Recession-Bred Budget Woes Run Rampant in Cities
Lessie Alina Tarver was two weeks shy of her six-month probationary period as an office clerk for the city of Carson when she was called into her boss’ office.
The news was not good. Sales taxes, which pay about half of the city’s bills, were running $600,000 short of projections. More than a dozen of the city’s 340 employees had to go.
“There was no reaction but to sit there and listen,” said Tarver, who lives in Carson with her retired husband. “We had heard rumors for some time, but still it was a surprise.”
The layoffs just before Thanksgiving were followed by a citywide hiring freeze and increases in city fees. The price of business licenses went up 40%. For the first time, the city began charging teen-agers to play flag football and other city sports.
The belt-tightening in Carson, a working-class community in the back lot of the Port of Los Angeles, reflects a growing unease in city halls across Los Angeles County as the region’s teetering economy slips deeper into recession.
Municipal budgets from Pomona to the Palos Verdes Peninsula were drawn up last spring while the economy still looked healthy and consumers were not skittish about spending. Suddenly, that has all changed. Pessimistic city managers and financial officers are now preparing local governments for the worst.
“We talk about it just about every day,” said Nelson E. Oliva, assistant city administrator in Hawaiian Gardens, a small, financially troubled city in the county’s southeast corner. “We know what side our bread is buttered on.”
Even in Beverly Hills, one of the most affluent cities in the nation, worries about the recession have led to predictions of a budget shortfall and talk of a new tax on utility users.
“The big question is how low revenues will dip,” said Don Oblander, Beverly Hills director of finance. “At this point, we just don’t know.”
Since Proposition 13 halted the growth in property tax revenues to cities statewide more than a decade ago, local governments have become increasingly dependent on other income--particularly sales taxes--to pay for city services. If Christmas holiday retail sales fell sharply and the economy remains in decline, as financial experts predict, many cities expect to find themselves scrambling to make ends meet when the fiscal year ends in June.
“I don’t see where we could cut back,” said Leonard Locher, city manager of Maywood, which relies on sales taxes for about 25% of its income. “Our budget is as spare as it can be. It’s like a household budget: (Money) comes in one week, and it’s out the next.”
Last spring, Mayor Tom Bradley warned that Los Angeles was on “a fiscal tightrope” even before the national and local economies dipped into recession. Los Angeles budgeters now predict at least a $20-million shortfall for the current fiscal year, with deficit projections for the 1991-92 fiscal year approaching $180 million.
Bradley ordered a hiring freeze late last year, sparing only a small number of police recruits. Indefinite holds have been placed on the purchase of new street graders and sweepers, the city’s 41 seasonal swimming pools were closed three weeks early, and the city has even shut some public restrooms because of depleted cleaning staffs.
“The public has not seen a serious diminution of services, but another year like this and it will be painfully apparent,” said Los Angeles City Councilman Zev Yaroslavsky, chairman of the City Council’s Budget and Finance Committee.
Budget officials in Long Beach, the county’s second largest city, predict that local sales tax collections may fall 6%--or about $2 million--this fiscal year, while a construction slowdown may cost the city an additional $1 million in building and planning fees. City Manager James Hankla has responded by asking departments to cut spending by 5%.
As a result, the Long Beach Public Library is buying fewer books and has cut back on part-time help. The parks department has delayed purchases of grass seed and fertilizer. Even Long Beach budget manager Bob Torrez has pitched in, spending part of his New Year’s weekend moving computers in his office to avoid paying a city maintenance crew overtime.
“It’s always been a real tight budget,” Torrez said. “The real difficulty is that the state and county are having severe problems and they’re coming down to us.”
The news is much the same in the once-booming towns at the far stretches of the county. A drastic turnabout in the housing market in Palmdale and Lancaster in the Antelope Valley, one of the fastest-growing areas of the state during the 1980s, has led to a frantic recalculation of revenues generated by the local building industry.
Palmdale had expected to collect $8 million this fiscal year from development fees, but officials now project a $4-million shortfall. The city has kept 15 to 20 jobs vacant and has cut or deferred non-essential expenses, including a library remodeling, auditorium rehabilitation and new City Hall phone system.
“The real question is going to be what the economy is going to do in 1992,” said Bill Ramsey, Palmdale’s finance director. “If we have a second year like this, it’s going to hurt.”
The economic slowdown has not required significant cuts in essential city services like police and fire protection, but law enforcement has not been spared entirely. Pasadena police saved $100,000 by trimming patrols during New Year’s Eve and the Tournament of Roses Parade, while plans to enlarge the Los Angeles Police Department have gone by the wayside.
Los Angeles police also say they have no money to upgrade the city’s woefully inadequate 911 emergency system. An estimated 100,000 calls to 911 went unanswered last year, police officials said, as did nearly a million non-emergency calls because of an outmoded communications system. Voters recently defeated a ballot measure seeking $235 million in bonds to upgrade the system, but city officials will try again on the April ballot.
The looming economic crisis may get even gloomier for local governments because the state and county are expected to pass more expenses along to cities as money gets tight everywhere. Long Beach, for example, recently received a $1.5-million bill from Los Angeles County, the result of a new state law that allows counties to charge municipalities for collecting local property taxes.
County officials say they need the money to pay for health, welfare and criminal justice programs they provide to residents countywide. The county relies heavily on vehicle license fees for income, but those revenues have dropped dramatically as fewer residents buy expensive new cars. Direct funding from the state for a variety of programs is also in jeopardy because of budget problems in Sacramento.
The recession “has had the double whammy effect, where revenues are anticipated to decline . . . (and) the welfare caseload is rising as the unemployment problem increases,” said Gerald A. Roos, the county’s senior assistant administrative officer.
The deteriorating state economy plunged the county’s mental health system into its worst financial crisis in memory when former Gov. George Deukmejian slashed $71 million in state funding for mental health last year. Without additional money, about 27,000 of the county’s 58,000 mental health patients faced dismissal from treatment.
The County Board of Supervisors responded by using taxing authority over unincorporated areas recently bestowed upon it by the Legislature. The supervisors recently voted a bailout plan that included a 5% tax on users of gas, electric and telephone utilities, an increase in the hotel and motel occupancy tax, and new taxes on landfills and amusement parks. The board also squeezed an additional $4 million in savings through cuts imposed on other county departments.
The bailout averted a massive dismissal of mental health patients and a feared increase in “hostage situations, barricade situations, suicides and suicide attempts,” in the words of Assistant Sheriff J. L. Harper. But it will be a short-lived victory if the state economy continues to deteriorate, leaving even less money for counties in fiscal 1991-92.
It is such uncertainty about the coming fiscal year that has local governments across the county second-guessing every dollar they spend.
“The furniture looks real bad, but I’m not going to (buy new furniture) because we have more important things to do,” said Pomona City Administrator Julio Fuentes, whose city faces a $2-million deficit. “We’re trying to get as much bang for the buck as we can.”
Contributing to this story were Times staff writers Bettina Boxall, John Chandler, Irene Chang, Jane Fritsch, Michele Fuetsch, Kenneth J. Garcia, Tina Griego, Anthony Millican, Richard Simon and Irene Wielawski.
