City Faces Major Loss of Revenue From State : Budget: Council must decide whether to raise taxes or cut services to absorb a projected shortfall of $5.5 million.

Raise taxes or cut services: That was the unpalatable choice presented to the Santa Monica City Council on Tuesday night.

City Manager John Jalili and Finance Director Mike Dennis told the council there is no other way to absorb a projected loss of $5.5 million in state revenue and have a balanced budget.

“It is going to be impossible to restructure and downsize to bring that about without substantial reduction in services,” Jalili said.

The forecast began the 1993-94 fiscal year budget process on a sour note, the second year in which the city, accustomed to having money in abundance to pay for an array of social and environmental programs, must face recession reality.

During the current fiscal year, which ends June 30, a smaller gap in a $185.7-million budget was plugged by using reserve funds and reducing spending 11% through a combination of job attrition, trimming department budgets and delaying capital projects.

Now the state is coping with its own dire straits by what Dennis called “trickle-down budgeting,” forcing local governments to solve the state’s budget problems.

In addition, Dennis said, Santa Monica’s own economic boom is over, with flat revenues expected for the foreseeable future even if the recession ends, as many economists predict, in 1994.

The financial prognosis was offered at a hearing designed to offer the public an early opportunity to make suggestions and comments before the budget is written.

Jalili also asked the City Council for guidance, saying that the task of coping with the shortfall is a policy issue for them to grapple with.

Council members told him they were willing to consider raising taxes and fees. The City Council also voted unanimously to ask staff to look at across-the-board cuts. The council’s first formal study session on the budget will be held in about six weeks.

Noting the “T word” is “something no one wants to talk about,” Councilman Ken Genser made a motion to look at a tax increase to bridge the financial gap left by the state.

“I’m willing to talk about it,” responded Councilman Kelly Olsen. “The reality is either we stop these programs or replace the money the state is stealing from us.”

City officials would not say which taxes or fees they might recommend raising and even avoided the word taxes, using instead the euphemism “revenue enhancement.’

But City Councilman Robert T. Holbrook said he believes there is a strong possibility the council will eventually decide to tax property owners for water use.

Holbrook said he opposes raising taxes, saying it’s time for Santa Monica to face reality and bite the bullet.

“I think we need to size down with the times,” Holbrook said. “We have to be as real at sizing down as we were at growing.”

Councilwoman Asha Greenberg said she is thinks there is fat to be trimmed from the budget without cutting services. “There is waste out there,” she said.

Competing pressures for the available money bore down upon the council Tuesday night. Members of the public representing every cause from the Convention and Visitors’ Bureau to after-school sports made impassioned pleas for a piece of the pie.

Several speakers reminded the council that the convention bureau is a moneymaker for the city and needs its funding to continue producing $11 million in tourist revenue a year.

“Remember not to bite the hand that feeds us all,” said Convention and Visitors’ Bureau board member Dorothy Ehrhart-Morrison.

Sunset Park resident Irene Zivi said she feared a recently enacted child-care master plan would languish on the shelf while money was spent on less worthy programs.

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The dilemma facing the council was best illustrated in a video prepared for new city employees that was shown to the council and audience. It trumpets Santa Monica as “on the cutting edge” of cities.

“A vast array of services for seniors,” a public arts program, its own AIDS agency, television station and child-care center: The list of the city’s offerings went on and on.

“As you saw on the video, 90% of them are not essential services,” Jalili said.

Typically, essential services are police, fire and waste management. But, as Mayor Judy Abdo noted, Santa Monica is not a typical city. “Tonight I heard essential services are after-school playground (activities),” Abdo said. “We need to expand our idea of what is essential.”