For the second time in less than a year, the City Council has rejected a proposal to raise local utility taxes, turning elsewhere for money needed to patch a growing budget gap.
Shunning the city administration's recommendation to raise the tax on utility use from 7% to 10%, the council instead decided to try to head off a multimillion-dollar deficit by collecting an old debt from the city airport fund.
In so doing, council members conceded they were adopting a stopgap measure that was merely postponing a budget crisis for a few months.
"We're going to end up in May or June looking at the same issue," warned Councilman Tom Clark. "I don't think we're really resolving it, we're simply putting it off."
By a 6-3 vote, the council decided to collect a $4.3-million debt from the airport fund to help the city get through the fiscal year, which ends this summer. The sum is the balance of a $9.5-million loan borrowed decades ago by the airport, which has been repaying the general fund over the years, along with interest that currently amounts to $550,000 annually.
Mayor Ernie Kell, who has no vote on the council, argued repeatedly that by calling back the loan, the city was robbing itself of future interest payments. "We're going to mortgage the future for the next 20 years," Kell insisted.
To return the $4.3 million to the general fund, the Airport Bureau will borrow money on the bond market, so the interest will go to bond holders instead of the city. The airport should not have to raise fees as a result of the refinancing, an airport spokeswoman said.
Councilmen Evan Anderson Braude, Douglas Drummond and Les Robbins opposed calling back the airport debt. Braude made another motion that would have imposed the utility tax increase for three months only. That failed 5 to 4, with Councilmen Jeffrey Kellogg, Wallace Edgerton, Ray Grabinski, Warren Harwood and Clark voting against it.
City departments already have slashed about $10 million in spending to avert a deficit in this fiscal year's $287-million general fund budget, but even with those reductions, the city faces a $5-million shortfall by the end of June. City Manager James C. Hankla's answer was the utility tax increase, which would have raised just about that sum over the next several months and an estimated $13 million to $15 million annually after that.
But business interests argued at Tuesday's council meeting that more taxes would further hurt businesses already suffering from the recession. Opponents also pointed out that the city raised its tax on utility use from 5% to 7% only last year.
Council members who supported collecting the airport debt said the money would give them a few months to come up with more lasting answers to the city's growing budget problems.
"For a period of about four years . . . we have been living very close to our fiscal margins," observed Hankla, who added that he recently turned in his city car and now uses his own car on city business.
City finances have grown even tighter as the recession has eaten into revenues and the financially strapped county and state have passed on bills for services they used to provide free.
As a result, Long Beach has cut library hours, recreation programs, tree trimming and other services, and Hankla has warned that further cuts and layoffs of city employees may be necessary.