Budget Woes Grow Deeper for Rancho Palos Verdes : Finances: Wilson’s veto of bill will cost the city $1-million in property tax revenue from the county on top of $1.2-million deficit for next year.

Already facing a $1.2-million shortfall on next year’s $7-million budget, hard-pressed Rancho Palos Verdes city officials were hit by more fiscal bad news this week: They are losing another $1 million in anticipated property tax revenue from the county.

Officials blame the loss on Gov. Pete Wilson, who vetoed a bill designed to help financially strapped cities. Though the issue is complex, the effect on the city is quite clear.

Fiscal experts say the deficit could double, bringing it as high as $2.4 million during 1992-93. And it could get worse. City Manager Paul Bussey said the city stands to lose millions more over the next five years because of the Wilson veto.

“This is a nightmare,” said Councilwoman Jacki Bacharach. “The veto means we won’t get our money. . . . we’ve lost it.”

Unless something is done in Sacramento or in the courts to head off the projected loss, the city will either have to cut spending by one-third or raise taxes, Bacharach explained. This bitter prospect comes after the city has already laid off 20% of its 50 employees and has made other major cuts in city services.

“We can’t solve this by cutting more police services . . . or telling people they can’t remodel their homes just because we don’t have a planning staff to issue the permits,” she said. “We’ve got to come up with more money . . . somehow.”

The $1-million loss comes out of the city’s share of the Rancho Palos Verdes property taxes collected by the county and then divided up among the various public agencies. The amount returned to each city is determined by laws enacted after the voters approved Proposition 13, the tax-slashing measure passed in 1978, Bussey said.

Proposition 13 limited the total property tax rate to 1% of property values, but it didn’t specify how the money was to be divided among county and city agencies. The result has been confusion and a scramble by various competing agencies to get a larger share of the shrunken tax revenue.

In the process some cities got more money and some, like once-affluent Rancho Palos Verdes, received less. In 1988, the Legislature tried to straighten out the inequities by passing a law that required the counties to increase the property tax share to certain cities, like Rancho Palos Verdes, Bussey said.

Then, as the Legislature attempted to balance the state budget this session, it inadvertently suspended the provisions of the 1988 law granting cities a larger share of the property tax. The cities protested and another bill was quickly passed, Bussey explained.

That was the bill Wilson vetoed, and because of that, the county will keep the $1 million that was to have gone to Rancho Palos Verdes, Bussey said.

“Based on the governor’s veto . . . the county has indicated it will withhold these tax revenues,” he said. In his veto message, Wilson acknowledged that the intent of the bill had been to correct a legislative error, but Wilson said he could not sign it because it failed to correct other deficiencies. The governor said he was willing to work on some kind of compromise.

Even if the governor and the Legislature eventually resolve their differences or a court rules on the controversy, no solution is likely to come in time to avoid the huge deficit faced by the city of 42,000 residents, according to city officials.