COSTS COULD FORCE MIDYEAR CITY CUTBACKS.

Byline: Alexa Haussler Staff Writer

City departments are being warned to curb their spending because Los Angeles is facing millions of dollars in unexpected costs even as the economy slows down.

Mayor Richard Riordan has alerted city departments that the city's $4.3 billion budget, once flush from the benefits of the nationwide economy, likely will need to be shaved in places because of mounting legal costs and other unexpected expenses.

``It is imperative that all departments redouble their efforts to operate within budgeted funds and aggressively seek savings to offset potential cost overruns,'' Riordan wrote in the Dec. 11 memo to department heads. ``This is to be given the highest priority.''

The city's Office of Administrative Research is scheduled to issue a midyear report on municipal revenues and spending at the end of January, about halfway through the fiscal year that began last July.

``There are a number of challenges facing us and a lot of news lately about a possible slowdown in the economy, so we are mindful of that,'' said Richard Hart, assistant director of the office's budget division.

In the meantime, City Councilman Michael Feuer, chairman of the council's Budget and Finance Committee, said Friday that he is trying to ``inject a note of caution'' and has asked department chiefs to scale back requests for additional funding in the next six months.

``I directed all of the city departments not to come forward with any additional spending proposals without any new revenue identified,'' Feuer said. ``I am very focused on assuring that we retain a significant reserve by the end of the year and, in order to retain that reserve, we have to watch our spending now.''

Along with a dip in the economy, Feuer said, the city also has been hit with climbing workers' compensation costs and a growing price tag for police reforms stemming from the Rampart police corruption scandal.

The unexpected costs that the city had not built into the 2000-01 budget include a $9 million shortfall in workers' compensation funds. Feuer said the number of workers' compensation claims has remained steady but medical care costs have risen.

Plus, the city must pay millions for police reforms required in a consent decree with the U.S. Department of Justice stemming from the Rampart Division corruption scandal. Included is at least $15 million to launch a computerized tracking system for problem officers and the cost of transferring complaint investigations from the Robbery-Homicide section to the Operations unit.

``These are expenses that are important to incur and yet they are expenses that, when we formulated the budget this year, we did not expect,'' Feuer said.

Carolina Guevara, a spokeswoman for the mayor, said the city has plenty of reserves and that city services are not likely to feel an impact from the crunch.

``We have to prepare and secure the city, but we have plenty of reserves, and none of the city services will have to be affected,'' she said. ``We just want to be able to prepare and make sure the city stays on a stable course.''