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Huntington Park Called 'Out of Cash but Not Bankrupt'

November 12, 1987|RICHARD HOLGUIN | Times Staff Writer

HUNTINGTON PARK — City officials, who learned last year that they would have to begin dipping into sales tax income to help lagging revenues from ambitious redevelopment projects, sought to explain this week why they had misjudged the amount of money that would be siphoned from city coffers.

That miscalculation led the City Council to agree Monday to eliminate 13 municipal jobs. The council also gave tentative approval to borrow as much as $2.1 million to offset the budget shortfall.

Mayor Thomas E. Jackson backed away this week from statements he made last week that the deficit spending, if unabated, would bankrupt the city by Dec. 1. He called the financial crisis a "cash-flow" problem.

"We're not bankrupt," he said. "We just don't have the cash to pay our bills."

Huntington Park's financial problems surfaced last week when the City Council called a special meeting to consider eliminating more than 50 municipal jobs and some services. The city was deficit-spending at a rate of more than $300,000 a month, which would have left it unable to meet its payroll by Dec. 1, officials said.

After strong employee opposition to the layoffs, the council decided to sharply reduce the number of layoffs and borrow money.

City officials said they knew there was a money crunch, but they did not now how bad it would be.

"We anticipated that we would be tight but we felt . . . we were making it," Councilman Jim Roberts said earlier this week. "The numbers were changing on us and we weren't aware they were changing. The well ran dry very quickly."

Roberts was on a city committee that advised the City Council on its 1987-88 budget. The same committee worked for the last month to find a solution to the deficit spending. Roberts said he was not advised in a timely fashion that the city was facing a financial bind.

But he stopped short of blaming either Donald L. Jeffers, the city's chief administrative officer, or James Funk, the city's redevelopment director.

"I'm trying to find out why I wasn't (advised)," Roberts said. "We had a fire to put out. . . . "

Looking back, Jackson said the city's effort to complete 90 redevelopment projects between 1980 and 1990 may have left the Redevelopment Agency juggling more projects than it could handle. The Redevelopment Agency has completed about 70 projects, including the Pacific Center Shopping Mall and Medical Office Building, which has 163,000 square feet of floor space.

Jackson said he was surprised when he was informed about four weeks ago that severe spending cuts--possibly involving layoffs--would be required.

"There were so many things happening that it can just get away from you," he said. "Somehow or another I do not think that any of us felt that we would ever continue to lose as much as we did. We always felt that we were bringing more projects on line."

"The City Council has to keep closer tabs," he said. "We are going to have a requirement to have specific types of cash flow charts so we will know exactly what is going on (with redevelopment projects)."

Nevertheless, Jackson strongly supported the city's redevelopment program.

"There's going to be one day four or five years from now when the city will be rich, when all these projects get on the tax roles," he said.

The city has backed its redevelopment bonds with anticipated property tax income from redeveloped properties. If that source fails to provide enough money, the city must dip into sales tax dollars, and that is just what has happened. This fiscal year the city must channel about $1.4 million in sales tax revenue--money used to operate the city--to the Redevelopment Agency to meet its bond payments.

Property tax revenues, officials said, have not met projections because of project delays beginning in 1984. The fiscal year began July 1, and ends June 30, 1988.

The Redevelopment Agency's revenue shortfall appeared last year when the city was required to funnel $1.7 million in sales taxes to the agency for bond payments, Funk said. While city officials anticipated some drain on city funds this year, the full extent was not known until audit reports reached the city last month, Funk said.

Last year's drain cut into projected reserves, leaving Huntington Park unable to weather a similar shortfall this year, Jeffers said.

The sales tax revenue that goes to the Redevelopment Agency is recorded as a loan that could take years to repay. As of June 30, the agency owed the city about $9 million in sales tax diversions and up-front loans.

Last summer, the City Council approved spending $10.6 million during 1987-88 to pay for general city operations, including a 5% pay raise for its 227 employees. The raises cost the city about $200,000.

"We hoped by this time, loss of that money would have been compensated by the agency," Jeffers said.

The value of property in the city's four redevelopment areas--comprising about 760 acres--has risen dramatically since the first district was established in 1972.

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