Cities Juggle Facts, Figures, Best Guesses to Plan Spending : Communities, Like People, Must Live Within Their Means

If the 15 municipalities of the South Bay joined together in one big city, that sprawling urban entity would be the county’s second largest city with 700,000 residents, 4,791 municipal employees and an operating budget of $366.4 million.

This is the composite picture that emerges from the 1987-88 budgets prepared for the region’s cities.

This being budget time, the city council of this mythical municipality would be holding hearings on staff recommendations to increase the budget 5.1%--a little more than the inflation rate.

Judging by the situations in the individual cities, citizens would not be storming city hall. No wave of labor militancy would be seething. No great fiscal calamity would be threatening bankruptcy.

Juggling Act

The issues, though less dramatic, would still be enough to keep the council members involved in the increasingly complex juggling act that is municipal finance in the late 1980s.

Behind closed doors, the council would be arm-wrestling with municipal unions fighting to hold their own against cost-cutting moves.

Council members would be trying to figure out how to compensate for lost federal revenue sharing.

Keeping in mind recent shortfalls in retail trade, they would be nervously looking at estimates that retail sales will reach an expected $6.7 billion in the South Bay during the next 12 months. Balancing the budget frequently depends on the accuracy of those estimates: The state, which collects sales tax, returns a portion to cities--their largest source of state funds.

With liability insurance expensive and hard to obtain, council members would debate the size of a contingency fund to handle lawsuits.

A report from the finance department would notify the council that the city is getting closer--but still has several years to go--before reaching the limits on municipal budgets imposed by the Gann amendments.

The council would greet with relief a report that an amendment to the state Constitution that went into effect last year now protects $22.1 million in motor vehicle license fees slated for the South Bay. The money, the second largest state funding source for local governments, was raided several times in the early 1980s by the Legislature seeking to balance the state budget.

But there is no such city of South Bay, and with all its differing political, ethnic, racial and economic constituencies, there probably never will be.

Nevertheless, this somewhat fanciful sketch illustrates some common financial realities reported by municipal budget officers throughout the South Bay.

Rancho Palos Verdes Finance Director Kevin N. Smith sounded a general complaint over the loss of federal revenue sharing, which was being phased out last year and now has been eliminated.

“When you lose revenue like that, it hurts,” Smith said. Rancho Palos Verdes lost $300,000 of the unrestricted funding, about 3.3% of this year’s proposed budget.

Salary agreements in the South Bay this year are keeping even with inflation by and large, but making few gains beyond that, according to city officials and Vernon Watkins, area director for the American Federation of State, County and Municipal Employees.

“There is a lot of (rank-and-file) pessimism,” reported Watkins, whose union represents employees in Torrance, Carson and Manhattan Beach. “It is unreasonable and untenable for an employer to say, ‘Let’s hold the line on everything.’ Employees are subject to inflation, (too).”

In Hermosa Beach, as in most South Bay cities, liability insurance has become increasingly difficult to find and increasingly expensive.

The city joined the Independent Cities Risk Management Authority in November when private insurance companies indicated an unwillingness to continue providing coverage. In the coming fiscal year, Hermosa Beach must pay $176,539 for liability insurance to the authority, an increase of 19% over last year. Four years ago, the city paid $55,735.

If common themes unite the cities, many differences separate one from another.

Some cities are doing well this year, bolstered by the wealth of their residents, the size and activity of their shopping malls or the number of large industrial facilities paying property taxes and business license fees. Others are doing not so well.

Although the average increase in the budgets of South Bay cities was 5.1%, the variation was considerable and only Manhattan Beach and Gardena were close to the average.

Avalon, where upgrading a sewage treatment plant has boosted general fund expenditures, took the top spot with a 22% increase. Almost all the funding comes from federal grants.

Hawthorne, with a nominal decrease of 1.1%, ranked last. But the city, which is now negotiating with its unions, has up to $1 million in reserve that could go into the general fund for salaries. That would put the city into the ranks of those holding the line, where increases are less than 2%.

Standing Pat

Other cities that are standing pat this year include Torrance, which is trying to recover from the unexpected expenses of a landslide and a shortfall in sales tax revenues, Manhattan Beach, Hawthorne, Palos Verdes Estates and El Segundo.

Manhattan Beach, with a general fund increase of 5.5%, is closest to the South Bay average. City officials describe their budget as a “status quo” program.

Cities proposing general fund budgets with increases of about 7% to 8% are Inglewood, Carson, Hermosa Beach, Redondo Beach, Rancho Palos Verdes and Rolling Hills Estates.

During this period of municipal self-examination, some deep-seated differences among South Bay cities emerge.

Some cities take on more responsibilities than others. Some have more employees in proportion to the number of residents. Some spend more per resident.

A number of cities, citing a desire for local control, operate their own police departments. In the South Bay, Inglewood, Torrance, Gardena, Hawthorne, Palos Verdes Estates, Hermosa Beach, Manhattan Beach, El Segundo and Redondo Beach have police departments. Carson, Lomita, Avalon, Rancho Palos Verdes, Rolling Hills Estates and Rolling Hills pay the Sheriff’s Department to police their towns.

Other optional operations in the South Bay include airports (Torrance and Hawthorne), a harbor department (Avalon), bus lines (Torrance and Carson) and a water department (Torrance).

Payroll Is Top Expense

The staffing level at city hall is a frequent target for municipal gadflies contending that the city spends too much. Payroll expenses typically account for the bulk of municipal operating expenditures. For example, in Torrance the payroll is 73% of the operating budget.

An analysis of South Bay personnel rolls shows that the number of city employees per 1,000 residents varies dramatically from city to city. But comparisons can be misleading because of the optional operations mentioned above and other factors.

The average for South Bay cities is about 7 employees per 1,000 residents. The highs are 27 per 1,000 population in Avalon, where the Harbor Department, which provides tourism services, boosts the city personnel rolls, and 25 per 1,000 in El Segundo, where city employees deal with a daytime population perhaps 150,000 larger than the number of residents because of the city’s many aerospace companies.

Per-Capita Spending

In the middle range are Hawthorne with 5 per 1,000 residents, Inglewood with 8 and Torrance with 10. All of these cities have fire and police departments.

On the low end are Rolling Hills, which has 2 employees, about 1 per 1,000 population, Rancho Palos Verdes, 1.1 per 1,000, and Lomita, 1.4 per 1,000. None of these municipalities have police or fire departments.

Another measure of municipal service is the amount cities spend per resident in their operating budgets. The average for the South Bay is $523.86 per resident.

El Segundo, not surprisingly in view of its heavy daytime municipal burden, spends the most--$1,629.55 per resident. Next are Inglewood, $868.91, and Avalon, $743.80. The middle range is occupied by Torrance, $546.29, Hermosa Beach, $567.51, and Manhattan Beach, $604.25.

On the low end are Lawndale, $186.37, and Rancho Palos Verdes, $197.90. Lowest of all is Lomita--$139.13.

By way of comparison, the City of Los Angeles spends $742.87 per resident and Long Beach, the county’s second largest city, spends $588.38.

Gann Limits

Another difference among the South Bay cities lies in how close they are to the so-called Gann limits.

Passed in 1979, the constitutional amendment drafted by anti-spending crusader Paul Gann, limits municipal and state budgets to a specific rate of growth. The rate is governed by a formula based on population growth and the national inflation rate or the increase in per-capita funding--whichever is lower.

Carson, alone among South Bay cities, is apparently prevented from further increases in its budget because of the Gann limits. The city recently hired a consulting firm to go over the history of municipal finances to make sure the complex calculations have been done correctly.

According to a study released by the California Taxpayers Assn. in December, none of the other nine South Bay cities responding to a survey are close to their Gann limits. Municipal officials report no significant change since the December report.

$3 Million at Stake

Carson’s situation could become particularly acute because, as one of four South Bay cities that does not impose a property tax, Carson would be in line for $3 million in special funding if a bill (AB 339) passes the Legislature.

The bill would see to it that cities receive 10% of the property taxes collected within their boundaries by counties, water districts and other government agencies. Carson would apparently not be able to accept the money because of the Gann limits, according to Finance Director William Parrott.

Other South Bay cities that do not levy property taxes are Lomita, Rolling Hills Estates and Lawndale. Some South Bay cities receiving less than 10% of the property taxes collected in their boundaries would also be eligible for the special funding, such as Rolling Hills, Rancho Palos Verdes and El Segundo.

Here is a look at each of the municipal budgets in the South Bay.

Torrance

Retail trade in Torrance, propelled by the Del Amo mall and automobile dealerships, is expected to be a staggering $2.4 billion in the coming budget year, an 8% increase over the past year.

In sales taxes, the largest single source of city revenue, that amounts to $24 million for Torrance.

But the city has been stung in the past when similar projections proved wrong.

“The volatility of economy-linked revenue sources . . . has placed the city manager and his department heads in an extremely difficult position to plan the budget for the incoming year,” City Manager LeRoy Jackson wrote in his budget message.

In addition, the costs of a landslide on city property, now more than $2 million, have put another unexpected burden on the city. And this year is the first without federal revenue sharing, which used to pump $2 million into the budget. Last year’s phase-out allocation was about $300,000.

So, the watchword is caution as the city of 135,000 tries to build up reserves to handle unforeseen costs and the vagaries of retail trade. “Our highest priority is to recover reserves,” Jackson said in an interview.

Despite a 7.8% overall increase in revenue, his proposed operating budget, which is expected to be adopted in several weeks, is $76.6 million, only 1.2% higher than last year’s. Revenues are projected at $77.9 million. (The city’s total budget, which includes the bus system and other revenue-generating operations, is about $100 million.)

Most of the $1.3-million revenue surplus over the operating budget is to go into reserves, with an unspecified amount being held aside for possible salary increases. The city is now negotiating with its unions.

Over five years, Jackson hopes to build up “a catastrophic reserve for economic anomalies” equal to 5% of the operating budget. The current budget sets aside $500,000 to start the special reserve fund.

Elsewhere in the budget, no department is receiving major additions or cutbacks. Protecting people and property, mostly police, accounts for 49% of the budget. Administrative costs eat up 25%, health and environmental items absorb 13% and recreation and other enrichment programs take 7%.

The budget proposes adding 17 positions at a cost of $741,127, including a theater manager for the new Theater and Community Arts Center and a police officer for increased patrol in retail areas.

Another feature of the budgeting process--an attempt by Jackson to respond to council unhappiness at unpleasant budget surprises--is the creation of a two-year budget. The second year is viewed as a detailed planning document that must be refined before adoption next year. The 1988-89 budget foresees a more modest revenue increase, 3.1%, than the amount predicted for the coming year.

In addition to the operating budget, Torrance runs an airport with a proposed budget of $2.3 million; a bus system, $7 million, and a water department, $9.1 million. These departments are funded with grants and user fees.

Other city operations funded entirely by grants are employment and training programs, $3 million; Section 8 rental assistance, $316,643, and the housing and community development department, $17,179.

Construction on a city cultural center is expected to start in several months. The current budget adds $225,000 to a construction fund that will total $925,000.

Lomita

The $4,07,580 budget of this bedroom community, which was approved June 15, is largely a carbon copy of the past year’s.

Only one major project is planned for the year, and that will be financed with money left over from the previous year.

Lomita’s operating budget of $2.8 million represents a 3.3% increase over last year’s--a rise that reflects the City Council’s decision to give the 29 full-time employees a 5% cost-of-living salary increase effective next month.

City Administrator Walker Ritter said the lion’s share of the operating budget--$1,082,000--will go to the Los Angeles County Sheriff’s Department to pay for police services. The city expects an operating budget surplus of $28,460, or about 1%, he said.

Ritter said $300,000 of the city’s $385,000 capital budget this year will be spent to construct a new public works building on property the city purchased from Los Angeles County adjacent to Lomita Park. The remainder will be spent on improvements to Regent Street.

Most of the money in the capital budget is federal revenue sharing money carried over from last year, Ritter said. The city will be left with no surplus in its capital budget, he said.

Lomita, which has a population of 20,125, spends $139.13 per 1,000 residents--the lowest of all South Bay cities--and has 1.4 employees per 1,000 residents, a figure near the bottom among area cities.

Gardena

Gardena, a blue-collar city of 50,218, has had the luck of the draw in preparing its $29.8-million budget for the coming year. The city’s three card clubs have been doing a booming business after several years of declining revenues, while retirement costs for city employees have declined 3% and wages stabilized with a 3% increase.

The city has been the beneficiary to all these developments and also expects in three years to get $600,000 a year in sales and bed taxes generated by a $40-million, 208-room hotel now under construction.

Landau said the most unexpected development in the budget was an increase in card club fees, which are projected at $2.8 million in the coming year, up from $2.2 million. The good times, which permit the city to put $500,000 into reserves, are due to new card games being offered at the clubs, he said.

The outlook is so promising that the city council agreed with an administration proposal and cut the utility-users tax from 5% to 4%, which will mean a $480,000 decrease in revenue. The recommendation came even though the closing of a Gemco store will cost the city $300,000 a year in sales taxes.

The tax cut, approved when the budget was adopted this week, will take effect Dec. 1.

The 1987-88 city general fund budget is $21.9 million, about 4.6% more than the past year’s $20.9 million. The total budget of $29.8 million represents a 1.8% increase over the previous budget, which was $29.3 million.

Other major budgets include capital improvements ($1.7 million), the transit system ($4.9 million) and self-insurance ($1.2 million).

Most of the capital improvements are street improvements. The city also plans to buy a new fire truck ($175,000).

Major revenue sources are sales tax ($5.5 million), card club fees ($2.8 million), property tax ($1.99 million), and utility-users tax ($1.92 million).

The city is in the final year of labor contracts with its employees unions, so salary increases are not a significant factor.

Los Angeles

Although downtown Los Angeles frequently seems far removed from the South Bay, five areas of the city--Wilmington, San Pedro, Harbor City, Harbor Gateway and parts of Westchester--lie in the South Bay and look to the city government for services.

The total city budget, approved last month, called for spending $2.46 billion, a 4.2% increase in appropriations over the previous year. More than $100 million in departmental budget requests were cut, according to Mayor Tom Bradley, who described his recommendations as “a tough pill to swallow” when he presented them to the City Council in April.

Although the budget is a citywide document, a few items are of particular interest to harbor-area residents.

- The budget includes $121,000 for three new Department of Recreation and Parks employees at the Cabrillo Marine Museum in San Pedro. The museum had been seeking five new employees but, since the appropriation is the only staff increase approved at a city museum, officials have voiced thanks for what they got.

- The budget eliminates funding for the Wilmington cleanup day ($2,500) and half the funding for the San Pedro clean-up day ($1,250). Councilwoman Joan Milke Flores, however, has requested that the funding be restored.

“It is absurd to pick on the cleanup days,” said Julie Kalgren, Flores’ legislative assistant. “They are one of the few things in which the city receives so much more benefit than it costs. We had tons of trash at those cleanups. And we had thousands of volunteers, with over 100 community organizations involved.”

The cleanup days are held annually. Volunteers haul trash from garages and alleys, pick up litter along streets and roads, and generally spiff up the community. The city provides sanitation crews and trucks to remove the garbage.

Funding for the Harbor Gateway and Watts cleanups, also in Flores’ district, were not cut.

- The budget includes $8.5 million in revenues that the city expects to receive from the Harbor Department as part of a cash deal for 99 acres near the Harbor Freeway in San Pedro. The city has agreed to sell the property to the Harbor Department, which has been leasing it since 1955. The $8.5 million is the second of two installments. The first payment for $17.5 million is supposed to be paid by the end of the month and be applied to the 1986-87 budget.

- Ezunial Burts, executive director of the Harbor Department, led all city employees in pay increases under a merit-pay program included in the budget. Burts’ salary, which is paid by the Harbor Department, jumped 14.1% from $101,101 to $115,383.

- Despite Bradley’s initial opposition, the budget includes funding to hire 250 police officers to add to the current citywide police force of 7,100. Bob McVey, commanding officer of the Harbor Division, said it is too early to tell how many of the new recruits will wind up in his division.

Avalon

In the tourist town of Avalon (population 2,420) on Santa Catalina Island, the budget this year focuses on sewage treatment.

The combined 1987-88 budget, adopted this week, is $6,820,406, an increase of 42% over last year’s budget of $4.8 million, with the major increase stemming from a $1.25-million upgrading of the sewage treatment plant and nearly all of the money coming from a federal grant.

Other major expenditures include a new fire truck ($350,000) and harbor improvements ($140,000).

Because income--expected to be $6,596,544--will not cover expenditures, the $223,000 balance will be drawn from reserves.

Major sources of revenue are hotel bed tax ($547,000), sales tax ($342,300), property tax ($268,800), wharfage tax ($840,000), harbor service fees ($700,000) and sewer connection fees ($435,000).

The general fund budget, which includes personnel costs for the city’s 65 employees, is $1.8 million.

El Segundo

Money is tight in El Segundo, a seaside municipality of 15,403 residents with a daytime working population of more than 150,000, and city officials are planning to use reserves and new taxes to balance the $27,496,144 budget.

The downturn in the fortunes of the city, which is home to a Chevron refinery and a cluster of aerospace companies, is due to low oil prices and a decline in contracts to local defense plants, both of which affect tax revenue, according to City Treasurer Jose Sanchez.

Because of the impact of daytime workers on city services, the city imposes floor taxes and employee head taxes on the companies, but that revenue has not grown as rapidly as expected.

Sanchez said the coming budget year will be the city’s fifth straight in which income did not cover proposed expenses, and ranks as the tightest budget year since the early 1970s.

The operating budget, which includes the general fund budget, is $25.1 million, a meager 1.6% increase from last year’s $24.7 million. The budget was adopted June 16.

The city is averting large cuts only by using $2.3 million of its $3.9-million reserve and seeking new taxes, including a utility user tax that could generate $2 million and an increase in the hotel bed tax and new recreation and garbage collection fees that would produce lesser amounts.

A proposed sewer-service fee that would raise an estimated $560,000 also is being considered.

Spending per resident, $1,630, will remain by far the highest in the South Bay because the city has to provide services to so many daytime workers. With almost 25 city employees per 1,000 residents, El Segundo also has the second-highest concentration of city employees in the South Bay, after Avalon.

The Police and Fire departments account for the largest part of the $18.4-million general fund budget, $10.5 million, followed by the Parks and Recreation Department, $1.8 million.

Economy measures include holding vacant four Fire Department positions that were approved two years ago and the elimination of a position in parks maintenance.

Police and rank-and-file employees are to receive a 3% raise July 1 and another 2% raise Jan. 1.

Hawthorne

Hawthorne, a largely working-class city of 62,857 residents, was hit with a $750,000 shortfall in sales-tax revenue last year when Hewlett-Packard Co. moved its computer sales operations out of the city.

This year, says City Manager Kenneth Jue, “we’re coming out of the woods. We expect our financial position to be stronger in the future.”

But holding the line is still the watchword.

The 1987-88 total budget of $37 million represents less than a 1% increase over the previous year. Total revenues expected are just under $36 million. The balance will be taken out of reserves.

The general fund budget is $20.9 million, with the airport ($1.4 million) and Water Department ($1.4 million) the other major budgets.

Major sources of revenue are sales tax ($6 million), property tax ($2.5 million, a 9% increase over the previous year), utility-users tax ($2.5 million--residents are taxed 3.5%) and motor vehicle license fees ($2 million).

Hawthorne has a new Pontiac dealership, which is expected to provide the city with at least $60,000 in sales taxes. A new discount store, Costco, is expected to open this year.

The city is a comfortable $3 million below its Gann limit on spending.

To fund a high-priority paramedic unit, officials are exploring a new tax or an increase in the utility-users tax.

The city is negotiating with four employee groups whose salary increases in the past averaged 3.5%. Jue said up to $1 million is currently available to provide raises for the 320 city employees.

The budget will be discussed at several council workshops in July.

Palos Verdes Estates

The affluent hillside community of Palos Verdes Estates (population 15,033) adopted a 1987-88 budget this week of $12.5 million, which includes a $7.9-million operating budget, slightly more than the current $7.8 million.

“No major changes in things,” said City Manager Gordon Siebert.

The operating budget provides for such services as police protection, animal control, building inspection, tree trimming and swimming pool operations.

Staffing will continue at about 62 employees, 34 of which are in the Police Department.

The operating budget projects a year-end surplus of $26,000, considerably more than the $9,000 the city expects to end the current fiscal year with.

City Manager Gordon Siebert said Palos Verdes Estates depends on two special property taxes that require regular reapproval by voters, so it is “not sitting on reserves.”

The big-ticket items in the budget are the Police Department, totaling $2.4 million, and fire protection from Los Angeles County, $1.4 million.

The budget includes a 15% increase in police salaries and benefits, which Siebert said is intended to keep Palos Verdes Estates competitive with other cities. A labor contract with the city police association has not been ratified.

The head of the association, Sgt. Art Clabby, said the 15% is for five sergeants, while patrol officers are getting a 13.7% increase. The department has been critical of police salaries and retiring Police Chief Monte Newman cited this as one reason for his departure. Clabby called the contract fair, but said salaries still lag by 15% or 16% salaries paid by neighboring cities.

“We did not expect to be brought up (to) par in one year,” he said.

Siebert made special note of the $484,000 budgeted for city attorney services, saying it is a 4,108% increase over the $11,500 costs a decade ago. He called it “interesting and frustrating.”

He said this climb is largely due to legal expenses--more than $1 million so far--in connection with 12 lawsuits filed since 1981 by Bluff Cove property owners who have alleged that water from poorly maintained city storm drains undermined their homes. So far, nine have been settled--city insurance carriers have paid residents--and the city hopes that the remainder will be settled during the 1987-88 fiscal year.

Major revenue sources are $1.6 million in property taxes and $2 million in other local taxes, including a utility-users tax that accounts for about $1.4 million. The city uses utility-tax money for capital improvements. Both taxes represent slight increases in revenue over those in the the current fiscal year.

Revenue from a property tax for police and paramedic services is projected at $998,000, down slightly from this year, and another property tax for such things as street and parkland maintenance will raise $431,300, about the same as this year. Both taxes have been approved by voters.

The budget contains a $4.6-million capital improvement program, with major expenditures for storm drains and major street construction, although the budget notes that not all of the work may be done during the budget year.

The city is shooting for budget adoption by June 30.

Palos Verdes Estates lost about $60,000 with the end of federal revenue sharing, but has made it up through cost-cutting in the Police Department.

Lawndale

In Lawndale, a densely populated working-class community of 27,048 residents, the proposed budget for 1987-88 is $6,651,275, a .6% decrease over last year’s budget, which was $6,696,000.

The proposed general fund budget of $5,041,000 is a 17% increase over the past year’s $4,296,000, but the increase is the result of transfers of some programs into the general fund from other accounts, according to Jan Rush of the Finance Department.

Major revenue sources are the sales tax ($1.7 million), motor vehicle license fees ($870,000) and building permit fees ($460,000). Lawndale does not collect property taxes. The city also earns about $300,000 a year on investments of $3.1 million.

City Manager Paul J. Philips proposes increasing the city’s permanent work force from 64 to 68, and part-time employees from 49 to 53, at a cost of about $128,750. The four new positions would be a recreation supervisor, a community safety supervisor, a receptionist/clerk and a maintenance worker.

In addition, eight positions are being reclassified, resulting in pay increases of between 2% and 17%, for a total increase of $24,000.

The City Council is expected to vote on the budget July 2.

Rancho Palos Verdes

In Rancho Palos Verdes, the largest city of the Palos Verdes Peninsula with 45,982 residents, the City Council last week adopted a 1987-88 operating budget of $9.1 million and a capital improvement budget of $7.4 million, for a total of $16.5 million.

“We presented a good, strong operating budget and I feel we can successfully operate next year without significant problems,” said Finance Director Kevin N. Smith.

Smith said that last year the city had an operating budget of $8.5 million and a $6-million budget for capital improvements. While the new budget is larger in numbers, he said, it is about the same as last year because about $2 million in capital improvement money has been carried over.

“There is no real budget growth,” Smith said.

Smith said the budget presents no significant changes in the direction of city government, although there has been some reorganization at City Hall under new City Manager Dennis McDuffie, including elimination of community services as a separate department and an increase in building and planning services.

Although large, Smith said, the capital improvement program is primarily maintenance and repair of existing streets and storm drains.

The city staff will remain at 50. The budget contains employee raises averaging 5.5% but total increases are under $60,000.

General government, including a $1.4-million law enforcement contract with the Los Angeles County Sheriff’s Department, is the largest chunk in the city’s operating budget, coming in at $6.1 million. There is a $1.4-million item, financed by state gas-tax money, for street maintenance and tree removal.

The largest revenue chunks for the operating budget are property and business-related taxes ($1.8 million) and state motor vehicle fees and taxes collected from utilities and cable television companies doing business in the city ($2.1 million). Other revenue includes $850,000 in sales taxes, $800,000 in building and planning fees and $580,000 in fees for recreational programs.

Two major capital improvement programs are scheduled for next year: resurfacing Hawthorne Boulevard from Crest Road to Palos Verdes Drive South, which is budgeted at $900,000, and reconstruction of Palos Verdes Drive South from Hawthorne to the Wayfarer’s Chapel, a $1-million job. Community development grant money will be used for a $586,000 realignment of the ever-moving stretch of Palos Verdes Drive South through the Portuguese Bend landslide area.

The major source of capital improvement revenue is the city’s 5% utility-users tax, which Smith said will generate $1.6 million next year. Including the carry-over from next year, the amount of money available from this tax will be $2.9 million.

Capital improvement revenue in the budget also includes $700,000 in federal road money, $800,000 from county road funds, and $900,000 in state road money.

Rolling Hills

During the 1987-88 budget year, it will be business as usual in Rolling Hills, which means taking care of 2,070 mostly wealthy residents in the gated, entirely residential city of rustic estates, horse barns, riding trails and tennis courts.

Some government functions in the city, such as road maintenance, are handled by a private association that assesses residents.

Of the $774,954 budget adopted Monday by the City Council, the city will spend $457,254 for governmental operations in the upcoming fiscal year. This is about $59,000 higher than the current fiscal year, and the rise is attributed to normal increases in service costs, said Norma Young, deputy finance officer.

The largest expenditure is for general and administrative expenses ($219,000), followed by public works and planning ($120,000), and police protection under a contract with the Los Angeles County Sheriff’s Department ($115,000).

In addition to the operating budget, the city is proposing to spend $3,500 on recreation, $5,000 on self-insurance and $309,200 for refuse collection, which is recovered through fees.

The city has two employees, who will receive 3% raises.

City Manager Terrence L. Belanger, who works on a consultant basis, received a 6% raise. His salary is $51,000 for the year.

Rolling Hills Estates

Rolling Hills Estates, home to 7,700 residents, is looking at what officials call a lean operating budget of $2 million that is designed to continue city services largely at their present level.

The budget adopted this week by the City Council totals $3.5-million, $200,000 more than the past year.

“We’re keeping everything identical to last year,” said Douglas Prichard, assistant city manager. He said the major factor in the operating budget, which is only $100,000 higher the past year’s, is that income from sales taxes has remained flat at about $1.3 million. The sales tax is the city’s major source of revenue, most of it generated from the Peninsula Center, the largest shopping center on the Palos Verdes Peninsula. The city does not levy a property tax.

The city expects to end the current fiscal year with a $414,983 surplus and is projecting an ending balance next year of $394,151.

“The aim of the council is to have a $600,000 reserve,” Prichard said. “You never know what the sales tax will do from one year to the next, and we could get hit with unexpected expenditures.”

Major expenditures projected for next year are:

- $851,432 for public safety, which is mainly for police protection through the Los Angeles County Sheriff’s Department. The increase from last year’s payment of $756,000 is due mainly to higher personnel costs.

- $352,558 for recreation, some of which is recovered through fees for classes, a spending level almost identical to this year.

- $257,018 for parks and open space, which is mainly for maintenance of parks and horse and bike trails, also identical to this year.

- $283,748 for transportation, which is for city participation in PV Transit, a van transportation system, and a dial-a-ride taxi service. The amount is slightly lower than last year.

The city is proposing a total of $484,000 in capital improvements, but Prichard said some may be deferred, as was the case this year. Prichard said the council’s policy is to do only those projects that are substantially funded by federal or state grants.

On next year’s capital improvements schedule are a bridle trail around the Metropolitan Water District’s reservoir, which is budgeted at $116,000; a Rolling Hills Road bike path for $184,000, and guardrails at various locations on Palos Verdes Drive East and Silver Spur Road, which would cost $34,000.

If efforts to get federal and county money succeed, the city may be able to carry out a $700,000 reconstruction of Palos Verdes Drive from Rolling Hills Road to Crenshaw Boulevard.

“At the very least,” Prichard said, “we will be able to overlay a new surface” for $100,000.

In addition to the operating and capital improvement budgets, the city is projecting a $978,324 personnel budget. This includes 4% raises for all employees, including top administrators, although top performance evaluations can earn up to 8%. The staff size remains steady at 32 employees.

Manhattan Beach

Officials in the affluent oceanfront city of Manhattan Beach (population 35,085) coined a new term to explain why the $21.2-million budget this year looks about the same as last year’s.

“We’re what you might call a saturated city,” said Merle F. Lundberg, the city’s finance administrator.

No major businesses are leaving or entering the community and there is not much residential construction. In addition, sales-tax receipts have leveled off, the consumer price index did not rise much, salaries are fixed under previous labor agreements, no new capital projects were added and only one new employee is to be hired.

“We don’t see any phenomenal increases in the revenues. Our expenditures are about the same. We’re just maintaining the status quo,” Lundberg said.

The operating budget, which was approved June 8, increased 5.5%, close to the South Bay average of 5.1%.

During budget hearings, there was a lot of talk about the need for senior housing and $200,000 was set aside in the 1987-88 capital improvement fund, but the city is waiting for seniors groups to come back with definite proposals.

The city plans to finish several capital improvements this year, including the $3.5-million first phase of the Downtown Street-scape, an intensive landscaping project. The city, which built up funds for the project in earlier budgets, will spend them in the coming year. Street improvements are budgeted at $1.6 million.

Scheduled salary increases include a 6.6% raise for police in July, a 5.5% increase for general employees in September, and a 5.8% boost for firefighters in November.

Federal revenue sharing in the last budget amounted to a mere $23,000, so its loss this year is not felt much. Lundberg said: “It didn’t really make any traumatic impact.”

The city is budgeting an operating surplus of $781,000 in the coming year.

Carson

The budget question in Carson is not whether revenues will cover an operating budget of $27.4 million for the coming year, an increase of 7.9%.

The question is whether the state Constitution will permit the full increase.

Alone among the cities of the South Bay, Carson has bumped up against the Gann limits, which were imposed in a 1979 constitutional amendment dubbed for anti-tax crusader Paul Gann. The measure limits spending under a complex formula that factors in population growth, the national inflation rate and per-capita spending. Carson has 85,300 residents.

For Carson, the city Finance Department figured the limit at $27 million. The council has commissioned a study to see if the computations were done correctly.

“We cannot exceed the Gann limits,” said Finance Director William Parrott.

Until the study is completed, the council discussions are focusing on the $27.4-million proposal.

City Administrator Richard Gunnarson said he was taking a “continuation” approach to the budget this year: “No new employees, no new programs.”

The Parks and Recreation Department, the city’s largest department, will get a boost from $8.4 million to $9.1 million, or 8.4%. The budget for policing, which is provided by the Los Angeles County Sheriff’s Department, will rise from $6.4 million to $6.7 million, or 4.7%. The Public Works Department budget will go from $3.6 million to $3.8 million, or about 4.5%, and the costs of finance and administration are to rise from $1.8 million to $2.1 million, or about 14.1%.

The city has a pay-as-you-go approach for capital projects, Parrott said. After the budget is adopted sometime in the next several weeks, the City Council will consider a “wish list” of projects that could be funded if sales-tax revenues meet projections.

“Last year, revenues did not come in,” Gunnarson said. “If revenues come in, we will be underspending by $1.5 million.”

On July 1, city employees will get a 4% raise under a contract that expires in one year.

Redondo Beach

Buoyed by a hot real estate market, revenues from the Galleria at South Bay and a Sheraton hotel, the seaside city of Redondo Beach (population 64,362) has been able to add personnel in three departments despite the loss of federal revenue sharing and a drop in natural-gas franchise fees.

The proposed budget, which is expected to be adopted at a special City Council meeting Monday is to rise 7.2%, from $39.1 million last year to $41.9 million.

The Police Department will get at least two more detectives in the vice-narcotics unit, which will double the size of the division. A third detective may be added to concentrate on sex-related crimes.

The Community Development Department, which has had a heavy load because of real estate development, will get three or four new hires, including a building inspector, a zoning enforcement employee and an assistant planner.

The Public Services Department will get a full-time park caretaker and two street maintenance personnel to catch up on sidewalk repairs and replacements.

The new employees will bring the personnel rolls to 479, or 7.4 per 1,000 residents.

Tax revenues from the Galleria and the Sheraton, more than $1 million altogether, have enabled the city to weather the loss of federal revenue sharing and a drop in franchise fees paid by the Southern California Gas Co., City Manager Tim Casey said.

The coming year will be the first full year that the Sheraton will be open and the city expects about $200,000 more from the 7% bed-tax revenues than it received in the past year, when the hotel was open for about six months.

The City Council plans to increase business head taxes and license charges by 10%. There also will be a 5% increase in fees for the Street Landscaping and Lighting Assessment District, amounting to about $3.50 a year to residential owners of 50-foot lots and about $7 a year for commercial property owners. The money is being used to convert from mercury vapor to more efficient sodium vapor street lights.

The City Council also is considering reducing the 5% utility users’ tax.

The proposed operating budget sets aside $1.1 million for unspecified capital-improvement projects, which will be discussed by the council in July or August. The amount could be reduced if the council adds more personnel than the city manager has requested.

Property-tax revenues, propelled by a rapid pace of real estate transactions and subsequent higher assessments, are projected to grow nearly 11% to $6.5 million. The average county increase is 9.5%.

Inglewood

In Inglewood, the second largest city in the South Bay (population 102,888), city officials say that a healthy local economy has helped them avoid major tax increases this year, despite high spending levels and a proposed budget increase of 8.6%.

The total budget, which was approved Tuesday, is $89.4 million, up from last year’s $82.6 million.

Boosting city revenues are a robust construction industry and a tax base with a projected $6 million in property taxes, $7 million in utility taxes and $2 million in pari-mutuel taxes from horse racing at Hollywood Park.

The City Council is expected to approve a 1% increase in the city’s 9% hotel bed tax, for a projected total revenue of slightly more than $1 million. Increases also are planned for parking meter charges, sewer rates and water fees.

The city also plans to use a $7.6-million Federal Aviation Administration grant to redevelop land near Los Angeles International Airport.

Inglewood has tried to tighten spending with a hiring freeze in the city work force of 774, but spending levels remain high. The city spends $868.91 per resident, one of the highest levels in the South Bay and well above the $742.87 that the city of Los Angeles spends.

City Manager Paul Eckles, who is the highest paid city manager in the nation, plans to set a personal example in an austerity effort. His contract stipulates a 4.5% increase, but Eckles says it’s “unlikely” he will accept the hike in the current $111,918 he earns a year.

The city will also forgo replacing vehicles in the city fleet. City-financed capital improvements also have been deferred wherever possible.

A major chunk of spending goes to the $18.8-million Police Department budget, with the city’s fight against crime and drugs remaining a top priority. Salary negotiations with the police union continue, while other union members have agreed to a 5% salary increase.

The total budget also reflects redevelopment-fund expenditures that will jump from $5 million to $9 million, a figure that Cravens said fluctuates from year to year depending on the progress of projects.

Hermosa Beach

The financial trend in Hermosa Beach (population 19,383), bolstered by construction, seems to be improving after several tough years. The City Council this week approved a budget of nearly $11 million for the coming fiscal year, up 8% over the past year.

The city has balanced its budget in recent years by cutting back personnel and services, but for the coming year it has added eight full-time positions--five in the police department--and will increase many services.

The only service cutback will be a reduced level in the Child Abuse Education program, which will be cut in half.

“We still have to be prudent,” City Manager Gregory T. Meyer said, explaining that for many years the city had neglected to build up reserve funds for maintenance, repairs and replacements of infrastructure and equipment.

The budget turnaround began during the the 1985-86 and 1986-87 fiscal years when the city staff frequently underestimated revenues and, to a lesser extent, overestimated expenditures.

The city was able to pile up reserves of $818,000 last March, an amount that astonished council members when they learned reserves would be nearly 75 times larger than anticipated. Council members were particularly upset because they had told voters two months earlier that the city was in dire financial trouble and that a $52 parcel tax was needed. Voters rejected it anyway.

After news of the surplus surfaced, City Council members said that they depended on the staff, and specifically on Meyer, to provide accurate, up-to-date financial information.

But staff projections have again proved inaccurate, Meyer acknowledged.

The 1986-87 budget approved a year ago estimated that only $246,066 would remain in the general fund on June 30, but the most recent staff projections are that more than $1.8 million will be in the fund when the fiscal year ends Tuesday.

Meyer said that the staff was instructed by the City Council to make conservative estimates. “Building activity was phenomenal versus what was ‘guesstimated’ at any point during the year,” he added.

The City Council voted 3 to 2 recently to put a business license tax initiative for theaters on the Nov. 3 ballot. If passed by two-thirds of the voters, theaters will be taxed $100 for the first $20,000 of their gross receipts and $1 for each $1,000 of gross receipts after that.

The council also is thinking about putting a residential construction tax on the ballot, which would require buildings to pay 3% of a building’s valuation. This tax will apply when the number of units on a parcel is increased.

SOUTH BAY CITY BUDGETS

‘87-’88 ‘86-’87 City Operating Operating Percent Spending Budget* Budget* Change per Capita Hawthorne 20.7 21.2 -1.1 $332.50 Lawndale 5.0 4.3 +17.3 $186.37 Rolling Hills 0.5 0.4 +12.9 $214.32 Hermosa Beach 11.0 10.2 +8.0 $567.51 Inglewood 89.4 82.6 +8.2 $868.91 Gardena 21.9 20.9 +4.6 $435.57 Torrance 76.6 75.4 +1.2 $546.29 Carson 27.4 25.4 +7.9 $310.08 Manhattan Beach 21.2 21.1 +0.5 $604.25 Redondo Beach 41.9 39.1 +7.2 $651.01 Palos Verdes Estates 7.9 7.8 +1.3 $525.51 Rancho Palos Verdes 9.1 8.5 +7.1 $197.90 Lomita 2.8 2.7 +3.3 $139.13 Rolling Hills Estates 3.0 2.8 +7.1 $379.60 El Segundo 25.1 24.7 +1.6 $1,629.55 Avalon 2.9 2.4 +22.0 $1,198.35 South Bay Totals 366.4 349.5 +4.8 $523.86 Long Beach 239.0 270.0 -11.7 $588.38 Los Angeles 2,460.0 2,360.0 +4.2 $742.87 * in millions

Employees per 1,000 Residents

City City City Employees Hawthorne 324 5.15 Lawndale 68 2.51 Rolling Hills 2 0.94 Hermosa Beach 156 8.05 Inglewood 774 7.52 Gardena 450 8.96 Torrance 1,420 10.13 Carson 277 3.13 Manhattan Beach 223 6.36 Redondo Beach 479 7.44 Palos Verdes Estates 62 3.08 Rancho Palos Verdes 50 1.09 Lomita 29 1.44 Rolling Hills Estates 32 4.05 El Segundo 380 24.67 Avalon 65 26.86 South Bay Totals 4,791 6.85 Long Beach 4,100 10.09 Los Angeles 40,495 12.23