reducing services, selling surplus land and imposing new fees and taxes.
This fiscal year, Cerritos will spend $10.3 million, most of it on land acquisition, to expand its highly successful Auto Square, which had estimated sales last year of $170 million and generated more than $1.7 million in sales tax for the city.
Norwalk is banking on the Price Club, the popular warehouse-style discount retailer that opened less than a year ago, to add $400,000 to sales tax totals. The city gets a third of the its income from such taxes.
For most cities, sales tax revenue is the largest single source of income, and so their futures may hinge on the effectiveness of luring new development. Such ventures, however, are expensive and time-consuming and often out of reach of smaller cities that have little to offer in the way of prime building sites or a lack a populace with steady purchasing power.
May Run Into a Roadblock
And even if a municipality has the means to induce new development to broaden its revenue base, it may run into a roadblock.
The so-called Gann limits, a state constitutional amendment passed by voters in 1979, places spending limits on the state and municipalities. In the case of municipalities, the limits do not apply to all spending. It generally restricts spending of funds raised by among other things sales taxes, user fees, property taxes--but not state and federal grants.
Whittier is the only the area city flirting with its Gann limit, which is calculated by a formula based on population growth and the national consumer price index.
Should Whittier spend more than it is allowed, the city would have to return the difference to residents in the form of a rebate or seek voter approval to raise the limit, according to Peter Detwiler, a state Senate consultant on municipal finances.
Since the limits were imposed, eight California cities, including two in Los Angeles Couinty--El Segundo and Redondo Beach--have held special elections and received approval to raise their limits.
Calling a special election in Whittier to override the spending limit is opposed by City Manager Tom Mauk. Rather than tinker with the limit, he said, he believes that the city “should learn to live within it.”
In June, the final month of fiscal 1986-87, the city came within $50,000 of its $15-million annual spending limit. Mauk said the city begins the new fiscal year with a $700,000 cushion between the limit and proposed expenditures. Robert Armitage, the city’s assistant finance director, predicted: “We will be playing tag with the (Gann limit) all year long.”
The reason, Mauk said, is the city’s relatively stable population of 71,500. With little or no growth in recent years, the city has been unable to raise its spending limit, yet the cost of basic services--sewer, water and trash pick-up--have continued to climb faster than the consumer price index. “We are a fully built city with no developable area,” Mauk said. “It’s going to be a problem for some time.”
Despite the spending restrictions, Mauk said, there are no plans to scale back the city’s ambitious redevelopment plans. But rather than use taxpayers’ dollars as seed money for new construction projects, the city is relying heavily on developers’ putting up a bigger share of the cost in exchange for project approval and favorable zoning changes.
Most local cities are comfortably short of their Gann limit. But budget officers such as John Saunders, director of internal affairs in Cerritos, believe that the Gann limit is “going to be a big issue down the road. . . . It could affect the ability of cities to provide services.”
To keep pace with the rising cost of services, cities may put the issue on the ballot. But Rebecca Taylor, research director for the Sacramento-based California Taxpayers Assn., said such a move could become a referendum on growth. “Where people are tired of runaway development, they may turn thumbs down on any change in the Gann limit, forcing city fathers to tighten their belts rather than open their wallets and spend more.”
While the Gann limit is still in the distance for most, the end of federal revenue sharing has created real difficulties now. Two years ago the Reagan Administration and Congress agreed to end revenue sharing. Rather than immediately curtailing the program that municipalities had come to depend on, it was sharply reduced in fiscal 1986-87, before being eliminated this fiscal year. Thus, revenue sharing allotments for 1985-86 represent the true impact of the reduction, city officials say.
Cities have reacted in various ways, some cutting services, others by selling assets and some by postponing capital projects.
Bellflower--which two years ago, at the height of the revenue-sharing program, received $260,000--put the bulk of the money into police and fire protection. Without that money, the city is eliminating one police officer.
The South Gate City Council--which received more than $1 million in revenue sharing two years ago--is wrestling with 54 proposed program cuts for a savings of $200,000, including closing one of the area’s few indoor, Olympic-size swimming pools for six months of the year. The process can be painful.
A recent hearing on the pool matter attracted an overflow crowd, eliciting impassioned pleas from children and senior citizens alike who depend on the facility for recreation and therapy. Heating bills for the pool can run as high as $5,000 a month, City Manager Spragg said, and closing it for part of the year would save at least $25,000.
“I don’t envy that council having to tell those people their pool will be closed,” Spragg said. “That’s the kind of difficult position we’re all in. . . . It doesn’t seem like it makes much difference when you’re talking about a $15-million budget. But every bit helps.”
In Cudahy, a dot of a city covering less than 1.1 square miles, four of the city’s 29 full-time positions have been eliminated this year, and City Manager Gerald Caton is now wearing a second hat, that of city clerk, to save money.
Like many cities, the bill for police is Cudahy’s biggest expense. The city’s fiscal 1987-88 budget is nearly $2.7 million, and almost half goes for police service, which is contracted with the Bell Police Department. Cudahy’s contract with Bell jumped $200,000, or 22% for this year. Faced with losing $370,000 in revenue sharing, the city faced tough budget decisions. To cover the shortfall, the city sold two parcels it owned to the Los Angeles Unified School District and a senior-citizens housing developer, for a total of $340,000.
In Montebello, where federal revenue sharing pumped $1.1 million a year into the city, the council may vote in the coming weeks to eliminate, through attrition, 12 of the city’s 387 full-time positions, including six patrol slots in the police department.
Downey officials also held the line on spending for this year, funding only one-quarter of the $445,000 requests for new equipment, and approving only one tiny park-improvement project. The city spent most of its annual federal check of $600,000 on capital projects rather than the personnel costs of on-going services, to avoid the difficulty of laying off workers and ending programs. Nevertheless, the loss of the funding is still being felt.
“It’s not catastrophic,” said Lee Powell, the city’s administrative services director, “but it is certainly unfortunate because at the same time (the federal government) has been adding costs” by requiring cities to pay for new programs, such as health insurance for all city workers.
Signal Hill spent its federal money on improving the city’s water-delivery system. At one point, the city was receiving about $250,000 a year from the program, enough “for one good water project,” Finance Director Vicki Baker said. Without the federal money, Baker said, it’s unlikely any new capital projects will be launched in the next year if the city must pay for it.
In some cities, program cuts or deferred spending has been accompanied by the levying of new user fees or taxes this year.
Norwalk residents will receive a notice that trash rates have gone up 13% to $90.80 per year.
Long Beach, the state’s third-largest city, recently approved a $1.12-billion budget that increases fees and taxes in a wide range of areas. The electricity tax will increase by 2%, adding about $7 a year to the bill for a typical household. Garbage-collection fees for homeowners will jump by $1.08 to $8.80 a month. There will also be increases in emergency ambulance service and marina slips.
And in Paramount, which received more than $1 million a year from the federal government, officials will continue to charge all vendors $1 a day at its daily swap meet, a fee that generates about $380,000 a year. The city also raised its business license fees from $26 to $78 a year, a move officials expect will bring in another $200,000 a year.
And some cities have combined a number of these approaches, even adding a twist of their own.
La Mirada has had to absorb about $500,000 in lost federal money. Much of that went into police protection. But City Manager Gary Sloan said than rather than trim police, he is “doing a high-wire act,” holding down expenses in other areas and using the savings to pay for police service, which the city contracts for with the Los Angeles County Sheriff’s Department.
Sloan also reduced the new budget about $300,000, or 2.5%, from last year’s budget of $12.2 million. Part of the savings--about $40,000--is the result of taking over the operation of its Dial-A-Ride bus system rather than contracting it out. Sloan hopes the cost-cutting measures will tide the city over until several large retail developments, including a four-dealer auto mall, will be completed by decade’s end.
When asked how important revenue sharing was, Sloan responded: “It was important enough that every time I see our local congressman, I tell him I’d like to have it back. . . . He just smiles.”
Not all area cities have had to bite the budget bullet because of the federal pullout.
Those with card casinos, particularly Commerce and Bell Gardens, say they will feel little effect as long as club revenues remain steady. Commerce officials expect to receive about $3.4 million, 18% of their total income, in the 1987-88 fiscal year, from the California Commerce Club.
And in Bell Gardens, the Bicycle Club is expected to pay the city about $7.4 million in 1987-88. About $3 million of the club money is earmarked for the city’s general operating budget of $14.5 million and the rest will be banked for redevelopment projects.
The success of the two clubs may prompt other cities to follow suit and open casinos. Several officials in South Gate, which is dipping into its reserves for $2 million to keep the city operating next year, said the recent legalization of new poker games makes the casino option attractive, despite the controversy it may trigger.
Other cities, like Cerritos, continue to cash in on smart bets made long ago.
Expanding the city’s Auto Square, a string of 15 dealerships along Studebaker Road just west of the 605 Freeway, may add another $800,000 to $1 million a year to sales tax revenues, officials said. With revenues from sales tax expected to top $14.3 million this fiscal year, the city is breaking ground on its $225 million Towne Center hotel, retail and office building complex, a project that officials say will financially secure the city’s future.
Still, Internal Affairs Director Saunders said the city would like to have the $1.1 million it was receiving from the federal government.
“Right now we are in a huge spending period . . . so when you cut $1 million out of the city that is $1 million that the redevelopment cannot borrow,” he said. “The loss of that federal money will be felt for two or three years.”
WHAT THEY EXPECT TO DO
COMMERCE
The California Commerce Club, one of the area’s most successful poker casinos, has become a key revenue source for the city. In the highly industrialized city, officials expect to receive about $3.4 million or 20% of their total income this year from the casino. But relying on card club money can be a gamble. Other cities may open clubs, and legal questions remain about the games themselves.
SOUTH GATE
With the loss of federal money, city officials are wrestling with 54 budget-cutting options, including closing its Olympic-size swimming pool part of the year. Protests came from children and senior citizens alike who depend on the pool for recreation and therapy. But officials say they may have no choice, needing to trim $200,000 from this year’s budget. Said one city official: ‘Budget cuts carry a human price.’
LA MIRADA
Testing the economic axiom that it is cheaper to do it yourself, the city is now operating its Dial-A-Ride bus system. Struggling to trim $300,000 from this year’s budget, the city opted to cancel its contract with an outside firm and run the transit line in-house, saving at least $40,000 a year. Other savings may be realized in the areas of bus maintenance and personnel because the city now has greater control over the program.
PARAMOUNT
Two years ago, Paramount received more than $1 million in federal revenue-sharing money. Today, the program is history. Like many cities, Paramount in recent years has imposed new fees and taxes to make up the shortfall. For example, the city charges all vendors $1 a day at its daily swap meet, a fee that generates about $380,000 a year. Business license fees also have been raised to bring in another $200,000 annually.
SOUTHEAST / LONG BEACH CITY BUDGETS
City 1987-88 1985-86 *Budget Rev. Sharing Artesia $2.8 121,000 Bell NA 770,000 Bellflower $13.2 260,000 Bell Gardens $14.5 630,000 Cerritos $30.7 1.1 Million Commerce $18.6 335,000 Compton $19.3 2.4 Million Cudahy $2.7 370,000 Downey $41.2 605,000 Hawaiian Gardens $2.6 300,000 Huntington Park NA 1.4 Million Lakewood $26.8 420,000 La Mirada $11.9 500,000 Long Beach $1,120.0 5.6 Million Los Angeles $2,460.0 NA Lynwood $25.0 1 Million Maywood $4.3 290,680 Montebello $28.3 1.1 Million Norwalk $19.0 780,000 Paramount $19.0 1 Million Pico Rivera $18.3 500,000 Santa Fe Springs $17.4 500,000 South Gate $15.3 1.2 Million Signal Hill $9.2 250,000 Whittier $30.0 500,000
*--In millions of dollars. NA--Not available. NOTE--Fiscal 1985-86 was the final year for full federal funding of revenue sharing. Cities’ allotments were reduced in fiscal 1986-87 before being ended this month.
Contributing to this story were Times staff writers Mary Lou Fulton, Lee Harris, Richard Holguin, Daryl Kelley, Roxanna Kopetman, Bill Nottingham, Rita Pyrillis, and Beth Uyehara.
