Sale of Prop. A Funds Helps Cities Offset Budget Woes : Finances: Local communities receive an average of 60 cents on the dollar by selling state funds earmarked for transportation. The money is then used to make up for declining revenues.

Five financially strapped Southeast cities have taken to selling money--cheap.

During the last fiscal year, Cerritos, Downey, Lakewood, South Gate and La Habra Heights sold a total of $2.8 million in Los Angeles County transportation funds to other cities. They received an average of about 60 cents for each dollar.

However, as far as the cities were concerned, that was better than nothing because they were dealing in highly restricted money that could be spent only for transportation projects.

The funds came through Proposition A, a voter-approved sales tax that Los Angeles County cities have shared for 10 years. Its uses are limited to such things as bus systems and dial-a-ride services; any money not spent within three years reverts to the county.

A few cities have created a brokerage system that turns their surplus transit money into general fund dollars that pay for basic services, including police and recreation, and take up the slack for declining revenues and reductions in state support.

“In the best of all possible worlds, cities would spend money for projects most important in that community,” said Donald Waldie, public information officer for Lakewood. “But increasingly, federal, state and local money is woven around with strings. Unrestricted money is harder to find.”

Last year, according to the Los Angeles County Transportation Commission, Cerritos sold $1 million each to Inglewood and Glendale from its Proposition A funds for 60 cents on the dollar. Downey sold $125,000 to Santa Fe Springs, and Lakewood sold $400,000 to Commerce for the same exchange. South Gate got 65 cents on the dollar when it sold $200,000 to Torrance. But La Habra Heights got only 58 cents on the dollar for $129,310 of Proposition A money that it sold to Torrance.

Cerritos has sold another $476,415 worth to Glendale, which will combine that money with other Proposition A funds from La Canada Flintridge and Lawndale to pay for part of a commuter hub at the historic Southern Pacific Railroad Depot. Cerritos received $252,500 in the deal.

A study by the Los Angeles County Transportation Commission, which administers Proposition A, showed that during 1990-91 about 10% of Proposition A funds received by Southeast cities were sold for general fund money. The average sale was 60 cents on the dollar, according to the LACTC, but the rate has been declining.

The practice “is not extremely common,” but it is increasing as cities struggle to balance tight budgets in the recession, said LACTC spokeswoman Cynthia Pansing. Such sales are allowed under Proposition A rules.

In the case of Cerritos, proceeds from Proposition A fund sales go into a trust fund to support the city’s new performing arts center, which will open Jan. 13 and will require a $2-million-a-year city subsidy to operate.

Typically, cities with Proposition A money to spare are contacted by cities looking for funds, and they strike the best deal they can get. “It’s what the market will bear. We look for whoever gives us the best rate,” said Rebecca Lingad, Cerritos’ finance director.

She said that before concluding the latest sale with Glendale, Cerritos turned down another city that wanted to buy funds for 50 cents on the dollar. Glendale offered 53 cents. Last year, Cerritos received a 60% return from Glendale.

Officials said selling Proposition A money doesn’t detract from city programs because it is money they can spend only for transportation anyway. “It becomes free money. You can use it for the general fund,” Lingad said.

South Gate City Manager Todd Argow, whose city is hard-pressed for general fund dollars, said the Proposition A sale to Torrance gave his city money for police protection and road maintenance. “Torrance comes up happier because they have more dollars to develop their transit programs, which are important to them. So we both end up butter-side up.”

Most of the cities don’t sell all of their transportation funds. Last year, four of the five cities used some Proposition A money on local transportation programs. The exception was La Habra Heights, which has no transit services and tried to sell all of its Proposition A money.

Downey put $600,000 from Proposition A into its dial-a-ride program for senior citizens and disabled people.

Lakewood spent $507,222 on a van transportation system for senior citizens and the disabled, and provided a $118,248 subsidy to Long Beach Transit for a dial-a-ride system that serves Lakewood, as well as a shuttle for holiday shoppers at the Lakewood Center mall. Another $93,000 went into reinforcing street pavement at bus stops in the city.

South Gate spent $300,000 on a van transportation system and an additional $17,000 on taxi fare subsidies that supplement the van system. It also spent $200,000 on Southern California Rapid Transit District bus pass subsidies for senior citizens and students, and $20,000 on transportation services for senior citizens.

Cerritos spent $97,552 on a city dial-a-ride system, and paid $5,896 in subsidies to Long Beach Transit for its bus lines in the city. Cerritos is also designing a fixed-route bus system within the city, which could be operating this winter and would cost $60,000 to $80,000 a year in Proposition A money.

Even with these expenditures and sales, the cities retain Proposition A fund balances because money is received each year. In the case of Lakewood and Cerritos, more than $1 million is available.

“The money flows into the city,” said Lakewood’s Waldie. “You can’t turn it off, say, ‘Don’t send it.’ But it’s commonly used for only a limited number of purposes. What happens (is) that funding sits and waits for transit-related expenditures.”

Or for buyers.