Huntington Park Called ‘Out of Cash but Not Bankrupt’

City officials, who learned last year that they would have to begin dipping into sales tax income to help lagging revenues from ambitious redevelopment projects, sought to explain this week why they had misjudged the amount of money that would be siphoned from city coffers.

That miscalculation led the City Council to agree Monday to eliminate 13 municipal jobs. The council also gave tentative approval to borrow as much as $2.1 million to offset the budget shortfall.

Mayor Thomas E. Jackson backed away this week from statements he made last week that the deficit spending, if unabated, would bankrupt the city by Dec. 1. He called the financial crisis a “cash-flow” problem.

“We’re not bankrupt,” he said. “We just don’t have the cash to pay our bills.”

Huntington Park’s financial problems surfaced last week when the City Council called a special meeting to consider eliminating more than 50 municipal jobs and some services. The city was deficit-spending at a rate of more than $300,000 a month, which would have left it unable to meet its payroll by Dec. 1, officials said.

After strong employee opposition to the layoffs, the council decided to sharply reduce the number of layoffs and borrow money.

City officials said they knew there was a money crunch, but they did not now how bad it would be.

“We anticipated that we would be tight but we felt . . . we were making it,” Councilman Jim Roberts said earlier this week. “The numbers were changing on us and we weren’t aware they were changing. The well ran dry very quickly.”

Roberts was on a city committee that advised the City Council on its 1987-88 budget. The same committee worked for the last month to find a solution to the deficit spending. Roberts said he was not advised in a timely fashion that the city was facing a financial bind.

But he stopped short of blaming either Donald L. Jeffers, the city’s chief administrative officer, or James Funk, the city’s redevelopment director.

“I’m trying to find out why I wasn’t (advised),” Roberts said. “We had a fire to put out. . . . “

Looking back, Jackson said the city’s effort to complete 90 redevelopment projects between 1980 and 1990 may have left the Redevelopment Agency juggling more projects than it could handle. The Redevelopment Agency has completed about 70 projects, including the Pacific Center Shopping Mall and Medical Office Building, which has 163,000 square feet of floor space.

Jackson said he was surprised when he was informed about four weeks ago that severe spending cuts--possibly involving layoffs--would be required.

“There were so many things happening that it can just get away from you,” he said. “Somehow or another I do not think that any of us felt that we would ever continue to lose as much as we did. We always felt that we were bringing more projects on line.”

“The City Council has to keep closer tabs,” he said. “We are going to have a requirement to have specific types of cash flow charts so we will know exactly what is going on (with redevelopment projects).”

Nevertheless, Jackson strongly supported the city’s redevelopment program.

“There’s going to be one day four or five years from now when the city will be rich, when all these projects get on the tax roles,” he said.

The city has backed its redevelopment bonds with anticipated property tax income from redeveloped properties. If that source fails to provide enough money, the city must dip into sales tax dollars, and that is just what has happened. This fiscal year the city must channel about $1.4 million in sales tax revenue--money used to operate the city--to the Redevelopment Agency to meet its bond payments.

Property tax revenues, officials said, have not met projections because of project delays beginning in 1984. The fiscal year began July 1, and ends June 30, 1988.

The Redevelopment Agency’s revenue shortfall appeared last year when the city was required to funnel $1.7 million in sales taxes to the agency for bond payments, Funk said. While city officials anticipated some drain on city funds this year, the full extent was not known until audit reports reached the city last month, Funk said.

Last year’s drain cut into projected reserves, leaving Huntington Park unable to weather a similar shortfall this year, Jeffers said.

The sales tax revenue that goes to the Redevelopment Agency is recorded as a loan that could take years to repay. As of June 30, the agency owed the city about $9 million in sales tax diversions and up-front loans.

Last summer, the City Council approved spending $10.6 million during 1987-88 to pay for general city operations, including a 5% pay raise for its 227 employees. The raises cost the city about $200,000.

“We hoped by this time, loss of that money would have been compensated by the agency,” Jeffers said.

The value of property in the city’s four redevelopment areas--comprising about 760 acres--has risen dramatically since the first district was established in 1972.

Property values in the districts rose from $282.4 million when they were formed to $445.5 million this year, Funk said. About $2.7 million in tax revenue from the areas is expected to flow to the Redevelopment Agency this year.

But the Redevelopment Agency expected to be receiving much more by now, enough to meet its $4.4 million-a-year bond payments.

Funk said the shortage is rooted in 1984, when developers operating in a climate of high interest rates began defaulting or backing out of seven key projects. Although substitute developers were eventually found, property tax income that the Redevelopment Agency counted on to meet its debt service was delayed.

That meant financial problems for the city because in 1985, Huntington Park agreed to back redevelopment bonds with sales tax revenue. By doing that, the rating of the redevelopment bonds was improved, making them more attractive to investors and reducing bond costs for the Redevelopment Agency, Funk said.

But the bond agreements require that almost all the city’s sales tax revenue be funneled to the Redevelopment Agency’s bond trustee until the bond payments are met in full. Any remaining sales tax revenue--expected to be more than $1.6 million this year--will be held by a bond trustee until late in the fiscal year. The city is moving to borrow against that money and surplus funds the Redevelopment Agency expects to receive by the end of the year, Funk said.

Nine city employees will be laid off effective Jan. 4, while the other four positions are vacant or will be vacated through retirement.

The city also eliminated the municipal newsletter, travel, conference and seminar budgets and made other cuts to reduce general fund spending by about $80,000.

The strongest opposition to the budget cuts came from the Huntington Park Police Officers Assn., which complained that the Police Department suffered the brunt of the cutbacks. In addition to cutting the positions of two officers, five clerical and support positions will be eliminated. One captain’s position will be cut when Capt. Charles Plum retires in January.

“It’s amazing that the council would make cutbacks in an agency that is most critical to the public welfare,” said Richard M. Kreisler, an attorney representing the officers. “The association does not want anyone laid off. There ought to be a way for them to completely avoid layoffs.”

Plum, the city’s interim police chief, said he did not know what effect the reductions would have on public safety. He said the loss of police presence would go beyond two officers because more policemen will be required to perform tasks handled by clerical and support staff.