As Budget Cuts Loom, O.C. Cities Slim Down

Long before state leaders started wrestling with California’s gaping budget gap, Orange County cities slipped into a cost-cutting mode. The sour economy, a drop in tourism and a general sense of foreboding that Sacramento would pass along some of the state’s economic woes have put municipal governments in a bunker mentality.

Cities across the county have imposed hiring freezes. Anaheim has ordered an across-the-board spending cut in all departments of 3% that will increase to 5% next year. And city managers are preparing worst-case scenarios in the event their budgetary problems worsen.

To give Garden Grove residents and council members a picture of what specific cutbacks might achieve, City Manager George Tindall offered the following list:

If fire service is contracted out, the city would save $1 million.

If the Police Department is shut down and such services are provided through a contract with the Sheriff’s Department, the savings would be $3 million to $4 million.

If every city employee outside public safety is laid off, Garden Grove would save $3.5 million.

“Add that up and it doesn’t add up to what the governor wants to take from us,” Tindall said. “Who knows how this web is going to weave ultimately, but the bottom line is it’s millions of dollars for Garden Grove that we don’t have. A one-time 15% cut, we could probably handle. An ongoing 15% to 30% cut is going to put us out of business.”

Tindall and other city leaders are sounding the alarm, using words like “devastating” and “disastrous” to describe Gov. Gray Davis’ proposal to cut two-thirds of the cities’ vehicle license fee revenue and some of the money they receive for redevelopment.

It’s too early to predict what will happen, but many city officials said they have begun taking precautionary measures.

At a midyear budget review last week, Anaheim officials said they had already asked city departments to cut 3% to offset lagging revenue.

“Bed tax revenue and tourism business to the city is not fully back to where it was anticipated post-9/11,” Anaheim Mayor Curt Pringle said. “We’re going to be cautious. We’re making midyear budget corrections so we slow our spending.”

Like Anaheim, Irvine has been able to weather the economic downturn better than most, because of a rainy-day fund it developed.

The city is home to several corporate headquarters and software, biotech and manufacturing companies. But the city’s $100-million budget relies on sales tax revenue for almost 50% of its revenue and thus is extremely sensitive to any downturns in consumer spending. To save money, the city imposed a hiring freeze two years ago. Despite a flat economy, it has amassed a budget surplus of $7.5 million, Irvine City Manager Allison Hart said.

Even a city with the best-laid plans and a lean budget might not be able to take a $6.5-million hit, which is what Irvine stands to lose in vehicle license fees under Davis’ proposed budget.

“This is like taking a hit in the hull with a torpedo,” Hart said.

Huntington Beach was already hurting because of a series of unforeseen expenses. Two years ago, it lost $9 million in a court case that is now on appeal. And last year, the city was forced to spend $2 million on water-quality studies -- all while absorbing a $5-million drop in sales tax revenue, City Administrator Ray Silver said.

Although the city raised some cash by increasing fees and finding new revenue in redevelopment projects, it has still been forced to eliminate 41 jobs and cut recreation and community services.

City officials closed the Shipley Nature Center, eliminated a supervisor at the city’s senior center and cut funding at the Oak View Community Center in a predominantly low-income Latino area.

Officials in most cities said they might put projects such as sidewalk and street repairs on hold to protect critical services such as public safety.

In Laguna Beach, City Manager Kenneth C. Frank said officials will probably delay or cancel improvements to infrastructure such as street paving, sidewalk repairs and storm drains.

In Santa Ana, the city is already leaving 160 of its 1,700 positions vacant in anticipation of a state budget crunch. So far, City Manager David N. Ream said, he does not expect to lay off workers or make cuts in services.

Like every other city, Santa Ana is closely watching the debate over repealing the vehicle license fee reductions, which were adopted four years ago. Should such a step be taken, the state wouldn’t need to take away the $4.2 billion that cities and counties were expecting to get from such fees over the next 18 months.

Democratic leaders have suggested such a repeal, saying that vehicle license fee cutbacks implemented in good economic times should be canceled at least temporarily during the budget crisis. But such suggestions have been opposed by Republicans, and Davis has said he is “not enthusiastic” about the idea. “We really count on vehicle license fees,” Ream said. “We are hoping that our state representatives work for us on this matter.”

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Times staff writers Stanley Allison, David McKibben, Jennifer Mena and David Reyes contributed to this report.