Crypto income tax suggested to solve city's deficit.

A payroll tax on all people who work in the City of Los Angeles was among the suggestions discussed last week at a meeting of the City Council's Ad Hoc Committee on the Budget Crisis.

The city's budget problems are so severe that even if the city laid off all its employees except for police, firefighters and refuse collection workers, it could not make up the projected $500 million deficit it will face if the state cuts property tax funding to cities as proposed, Chief Administrative Officer Keith Comrie told the committee.

Even without the expected $300 million in state cuts, the city is facing a roughly $180 million shortfall, and "it's more likely to get worse than better," said Comrie, who presented the committee with a table of optional spending cuts and revenue transfers totaling $184.5 million.

"How many more libraries do we have to close? How many more parks, before we go after what none of us wants to talk about -- police, fire and refuse?" posed Councilman Richard Alatorre, who later proposed the committee consider a "gross receipts" payroll tax to balance the budget.

Comrie said such a tax, which is called an "occupational license fee," if set at 1 percent, would generate $100 million per year for city coffers. This means that the "fee" for a person earning $25,000 per year would be roughly $125.

"In small percentages, it does raise large amounts," said Comrie.

A city "income tax" would be illegal, but Comrie said the law allows for the "occupational license fee," which has essentially the same effect.

"You're taxing the income of the individual employee," Comrie said.

He added that the idea has been discussed in Los Angeles before and was dropped because of strong negative public reaction.

In documents prepared for the council in 1983 and 1991 analyzing the idea, city staff noted that "factors such as the possibility of businesses locating elsewhere, and the greater difficulty in recruiting employees in competition with businesses in surrounding cities, cannot be coasted."

"The only real advantage would be that 'commuter' employees would pay part of the cost of providing services which they share with city residents. However, those city residents employed outside the city would pay nothing," the analysis noted.

Under the city charter, approval of the "fee" would require a vote of two-thirds of the council (10 votes).

Committee Chairman Zev Yaroslavsky urged committee members to look hard at major city staff cuts, saying "the longer we wait, the more Draconian the measures will be."

"Cuts have been made. We have less employees. That is real," countered Alatorre.

"It's real, but it's not enough," Yaroslavsky shot back.

This week, at its March 15 meeting, the committee will consider whether to close down all or part of the Community Redevelopment Agency, returning its tax increment to the general tax rolls, to be divided among the city, the county and local schools. The committee also will examine the possibility of selling one or more of the city's four airports.

Major elements of Comrie's $184 million budget-balancing package presented last week included:

* Continuation of a hiring freeze in all departments except police, fire and refuse. It is estimated this would result in the cutting of 1,250 positions through attrition, for a total cost savings of $39.5 million.

This would also mean cutting back libraries from six days a week of service to five, and cutting recreation center hours to 35 per week.

* Transfer of $37.5 million from the special parking revenue fund. This would deplete that fund.

* Transfer of $25.3 million of harbor revenue. This is allowed under state law for only one more year.

* Transfer of $25 million in CRA funds (the same amount as last year).

* Reduction of general fund overtime by 10 percent in all departments with more than $10,000 allocated for overtime, including police, fire and sanitation, for a cost savings of $7.5 million.

* Elimination of all street construction and improvements in 1993-94, for a savings of $7 million.

* Cutting the city's arts endowment program -- $5.5 million.

* Laying off 128 people in the Building & Safety and Planning Departments, for a savings of $5.1 million.

* Cutting after-school programs to save $3.5 million.

Yaroslavsky said the city could save $1 million just by cutting 60 building inspectors "who have nothing to do" because of reduced workloads in the department.

"There are planning people whose jobs were supposed to be fee supported, and they're not," said Yaroslavsky. "We can't get the votes on the City Council to lay these people off."

He also said that "the notion of bringing the street repair program to a grinding halt is about the dumbest thing we could do."

Comrie agreed that the street fund should be used to balance the budget "only as a very last resort."

After the first $184 million in budget-balancing moves, Comrie's plan consisted of a formula for lay-offs: 3,200 people equals $100 million.

"You will see example after example like this coming from all the cities" based on the expected state cuts, said Comrie.

Other taxes discussed included charging people for refuse collection (expected to generate $130 million), a 10 percent tax on cable television ($19 million), an entertainment tax on tickets to such things as movies, sports events and the theater ($18.5 million) and charging for fire protection ($22 million).

In another example of the effects of budget problems on the city, the 12th Annual St. Patrick's Day Parade, scheduled for March 14 in Century City, was canceled last week when parade organizers couldn't come up with the $75,000 fee required by the city.

The city used to provide traffic control and clean-up services free of charge for civic-oriented events, but not anymore. In fact, organizers of the Hollywood Christmas Parade may need to cough up $1 million in city fees or cancel their event.