New City Council Will Face Deep Deficit : Elections: An unpopular utility tax led to the old council’s ouster. But whoever wins the upcoming races will have to struggle with alternative ways to balance the budget.

Facing a record field of 21 candidates, Covina voters will try to choose five that can balance a budget that will begin bleeding red ink shortly after a completely new City Council takes office.

That’s assuming the community’s controversial utility tax is not revived. A small group of older Covina residents’ contagious protest about the 6% tax that was passed in the summer of 1992 led to a resounding recall of the entire Covina City Council on July 13.

When all five council newcomers sit down together for the first time in late November or early December (depending on when the county registrar confirms the election results), they will have to figure out a lot in a short time. Without the utility tax, which expires Oct. 31, the city will come up at least $1.2 million short by summer, officials said.

The city’s financial plight has been the focus of the campaign. Over the last few months, candidates have suggested an array of methods to patch up the budget without reinstating the utility tax, for which revenue will trickle in through December. The tax cost the average household about $12.60 a month and pumped more than $200,000 a month into the city treasury.

To balance the budget, the new council will have to either find new revenue sources, hack away at major budget items such as services or salaries, or draw on an estimated $4.1 million in reserves. The last option would be risky business: The city is self-insured for liability and partially self-insured for workers’ compensation, and relies on those reserves to pay settlements on claims against the city.

Some candidates insist that there are plenty of ways to balance the budget without resurrecting the utility tax.

Bill Mason, a writing and financial planning consultant who waged his own recall campaign targeting Mayor Henry Morgan, and Cody Cluff, a recently appointed Los Angeles assistant deputy mayor of economic development, have made a public pledge: “No new taxes.”

At a recent candidates forum, Cluff said: “I promise I will never vote for a tax increase.”

Other candidates, such as Covina realty agent Ron Capotosto and Chris Christiansen, a California Highway Patrol officer, have said they believe much can be done to cut city spending and generate new revenue. But they said they will not rule out reinstating the utility tax if they deem it necessary.

“I don’t believe we need a utility tax, but I would support one if we could not find the resources, nor cut enough out of the budget to maintain health and safety in the community,” Capotosto said.

Among the list of suggested methods to shore up the city’s ailing finances, candidates have proposed charging out-of-towners for emergency paramedic service, charging booking fees to everyone they arrest, charging a fee for library cards and “privatizing” some city services, such as paramedics.

Linda Sarver, a self-employed marketing director and the only woman running for office, said that even if the city were in dire financial straits she would not vote for a new tax. However, she said, she would support a ballot initiative that would let voters decide whether a tax is necessary.

“What got the council recalled was their arrogance and their failure to go to the voters with the (utility) tax initiative,” she said.

Sarver, one of the founding members of the Stop the Utility Tax Committee, is one of five candidates that the citizens group has endorsed to lead the city for the next four years.

The four others chosen by the group, which interviewed candidates earlier this fall, are Mason, Thomas Falls, a deputy district attorney who prosecutes gang members, Thomas M. O’Leary, an attorney and former council member, and John Wilcox, a computer science consultant and Covina business owner.

“We’re not saying ‘vote for these people,’ we’re saying that these are the people who were best-prepared, who had done the most homework at the time we interviewed them, and were the best-prepared to deal with the issues,” said Earl Purkhiser of the committee.

Wilcox, 32, was doing his homework on the city budget even before the council was recalled. And he has made specific proposals as to where spending could be trimmed.

Months ago, for instance, Wilcox’s research showed that what some city officials called a “salary freeze” for non-union city workers was actually a cost-of-living freeze in selected departments. However, employees are still receiving raises based on length of service.

A big issue emerging in the race is the agreement that the city’s redevelopment agency has made with Wal-Mart Stores in an effort to ensure the retailer will build a 125,000-square-foot store in Covina.

The redevelopment agency plans to buy the land Wal-Mart needs, next to Toys R Us on Azusa Avenue, and then resell it to Wal-Mart at a bargain price.

In July, the council approved a deal in which Wal-Mart will lend the agency up to $12 million. The city will use the money to buy the land needed for the Wal-Mart store. The agency would then sell the land to Wal-Mart for $6.7 million--much less than what it is worth.

The money that Wal-Mart pays the city for the land would be used to help pay off Wal-Mart’s loan to the redevelopment agency. The agency would then owe Wal-Mart the balance--$4 million to $6 million--of the loan.

City officials have justified the deal by saying that Covina can’t afford to lose Wal-Mart--and the millions in tax revenue expected to be generated from it--to West Covina or another neighboring city. Wal-Mart has announced plans to open a store in Glendora and is negotiating for land in Duarte and Pomona.

“I’ve never gone into a deal like this where one guy (Wal-Mart) has all the advantage over the other,” said candidate Hugh S. Jenings, a retired investment banker. “If things don’t work out (for Wal-Mart), all they have to do is walk away, and the city owes them $6 million. If it isn’t a fair deal, it shouldn’t be entered into.”

But some candidates, such as Cluff, have said they believe that ultimately the deal, though not ideal, will pay off.

Meanwhile, some candidates are touting their plans to heal a City Hall that has been under siege by angry, anti-tax citizens for the last year and to restore morale among city officials.

Capotosto wants to solve what he says is a serious communication breakdown between the council and staff by forming citizens advisory commissions that would report directly to the council. Often, he said, city administrators do not convey their true feelings to the council on critical issues because they fear reprisals.

Other candidates in the race are: Richard Gratton, a retired accountant who serves as an appointed member of the City Council; Brian Akers, a businessman; Timothy Murphy, a high school teacher and counselor; Roy Swan, a mortgage broker who owns his own Covina business; James M. Holder, who is retired from the U.S. Air Force; Ram C. Mukherji, an engineer; Fred Bergman, self-employed; Jim Mihalka, a paramedic; Thomas F. Palmeri, a certified public accountant; Peter Douroux, a retired educator; business owner Dennis O’Brien, and Robert Cruz, an environmental compliance specialist.