Council Acts to Raise Taxes to Fight Shortfall : Government: The action includes a 10% levy on water bills. The city is seeking to close an $11.2-million budget gap.

Seeking to recoup part of an $11.2-million revenue shortfall for next year, the Santa Monica City Council on Tuesday took the first step toward raising taxes--including a new 10% tax on water bills.

The vote was 5 to 2, with the members of the council’s renters’ rights majority voting as a bloc in favor of new taxes to balance the budget. But one of those supporting the proposal--Councilman Paul Rosenstein--said he remains to be persuaded before a final vote that expenses have been cut to the bone.

In addition to the proposed new water tax, the council asked the city attorney to prepare ordinances to impose a new 10% tax on parking and raise the utility user tax from 9.5% to 10%.

Protesting that raising taxes was premature, council members Robert T. Holbrook and Asha Greenberg voted against the measure. “The motion is putting the cart before the horse,” Greenberg said. “We haven’t explored the possibility of other cuts.”

Both she and Holbrook said they lacked sufficient information to propose specific cuts to city department budgets or programs because they could not ascertain what those cuts would mean.

But City Manager John Jalili insisted that the council provide him with policy direction about whether they were willing to raise revenues before he actually drafted the budget, which will go through public hearings in June.

Jalili and Budget Director Mike Dennis predicted dire results if they were forced to cut deeper into city spending. They posed the possibility of closing one branch library and keeping others open only three days a week, as well as closing recreation facilities at parks.

“I’m not happy about my choices,” said Greenberg, who pressed the city manager for other options.

Jalili said the city could absorb $4 million of the shortfall by internal economies and by cutting 40 staff members through attrition next year, bringing the total of lost positions to 100 in the past two years.

“Last year the the city manager used a scalpel to make cuts,’ said Councilman Ken Genser. “What city staff is telling us is that they can’t make any more of those surgical excisions from the budget. . . . What cuts could council members conceivably suggest that could save $5 million more? You can’t manufacture the money out of thin air.”

Citing his experience as a school board member in trimming budgets, Holbrook said he would be happy to wield the pencil. “If you’d give me the authority, I’ll cut the budget,” Holbrook said. “I’m willing to take the flak.”

Holbrook was especially critical of the water tax, which will be born by property owners, giving the city’s renters “a free ride.”

If enacted, the water tax would bring in $1.3 million and cost the owner of an average home $36 a year. On the Westside, only Culver City taxes water, though West Hollywood is considering it.

The parking lot tax, which would be paid by everyone who parks in pay lots, would raise $871,300, and the utility tax $750,000. Los Angeles is the only other Westside city to tax parking.

The Santa Monica City Council has already provided for $2.2 million in additional revenue by more than doubling its parking ticket fines.

A plan for making up the balance of the shortfall has not been determined.

The anticipated revenue shortfall for the fiscal year that starts July 1 comes from the combined effect of the recession and the state government’s efforts to cure its own financial woes by diverting to public education money that had been previously allocated to cities.

Cities are left to cope with their dwindling revenue as best they can. Until the recession hit in late 1991, Santa Monica had been blessed with a seemingly limitless revenue base that climbed every year.

The city responded with an expensive array of social programs and amenities much loved by the tenants’ rights majority on the council and their constituents. Those same programs are seen by fiscal moderates and conservatives as prime targets for cutting in lean times.

The staff has argued this year that municipal amenities, including the city’s own cable TV station, senior citizen services and homeless programs, are key factors in attracting businesses and residents.

“Some of the social programs could be cut, but they’re sacred cows,” said resident Jean Sedillos, a leader of a community group called Save Our City.

Sedillos acknowledged, however, that the council majority appears unshaken in its commitment to the programs.

Indeed, Rosenstein said in an interview that he would be persuaded to raise taxes if sufficent economies have been achieved because “my reading of the public is that they’d rather pay a little more than cut services. People treasure the variety of services we have in the city.”

Dennis said the local economy is not expected to rebound until late 1994 or early 1995. “The economic and financial pressures facing the city are purely unprecedented,” he said.