Bleak Fiscal Outlook, Tax Rulings Force Cutbacks

Faced with its worst financial outlook in nearly a decade, Huntington Beach has begun slashing spending on everything from new library books to police and fire programs, with officials warning that more severe cuts are probably on the way.

While cities throughout the state are tightening their belts because of the slowing economy, Huntington Beach’s financial woes are heightened by two rulings that are likely to reduce tax revenues by nearly $11.7 million. The city expects to take an additional $7-million hit if the state makes good on plans to cut the amount of vehicle license fee revenues that municipalities receive.

The gloomy outlook, officials said, leaves the city with a stark choice: Either find new sources of income, including new taxes, or consider further cuts in seemingly sacred programs--including police and fire protection.

So far, the city has trimmed its $140-million general fund budget 6.4%--or $9 million. This included cuts in the Police Department’s crime statistics analysis unit, Regional Narcotics Task Force and DARE drug education program.

In the Fire Department, the city eliminated three open firefighter positions and a fire prevention specialist position. The library’s acquisition of books, magazines and videos was reduced by $116,000. Part-time positions were eliminated in various departments, and allocations for other items, such as equipment for the city’s cable TV channel, were either reduced or eliminated.

The City Council has talked about closing some library branches, charging residents for library cards and putting parking meters in library lots. But after a public outcry in letters, e-mails and phone calls, the city dropped those plans for now.

If finances continue to worsen, however, “I can only assume they will be brought up again,” said Ron Hayden, director of library services.

One of the unknowns involves the heightened security alerts that have been issued since the Sept. 11 terrorist attacks. Each alert forces the city’s emergency services departments to spend more money on overtime, though an exact figure was not provided. Officials worry about costs escalating if the alerts continue for months or even years.

“Whenever the FBI orders a high alert, it’s our police officers and firefighters who have to be on high alert, and there’s more cost to do that,” City Administrator Ray Silver said.

City officials are trying to make about an $8-million cut in the budget. That would represent about 6% of the city’s general fund budget. They are tight-lipped, however, about exactly what is under consideration.

“Having to cut another $8 million on top of $9 million is going to hurt,” said Councilwoman Connie Boardman.

The cutbacks concern resident Huong Nguyen, 38, who checks out 15 to 20 books a week from the Banning Branch Library for her children. She said there’s been talk of closing the small branch before--a prospect she dreads.

“That [would] mean we would have to go way across town,” Nguyen said, adding that she would be willing to pay more for parking or other library services to keep the branch open.

The roots of the city’s fiscal problems began last spring, when a court ruled that a property tax was illegal. The levy, collected in addition to the state’s 1% property tax, was designed to help pay for the city’s employee retirement fund.

The Howard Jarvis Taxpayers Assn. successfully argued in court that the city levy violated Proposition 13, the 1978 statewide ballot measure that strictly limited how much property taxes cities could collect. The city is appealing the ruling, but has nonetheless stopped collecting the tax.

The city also faces the loss of an additional $1.7 million because of a new ruling by the State Board of Equalization on how property taxes from power plants are distributed.

At issue is the AES power plant in southeast Huntington Beach. The city is in the process of creating a redevelopment zone that includes the plant. Under old state rules, the move would entitle the city to $1.7 million in tax revenues. But a recent change in policy by the Board of Equalization means the city will receive only about $13,000.

City Treasurer Shari Freidenrich has been aggressively lobbying lawmakers in Sacramento to reverse the board’s ruling, but given the state’s economic condition, chances are slim that she will prevail.

“We are going to try to fight to keep it, but we have to plan for the worst,” Silver said.

Some of the reductions made so far have been painful. Some students urged the city not to cut the Drug Abuse Resistance Education program, which they considered a valuable resource for students to learn about the dangers of drugs.

But officials determined that DARE was a nonessential program.

“It’s going to be very difficult to find enough savings without a review of what we do in public safety,” Silver said. “We may have to reduce service levels or eliminate some programs.”