City Officials Bracing for More Budget Woes : Economy: City manager says local government will have ‘to work smarter’ and become more entrepreneurial in order to cope with worsening fiscal problems.

Glendale, like all other cities that once relied heavily on property taxes to support city services, is going to have to change its way of thinking.

The state budget crisis that whacked cities this year with decreased revenues in the worst economic downturn since the Great Depression is only a hint of what is to come, city leaders are warning.

Glendale spent months painstakingly paring $8 million from its $288-million budget earlier this year--largely through staff reductions--to meet decreased revenues. Now the city is coping with another $3.2 million in lost revenue because of the state deficit, and officials already are predicting a further $7.5-billion state shortfall next year that will again diminish city revenues.

But that is not the worst of it.

“Those problems are simple compared to what we face in the future,” City Manager David H. Ramsay told a recent gathering of concerned taxpayers. “We are going to have to make substantial structural changes.”

Although the specific nature of the changes has not been determined, Ramsay said it is clear that the city can no longer rely on former methods of resolving budget problems.

Governments traditionally have looked to two alternatives: cut services or raise taxes. But Ramsay said those alternatives are no longer acceptable in Glendale where the city staff has been significantly reduced after a yearlong hiring freeze and the conservative administration is unwilling to raise taxes under poor economic conditions.

Instead, Ramsay said local government “needs to work smarter,” becoming more entrepreneurial, more competitive and more efficient.

It is an idea he gleaned from a book published this year, “Reinventing Government,” written by David Osborne and Ted Gaebler, experts on municipal management. The book hammers home the theme that government must function more like business.

Glendale already has embarked on a few such enterprises, like selling excess electrical power and recycled water to other cities and governmental neighbors. It is looking for more ways cities could share resources such as library materials, communications systems and equipment, and to make its own departments compete with the private sector.

Departments might be given separate budgets for support services, for example, which could be used to seek competitive bids for printing, mechanical maintenance and other services rather than automatically requiring city departments to use in-house services, officials said. If in-house services are not competitive, they could be eliminated.

Conversely, departments also could be encouraged to provide for-fee services. In keeping with that theme, the city last month began competing with private trash haulers by offering for rent large, roll-off bins for cleanup and construction projects. Naturally, the city would have to maintain accounting procedures to ensure that enterprise services are not subsidized by tax dollars.

But Ramsay and other officials believe that those programs are only the tip of municipal enterprise possibilities that the city must dream up to supplement traditional funding sources. An intensive search is under way for new ideas.

During the past month, Ramsay has sought suggestions from taxpayers at a public forum, has met with all city employees in about 20 large and small informal gatherings and formed a “dream team” of representatives of city departments.

“We have tried to unleash as much creativity as we can” to resolve the budget problem, Ramsay said. “We are beginning to get some suggestions.”

One employee proposed a city store where materials such as old stop lights, fire hydrants and metal beams that are now sold for scrap could be sold for more money to collectors.

“That idea alone is not going to solve the budget problems,” Ramsay said. “But if we add up a whole bunch of those ideas, we would be working a lot smarter.”

Ramsay told business and political leaders from Burbank, Glendale and Pasadena at a Tri-City conference this fall that, “All of us need to be more entrepreneurial. We need to look at our assets and start selling services. Local government needs to do a lot less rowing and a lot more steering.”

The search for new ideas in city finance has been going on--to some extent--ever since voters approved Proposition 13, the 1978 property tax limitation measure. Despite the predictions of doom that preceded Proposition 13, cities, for better or worse, managed to survive with growing revenues from sales taxes, cigarette and gasoline taxes, fees for services and other income to local government.

Prior to 1978, property taxes accounted for about 25% of Glendale’s general fund revenues. That figure now has dwindled to about 18%, said Finance Director Brian Butler, while costs, particularly for police and fire protection, have soared.

The city this year will earn $16 million in property taxes, plus $27.5 million in property tax increments from the downtown redevelopment zone. Yet police and fire costs are $45.5 million. “Therein lies the great challenge of local government,” Ramsay told the recent gathering of taxpayers.

“We lack the fiscal integrity to pay for the services we demand,” he said, pointing out that 85% of the city’s $82 million general fund budget is spent on employee wages and benefits.

The booming economy of the 1980s temporarily met the appetite of growing costs. Coupled with its conservative pay-as-you-go policy, a thriving redevelopment project and dramatic increases in sales tax revenues, Glendale fared well through the decade, allowing a buildup of reserves to about $40 million five years ago.

Reserves are down to $22 million, which still gives Glendale--unlike most cities--plenty of breathing room to deal with unexpected state cuts, but the surplus is steadily dwindling, Butler warned. He estimates the city will have to pare another $2.5 million in costs to balance its budget next year.

The city also is considering so-called “revenue enhancements”--additional taxes on sewers and electrical power, possibly an assessment district for police and fire protection, a tax on multiple units and a business license tax. One citizen suggested a “scenic tax” on Glendale residents for the privilege of living close to downtown Los Angeles.

But those notions are not popular among leaders. “There isn’t a single silver bullet out there that is going to solve the problem,” Ramsay said. However, the city this year initiated what Butler calls “consumer sovereignty fees,” requiring users to pay for services they demand, such as soccer fields.

The city also rejects one-time, stopgap methods such as borrowing from pension funds. Instead, it favors structural changes such as the reduction in the city work force--more than 90 positions were trimmed in the last year to a current staff of 1,566. But those cuts now are becoming harder to find.

“The period from 1990 to 1992 is just the start of a new era in public financing,” said Peter Detwiler, a consultant with the state Senate Local Government Committee. “It’s the beginning of a downsizing in government.”

According to Ramsay, it may also signal a new twist on the old-fashioned premise of private enterprise: the beginning of public enterprise.