Council Prepares to Make Tough Decisions Amid Budget Crunch : Finance: Slide in revenues leads to $5.8-million shortfall. Spending cuts, fee increases, tax measure are considered.

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Faced with dwindling revenues and voter-imposed limits on taxation, the newly seated Glendale City Council is bracing for difficult budget choices that critics, including its two newest members, contend should have been made years ago.

To help balance previous budgets, the council spent some sewer and refuse fees for other municipal projects--a practice now outlawed by Proposition 218, the anti-tax initiative passed last year as a successor to 1978's Proposition 13.

Glendale's annual transfers, projected at $2.8 million next year, can no longer be made without voter approval, council members have decided.

Add a precipitous drop in property- and sales-tax collections that have left the city with a $5.8 million shortfall in its preliminary $88-million general-fund budget, and the specter emerges of spending cuts, various fee increases and a possible tax measure on next year's ballot.

"We're going to have to bite the bullet," said four-term Councilman Larry Zarian, elected last week to his fourth one-year term as mayor. "We're going to have to look and see where we can increase our income and cut our expenses... [But] in my view, to increase taxes is a lazy way of generating revenue, rather than going after increasing business."

More direct was Brian A. Butler, Glendale's director of finance, who wrote of the city's spending that "we have progressively avoided the 'hard decisions' over the last three or four years."

Assessing how to close the budget gap, Butler said the city has already "picked all the low-hanging fruit." He added that the financial shortfall in Los Angeles County's third-largest city is structural, with no immediate end in sight to the lower tax collections, which he estimated in January would drop $3.7 million next year.

"In previous years," Butler wrote, "the deficits...were derived from the desire of the departments to provide higher levels of service and concomitant increased revenues. As such, balancing the general-fund budget was relatively easy. We either came up with new revenue or reduced the 'wish-list.' "

While acknowledging that the council on which he has sat since 1983 might have deferred some tough budgetary decisions, Zarian, in an interview, pointed to the lagging local economy.

"The state's revenues are down, and the county's revenues are down, and business is flat," he said. "Property values are down. Therefore, your revenue is down. We're talking about revenues down to what they were 10 years ago."

Adjusted for inflation, per-capita receipts from the city's key revenue sources--property and sales taxes--shrank by 19.6% and 30.6%, respectively, in the nine years ending in 1996, according to a report prepared by City Manager David H. Ramsey.

Interest income, too, is expected to be down or at best flat next year, Butler said.

Exacerbating these problems are the revenue-raising restrictions of Proposition 218, the state initiative passed in November requiring that a majority of voters approve tax increases and that fees must cover the cost of a particular government service--such as those for sewer or refuse--and no more.

Elsewhere, the new rules have led to cutbacks and layoffs in some cities. In Stanton, for example, officials have considered deep cuts in police and fire services, while San Clemente reported $2.7 million in losses and Yorba Linda reported $4.2 million at risk.

In addition, Los Angeles, San Diego and Sacramento, among other cities, have suffered lowered credit ratings because of investor fears that raising revenue will be more difficult.

"If not for 218, the routine way of doing business, not just in Glendale but in every other city, I'm sure, would be the same," said newly elected Councilman Dave Weaver, who took office last week.

In his view, the annual transfers of sewer and refuse revenues in Glendale amounted to a hidden tax, tantamount to "robbing Peter to pay Paul...It was an easy way [to address budget problems]."

"It was a darn sneaky way to raise revenue," concurred newly elected Councilwoman Virginia "Ginger" Bremberg, who had served on the council from 1981 to 1993 and was mayor for three terms during those years.

"[Now] you're going to have to be upfront," Weaver added.

The question remains whether to put the issue before the voters, as officials in Pasadena and Claremont did with electoral success March 4.

Zarian, a Republican whom Gov. Pete Wilson appointed to the State Water Board last week, conceded that the city ultimately might have to seek voters' permission to transfer the sewer and refuse fees into the general fund.

But he preferred what he called a "positive approach," a multipronged effort to improve the business climate--and sales and property-tax revenues--along with increased fees for permit services, public works, library services and parks and recreation facilities, among others.

"The days of freebies are gone. We can no longer provide services and not cover costs," said Zarian, 58, a retired real estate investor and entrepreneur who also serves as chairman of the Metropolitan Transportation Authority.

Studying the budget for the first time last week, the new council reviewed a report compiled by City Manager Ramsey that included a wide menu of revenue opportunities and a less extensive list of cost-cutting measures. The overall budget for the fiscal year beginning July 1 is projected to be $350 million.

Included as possible revenue sources was the sale of city-owned property as well as higher charges for the city's cellular phone and radio-tower lease arrangements; the possibility of charging the local cable-television company an access fee; the option of having the Verdugo Fire Communications Center expand its service to Arcadia and Monrovia; exploring whether the city bed tax can be collected for the first 30 days of rental agreements; and increasing fees to those outside the city who use the Scholl Canyon Landfill.

Butler urged the council to consider even some politically unpopular measures, such as police and fire department cuts, to help balance the books. If police and fire protection were exempt, Butler later said, all other general funding expenditures would be cut 13.5%. If cuts were spread across all departments, including police and fire, about 6.6% would be trimmed, Butler said.

Zarian rejects public-safety cuts.

"I'm not willing to cut police and fire because those are departments that deal with safety issues," he said.

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