Cities Under Fiscal Siege Ponder Crippling Cuts : Finances: With fat gone, state plan to slash funds threatens bare bone. Can Seal Beach afford its beach?

SEAL BEACH — Battered by recession and with budgets shrinking by the month, city leaders in Orange County don’t know real fiscal troubles unless they’ve been to Seal Beach.

Talk about trouble, this is a town where money is so tight that for 15 months it couldn’t afford to hire someone to manage its finances. Here, the post of public works director has been vacant for a year, leaving the responsibilities to a consulting engineering firm.

While cities such as Santa Ana and Irvine still have the “luxury” of paring staff positions to make up for anticipated losses to the state, Seal Beach City Manager Jerry L. Bankston has actually pondered a budget trim that would cut to the heart of the city’s identity.

As a last resort, Bankston said, his city may have to surrender control of its beach to the state.

“It is very simple,” said the manager, who because of staff cuts also helps supervise the city’s street-sweeping service. “There isn’t any room to talk about fat and glut at the city level. There are important services at stake here.”

Among local municipal leaders there is little dispute that Seal Beach gives life to the dreaded worst-case scenario in a budget year described as the most severe in recent history.

By this Wednesday, the start of new fiscal years for many municipal governments, cities were to move forward with gutted but balanced budgets and pray for economic recovery. Instead, all are waiting for yet another hammer to drop: the day the state decides how much it will take from cities to balance its own $11-billion deficit.

The prolonged recession and its effect on property and sales taxes--key funding streams for most cities--has made this year especially difficult for local governments to pay their bills. That problem could be compounded by state proposals which call for taking more from cities in the form of vehicle license fees and additional share of property tax revenue.

The loss of license fees and/or property taxes could cost Orange County cities millions. For individual cities, however, the cost is being measured in the possible loss of more staff positions, library closures, elimination of recreation programs and other services.

No city seems to be immune from the combination of fiscal setbacks, but for a handful of local cities further cuts do mean slices from the bone.

Garden Grove City Manager George Tindall said his city recently was forced to sell land to help balance its budget because there are no reserve funds.

“We’ve cut 37 full-time positions, including 10 sworn police officer positions,” Tindall said. “We’re already into public safety and the next round (of state cuts) is going to be worse.”

Last week, city leaders placed “for sale” signs on police cars to symbolize possible cuts that could eliminate patrol officers.

In Stanton, the state’s take in vehicle license fees and additional property tax funds could amount to 20% of the city’s entire general fund budget of $8.2 million.

“That could be one major hit,” City Manager Terry Matz said. “We are already at our minimum staff levels. We just can’t sustain a hit like that.”

In an overstatement of the present fiscal climate, yet also symbolic of the times, one city leader likened the prospect of further state-forced staff cuts to “throwing body bags on the front lawn” of city hall.

But as bad as these situations seem, officials will admit their balance sheets look much better than the one Bankston is stuck with in Seal Beach.

“I don’t know how cities like Seal Beach will be able to survive this,” Costa Mesa City Manager Allan L. Roeder said of the possible state demands. “This is a serious, serious condition.”

Even Bankston admits that without recent financial overhauls, which have included a 15% reduction in staff, “this city would have gone well under 12 to 15 months ago.”

At the worst, Bankston and Mayor Gwen Forsythe acknowledge, the city may have to consider the elimination of entire departments and/or the increase of user fees, something the city has not considered in years.

The city manager, who is completing his first year on the job, said the city’s financial problems got their start in the pre-recession budget years of 1989-90 and 1990-91.

In what should have been a continuation of good times, when property tax revenue was peaking, city spending exceeded revenue by nearly $2 million. Staffers are still attempting to determine exactly what happened, but Bankston said the best explanation is that a combination of lawsuit payments and overly optimistic revenue forecasting put the city in financial free fall.

“It wasn’t that the city went wild or crazy spending money,” Bankston said. “The forecasts were more healthy than they should have been and the expenditures side wasn’t modified according to revenues.”

To close the spending gap, the city leadership at the time wiped out its reserve fund of about $1.8 million, leaving nothing to cushion the blow of the hard times to come.

In an abrupt reflection of the economy, growth in property tax revenue--the city’s main source of funds--dropped from 13.6% in 1990-91 to 2.5% this year.

“It couldn’t have come at a worse time,” the manager said. “There was simply not the cushion of reserves there should have been.”

Also during that time, the executive wing of the city’s administration was beginning to come apart. Because of money problems, Bankston said, the city did not fill the position of finance director, leaving the assistant director to carry both responsibilities.

Until Bankston’s hiring last June, the city was also without a chief executive for just less than a year.

An added distraction surfaced in what became a prolonged political fight over the Mola Development Corp.’s proposal to develop the 149-acre Hellman Ranch property.

“The city was spending an inordinate amount of time on Mola, and it became such a paramount issue in the community. It took away from such issues as money and revenue.”

Said Mayor Forsythe: “Quite frankly, Mr. Bankston inherited a mess. It was a nightmare. That poor man was trying to patch things up and make the city run more efficiently and now the state comes in. What makes our situation more vulnerable is that our reserves were depleted.”

Mostly through staff reductions, and with the City Council’s attention redirected to financial matters, Bankston said the city is just now beginning to get its budget back on firmer footing.

But should the city be forced to give up the maximum--$1.6 million--in vehicle license fees and property tax revenue to the state--Seal Beach could be looking at even more desperate times.

“I couldn’t even comprehend how we would deal with that,” said Bankston, adding that elimination of entire departments, including surrender of the beach, become ultimate options.

Maintenance of the city’s beach, including provisions for lifeguard services, costs the city about $819,000 annually. And revenue drawn from parking and other related fees don’t cover even half that amount, according to city budget documents.

More realistic options, however, probably would come in the form of increased fees, such as for water, sewer and landscape maintenance. In some cases, the manager said, those fees have not been increased in five years.

“If we’re going to be able to survive as a city, it’s time for the citizens to recognize that their water, sewer and other fees are going to go up.

“We have to say, here’s the service--the beach. If you want it you are going to have to pay for it. If you don’t pay for it, you obviously don’t want it.”

Times correspondent Robert Barker contributed to this article.

Dark Days for Seal Beach

Seal Beach City Manager Jerry L. Bankston traces the city’s fiscal dilemma to the 1989-90 and 1990-91 budget years when spending far exceeded revenue. Deficits in those years virtually wiped out the city’s $1.8-million reserve. Adding to these woes: declining increases in the amount of property tax revenues, the city’s main source of income: Revenue and Expenses Up In millions of dollars : ‘88-89 Revenue: $13.7 Expenses: $12.9 ‘92-93* Revenue: $15.0 Expenses: $15.2 Property Tax Increases Slow Annual percentage change: ‘86-87: 9.8% ‘92-93*: 3.5% * Projected NOTE: These are fiscal years. Source: Seal Beach city manager

Budget Busters The state has threatened to lighten its $11-billion deficit by taking vehicle license fees and property tax revenue away from cities. Samples of the cuts some Orange County cities are contemplating if both revenue sources disappear:

Pct. of Vehicle Property 1992/93 City License Tax Budget Brea $1.2 million $996,000 7.3 Cypress $1.5 million $893,000 12.0 Fountain Valley $1.8 million $1.5 million 15.8 Fullerton $4 million $4 million 18.0 Garden Grove $5.1 million $2.6 million 18.6 Huntington Beach $6.4 million $7.2 million N/A Irvine $4 million $1.3 million 8.4 La Habra $1.8 million $1.6 million 20.4 Laguna Niguel $2.5 million 0 26.0 Mission Viejo $3.5 million 0 14.2 Orange $4 million $3 million N/A Placentia $1.5 million $861,000 18.0 San Juan Capistrano $951,000 $750,000 15.5 Santa Ana $10.6 million Stanton $1 million $378,000 17.7 Villa Park $219,000 $197,000 24.0

N/A: Information not available City & Potential Impact Brea: Cuts in public safety, park and recreation programs. Cypress: 50% reduction in fire contract services; elimination of 30 positions. Fountain Valley: Unspecified reduction or elimination of services. Fullerton: Elimination of street cleaning, maintenance and lighting; one community center, and branch libraries. Garden Grove: Cuts in police personnel; shutdown of one or two fire stations, recreation programs; reduce parks and community services. Huntington Beach: Unspecified substantial reductions in labor and services. Irvine: Elimination of 60 full-time positions. La Habra: Loss of three fire crews, 20 police. Laguna Niguel: Unspecified elimination of city services. Mission Viejo: Elimination of capital projects, park maintenance. Orange: Elimination of four of seven fire stations, reduce police force from 144 to 58. Placentia: Elimination of 33 of 147 full-time positions and local public transportation, 50% cuts in recreation program. San Juan Capistrano: Elimination of 12 employees and 10% of police force; reduced recreation and youth programs, street cleaning and code enforcement. Santa Ana: Elimination of library and recreation services, community events and 80 safety positions. Stanton: Reduction of narcotics, school drug and gang prevention programs as well as patrol; elimination of maintenance and recreation programs. Villa Park: Elimination of all road maintenance. Source: Orange County Division of the California League of Cities