PERSPECTIVE ON LOS ANGELES : Shareholders Deserve Better Return : We can turn the city around without raising taxes if we set aside politics and revamp fiscal practices.

Here’s the bottom line. As citizens of Los Angeles, we’re facing some harsh financial realities. Our city has repeatedly paid today’s bills by cutting vital services and deferring crucial maintenance expenditures until tomorrow. Now we’re playing catch-up. In order to enhance public safety, provide required maintenance and cover projected cost increases, Los Angeles is facing a staggering $849-million budget shortfall within five years.

The good news is that our city has the money available to fund these expenditures. And we don’t have to raise taxes.

I’m referring in part to the three businesses the city runs in addition to its governmental functions.

* Los Angeles International Airport-- Arguments for and against selling the airport have raised a lot of steam. But it doesn’t have to be sold; it can be leased. Lease payments would bring in from $60 million to $130 million a year, with a potentially sizable up-front payment.

The issues are complex. Air carriers, airport employees, the federal government and the city are all interested parties. They would have to be consulted. But in the absence of a concrete proposal, what are they to be consulted about? The City Council should solicit proposals and go from there. Call it privatization if you will, but it’s privatization without losing control. If lessees don’t perform, they can be fired.

* The Department of Water and Power-- It accounts for $3 billion in the city’s 1993-94 budget. And what does this potentially profitable business bring back to the city’s general fund? In 1993, only $122 million. No shareholder-based company would tolerate such a stingy return.

The city should explore compensating management and/or private operators on the basis of savings achieved, while retaining city ownership and preserving tax-exempt financing. A study conducted by Arthur Andersen & Co. contends that a more efficient DWP could add up to $118 million more to the city’s coffers.

DWP’s costs could also be lowered by a simple accounting measure. Contrary to accepted practice, the DWP pension plan values its assets at the original cost rather than market value. This understates the true value of the fund by nearly $600 million. As a result, taxpayers unnecessarily contribute in excess of $60 million to the fund each year.

* The Port of Los Angeles-- This business is more complicated. State legislation permitted the transfer of port revenues to the city totaling $44 million in 1993 and $25 million in 1994. This compensated the city for the loss of property taxes taken by the state to help balance its budgets in those years.

In dispute is whether such transfers to the city violate the tideland trust doctrine (i.e., the state’s tideland properties and revenues must be held in trust for all the citizens of the state). If it is decided that such transfers are legal, then a review of the port’s operations is in order to see how net revenues to the city can be increased without impairing the port’s competitive position.

If the legal bar persists, the city still should review how much the port is paying Los Angeles for maintenance of streets and other infrastructure elements. Improvement in port operations could support compensation for infrastructure improvement in the range of $20 million to $40 million annually.

These numbers are real. The come from almost four months of study by a team of seven business executives appointed by Mayor Richard Riordan to review the city’s fiscal practices. Our team also found other ways to increase revenues or effect savings. Collecting part of the more than $200 million in unpaid parking tickets. Getting our share of tax revenue from the state. Putting the collection of solid waste up for competitive bid. Eliminating inconsistencies in the city’s three pension plans. Trimming the city’s work force of 44,000. Continuing the hiring freeze. Early retirement incentives.

With such savings and increased revenues, we can turn Los Angeles around. Not increasing taxes would attract (and retain) business. A reduction in the cost of industrial and commercial power rates would also help stem the departure of business. With more money, we could pay for improved public safety and deferred street maintenance.

Our Committee on Fiscal Administration has reported. Now it’s your turn to let city officials know that you are not interested in politics as usual. Tell them to be bold, to put special interests aside and do what must be done to put this city on a solid financial footing. As stockholders in Los Angeles, we deserve a better return on our investment.