Port Cities May Dodge Fiscal Bullet : Finances: The Legislature would allow diversion of port revenues to pay for municipal services affected by cuts in the state budget. The governor has yet to sign the bill.

The Legislature on Wednesday passed a bill that would allow Long Beach city officials to tap into as much as $9 million in port revenues to help balance the city budget.

The bill, which won final passage at 1 a.m., would authorize the city to spend the funds for such vital services as police and fire protection.

Assemblyman Dave Elder (D-San Pedro), who represents Long Beach, said the money would offset funds the hard-pressed state government is taking away from the city to help balance California’s budget.

By Wednesday afternoon, Gov. Pete Wilson had not signed the bill, but city and port officials were optimistic about its impact.

Paul E. Brown, assistant executive director of the Port of Long Beach, said port officials expect to transfer about $5 million in reserves to the city, an amount that would not significantly hurt port development. Officials had opposed a previous proposal that could have transferred $35 million to $72 million a year to state coffers.

Long Beach Mayor Ernie Kell said that administrators were still studying the state budget, but that it appears the port money would fully make up for the state funding cuts.

“It looks like we’re in pretty good shape,” Kell said. “We’re lucky we have a very prosperous port.”

City officials had feared that they would have to make drastic cuts in spending for city services, including police and fire protection, to make up for losses in state funding.

The city is already scheduled to use about $6 million in surplus pension funds to pay for police, fire and other city services this year.

The legislation would allow Long Beach and four other charter cities with ports--Los Angeles, San Diego, Oakland and San Francisco--to use port funds for the next two years.

As the Legislature finished its two-year session, the measure was approved by 59 to 12 in the Assembly and 33 to 5 in the Senate and sent to Wilson for his signature.

The cities see the port coffers as a potential bonanza to tide them through the current rough economic seas. The ports generate revenue from things such as leases to steamship companies.

The idea of using port revenues to help governments has been controversial. At issue is whether port profits should be poured back into harbor projects or whether some of the money would be better used away from the docks on essential city services.

The port proposal, tucked into a local government financing measure needed to balance the state budget, is the byproduct of weeks of behind-the-scenes negotiations.

Initially, the proposal would have forced the five ports to give up at least $90 million to help balance the state budget. However, lobbyists for Long Beach and Los Angeles argued that the scheme was a power grab by the state that would impair the ability of ports to finance long-term expansion projects. It was later scuttled.

Still, cities, especially Los Angeles--which could gain $44 million in port funds under the measure passed Wednesday--have been scrambling to find ways to replace money the state is no longer going to give them. The funds were originally shifted to the cities in 1979 to bail them out after the voters slashed property taxes with Proposition 13.

As the two-month state budget crisis deepened, Los Angeles City Controller Rick Tuttle spent much of his time in the Capitol trying to limit the damage to the city treasury. “I think we need the option” to be able to use the port funds, Tuttle said in an interview.

Tuttle said that if the city does not have a source to replace the cut state funds, it would mean “a cut in services or the raising of other fees and taxes.”

He estimated that the city is likely to lose about $50 million a year in state funds overall. Elder estimated that the legislation would allow the city to make up about 75% of the loss.

But during the Assembly floor debate Assemblyman Gerald N. Felando (R-San Pedro) questioned the wisdom of the proposal because “the City of Los Angeles is still able to steal $40 million from the Port of Los Angeles.”

Felando, his voice rising, declared that the port needs the funds to embark on expansion projects that would attract new jobs to the harbor.

Similar objections were raised Wednesday by some Los Angeles officials.

Mayor Tom Bradley vowed to fight any transfer of funds from the port and its executive director, Ezunial Burts, warned that shifting port reserves to the city could have profound consequences for the harbor’s future.

“I don’t anticipate our operating side would be affected. There would not be layoffs of closure of facilities or anything like that,” Burts said.

He added, however, that allowing the transfer of funds would set a precedent that would jeopardize the port’s ability to commit to long-term development and projects seen as vital to the economy of the port and the region. At present, the port is attempting to win Coastal Commission approval of a $2-billion expansion project designed to keep it competitive during the next 30 years.

“I can only say that when you have a healthy industry like ours that produces jobs, you don’t go out and kill that. You do what you can to preserve it,” Burts said.

But others in the city argued Wednesday that Los Angeles’ potential budget crisis would be softened by the availability of funds from a port that, by all accounts, is financially in the pink.

“We have the option of leaving the money in the harbor or taking some of it to pay for police, fire and other services in the city,” said Council President John Ferraro, who said he would push for transferring the funds to safeguard other city departments.

Those same arguments were advanced in Sacramento to win the proposal’s passage.

“What we have empowered cities like Los Angeles to do is tap into surplus port funds if it is necessary for them to maintain police, fire and paramedic services,” Assemblyman Richard Katz (D-Panorama City) said.

“It makes sense if you believe in local control . . . to give the City of Los Angeles . . . the local option to do what they need to do to protect the port as well as the city,” said Katz, who is weighing whether to enter next year’s Los Angeles mayoral race.

Staff writer Richard Holguin contributed to this report.