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Making Do With Less : Area Cities Caught in Budget Squeeze as Revenue-Sharing Money Dries Up

July 02, 1987|STEVEN R. CHURM | Times Staff Writer.

Living with less has become a way of life for most Southeast-and Long Beach-area cities, and fiscal 1987-88 has proven even tougher with the end of the federal government's revenue-sharing program.

From South Gate to La Mirada to Long Beach, the cut-and-paste approach to budget planning has become commonplace, as officials scramble to make ends meet with a minimum of trimming services or laying off workers.

The annual check from Uncle Sam--in some cases more than $1 million--helped local cities pay for a host of needs. La Mirada, Bellflower and Maywood had poured their shares into police equipment and salaries. Signal Hill overhauled parts of its aging water system. And Whittier bought office computers and city vehicles.

But Congress voted to begin phasing out federal revenue sharing last year, and it ended Wednesday, the first day of fiscal 1987-88.

'Nice While It Lasted'

"It was nice while it lasted, but now it's over," lamented South Gate City Manager Bruce Spragg, whose own city received as much as $1.2 million a year in federal money, but now must draw heavily on its reserves to make up the difference this year. "For some of us, it's going to be real, real tough to recoup those loses."

Boosting sales tax revenues through new commercial development is one way many cities are trying to keep pace with escalating employee, insurance and program costs. Other methods included reducing services, selling surplus land and imposing new fees and taxes.

This fiscal year, Cerritos will spend $10.3 million, most of it on land acquisition, to expand its highly successful Auto Square, which had estimated sales last year of $170 million and generated more than $1.7 million in sales tax for the city.

Norwalk is banking on the Price Club, the popular warehouse-style discount retailer that opened less than a year ago, to add $400,000 to sales tax totals. The city gets a third of the its income from such taxes.

For most cities, sales tax revenue is the largest single source of income, and so their futures may hinge on the effectiveness of luring new development. Such ventures, however, are expensive and time-consuming and often out of reach of smaller cities that have little to offer in the way of prime building sites or a lack a populace with steady purchasing power.

May Run Into a Roadblock

And even if a municipality has the means to induce new development to broaden its revenue base, it may run into a roadblock.

The so-called Gann limits, a state constitutional amendment passed by voters in 1979, places spending limits on the state and municipalities. In the case of municipalities, the limits do not apply to all spending. It generally restricts spending of funds raised by among other things sales taxes, user fees, property taxes--but not state and federal grants.

Whittier is the only the area city flirting with its Gann limit, which is calculated by a formula based on population growth and the national consumer price index.

Should Whittier spend more than it is allowed, the city would have to return the difference to residents in the form of a rebate or seek voter approval to raise the limit, according to Peter Detwiler, a state Senate consultant on municipal finances.

Since the limits were imposed, eight California cities, including two in Los Angeles Couinty--El Segundo and Redondo Beach--have held special elections and received approval to raise their limits.

Calling a special election in Whittier to override the spending limit is opposed by City Manager Tom Mauk. Rather than tinker with the limit, he said, he believes that the city "should learn to live within it."

In June, the final month of fiscal 1986-87, the city came within $50,000 of its $15-million annual spending limit. Mauk said the city begins the new fiscal year with a $700,000 cushion between the limit and proposed expenditures. Robert Armitage, the city's assistant finance director, predicted: "We will be playing tag with the (Gann limit) all year long."

The reason, Mauk said, is the city's relatively stable population of 71,500. With little or no growth in recent years, the city has been unable to raise its spending limit, yet the cost of basic services--sewer, water and trash pick-up--have continued to climb faster than the consumer price index. "We are a fully built city with no developable area," Mauk said. "It's going to be a problem for some time."

Despite the spending restrictions, Mauk said, there are no plans to scale back the city's ambitious redevelopment plans. But rather than use taxpayers' dollars as seed money for new construction projects, the city is relying heavily on developers' putting up a bigger share of the cost in exchange for project approval and favorable zoning changes.

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