Money Woes Could Mean Service Cuts : Budgets: Rancho Palos Verdes officials say declining revenue might mean less upkeep for streets and parks.

TIMES STAFF WRITER

The potholes are plugged and the trees trimmed, the streets swept and parks manicured. Signs that Rancho Palos Verdes faces a money crunch are hard to find.

Nevertheless, city officials last week warned that the potholes may soon go unplugged, the trees untrimmed and park grounds left shaggy unless the city quickly finds new sources of money.

Confronted with a weak local tax base, dwindling reserves and a recession, council members and other city officials say the coming fiscal year's $7.4-million operating budget is probably the last one that can be balanced without cutting services or enacting new taxes.

Consequently, council members, who last week unanimously passed the 1991-92 fiscal year budget, say they'll be sitting down in the coming weeks to study their options for increasing revenues.

"There is literally no more money to squeeze out of anything," Rancho Palos Verdes Mayor Douglas M. Hinchliffe said. "The fat went out three or four years ago and the muscle is now being pared away."

"I think the average person thinks 'Hey, the city is operating pretty good, and nothing is wrong here,' " said Councilman Robert E. Ryan. "But the situation is deadly."

The grim predictions come seven months after chagrined city officials found themselves faced with a whopping $3-million deficit in the 1990-91 general fund budget.

The deficit, brought about by sloppy bookkeeping, overspending and shortfalls in projected revenues, was discovered last November by City Manager Paul Bussey during an inspection of the city's financial records. Bussey was hired by the city last June, after the budget had been drawn up and approved by the City Council.

The shortfall was quickly corrected by slashing $1 million from the budget. Although city services did not have to be cut, six city jobs were eliminated and six public works projects were postponed indefinitely. Additionally, money was transferred from the city's capital improvement fund and other accounts with surplus funds.

Council members say the mistakes made in preparing the 1990-91 budget left them with the impression the city had more money than it actually did. The major error was the transfer of money from the General Fund to another account without being recorded.

But despite the 1990-91 budget mistakes, council members say they had long anticipated the city's present money woes because the town lacks a major commercial tax base and residents have been spared having to pay local taxes, except for property taxes. Unlike many smaller cities, including neighboring Palos Verdes Estates, Rancho Palos Verdes does not have a utility users' tax.

"The fact of the matter is we have been financially vulnerable now for as long as I have been on the council, and it is getting progressively worse," said Hinchliffe, who was first elected in 1983.

Councilwoman Jacki Bacharach said: "Our city runs on a shoestring."

The city's operating budget expenses have outstripped revenues since at least 1987, according to Bussey. The budget has been balanced largely by relying on reserves accumulated in the capital improvement and environmental excise tax funds. Money from the latter account, which was set up to buy parklands, is derived from fees charged to developers.

To balance the 1991-92 fiscal budget, Bussey said, the city will have to withdraw $765,000 from the capital improvements fund, leaving a balance of $144,000 in the account. About $150,000 will be withdrawn from the excise tax fund, leaving $45,000, he said.

Bussey blamed the recession for exacerbating the city's money problems, costing the city an estimated $600,000 in lost sales taxes and other fees. For example, the slowdown in construction activity has severely cut the amount of money collected from planning and building fees, he said. The city collected $600,000 in such fees during the 1990-91 fiscal year, down from $908,000 the previous year.

At the same time, Bussey said, the city will receive $450,000 less in state funds in the 1991-92 fiscal year because the federal census calculated Rancho Palos Verdes' population to be only 41,650. The number is well below the 49,051 figure the state Department of Finance had been using to determine the city's share of motor vehicle, cigarette and other taxes, he said.

To bolster the city's treasury, Bussey last week recommended to council members that an assessment district be formed and residents taxed to raise money for street and other maintenance projects. Such a tax could raise between $500,000 and $750,000 annually, according to city estimates.

Also, Bussey told council members they should consider passing a parcel or utility tax to raise up to $1 million a year, as well as increasing the bed tax from 6% to 10%.

Hinchliffe said he believes the council within the next several months will seriously consider creating an assessment district. Whether it will consider a parcel or utility tax, which residents voted against several years ago, is less certain, he said.

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