$2.4-Million in Red Ink Has Rancho P.V. Talking Taxes : Budget: City Council will meet on Saturday to hammer out a ballot proposition.

The fiscal crisis in Rancho Palos Verdes is so severe that city officials plan to go to the voters in April with this grim proposition: Either raise taxes or shut down most of the city government.

Faced with a $2.4-million shortfall in its $7-million budget for the 1992-93 fiscal year, this city of 42,000 has already sharply cut services and is considering laying off another 10% of its work force. That would leave the city with only 35 full-time employees, officials said.

However, even with the added cuts, the City Council has unanimously agreed there won’t be enough money to meet current expenses and still keep the city running unless taxes are raised. Just what kind of a tax increase will be proposed is up in the air, but the discussions so far center on a real estate parcel tax, a tax on utility bills or some combination of the two.

City officials say a $150 a year parcel tax would eliminate the $2.4-million deficit but would not pay for much-needed maintenance and repair projects. A 2% utility tax would raise about $1 million annually, they said. Any new tax is likely to include a “sunset clause” that would limit the number of years the tax would be imposed.

The council must file its tax-increase ballot measure with county election officials by Jan. 17 to get the measure on the April ballot. To meet that deadline, the council has called a special session for 9 a.m. Saturday at City Hall to hammer out a proposal.

The council plans to formally adopt the ballot measure at its regular Jan. 7 meeting, officials said. Then the matter will be up to the voters.

“This is serious business and we’ve got to act right now,” said newly elected Councilman Steven Kuykendall. “We’ve got to come up with a package of more cuts and new taxes if we are going to keep City Hall open.”

If voters reject the tax increase, Kuykendall said the city would be forced to shut down most government services by June 30, the end of the current fiscal year.

City Manager Paul Bussey’s evaluation was only a little less gloomy. Without a tax increase, the city’s already reduced level of services would have to be cut even further, he said.

To save money, the city may close the gift shop at the Point Vincente Interpretive Center and cancel the summer aquatic program and the Fourth of July Country Fair. There is talk of shutting City Hall down one or two afternoons a week and eliminating the telephone switchboard operator there.

The city laid off 10 of its 50 employees and cut some police services earlier this year.

“We will survive at some level, but we won’t be providing much in the way of service,” Bussey said.

If voters reject a tax increase, he said the city’s badly run-down streets, curbs, gutters and storm drains would go unrepaired, environmental protection services would be reduced or eliminated, and park maintenance and recreation programs would be cut back.

The money situation is so tight, the City Council decided to save $3,000 by canceling one drunk-driver police patrol car over the Christmas holidays. The council contracts with the county Sheriff’s Department for law enforcement, but it is considering hiring a cheaper private security service to respond to nonviolent crimes such as burglaries, officials said.

“We have to look at taking more severe cuts to show the people we are serious. We have to justify the need for new taxes at a time when no one has much money,” said newly elected Councilwoman Susan Brooks.

Rancho Palos Verdes, the largest city on the affluent Palos Verdes Peninsula, is an upscale bedroom community that has historically shunned commercial development. Taxes have always been low and so has municipal spending. Last year, general fund expenditures in this city ran $179 per person, compared to $592 in Manhattan Beach and $763 in Torrance, records show.

Like a lot of cities, Rancho Palos Verdes was hit hard by Proposition 13 taxing limits and the current recession. In addition, the city suffered a major financial setback when a $2-million accounting error was discovered a year ago. Rancho Palos Verdes had anticipated receiving $1 million through a state proposal to aid all California cities through the tough economic times, but Gov. Pete Wilson vetoed the measure.

When it became obvious this past fall that the city faced a 34% shortfall in its $7-million budget next year, officials started making deep cuts. The layoffs and reduction of some services saved nearly $1 million.

Although that helped, it wasn’t enough to staunch the fiscal crisis.

In a Sept. 13 memo, Bussey prepared a bare-bones proposal that cut $242,000 from the parks and recreation budget, eliminated $737,000 from the public works department and dropped plans to spend $150,000 to repair landslide damage in the Portuguese Bend area.

The financial crisis became the focal point of the November municipal elections. During the often acrimonious campaign, the previous council took no action to meet the worsening crisis while the political debate raged.

Legally, the new council can raise taxes on its own, but not without political repercussions. During the hard-fought campaign, Kuykendall, Brooks and incumbent John McTaggart all pledged not to raise taxes without voter approval.

In addition to a parcel or utility tax, the city is also considering other sources of revenue such as new fees for parks and recreation programs, planning department services, and building and safety inspections. However, such fees would not raise enough money to cover the deficit, officials said.

The city’s future depends on a tax increase, according to all five council members.

Kuykendall summed it up this way: “If the tax increase isn’t approved, we have 60 days to shut the city down.”