Wait for a State Budget Throws Cities Off Balance

As the state’s political leaders in Sacramento work to patch together a state budget, officials in Orange County cities are waiting with fear and loathing.

The fear is that the new state budget will take away or reduce city revenue sources. The loathing is about what will happen to cities if the money is taken away. Many city officials say layoffs of police and other city workers are grim possibilities.

“I don’t think the state should be doing this to cities,” said Huntington Beach City Administrator Michael T. Uberuaga. “Cities have been working hard to keep their budgets balanced. I think it’s inappropriate for the state to try to put its (budget) problem on the backs of cities.”

For more than a month, cities throughout California have been agonizing over the state budget crisis.

Like the state government, cities are required to enact balanced budgets by July 1 every year. Unlike the state, however, city governments throughout California adopted their budgets on or before the deadline passed. The state government, embroiled in a tug of war between Republican Gov. Pete Wilson and the Democrat-controlled Legislature, is now a month overdue in enacting its budget.

Legislative leaders have acknowledged that in juggling the state’s budget they will likely take away some property tax revenue that city and county governments have relied upon since passage of Proposition 13 and that the loss of tax revenue would throw all city budgets out of balance.

“We’ll have to go back to the drawing board,” said Fullerton City Manager William C. Winter.

In Brea, Assistant City Manager Tim O’Donnell said: “The state is talking about permanent (revenue) reductions. That means we’ll have to cut programs, and ultimately programs mean people.”

City officials have been frantically lobbying the Legislature in Sacramento to try to halt cuts to urban governments, but legislative insiders last week said the die is cast.

“It looks like all they’re doing now (in the Legislature) is debating about the size of the coffin” for the cities, said Bill Hodge, executive director of the Orange County division of the League of California Cities.

Dwight Stenbakken, the Sacramento-based legislative director for the statewide league, similarly said he thinks that the Legislature has already decided to reduce the revenue going to cities.

“I don’t think the Legislature really knows what this (taking away of city tax revenue) would do--how it would impact public safety by reducing police and firefighters,” Stenbakken said. “I really don’t think the Legislature knows or cares.”

Stenbakken said the Legislature seems almost certain to take away some property tax revenue from the cities. He added that the Legislature may also pass a special law allowing the state to tap some of the cities’ redevelopment funds.

“In some way, shape or form, they (the state budget drafters) want to extract money from (city) redevelopment agencies and dedicate that money to school agencies instead,” said Stenbakken.

Redevelopment clears decayed parts of cities and attracts new businesses. This renovation has generated increased property tax revenue for many cities. Current state law says that the increased revenue from redevelopment must be plowed back into yet more redevelopment projects and into low- and moderate-income housing. Stenbakken said the state’s latest plan to balance its budget is to seize some of that heretofore-protected city redevelopment money.

Orange County cities with major redevelopment plans, such as Huntington Beach and Brea, would be severely hurt under the state’s plan, according to league officials.

Huntington Beach Mayor Jim Silva has fired off a letter to Gov. Pete Wilson urging “staunch opposition to legislative proposals for reductions in local redevelopment funds.”

Silva’s letter added: “We have reached a critical period in the progress of our redevelopment efforts in Huntington Beach and rely on the tax increment and housing set-aside funds generated by the tax increment to fulfill our current obligations and complete our redevelopment program.”

Santa Ana Assistant City Manager Debra Kurita said: “Loss of redevelopment money would have a major impact on our city.”

In addition to property taxes and redevelopment money, state budget drafters have confirmed that they may also try to take some of the cities’ share of the state vehicle license fees.

Paul Gudgeirsson, assistant city manager of San Clemente, said the city could lose up to 10% of its income if the state diverts vehicle license fees and takes a chunk of property tax funds that heretofore have gone to cities.

“It’s a massive hit, especially since we’ve already done a lot of trimming on our budget over the last couple of years,” Gudgeirsson said.

Like most Orange County cities, San Clemente had to strain and cut back to balance its budget earlier this year. The city was forced to eliminate 14 city positions, such as public works director and an assistant city manager position. Gudgeirsson said the state budget could worsen the situation, forcing more layoffs, including police.

In Garden Grove, City Manager George Tindall similarly said there would be across-the-board layoffs, including police and firefighters, if the state takes away city revenue. Tindall said the city is sending letters, telegrams and telephone calls to state legislators and leaders.

Tindall said the message is: “Don’t balance your problems on our backs. We are willing to do our part, but be careful what you do.”

Stanton Finance Director John Hartman said his money-strapped city could lose anywhere from $150,000 to $1.4 million under the various revenue cuts being discussed by state budget drafters.

The cuts, Hartman said, would make it “difficult to maintain a minimum level of operations. There would have to be a very fundamental rethinking of how we provide service at all.”

Newport Beach City Manager Kevin J. Murphy said the proposed state cuts might force the city to lay off some workers, possibly including police and firefighters. He said the city wants to prevent any cuts in public service if possible.

But as many city officials noted, eventually a city gets to the point where there is nothing left to cut except personnel, including police and firefighters.

Stenbakken, of the League of California Cities, said the cuts proposed by the Legislature would force many cities to lay off police and firefighters. There would be no alternative, he said.

“I don’t think the Legislature realizes what its Draconian cuts would do,” said Stenbakken. “Some people are going to be shocked.”

Times staff writer Gebe Martinez and correspondents Robert Barker, Anna Cekola, Helaine Olen and Iris Yokoi contributed to this story.