Realty Tax Narrowly Approved by Council : Budget: Transfer fee to take effect around July 1. Enactment balances record $3.9-billion spending plan at the 11th hour.

Over the noisy protests of homeowners and the real estate industry, the Los Angeles City Council on Friday narrowly approved a controversial real estate transfer tax that brings the city’s record $3.9-billion budget into balance at the eleventh hour.

By the bare minimum of votes, and with just one day to go before a City Charter-imposed deadline for delivering a balanced budget package, the council approved the $52.7-million tax rather than cut into essential city services.

The council had earlier approved more than $100 million in budget cuts when it delivered its detailed annual spending package to Mayor Tom Bradley on Wednesday.

The vote completes the council’s budget package, considered by city officials to have been one of the most difficult in a decade. The city faced a $177-million deficit caused by a soft real estate market and stagnant retail sales that are expected to produce one of the smallest increases in tax revenues since the 1982 recession.

With the additional revenues from the transfer tax, the budget maintains current Police Department staffing, library and park hours and street paving and tree trimming schedules. It also includes an across-the-board 5% wage increase mandated by union contracts.

But it also includes the elimination of nearly 2,000 staff positions through attrition, reductions of fire and paramedic services, as well as the deferral of virtually all capital projects, vehicle purchases and all but a minimum of building maintenance.

Bradley immediately signed the tax ordinance and sent it to the City Clerk for publication. The tax, which would add $4.50 to every $1,000 of real estate sold or about $900 to the sale of a $200,000 home, will go into effect 30 days after publication, or around July 1, officials said.

Bradley spokesman Bill Chandler said: “The mayor is pleased the City Council saw the merits of this proposal and recognized the limitations of this year’s budget. A failure to approve the revenue sources would have brought chaos to the concluding phase of the budget process.” Bradley, under terms of the City Charter, must respond to the remainder of the council’s budget resolution by Wednesday.

Councilman Zev Yaroslavsky, who chaired the council’s budget writing committee and championed the real estate tax, said, “None of us are overjoyed to do this, but the alternative is worse.” A report by the city administrative officer said that if the tax were not approved, 500 city employees would have to be laid off immediately, and library and park hours shortened to balance the budget.

Opponents of the transfer fee said they are considering a variety of legal and political moves to derail the tax.

Lynn Wessell, a real estate industry lobbyist who led the anti-tax coalition, said the fee is illegal under Proposition 13, the state ballot initiative approved by voters in 1978 that limited property taxes.

If the court challenge is not successful, Wessell said coalition members are “committed to putting something on the ballot.” Wessell said tax opponents are attempting to write an amendment to the City Charter that would limit the City Council’s ability to raise taxes.

Council members were heavily lobbied by the real estate industry and later by homeowner groups and anti-tax organizations, such as the Howard Jarvis Taxpayers Assn. They argued that the tax would make Los Angeles homes more difficult for first-time buyers to afford.

One study cited by the realtors said that for every $1,000 increase in the cost of a home, 2,300 Los Angeles residents lose their ability to afford the purchase. City officials said that about one-half of the revenues raised from the fee would come from the sales of single-family homes and the remainder from commercial, industrial and multifamily properties.

Earlier, special interests were successful in defeating taxes on cable television and entertainment admissions, in part because the council found additional revenue.

The real estate tax was also in jeopardy of being defeated, as opponents and backers were still working on the uncommitted council members until minutes before the session began.

Retiring Councilman Robert Farrell cast what was considered the swing vote in the 8-5 tally. Eight votes were need for passage of a tax ordinance.

“It was important for us to have a budget in place, on time for statutory reasons,” said Farrell, who throughout budget deliberation had favored a complete revision of the city’s tax structure and adoption of a 1% income tax. “This was to meet our obligations,” he said referring to the June 1 deadline for balancing the budget.

Council members Ernani Bernardi, Hal Bernson, Joan Milke Flores and Nate Holden voted against the tax. Two council seats are vacant after the death of Gilbert Lindsay and the election of Gloria Molina to the Los Angeles County Board of Supervisors.

At a Glance: The City Budget Here are some highlights of the Los Angeles City budget for the 1991-1992 fiscal year that begins July 1: At $3.9 billion, it is the largest spending plan in city history and 8% higher than the current year’s budget.

To cover a projected $177 million deficit, the council cut more than $100 million in spending requests and added about $60 million in new taxes.

New taxes include a $52.7-million real estate transfer tax and a $7.3-million increase in the storm water pollution abatement charges.

The council rejected a $12.7-million tax on cable television and a $15-million tax on entertainment admissions.

The budget includes no layoffs, but will eliminate nearly 2,000 staff positions through attrition at an estimated saving of $80 million.

Workers who remain on the job will receive a 5% wage hike on July 1, as mandated by union contracts.

Library and park hours will be maintained on the current schedules as will tree trimming, street sweeping and street paving. An acclaimed after-school program for latchkey children has been retained.

Among the capital projects scrapped are a $1.8-million clean up of contaminated soil, part of the city’s garbage recycling program and virtually all new vehicle purchases.

The budget eliminates 160 firefighter positions, which fire officials said will be like having two greater-alarm fires at all times.

The spending plan includes record high expenditures--$14.8 million--for the City Council and its staff.

The measure allows for spending $3 million on cultural events, including $5,000 for a cold tofu festival.

The city budget document--in more than seven volumes--includes 1,000 pages and measures more than six inches thick.