Airport Owes L.A. Millions, Audit Finds : Budget: Officials hail grand jury opinion that the city is due $157.7 million. Airline industry spokesman says study of data back to 1928 is a sham.

After auditing records from as far back as 1928, the Los Angeles County Grand Jury has determined that the city’s independent Department of Airports owes its financially strapped parent--the city of Los Angeles--$157.7 million.

The grand jury finding, which was released Tuesday, was hailed by Mayor Richard Riordan and other city officials who are trying to bridge a deficit in the 1995-96 budget projected at $200 million to more than $300 million.

Riordan’s press secretary, Noelia Rodriguez, called the report “credible and good news,” but warned that “this is a complex matter with huge legal and financial implications.” She noted that Congress and the airline industry have vehemently opposed transfers from the airport to the city’s general fund.

City Controller Rick Tuttle said he was “very enthusiastic about pursuing the recommendations” of the 57-page report.

The report’s findings, prepared with the help of a San Francisco-based accounting firm, maintained that the city advanced the airport $5.4 million decades ago, that this money was never repaid and that the principal and interest now due is $157.7 million.

The Department of Airports should repay the city over a 50-year period, with 5% interest on the unpaid balance, the report recommended.

But others, including Tuttle, are pressing for an accelerated repayment schedule to give the city more help in patching up its finances.

The grand jury report is the second piece of airport-related good news to come the city’s way in recent weeks. A month ago, the U.S. Department of Transportation ruled that the city’s airport agency--an independent department since 1947--was erroneously paid for land that the state purchased in the 1960s to build the Century Freeway.

Instead, the city’s general fund should have gotten the money, transportation officials said. Last month, the Department of Airports transferred $58 million to the city’s general fund to correct the longstanding error.

A spokesman for the American Transport Assn., the airline industry lobbying arm, called the grand jury report a sham. The association has been embroiled in a bitter feud with Riordan over the use of airport revenues.

Riordan has sought to tap airport revenues to finance a campaign pledge to hire 3,000 additional police officers. The association says the redirection of funds is illegal.

Tuesday’s grand jury findings were based on an audit of 67 years of financial records. The audit was triggered, in part, by questions raised by the Los Angeles Police Protective League, the union that represents police officers, and inspired by a similar analysis that resulted in San Francisco realizing a substantial recovery of funds from its airport.

Letters from John Driscoll, airports general manager, and Tuttle, attached to the grand jury report, indicated that the pair basically agreed with the report’s conclusions.

Because of excellent record-keeping, auditors found it possible “to reconstruct most of the revenues and expenditures pertaining to the Department of Airports, including the funding source, for each year of (the department’s) 67-year history,” the report noted.

As a result, “it was determined that the city has not been been fully reimbursed for costs incurred on behalf of the Department of Airports,” it concluded. The report’s finding contradicted what other financial experts had found, but the city officials said the grand jury’s study was more comprehensive.

Meanwhile, Chris Chiames, a Washington-based spokesman for the airline industry, called the report “another shell game” in Riordan’s bid to divert airport revenues to the city’s general fund to pay for more police.

Chiames also noted that the airport did not have the $157 million in question. “So the next step, we expect, would be for the airport to raise our landing fees to pay this additional obligation. We’d expect to challenge any such move on their part,” he said.

The association also is challenging the $58-million transfer of city funds accomplished last month.

On Monday, in a separate matter involving the Riordan-airport fund feud, federal transportation officials gave the airline industry permission to challenge the tripling of airline landing fees approved two years ago by the city.