With the defeat of their two tax proposals, El Segundo officials are planning unspecified cutbacks and possible staff layoffs in an effort to make up a projected $1.6-million deficit in the city’s $20-million budget for fiscal 1989-90.
The council will discuss specific cuts at its meeting Tuesday.
With 89% of the voters opposed and 11% in favor, residents Tuesday swamped a proposal for a property excise tax that would have raised $3.5 million. A measure to double the utility tax for businesses, which also would have raised $3.5 million, lost by a 58%-to-42% vote. Council members voted last November to put the two measures on the ballot to deal with the city’s fiscal woes.
In the aftermath of the ballot defeat, some council members engaged in finger-pointing about responsibility for the defeat, and City Manager Fred Sorsabal faced the budget with bleak humor.
The city may have to call a mortician, Sorsabal said Wednesday, adding that it would be tempting to lock up City Hall and simply walk away. “We may do that. We don’t know yet,” he said.
Sorsabal said that although attrition may reduce personnel costs, layoffs remain a real possibility. Because 75% of the budget reflects personnel costs, it will be hard to cut costs without reducing the payroll. The city has about 300 employees.
The city’s financial crunch goes back to 1982, when Southern California Edison Co., under pressure to reduce air pollution, switched from Chevron fuel oil to natural gas to power its El Segundo generating plant.
The city, which has a sales tax, had been able to balance its budget on revenues from the Chevron oil sales, which amounted to more than $10 million a year.
Since 1982, the city has been dipping into its reserves, which have dwindled from $20 million to $3.1 million.
Without any new revenue sources, city officials had predicted a general operating deficit of $1.6 million in fiscal 1989-90.
However, if all proposed capital improvements for the same year are included, the deficit climbs to about $8 million, they said. Among other long-term expenses, the city must pay $15 million over the next 12 years as its share of the cost of expanding the Hyperion sewage treatment plant. El Segundo contracts with the city of Los Angeles for sewage treatment.
While the $1.6-million budget deficit can be funded from the reserve this year, some council members say bleeding the reserve leaves the city, which is self-insured, dangerously exposed.
“I am not about to bankrupt this city, and if we stay the course we are on, we would be,” Mayor Carl Jacobson said.
Sorsabal said a major break in a water or sewer line could result in unbudgeted expenses. He added: “If we were to have a major lawsuit that we lost, we would have nothing. It is not a comfortable feeling.”
Jacobson and Councilman Scot Dannen, who supported the utility tax increase for businesses, blame Councilman Alan West, who opposed both taxes, in part for the defeat.
Dannen, however, acknowledged that he had not campaigned for the new taxes as hard as he could have. “I accept a large part of the blame. I didn’t go out and knock door to door,” said Dannen.
West was pleased by the voting.
“Well, gosh, the people evidently spoke,” he said Wednesday. “I hope the council will get the message.”
West said the tax proposals lost because city officials failed to spell out what they do with the money.
“If you want people to buy something in the way of taxes, you have to tell them what you are going to provide,” he said.
“We will talk at great length on what we can do without and how we can economize. Once we get that settled, we can go back to the people, and I wouldn’t be surprised if they approve a tax once the council gets its act together.”
West said he rejects the argument that the taxes are needed to build up insurance reserves.
“Do we, the city, have the right to take money out of your savings account and put it in our savings account? I tend to thank that you tax for needs that are defined and definite. Just to put money in the bank I don’t think is a need for taxation.”
But West said he would work with the council to see whether another ballot tax measure could be framed that he could support.