Redevelopment Is at Heart of Disputes in 2 Communities : Official Says Montebello’s Fiscal Ills Have Been Blown Up to Spur Renewal

Councilman Edward C. Pizzorno has charged that city officials have exaggerated Montebello’s financial problems to build support for a controversial plan to spur redevelopment.

Pizzorno said he believes city officials have projected a $1.1-million budget shortfall, in part, by underestimating revenues for the current fiscal year, which ends June 30, 1989. Such a shortfall would provide impetus for a proposal to give the Redevelopment Agency the power of eminent domain in two areas of South Montebello, Pizzorno contends. The proposal has drawn strong community opposition.

“I object to the budget shortage being used as a means of trying to sell eminent domain,” Pizzorno said in an interview last week. “Staff and the council majority are trying to sell an unpopular thing. Eminent domain should stand on its own.”

The council had planned to approve a 1988-89 budget last week, but delayed action to study Pizzorno’s charges. In a report to the council, City Administrator Joseph M. Goeden said the city will have to draw about $1.1 million from its reserves this year to meet general operating expenses. Montebello has been running on a preliminary budget since its fiscal year began July 1.

Goeden said the shortfall indicates Montebello needs new development to bring more jobs and tax revenue to the city. And he said the Redevelopment Agency needs condemnation powers to be able to assemble sizable parcels of land to attract commercial and industrial developers. But he insisted that his proposed $21.1-million general-fund budget accurately reflects Montebello’s financial condition.

“This is a very serious matter to be playing politics with,” Goeden said.

Pizzorno has asked city staff to clarify numerous points in the city budget, but the councilman said he is most concerned over estimated revenues and a proposed increase in a fund to pay future insurance claims.

The councilman said he suspects that sales and property tax revenues the city will receive this year may have been underestimated by as much as $500,000. Pizzorno said the budget should have been adjusted to reflect a 15% increase in Montebello property values 1987 to 1988.

He also said sales tax income will almost certainly surpass the budget estimate of $6.34 million, a 4% increase over what the city received last year. Pizzorno bases his estimate on sales tax revenues for the first two months of this fiscal year--July and August--which are up nearly 8% over revenues for the same period last year. The councilman noted that last year’s sales tax income turned out to be nearly $400,000 more than the amount projected by city officials.

“The underestimating of the revenues is where the so-called budget shortage comes up,” Pizzorno said. “All these budgetary woes are being placed on the people to make them feel guilty.”

He also said the proposed budget includes about $1.5 million to bolster the city’s self-insurance fund. Instead of buying insurance, the city insures itself by maintaining a fund to pay anticipated claims. The money in that fund may be used or held in reserve depending on the number of claims against the city. Pizzorno questioned whether the city needs to set aside that much money, which otherwise could be used for operating expenses.

Although a review of Pizzorno’s claims is not complete, Goeden and other city officials defended the proposed budget in recent interviews.

More than half of the increase in property values occurred in redevelopment zones, said David Dong, assistant director of finance. By law, new property tax revenue generated in those areas must be used for redevelopment and cannot pay for general governmental expenses.

The budget includes a projected increase of 4% in property tax revenues from property outside redevelopment zones, Dong said. Recent figures on property values show an increase of about 9%, or $60,000 more than budgeted for the year, but the projected change is not considered significant enough to adjust the budget, Dong said.

Finance Director Ted Nix said the sales tax figures were increased only for inflation because of the uncertainty of sales, which generally are determined by the ebb and flow of the economy.

Goeden said the increase in the self-insurance fund stemmed from a consultant’s recommendation. A May 6, 1988, report by Coopers & Lybrand, a Los Angeles accounting firm, suggested that the city add $600,000 to cover claims up to last June 30, and set aside more money for potential future claims.

The city administrator acknowledged that Montebello is building its insurance fund this year from $3.48 million to $5.2 million, but he said the city will have most of the same expenses in the next few years to maintain the additional coverage.

To make up the anticipated $1.1-million shortfall, the city would draw from reserves that it planned to use for future road construction and maintenance, and other improvements.

The council is to consider the proposed budget at its Oct. 10 meeting.

Last year, Goeden estimated that the city’s general-fund expenditures would exceed income by about $1.8 million. But because of better-than-expected sales tax revenue and income from fees and other sources, the shortfall was about $1 million, Goeden said. The city drew money from the same reserve funds it will use this year, according to a budget report.

A citizens’ group called South Montebello Area Residents Together opposes the eminent domain proposal, saying the city has not properly planned to protect the residents from the effects of future development, including additional traffic, noise and pollution.

The city has held a series of informational meetings on its redevelopment plans. The eminent domain proposal is not expected to be considered by the council at least until November. Formal hearings are expected to be held by the city Planning Commission and the council within the next few weeks.