Hahn Critics Focus on One-Time Revenues

To plug a gaping hole in the city budget, Los Angeles Mayor James K. Hahn has proposed some controversial fixes, such as selling millions of dollars of poor-performing loans at a discount and taking more than the usual amount of money from the coffers of the Department of Water and Power.

All told, the mayor has proposed tapping one-time revenue sources for $189 million. That has sparked concern among some city officials, who say it could set the city up for greater pain in future years.

“If you use one-time revenue for multiyear projects, like hiring more police officers, you have to go find another one-time revenue source for next year to keep it going,” said Councilman Bernard C. Parks, chairman of the council’s Budget and Finance Committee and a possible candidate for mayor.

Hahn defended his $5.35-billion budget for the fiscal year beginning July 1.

“We wanted ... to find ways to not ask our residents to pay more in taxes,” the mayor said Wednesday. “I think we’ve been very prudent.”

In drafting the budget, Hahn faced a potential major shift in property taxes to the state, an increase in payments to the pension funds and an increase in personnel costs, according to Deputy Mayor Doane Liu.

All told, City Administrative Officer Bill Fujioka estimated that revenue was short of expenses by $306 million.

Hahn also wants to expand the police force by 30 officers, increase street repairs and staff three additional libraries being built with bond funds.

His plan for closing the gap and funding the priorities includes $227 million in new revenue sources and $79 million in cuts.

The plan already has its detractors, including some who object to Hahn’s proposal to transfer an additional $60 million from the DWP electric fund to the city general fund on top of the $178.7 million that is normally transferred from the agency each year.

Liu said the larger, one-time transfer was possible because the DWP had received more money this year by selling surplus electricity and paying lower interest rates on its debt.

But Richard Close, president of the Sherman Oaks Homeowners Assn., accused Hahn of essentially raising taxes without a vote. He noted that the DWP was asking for an 11% increase in its water rate at the same time Hahn was asking for a larger transfer of funds.

“Clearly, it appears to me this is an effort by Hahn to raise taxes illegally in order to balance the budget,” Close said.

However, Liu said the extra $60 million is coming from the DWP’s electric fund, which is separate from the water fund.

Some city officials are wary of Hahn’s proposal to sell much of the Community Redevelopment Agency’s approximately $75-million poor-performing loan portfolio to investors at a discount. The mayor estimates that would provide $24 million for housing programs.

But Councilman Eric Garcetti said he was open to the idea of selling troubled loans at a discount if it would help the city reach the goal of providing funds for affordable housing.

The biggest measure to close the budget gap is Hahn’s proposal to use more than $134 million currently in reserve funds, which was amassed this year largely through a hiring freeze and delaying the replacement of equipment, including computer systems.

After the transfer, the reserve fund would total $93 million, or 2.54% of the general fund. The city requires that the reserve fund be at least 2%.

The mayor proposes saving another $20 million by eliminating more than 300 jobs in the current year budget.

Several council members said they were open to proposals to use one-time revenue sources to get the city through the budget problems, with the hope that an improving economy would provide relief.

“I think we’ve been pressed into a corner,” said Councilman Ed Reyes. “We have to sustain the levels of service, and we have to go for one-time funds.”

Times staff writer Noam N. Levey contributed to this report.