Money Woes Forecast for Hollywood

An independent Hollywood city would not be financially viable because it would begin life with a $9.2-million deficit that could swell to about $26 million within three years, according to a state controller’s report to be issued today.

The report could deliver a blow to the Hollywood secession movement if its findings are embraced by a state commission studying the cityhood proposal. To place the secession measure on the ballot, the commission must determine that a Hollywood city would be financially healthy.

“Given the number of dollars coming in and the number of dollars that would have to be spent, we do not feel that there is a positive outlook for the fiscal viability of any new Hollywood city,” said state Controller Kathleen Connell.

Mayor James K. Hahn asked Connell to review an initial analysis by the Local Agency Formation Commission, which found Hollywood could survive economically if it left Los Angeles.

“We would not be surprised that the report would show that [Hollywood] would be operating with a deficit,” Hahn spokeswoman Julie Wong said. She said the mayor had not seen the report.

The leader of the Hollywood secession movement brushed off Connell’s dire conclusions, saying that any forecasted deficit could easily be erased. A new Hollywood would be a far more efficient place than the city it parted with, he said.

“It’s a matter of spending your money wisely that’s going to make the difference,” said Gene LaPietra, president of the secessionist group Hollywood VOTE. “We’re not going to cut services at all. All services will be enhanced because we’ll have plenty more money to do it with.”

In two other secession reports last month, Connell said that an independent San Fernando Valley would need to build up its budget reserves and that a breakaway harbor area could not survive financially, a conclusion hotly contested by secessionists. On Wednesday, she said Hollywood, with annual revenue of about $148 million, would be in a worse situation than the harbor area.

LAFCO, which is determining whether the three secession proposals will go on the ballot, is poised to release its final report on the harbor area’s viability. The harbor secession plan might be on shaky ground, because the commission appears to be having trouble finding enough revenue to declare the area’s finances solid.

Larry Calemine, LAFCO’s executive director, said the harbor area report likely would be finished Friday. He said he would not comment on Connell’s Hollywood report before reading it.

LAFCO is free to accept Connell’s findings in whole or in part, or to dismiss them entirely. The commission will decide during the next several weeks whether to place the secession proposals on the November ballot.

In March, a LAFCO report said a Hollywood city would be financially viable. Connell said LAFCO had incorrectly factored in a $10-million loan to the proposed city and a $10-million cut in services.

Connell said she compared Hollywood’s prospective budget reserve with those of 38 cities with populations between 160,000 and 203,000. The average city in that group has a reserve of 14%, she said. Hollywood’s population would be 185,000 to 200,000.

LaPietra said the Hollywood figures provided to Connell by Los Angeles were inflated, outdated, and based on a larger secession area. Hollywood VOTE, the secession group, originally proposed borders as far south as the Beverly Center. Several boundary proposals are still on the table, but none goes farther south than Melrose Avenue, he said.

LaPietra cited the city’s $40-million budget for police in Hollywood as one of many inflated figures. The estimate was based on a staff of 397 officers, whereas Hollywood now only has 223, he said.

“From the very first day, we’re going with the Sheriff’s Department,” he said. “We’re going to save millions, and we’re not going to be billed for things we don’t get.”

Also Wednesday, Assemblyman Keith Richman (R-Northridge) said he is exploring whether to run for mayor of a new Valley city, joining state Sen. Richard Alarcon (D-Sylmar), who had previously said he likely will seek the post.

“I’ve been talking to a number of people about the possibility of running,” Richman said, adding that he supports secession because he believes that City Hall has neglected the Valley for years.

“It’s time for the Valley to take control of its own destiny,” he said.

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Times staff writer Patrick McGreevy contributed to this report.