Most Cities Facing a Threadbare 1992 : Budgets: Services, including police and fire, will be cut as tax revenue slumps and state reduces aid.

Southern California’s cities are limping into the new year on splintered fiscal crutches.

Not only are tax revenues still sagging as people spend less in the continuing recession, but cities are also feeling the sting of the Legislature, which has passed more costs on to municipalities.

The result, city officials say, is a very bleak outlook for 1992: unfilled potholes, closed libraries and parks, dirty streets and fewer police officers and firefighters.

“What has happened to Southern California cities, and to cities elsewhere in the state, is that the state has assumed that somehow the cities can help with the state funding,” said Don Benninghoven, executive director of the League of California Cities.

“Now cities are having to cut back on their basic services. Many of them have already cut back on things like parks and library hours and street cleaning. So now the cities are cutting back on police and fire, and this is a first. Cities didn’t even have to do that after Proposition 13 was passed (in 1978).”

Two years ago, the Legislature, in a last-minute, budget-balancing move, required cities for the first time to pay jail booking and property tax-processing fees to county governments. The transfer was made after the state absorbed funds for itself that previously had gone to county governments.

That move unbalanced virtually all city budgets in 1990, and officials say the new state-required fees were even more painful in 1991 because city income was rapidly drying up with the economic drought.

The California League of Cities says that the past two years have been among the worst in modern times for city governments of all sizes. In a recent special report, the league said, “Both the largest and smallest cities suffered alike. . . . In addition to budget problems caused by (the Legislature) and the economy, adverse court decisions had a major impact upon the finances of California cities.”

In the individual cities themselves, officials bitterly say that they have been cast adrift by the Legislature and left with virtually no new tools for raising money. The few existing sources of revenue available to cities, such as a portion of the sales tax, are producing less. Cities say they have become the starvelings at the tail end of the governmental food chain.

In nominally wealthy Beverly Hills and Rancho Palos Verdes, city officials have been making painful cutbacks. Beverly Hills trimmed 80 city staff positions from its roster of 720 full-time employees to balance its budget this fiscal year. Rancho Palos Verdes laid off 10 of 50 employees, yet still faces a $2.4-million deficit by next summer. The city plans to go to the voters in April with a painful choice: Vote for increased taxes or cut off many city services, including street repairs, certain police patrols and park maintenance.

The city may even have to shut down its City Hall one or two afternoons a week if it gets no added income.

Oxnard already has chopped $2.5 million in city services out of its current $63-million budget, said City Manager Vernon Hazen. The city is eliminating, by attrition, 80 of its 1,000 employees over the next two years. “We made a forecast early in 1991, and it correctly forecast the (continuing) recession,” Hazen said. “Property taxes and sales taxes are down, so we cut back on operational costs, such as parks and recreation and public works.”

In Los Angeles and San Diego, police worry about insufficient forces to meet growing crime. Los Angeles’ budget cuts mean that police officer jobs left vacant by attrition are not being filled. While San Diego is not losing officers, it cannot increase police ranks enough to meet its needs, according to Paul Downey, the mayor’s press secretary.

“We’re able to maintain 1.6 officers per 1,000 population, but our goal, for increased safety, has been two officers per 1,000 population, and we can’t meet that goal,” said Downey. “In the meantime, crime is going up. There is a record homicide rate for this year.”

On Nov. 26, the Los Angeles City Council froze the hiring of police to its current number of sworn officers, 8,158. The city is authorized to have 8,332 officers.

Los Angeles Councilman Zev Yaroslavsky, chairman of the Budget and Finance Committee, has warned that the city may face a $130-million deficit in the fiscal year that begins July 1. He has urged an unprecedented series of cost cuts, including the elimination of cost-of-living pay raises for all city employees and furloughing every city employee one day a month without pay.

“Until the national economy turns around, I don’t see a light at the end of the tunnel,” Yaroslavsky said in a recent interview. “And even if the recession ended tomorrow, it would still be late this year or early next year before the city would start seeing the turnaround. . . . There is not going to be a quick cure.”

Los Angeles is no stranger to budget crises. But the current economic slump has imperiled the budgets of many smaller cities that for decades operated with comfortable surpluses. Glendale, for instance, is a fiscally conservative community that suddenly has found itself with money problems. The city’s tax revenues have plummeted, and a hiring freeze was imposed.

In Huntington Beach, the once-financially comfortable city government faces the prospect of a $6.5-million budget deficit by July 1. A citizens task force appointed to study the budget problem last month suggested 3% pay cuts for all city employees. Philip S. Inglee, a bank president who headed the task force, warned that Huntington Beach was headed for an economic crisis.

“I don’t think there is panic in the streets, but if we say that a $6.5-million deficit is not edging toward a crisis, we’re missing something,” Inglee said.

But there are some anomalies among the otherwise bleak balance sheets of Southern California cities. Montebello, in Los Angeles County, has a comfortably balanced budget and more police than ever. And in Orange County’s upscale community of Mission Viejo, a marvel is unfolding. The city has such a big surplus that the council is considering rebating about $5 million of its $21 million surplus to the residents.

Montebello Mayor Arnold Alvarez-Glasman said his community of 60,000 has survived the economic downturn by wise planning and tight budgeting.

“In the late 1980s, the city decided on a fairly conservative investment approach with our surplus funds,” said Alvarez-Glasman. “Also, back in the ‘80s we made some long-range economic forecasts, and we figured that large shopping centers were what we need for sales tax income.

“We got a regional shopping center in 1985, and the city will have another shopping center opening early in 1992. We’ve found that for sales tax-producing projects, high-volume income comes from the large shopping centers, not the strip centers that so many cities have.”

Mission Viejo Councilman Robert A. Curtis, the immediate past mayor of the city, said the budget surplus in that relatively recently incorporated community of 73,000 comes from a number of advantages.

“We are blessed with a dynamic and diverse revenue base,” Curtis said. “We’re not overly dependent on any one tax source. Also, we’ve been prudently building a reserve fund, and investments from city funds have created another source of revenue.”

Curtis acknowledged that one of the new city’s fiscal resources is a state law granting a new city an assumed population of three times the number of registered voters on the date the city is incorporated. The law allows the assumed population for purposes of allotting state per capita funds for a new city’s first eight years. In the case of Mission Viejo, which incorporated in 1988, the state law exaggerated the actual population.

“The state figure indicates that Mission Viejo has about 100,000 population, when we actually have only 73,000,” Curtis said, “. . . and so we are benefiting from that until 1996.”

According to League of Cities officials, Mission Viejo is the only city in California currently considering a tax rebate. Most cities have increased fees and taxes to cope with the recession, league officials noted.

Proposition 13 is a severe obstacle to raising taxes because the property tax-cutting constitutional amendment requires that new taxes be passed by a two-thirds vote of the people. Fees can be raised by a simple majority vote of city councils, but many city officials, among them Yaroslavsky, have said they believe fees already have been raised as much as possible.

Benninghoven, of the League of California Cities, said city governments will be urging the 1992 Legislature to pass a constitutional amendment to allow local governments to raise taxes with only a majority vote of the people, instead of two-thirds. Such a move has been frequently proposed, but never moved beyond the starting gate in the Legislature.

Some city officials say, almost with a sigh, that they simply hope that the Legislature will not make the cities’ economic problems any worse.

“We’re always nervous about the Legislature,” said Yaroslavsky.

Cities Under Stress

The League of California Cities recently surveyed 330 cities in the state to find out how they were faring in the recession-plagued current fiscal year. The survey found:

138 cities--or 42%--cut staff positions, a total of 3,200.

217 cities--or 66%--delayed major construction projects.

197 cities--or 60%--dipped into their reserves to balance budgets.

45 cities--or 14%--froze city employee wages.

223 cities--or 70%--raised taxes and/or fees.

94 cities--or 28%--reduced spending from the previous year.

SOURCE: League of California Cities