CITY CUTS TAXES, WARNS OF BUDGET WOES.

Byline: RICK ORLOV

Staff Writer

The Los Angeles City Council on Friday approved the third reduction in business taxes in as many years, despite a bleak financial outlook for the city that has prompted a call for tightened spending.

The council voted 14-0 to cut gross business taxes 4 percent in a move some said showed the city's good faith with the business community.

But even as the council cut taxes, it was told the city's reserve fund is in perilous shape and the city is facing another $200 million shortfall next year.

"Basically, what we're saying is that we have to cut about $20 million a month if we want to be in balance next year," Councilman Bernard Parks said.

Friday's reduction brings to 11 percent the amount taxes have been reduced for companies. Other changes also have included exempting firms making $100,000 or less from all city taxes. Friday's cut will take effect Jan. 1.

"We are doing this because we promised the business community that if more money came in, we would make additional cuts," said Councilwoman Wendy Greuel, who worked with council President Eric Garcetti to push through the reductions.

Garcetti said the program has helped create jobs.

But the council also heard from City Administrative Officer Karen Sisson, who urged the council to hold off on any new spending and look for ways to slow existing programs.

Sisson said a combination of factors have left the reserve fund at $111 million -- some $90 million less than had been projected.

"We need to look at what we can do to make sure we are getting all the revenue into the city that we are owed," Parks said.

The council also backed Parks' call for reports from individual departments on whether any new programs can be delayed and money saved for emergencies.

"We cannot afford to have departments go out of budget. We must make sure they don't overspend because we don't have the safety net for them," he said.

rick.orlov(at)dailynews.com

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