Beverly Hills Faces Possible Budget Deficit as Income Lags

After 11 straight years of budget surpluses, the city of Beverly Hills may face a deficit if it is not careful with its spending, officials warned this week.

Briefing the City Council on the municipal budget for the fiscal year starting July 1, the officials said the demands of completing a new civic center, underwriting the school system and helping to renovate the Hyperion waste-water treatment plant are likely to put a strain on city finances.

A proposal to spend $4 million to renovate the city-owned Greystone mansion, a decrepit pile that was once one of the most magnificent mansions in Southern California, could also be a drain on municipal reserves.

“We’re just saying that we’ve got a lot of expenses coming up and revenues are not keeping up with expenses,” said Don Oblander, director of finance administration for the city.

“And further, if we had a recession and revenues were down, or even stagnant, then we could have an unbalanced budget very quickly,” Oblander said.

Elected officials have yet to suggest drastic action such as layoffs of city employees. But the prospect of hard times was reflected in the City Council’s rejection Tuesday of a request by the Chamber of Commerce for $850,000 to fund the visitors’ bureau, an agency that helps attract tourists and business travelers to Beverly Hills.

“It’s not that the sky is falling, but that we want to avoid it from happening,” said City Councilman Bernie Hecht.

The chamber was told to come back with a proposal for $500,000, the same amount it was allocated this year.

At its meeting Tuesday, the City Council also held the spending at current levels for other nonprofit groups such as the Beverly Hills Symphony, the Theatre Guild, the Ministerial Assn. and the YMCA.

The city’s budget for 1989-90 will come in at $100,060,000, the first time it has exceeded $100 million, Oblander said.

Of that total, $70.2 million is earmarked for the general fund, compared to $63.3 million originally allocated for the 1988-89 fiscal year.

The addition of new projects, including a traffic improvement study, and the hiring of more staff to administer new zoning rules brought this year’s spending up to $67.7 million.

Major Expenses

“In the past it’s been relatively easy for the city to simply add new spending programs during the course of the year,” Oblander said. “We’re saying that we need to provide the basic important services, and when new programs come up we need to make sure we have enough money coming in to fund them so we don’t have cutbacks in other areas.”

The major expenses that will be felt most strongly in the coming fiscal year include about $4 million for the city’s share of renovating the Hyperion plant, which is owned by Los Angeles but serves several other municipalities.

Beverly Hills paid about half of that amount for its Hyperion costs this year, and as little as $1 million in previous years.

“In earlier years that was not such a problem because of reserves we held in our waste-water fund, but operating and capital costs have gone up so fast that within the next year we will have exhausted those reserves,” Oblander said.

Debt payments on the bonds that financed the construction of the city’s new civic center will also increase in the coming fiscal year, costing just over $7 million compared to $3.9 million in 1988-89.

The city will also be paying about $4.7 million to help the financially strapped school system, a figure that has quadrupled since 1986.

On the revenue side, payments from property taxes, sales taxes, business licenses and a hotel bed tax have been increasing steadily, Oblander said.

“It’s just that the expenses have been going up faster. We’re starting to spend a little faster than we’re collecting money,” he said.

Despite the dour prospects spelled out by Oblander, City Councilwoman Vicki Reynolds said the city is in good financial health.

“Obviously . . . a recession would certainly have a substantial impact on our revenues,” she said. “But one of the things we might be able to do is to allocate some funds now and appropriate them later so we’re able to manage our cash flow.”

She said the repairs at Greystone, which has been closed to the public since 1982, were essential in order to find a productive use for the mansion. It is rented out occasionally for movie and TV productions, but most of the time it stands empty and unused.

Full restoration of the lavish estate could cost as much as four times the $3 million spent to build the 55-room manor house, which was completed in 1928 as the residence of a son of the Doheny oil family.