Study of L.A. Finances Finds Millions in New Income : Revenues: Riordan team will recommend aggressive and creative management of city assets.

As the devastating earthquake hit the city, final touches were being put on a seminal, four-month Riordan Administration study of Los Angeles city finances that concludes that aggressive, creative management of city assets and revenues could generate hundreds of millions of dollars in new income over the next several years.

The closely guarded report, which will be carefully scrutinized by skeptical city lawmakers and employee unions when it is released in the next few weeks, is expected to provide one of the first significant gauges of Mayor Richard Riordan’s capacity to bring his business skills and connections to bear on the city’s daunting budget problems.

“They see this (report) as a chance to really lay out where they want to go in terms of overhauling the fiscal operation of city government,” said a City Hall source who is familiar with the work of the nine-member mayoral task force writing the report.

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Riordan’s office and investment banker Michael Tennenbaum, the task force chairman, have declined to discuss the panel’s findings before the release of the study. The quake has complicated projections of financial costs and revenues, and a fine point still is being put on some numbers and recommendations, sources cautioned.

Nonetheless, the panel has tallied up about $300 million to $400 million it maintains are potential savings and revenue increases that could be achieved over the next several years, knowledgeable sources said.

The panel is taking a new look at some familiar targets, such as how to increase collections on city parking tickets and bad checks and identifying excess landholdings that can be sold. It has also developed some fresh ideas on how to generate money, examining how the city could increase interest income through better cash management, reduce employee pension fund costs and draw more income from the city’s airports, harbor and Department of Water and Power, sources familiar with the study said.

Some of the options considered range from leasing all or part of Los Angeles International Airport operations to private bidders to stepped up efforts to recover bills owed to the city for paramedic ambulance services, sources said.

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Linda Griego, a deputy mayor in the Tom Bradley Administration and a task force member, said the panel believes about $100 million could be available in relatively short order. Recovering $300 million to $400 million in additional annual revenue over the next five years would require longer-range changes in city operations, as well as investments in such things as better computer programs and equipment to manage city tax collections and cash flow, sources said.

At the same time, the panel has identified considerable needs for investment in run-down city facilities and equipment, and remains unclear just how much of the potential increased funds might be available to help Riordan deal with budget deficits and expand a costly buildup of the police street patrols. For example, Griego said, about $80 million a year more needs to be invested in maintaining and repairing city streets.

Adding a cautionary note, Riordan adviser William Ouchi, the UCLA management expert who is overseeing the financial review, said the study has helped show that “the magnitude of the fiscal challenge is going to be larger than many people think.” He added that it will be more difficult than some people anticipated to meet the fiscal challenge without raising taxes.

Strong doubts already are being voiced outside the mayor’s circle about the practicality of the panel’s findings.

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Councilman Zev Yaroslavsky, finance committee chairman and a major player in city fiscal matters, said the Tennenbaum group is “extremely talented and extremely smart.” But they also appear “overly optimistic (and) perhaps somewhat unrealistic,” as well as unschooled in the legal and political complexities of City Hall’s highly unionized Civil Service environment.

“They can’t find $400 million,” said Yaroslavsky, who has been briefed on some of the task force proposals. “If it were so easy, we would have done it. We’re not here sitting on our hands.”

A sizable share of the expected shorter-term revenue would hinge on the politically sensitive notion of changing the way the city values and contributes to its three major pension funds, Griego said. It appears that the safety of employees’ benefits can be assured and changes still be made that could save tens of millions of dollars in annual city contributions, Griego said. The largest potential saving, perhaps in the $40 million to $50 million range, is in the huge DWP pension account.

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However, early Riordan Administration efforts to re-examine the DWP pension practices have touched off a storm of protest from employee unions. Other knowledgeable sources said the final task force report may de-emphasize financial gains possible from pension fund changes because of the political furor already brewing.

Elsewhere, Griego and other sources said, savings could be realized by overhauling and streamlining the manner in which the city leases office space, pursues bad check writers and tracks down city business tax scofflaws.

The Administration and council have already begun to move in some of these areas. This week, a long-studied proposal was approved to hire two outside firms to assist the city clerk and city attorney in collecting millions in past-due license fees and bills.

But even some of the task force’s less-lucrative notions, such as more aggressively pursuing past-due bills for services such as paramedic ambulance rides, may prove difficult. “It’s not easy to get,” said one veteran city budget analyst. “Many of these are poor people. . . . Some of these things have got built-in problems.”

Still, the task force effort represents a comprehensive attempt to organize and attach fresh dollar estimates to a host of revenue-generating ideas. It is expected to mark a jumping-off point for Riordan as he tries to rally public support for his campaign to stabilize city finances, dramatically boost spending on police and keep a pledge to avoid new taxes.

Task force members--who include the real estate developer Eli Broad, First Interstate Bank Chairman Ed Carson, Arthur Andersen Co. managing partner Dick Poladian and Gilbert Ray, a partner at the O’Melveny & Myers law firm--are being asked to help Riordan stump for the recommendations after the report is released.

Old hands at City Hall caution that past wall-to-wall financial reviews have produced plenty of paper, but not always results. Ten years ago, a study by a group of high-powered business leaders for former Mayor Tom Bradley, who was wrestling with a $160-million budget shortfall, identified more than $100 million in potential cuts and new revenue. Among them was cutting funds for nonessential services, imposing a rubbish collection fee and investing in more tax collectors.

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But attorney Daniel Shapiro, who headed the review, recalled this week that the report was coolly received and few recommendations were implemented, partly because many of the proposals ran afoul of vocal constituencies. Instead, the mayor and council opted for simple across-the- board budget trims and a temporary tax on city business, which, Shapiro noted, is “still there 10 years later.”

Members of Riordan’s task force, some of whom were also Bradley allies, say the key difference today is a mayor who is firmly committed to change and cost efficiency. “I think (Riordan) understands. He has a fiscal vision,” said one task force member who asked not to be identified. “We’re trying to come up with something that is realistic and could be doable politically.”

Ray, another panel member, added: “I don’t think it’s going to be blue sky.”