CITY COUNCIL WARNED OF ECONOMIC SHOALS SPENDING FREEZE, PERMIT WAIVERS EYED BY CAO.

Byline: RICK ORLOV

Staff Writer

Faced with growing financial concerns, Los Angeles city officials were warned Friday that they may need to freeze all new spending and end the politically popular practice of granting permit-fee waivers for groups' special events.

With a $7billion annual budget threatened by declining revenue and legal questions over existing taxes, Los Angeles' top budget adviser said the city needs to make sure it has money on hand before undertaking any new initiatives.

"I liken it to when you plan to make an addition to your home, but the bonus you were counting on didn't come through," City Administrative Officer Karen Sisson said. "So you put off the project until you have the money."

Sisson said the city is still grappling with a structural deficit that could mean a $215 million shortfall next year. It also faces the potential loss of an existing telephone-users tax that brings in about $270million a year.

"I know in a budget our size that $270million doesn't sound like a lot of money," Sisson told City Council members. "But when you look at the proportion of our money devoted to public service -- that's two-thirds of the budget. A $270million cut will be noticeable in other service areas and that is the choices we will be looking at."

The council is considering a proposal from Mayor Antonio Villaraigosa to ask voters on the Feb. 5 ballot to approve a 9percent telephone-users tax to keep revenue flowing to the city in case a judge rejects the city's existing phone tax.

Sisson said she will develop a list of recommendations that will include a freeze on all spending in the unappropriated budget for future programs and doing away with fee and permit waivers that could bring in $6million to $10million.

Fee waivers have long been the target of critics of City Hall. Waivers generally are granted for the costs the city incurs providing traffic control around events such as community festivals, street fairs and block parties.

Programs that are now in the unappropriated budget include the City Attorney's Office's gang-prosecutor program, expense accounts, fuel purchases, homeless shelters, various anti-gang programs, new police and fire stations and workers' compensation attorneys.

Sisson said the city faces the squeeze as revenue has dropped in a number of city tax categories.

Councilman Bernard Parks, who chairs the council's Budget and Finance Committee, also warned that the city's reserve fund is below the 5percent level it is required to maintain and the contingency fund -- scheduled to be at $88million -- is less than $15million.

"We can no longer do our budget on an annual basis," Parks said. "We have to look at it every month to make sure spending stays in control."

rick.orlov(at)dailynews.com

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