COLUMN RIGHT : LAX Can Tip City Scales Out of Red : Selling the airport would save vital city services.

The proposals now facing Mayor Bradley to reduce the city’s hemorrhaging budget are all politically volatile. Whatever the mayor does, he will run up against significant opposition.

If Bradley raises taxes, the city will be in an uproar. If he cuts services, the people using those services will be outraged. And if he tries to be innovative and reduce the levels at which services are being provided--such is the case with a proposed reduced garbage collection schedule--he will run up against powerful unions.

Yet, Mayor Bradley can use this crisis situation to his political benefit and to the benefit of the city by being innovative and seeking alternative solutions.

In the budget debate, it has become clear that certain vital services such as the police and fire departments are most susceptible to budget cuts because they do not enjoy the same budget protection as do departments such as building and safety, which is paid for by special fees. Other services, such as sewer operations and transportation projects are funded by bond sales, special taxes, sales taxes and special assessment districts. And because these services have special funding sources, these funds cannot be used for general-fund purposes like police and fire services. Consequently, little would be gained by cutting the building department’s budget. Mayor Bradley’s only alternative, if he wants to avoid a tax increase, is to cut services unprotected in the general fund.

Thus Bradley is studying cutting the police force by 100 to 500 officers, eliminating several fire stations and closing two battalion offices. Anyone on the street would tell you that this is not the time to be cutting down on our police forces. And with a long dry summer coming up, in the middle of a drought, cuts in the fire department budget would be just as dumb.

But through asset sales and the creation of a government corporation, Bradley could achieve a political victory and set an example for the nation’s mayors.

One major asset that could be sold, and which is already being studied by the city, is Los Angeles International Airport. Bradley should bring to the bargaining table the idea of selling LAX to a private corporation with the stipulation that the funds received from the sale go toward securing funds for certain vital services in the general fund, such as the police and fire departments.

The Reason Foundation has estimated the market value of the airport to be more than $1.3 billion. Moreover, the city would gain new annual taxes because the land used by a private LAX corporation would now be taxable. At 1% of market value, the annual property taxes would amount to more than $13 million.

If that one-time windfall from the sale were invested properly, the city would realize more than $130 million annually (based on a 10% return on investment), which could be earmarked for police and fire services. This compares to the city’s projected 1990-91 deficit of $100 million to $150 million.

The city has the legal authority to sell LAX, despite its having received federal grants. A 1988 regulation signed by all federal agencies gives cities and states the right to unilaterally withdraw from federal grant agreements for any reason. In the event the city went forward with selling LAX, it would have to work out a suitable settlement of outstanding obligations with the federal government.

There is precedent for this. Our study “Privatization 1991” reports that Puerto Rico intends to raise more than $2 billion to rebuild its school system by selling its commonwealth-owned telephone company.

In addition to selling the airport, Bradley should create a separate user-funded garbage collection department. The 1990-91 budget for refuse collection is roughly $75 million. Since the city does not charge its residents for garbage collection, all of this must come from the general fund.

By creating a collection corporation and requiring it to be self-supporting, Bradley would free up that $75 million in the general fund, allowing its use for other general-fund purposes.

The environment also would benefit from the creation of a separate garbage collection corporation. By requiring it to pay for itself, the company would charge fees to households for their services. By making households pay proportionately to the amount of garbage they produce, the end result would be less garbage going to landfills, thus benefitting the environment, and a more fiscally efficient garbage collection service.

The budget crisis presents Mayor Bradley with some tough alternatives. But the options offered here represent a win-win situation for him and the city.