$54 Million Goes to City, Not Airport : Finances: After U.S. decision, mayor says money will help beef up police. Airline industry decries ‘grand larceny.’

A windfall was dropped in the city’s lap Wednesday when federal officials sided with Los Angeles against the airline industry and ruled that more than $54 million in airport revenues could be used for city services.

At City Hall, Mayor Richard Riordan said the money would help to close a projected $200-million deficit in the new city budget.

The announcement was a victory for Riordan, who made the diversion of airport money a theme in his campaign for mayor and the centerpiece of his plan to beef up the Police Department by 3,000 officers.

“It’s a $54-million shot in the arm,” Riordan said. “These funds will keep police on the street and fill potholes throughout the city.”

Federal officials concluded Wednesday that the city was entitled to $43 million deposited several years ago--mistakenly, the city contended--into the airport fund from the sale of city land for the Century Freeway. With interest, the amount now totals $54 million.

Federal officials made it clear that the ruling dealt only with the land sale. “The city can expect close scrutiny of any new request or action involving the off-airport use of funds considered to be airport revenue,” Cynthia Rich, associate administrator for airports for the Federal Aviation Administration, said in a letter to city officials.

Riordan--who threatened to lock out airlines in 1993 when they balked at tripled landing fees--has been stymied by federal law and stiff congressional opposition and unable to tap airport funds for the LAPD buildup.

City officials said Wednesday that they remain committed to finding a way to use some airport revenues for city services. Sounding a conciliatory note, Riordan said Wednesday, “We are making a lot of effort . . . to protect the airlines so they don’t get gouged on landing fees, but at the same time take excess revenues from concessions and parking to be used for basic needs of the city, particularly police and streets.”

Ted Stein, president of the city Airport Commission, said he and airport Director Jack Driscoll discovered the erroneous transfer during a review of airport funds.

The federal decision drew an angry reaction from the airline industry, which accused the city of committing “grand larceny” and the U.S. Department of Transportation of “driving the getaway car.”

“L.A. officials, with the approval of the federal government, are being allowed to rip off close to $50 million from airport users, and will probably now argue that they must raise landing fees and other charges even higher to make up the revenue loss,” said Jim Landry, president of the Air Transport Assn. “We intend to pursue every possibly remedy to undo this damage.”

“The ATA has it backwards,” Councilwoman Ruth Galanter responded, saying that the money paid for the city land “should never have gone to the airport in the first place.”