Cash-Strapped Cities Hobbling Into 1992, Face Cuts in Service : Revenue: The Legislature has passed more costs on to municipalities, straining budgets further in Orange County and the rest of the Southland.

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

Not only is tax revenue 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,” he said. “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.

The outlook in Orange County, like everywhere else in the state, is gloomy. Bill Hodge, executive director of the county division of the League of Cities, said most county cities have frozen hiring, laid off employees or cut back services.

“We’re looking at the dark ages,” he said. “It’s a fiscal plague that doesn’t really appear to have an end.”

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. Officials said 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 said the last 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 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 part of the sales tax, are producing less. Cities say they have become the starvelings at the tail end of the governmental food chain.

“We have a diminishing pool of resources, and for those of us at the bottom of the food chain, there’s less and less,” said Michael W. Parness, city manager of San Clemente.

San Clemente is so pinched that it may have to cut back on core services, such as police and fire protection, he said.

Irvine is less hard hit than some cities because it began cost-containment measures 18 months ago, City Manager Paul O. Brady Jr. said. It has had to cut more than $15 million from its two-year budget and may have to consider further reductions. No cost-of-living increases are planned for city employees in fiscal year 1992-93, he said.

La Habra has had a 10% decline in sales tax revenue from last year and anticipates some mandated layoffs, said City Manager Lee Risner.

For 20 years, the city has had a balanced budget, he said, but this year it might have to dip into reserves to pay its bills.

The county’s biggest city is one of the few with a rosy outlook. Santa Ana attributes some of its good fortune to the diversity of its business base.

City Manager David N. Ream said many Santa Ana residents are “neighborhood shoppers,” people who walk to small, nearby stores. This has kept scores of little businesses vital and encouraged new commercial development, he said.

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.

In Los Angeles and San Diego, police worry about insufficient forces to meet growing crime. Budget cuts in Los Angeles 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,” he said. “In the meantime, crime is going up. There is a record homicide rate for this year.”

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, a city government once financially comfortable faces the prospect of a $6.5-million budget deficit by July 1. A citizens panel 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 committee, warned that Huntington Beach is 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 has a comfortably balanced budget and more police than ever. And in Orange County’s upscale 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 residents.

Mission Viejo Councilman Robert A. Curtis, the immediate past mayor of the city, said the budget surplus in the recently incorporated community of 73,000 comes from several 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 California city 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 constitutional amendment cutting property taxes requires that new taxes be passed by a two-thirds popular vote. Fees can be raised by a simple majority vote of city councils, but many city officials, among them Los Angeles Councilman Zev Yaroslavsky, have said they believe that fees have already 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 popular vote, 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 economic problems worse for the cities.

“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: 223 cities--or 70%--raised taxes and/or fees. 217 cities--or 66%--delayed major construction projects. 197 cities--or 60%--dipped into their reserves to balance budgets. 138 cities--or 42%--cut staff positions, a total of 3,200. 94 cities--or 28%--reduced spending from the previous year. 45 cities--or 14%--froze city employee wages. Source: League of California Cities

Budget Burdens Cities are struggling to meet the rising costs of providing services, from police to parks to libraries. Large and small cities alike have seen their budgets grow as they pick up responsibilities once shouldered by the state. Here’s how 10 county cities compare.:

1987-88 Per-Capita 1991-92 Per-Capita City Budget* Amount Budget* Amount Brea $17,036,380 $517 $24,791,307 $752 Buena Park 23,096,348 355 30,566,449 459 Cypress 12,418,878 287 16,322,608 383 Huntington Beach 72,100,000 410 94,107,104 517 Irvine 43,878,000 466 67,709,000 608 La Habra 10,387,225 213 13,247,140 257 Laguna Beach 12,158,707 501 17,974,550 778 Mission Viejo ** 4,441,283 N/A 20,058,898 275 San Clemente 14,192,440 396 20,148,690 478 Santa Ana 92,707,850 401 121,430,605 413

% Change City in Budget Brea +46 Buena Park +32 Cypress +31 Huntington Beach +31 Irvine +54 La Habra +28 Laguna Beach +48 Mission Viejo -- San Clemente +42 Santa Ana +31

* General operating budget ** Because of incorporation, figure reflects fourth-quarter operating budget only. Researched by April Jackson / Los Angeles Times

Source: Individual cities