Mayor’s Budget Still Too Rosy, Economists Say : Deficit: City Council advisers contend that the revenue forecast in Bradley’s proposal is optimistic. The potential shortfall could be $35 million more.

Private economists warned Tuesday that Los Angeles is spending beyond its means and relying on overly optimistic revenue projections that could balloon the potential budget deficit by an additional $35 million.

The city is facing one of the deepest financial crises in its history with a projected $177-million deficit. Mayor Tom Bradley has proposed closing the gap through $100 million in spending cuts and $77 million in taxes.

Lynn Reaser, senior economist with First Interstate Bank, opened the City Council’s annual budget hearings with a pessimistic appraisal of Bradley’s $3.9-billion budget proposal, saying “failure to address basic financial problems could jeopardize the city’s bond rating and trigger additional financial crises . . . in the future.”

Frederick Cannon, senior economist for Bank of America, echoed Reaser’s concerns, saying that a recovery from the national recession would have to be well under way for the mayor’s budget projections to come true.

Both economists agreed that the economy, while showing some spark, has not completely pulled out of the recession. Lagging retail sales and slowdowns in other business activity are keeping general fund tax revenue increases to a projected near-record low of about 2.3%.

Keith Comrie, the city’s chief administrative officer, who advises the mayor in preparing the budget, said he was not concerned about Reaser’s projection of an additional $35-million shortfall in revenues.

He said a $35-million difference was “insignificant,” less than 1% of a $3.9-billion budget. “We think our numbers are OK. . . . It’s too close to call.” He called the mayor’s proposal to cut $100 million and eliminate 2,000 staff positions through attrition “significant steps” toward reining in the city’s spending.

Others said they were concerned by the economists’ warnings.

City Councilman Zev Yaroslavsky, chairman of the Finance and Revenue Committee, which is holding the hearings, said the $35-million revenue discrepancy is the largest he has seen in the 10 years that Reaser has been advising the council.

William McCarley, chief legislative analyst, said he found the projections “troubling.”

Complicating the budget deliberations is a mounting campaign against two of Bradley’s tax proposals: a 10% utility tax on cable television bills, and a real estate transfer tax that would add about $1,000 to the sale of an average Los Angeles home.

On Tuesday, cable television operators fired the first salvo in what is expected to be one of the most contentious budget battles in city history. The Los Angeles Cable Operators Assn. ran a full-page advertisement in two newspapers--The Times and the Daily News--urging citizens to tell Bradley: “Don’t Tax My Television.”

The cable operators promised a continuing media campaign and said they would attend the budget hearings to press their opposition to the mayor’s proposal.

“The public pays the tax, not us,” said Dan MacKenzie, marketing manager for United Artists Cable Television, which operates in the eastern San Fernando Valley.

“Cable users will feel picked on and they will be angry,” said John Gibbs, president of the association.

Gibbs said it was unfair to single out cable subscribers, who already pay more than $10 million to the city in a 5% franchise tax.

The two economists advising the council aided the cable operators’ cause by telling council members that the proposed tax, adding about $4 to an average monthly bill, would result in some subscribers dropping the service.

Reaser said that as a result, Bradley’s estimates of $12.7 million in revenues from the cable tax were off by about $700,000.

Ironically, Yaroslavsky opened the hearings with the announcement that, for the first time, the budget deliberations would be broadcast on cable television.

“I wonder if anyone’s watching,” he mused before a packed house of cable television operators sporting red and white “No Television Tax” tags on their lapels.

Deputy Mayor Mark Fabiani defended the cable tax proposal, saying “it’s a tough budget year. . . . There are no easy choices.”

Bradley is on city business for the harbor and airport departments in the Far East.

This year’s fiscal crisis, which Bradley and Yaroslavsky agree is one of the worst in city history, was spawned by the recession, the softening in the real estate market and slow retail sales.

At the same time the city faces increases in key expenses--including across-the-board 5% pay raises, hikes in health insurance, workers’ compensation and other services for city workers, and state-mandated improvements at the Lopez Canyon landfill.