EARTHQUAKE / THE LONG ROAD BACK : Quake’s Timing Was Bad for Budgets

The timing of Monday’s quake--more than two hours before dawn--was fortuitous in minimizing injuries.

But the disaster hit at a particularly bad moment for Los Angeles city and county governments, adding a tangle of financial unknowns to efforts to balance budgets and to put a better face on the area as a center of tourism and commerce.

While City Hall concentrated Tuesday on ensuring public safety and restoring essential services, there were growing fears that the crisis could drain scarce funds and complicate attempts to erase a looming $150-million budget deficit in 1994-95.

“It’s uncertainty on top of uncertainty, and it makes it very difficult to budget,” said Deputy Mayor Robin Kramer, who coordinates legislative action for Mayor Richard Riordan. Both the city and county are in the process of drawing up their spending plans for the coming year.

Councilman Zev Yaroslavsky, chairman of the council finance committee, said: “I don’t think there’s any question there will be a substantial financial impact. . . . All the budget assumptions are out the window.”

Some officials said the costs could exceed those of the 1992 riots because of the extensive damage to highways, buildings and utilities across a wide area. County Assessor Kenneth Hahn estimated that the drop in assessed property values could be several times that resulting from the riots.

It was still too early to predict the city and county government costs. And the experience of some other natural disasters--notably the 1989 Loma Prieta earthquake--suggest that early fears of tax revenue losses may not materialize.

Nonetheless, city officials said the potential problems fall into two general categories: reduced tax collections, and coming up with the city’s share of costs for emergency services and rebuilding public facilities.

Damaged malls, stores and offices could mean a loss of sales tax and city business tax receipts, just when the stubborn Southland recession was showing signs of recovery, some officials and economists said. Also, taxes on utility use could be reduced by disruptions in services as well as by public response to pleas for conservation. Together, those levies account for about 25% of the city’s $3.9-billion annual operating revenue.

Although the Department of Water and Power had restored electricity to more than 90% of its customers by Tuesday, power consumption was only about 60% of normal, Deputy Mayor Michael Keeley said. “That clearly has a financial impact,” he said.

Moreover, DWP spokesman Mike Moore said the preliminary estimate is that the utility will incur $150 million in added costs because of the earthquake. He said it is not clear how much of that amount will be eligible for reimbursement from the state and federal governments. Riordan has been hoping to tap the utility for funds, but Keeley conceded that the quake expenses may require a re-evaluation of the money potentially available.

Some warned that tourism and shipping, which also generates city tax revenue, could be at least temporarily discouraged by real or perceived problems with the area’s transportation system, some officials and experts said.

“It just couldn’t have happened at a worse time,” said professor Larry Kimbell, director of the UCLA Business Forecasting Project. “It could shift resources away from a city already under heavy budget pressure at a very vulnerable time.”

With a strong show of support Tuesday by Clinton Administration officials, there was guarded optimism at City Hall that federal disaster relief programs will cover most earthquake-related overtime costs and damage to public facilities.

Generally, disaster relief programs for cities cover 100% of the added costs of emergency personnel for the first three days of a crisis, and 75% after that, said Pat Bennett, a spokeswoman for the Federal Emergency Management Administration. Reconstruction of public facilities is usually reimbursed at about 75% of the cost, she said. And various state programs can boost the reimbursement to more than 90%, said Ed Corser, a top city budget analyst.

Still, given the potential scope of the losses, the city’s share of personnel and rebuilding costs could be sizable, Yaroslavsky said.

Meanwhile, Los Angeles County Chief Administrative Officer Sally Reed said county costs of law enforcement and other services has reached tens of millions of dollars and will climb higher. At least 113 county facilities suffered some damage and at least 41 will remain closed for several more days, Reed said.

And Reed, who was the top county executive in Santa Clara County when the Loma Prieta quake struck, said recently adopted federal rules may reduce county reimbursements to half of the disaster-related costs. “It could be a problem, a real setback” for the already troubled county budget, she said.

But the earthquake may not have a significant adverse effect on tax revenue for the county, she said. After the Loma Prieta earthquake, Santa Clara County did not suffer serious reductions in tax collections, she said.

In the short term, “it’s actually good for sales tax,” she said. “People have to replace refrigerators” and other appliances and furniture.