Dire Warnings of Budget Cuts Turn Out to Be Real This Time : Finances: The recession, threatened deep reductions in state funding and possible layoffs make the annual process more difficult for municipal officials.

The yearly municipal budget dance is turning into a solemn and grim affair for the vast majority of South Bay cities. Sales tax revenues are stagnant. State funding is poised to take a big dive. And layoffs have become much more than a just an idle June budget threat.

Not only has the lingering recession continued to sap municipal coffers, cities face the prospect of deep cuts in state funding as a result of a desire among key legislators to take back billions in property tax revenues and vehicle license fees that have traditionally gone to the cities.

If those cuts are made it “would be devastating,” Palos Verdes Estates City Manager James Hendrickson said. “We’d have to go back and redo the whole budget, make some drastic cuts.”

Torrance alone was expecting to receive $4.6 million in vehicle license fees in the next fiscal year, an amount that could make or break a city recently stung by a financial crisis. Officials are braced for what City Manager LeRoy J. Jackson called the most difficult budget season in 14 years.

A series of multimillion-dollar legal settlements and some investment losses have depleted city coffers, and officials are worried that the state government’s strained finances may translate into further cuts. Together, these pressures have complicated the fine-tuning of Torrance’s proposed 1992-93 budget, which may be approved by the City Council as early as Tuesday.

In all, revenues could be $4.5 million less than originally projected, but the city anticipates no tax increases or other cuts in services.

However, the budget contains no money for wage increases for the city’s 1,528 employees, stirring anger among some workers who question why top managers will receive such perks as $446-a-month car allowances and year-end bonuses. City labor contracts expire June 30, further straining the budget debate.

Even cities that expect to squeak by this year forecast a gloomy future.

Redondo Beach

“Our problem is going to be long term. What are we going to do next year and the following year?” said Bill Kirchhoff, Redondo Beach’s city manager.

A Fire Department captain, battalion chief and inspector are among the nearly 50 staff positions that will remain unfilled because of severe budget constraints in next year’s Redondo Beach budget. Defense industry layoffs and a reduction in home purchases left the proposed $57-million budget about $3 million less than this year’s total, Kirchhoff said.

Redondo Beach’s firefighter association urged the city to postpone nonessential capital improvements rather than risk losing personnel at a public budget hearing last week. The council will consider the reinstatement of the positions at Tuesday’s meeting.

Hermosa Beach

Hermosa Beach is looking at a $400,000 shortfall in next year’s bare-bones budget, in part because of a 15% drop in sales tax revenues. City Manager Rick Ferrin also blamed the sluggish economy and a downturn in aerospace spending as the reason for next year’s lean $10-million budget--about a $1 million less than this year’s budget.

At a budget workshop last week, the City Council rejected Ferrin’s recommendation to dip into the unreserved fund balance to cover the budgetary shortfall.

“I’m saying we got a rainy day, and the council is saying it’s not as rainy as it’s going to get. And they may be right,” Ferrin said.

The city has already instituted selective hiring freezes, cutbacks in overtime and elimination of some contract services. Ferrin said layoffs and furloughs will be necessary to achieve a balanced budget, but it hasn’t been determined where those cuts will come.

“We as a city are in budgetary crunch and so is everyone else out there,” Hermosa Beach City Councilman Robert Benz said.

Manhattan Beach

Manhattan Beach has emerged as one of the few economic bright spots in the strapped South Bay. Last week, the City Council adopted a $34-million budget that showed a remarkably stable sales tax base.

“It’s absolutely amazing; it blows my mind,” City Manager Bill Smith said. “I expected the sales tax to decrease substantially, but it didn’t.”

Still, with the state scrambling for revenue sources to reverse its projected $11-billion shortfall, Manhattan Beach could still lose about $2 million to the state.

“That’s nothing for Manhattan Beach, but I suspect it may put other cities out of business,” Smith said.

Inglewood

In Inglewood, officials are worried about the effect the recent riots will have on the city’s economic health, already suffering under the weight of a recession that has caused a projected drop of $500,000 in sales tax revenues this year.

However, the city’s budget for next year calls for a $7.1 million increase. City Manager Paul Eckles warned the council in his budget message that the proposed budget was drawn up before the recent riots, meaning that over the coming months “as the costs and consequences are more fully understood, adjustments will probably be required.” Inglewood’s revenues are heavily dependent on spending by visitors, he said. If visitors stop coming to such attractions as Hollywood Park, the Forum, the Price Club and the airport hotels, the impact could be significant, Eckles said.

Already, city officials estimate losing $400,000 in tax revenues from Hollywood Park alone, where attendance for the year’s largest meet has been off as much as 50% because of the civil unrest and competition from satellite wagering at other racetracks. For the coming year, the city is proposing a general fund budget of $64.5 million, compared to this year’s figure of $57.4 million.

Palos Verdes Peninsula

On the affluent Palos Verdes Peninsula, three of the four cities report they are in reasonably good fiscal shape and are working on balanced, if austere budgets for the 1992-93 fiscal year. However, Rancho Palos Verdes, the largest city on the peninsula, has been scrambling to find ways to offset a projected $2-million deficit.

In Palos Verdes Estates, general fund expenditures are budgeted at $5.6 million, the same as last year. Revenues are expected to fall $400,000 short of expenditures, but City Manager Hendrickson reported that there are enough funds in reserve to make up the difference.

Police, fire, park and recreation costs are being held to last year’s expenditures, he said.

“All in all, we’ll be in pretty good shape, unless the governor and Legislature make some of the drastic cuts in city funding,” Hendrickson said.

The fiscal picture is about the same in Rolling Hills Estates and the tiny gated city of Rolling Hills. Both of these wealthy suburbs are adopting budgets at about the same levels of spending as for the 1991-92 fiscal year.

In Rolling Hills Estates, where the general fund budget is being set at $3.77 million, the city’s law enforcement costs are going up 5%, to $1.2 million, according to city officials. That is the city’s share of a three-peninsula-city contract with the Los Angeles County Sheriff’s Department for basic law enforcement.

In Rolling Hills, where the average home sells for well over $1 million, the general fund next fiscal year will be $682,000, down from the current $712,000.

“We’ve made some cuts where we could, $2,000 here, $3,000 there,” City Manager Craig Nealis said.

Rancho Palos Verdes’ problems are more severe. Faced with a large shortfall, city officials have struggled to find new sources of revenues and will make some major cutbacks in services.

“We cut spending about $500,000 and that, combined with some fee increases and a new landscaping and lighting assessment district, we’ll manage . . . unless things change in Sacramento,” said City Manager Paul Bussey, referring to proposed state cuts in funds to cities. If further cuts are made, Bussey said the effect on the city’s budget would be disastrous.

Lawndale

Lawndale’s proposed 1992-93 budget is also tight. City officials are planning to spend no more than $6.8 million on municipal services, with close to half of it--$2.5 million--earmarked for the Sheriff’s Department, which provides police protection to the city.

The proposed expenditures are about 6.3% less than those set aside for the current $7-million budget. City officials propose to cut expenditures mostly by not filling city positions that are, or soon will be, vacant. Employees would receive no salary increase and all travel and meeting expenditures would be eliminated under the proposed budget.

Gardena

In Gardena, officials say the city is emerging from recession in comparatively good condition. The City Council last week adopted a balanced two-year spending plan beginning July 1 that maintains a status quo in city services and programs.

“We’re optimistic,” Assistant City Manager Mitch Lansdell said. “We’re hoping that as we go through ‘92-93, that (the economy) will start to improve. But we are going to carefully monitor everything to make sure we stay in good financial condition.”

Much of the city’s optimism rests on increases in building permit fees and sales tax revenues, key indicators of economic activity in the city, Lansdell said. The council approved a $28.5-million budget for the 1992-93 fiscal year, a spending increase of 4% over the current year. The council also approved cost-of-living increases for city employees next year of up to 5%.

Carson

In Carson, a city whose fiscal fortunes ebb and flow with fluctuations in sales tax revenue, officials are grappling to craft a balanced budget, even though the city expects at least a $500,000 budget surplus next year.

Carson officials are considering another round of fee hikes, continuing a citywide hiring freeze and eliminating eight full-time positions to cut costs.

“It’s real tight right now,” City Administrator Larry Olson said. “We still are in a cutback mode.”

The City Council has been considering a proposed $30-million spending package for 1992-93, up slightly from a $29.1-million spending plan adopted this year. However, the projected surplus, attributed to lower than expected expenditures, may be used to restore depleted city reserves for such things as vehicle and equipment replacement.

Avalon

And proving that even islands are not immune from recessions, the Avalon City Council is adopting a $1.86-million budget, down slightly from the current $2-million general fund expenditures. Most of the cuts will come in the Public Works Department.

The city is also putting $350,000 of its reserve funds into a special set-aside account to hire a doctor, administrator and nurse practitioner for the municipal hospital. The city is taking over operation of the 12-bed hospital in December, when the current management contract with Long Beach Memorial Hospital expires.

Lomita

Even Lomita is being forced to run lean. City officials are proposing a $5.8-million budget, an increase of about $400,000 over the current year’s budget. No layoffs or cuts in services are being considered.

“We’re just a little bedroom community; we didn’t really get hit that much (by the recession),” City Administrator Walker Ritter said. “We’ve got a balanced budget, but if the state comes in and takes something, we’ve got problems, just like about 95% of the other cities around.”

Times staff writers Michelle Fuetsch, Kim Kowsky, Anthony Millican, Deborah Schoch, Ronald B. Taylor and correspondent Martin Miller contributed to this report.

The Budget Blues

Cities throughout the South Bay are grappling with budgets for the next fiscal year, which begins July 1. For many cities, the continuing recession has translated into budget cuts due to declines in sales tax revenue. Here’s how proposed general fund budgets, which pay for such services as fire and police, are looking in the South Bay:

City 1991-92 1992-93 Proposed Changes Avalon $2.08 million $1.83 million - $250,000 Carson $29.1 million $30 million + $100,000 Gardena $27.46 million $28.5 million + $1.04 million Hermosa Beach $11.05 million $10.5 million - $1 million Inglewood $57.4 million $64.5 million + $7.1 million Lawndale $6.9 million $6.8 million - $100,000 Lomita $5.4 million $5.8 million + 400,000 Manhattan Beach $32 million $34.1 million + $2.1 million Palos Verdes Estates $5.6 million $5.6 million no change Redondo Beach $60.2 million $57 million - $3.2 million Rancho Palos Verdes $7.8 million $7.6 million - $200,000 Rolling Hills $712,000 $682,000 - $30,000 Rolling Hills Estates $3.5 million $3.77 million + $270,000 Torrance $103.9 million $105.8 million + $1.9 million

Budget information for Hawthorne and El Segundo was not available . Specifics on San Pedro, Wilmington, Harbor City and Harbor Gateway are not included because they are part of the City of Los Angeles .

SOURCE: South Bay city budgets