GAS COSTS PUMPING AGENCIES' BUDGETS DRY.

Byline: Lisa Mascaro Staff Writer

Record-high gas prices have sucked millions of additional dollars from government agencies with fleets of cars, buses and trucks - money that could be going for other services.

The prices for unleaded, diesel and natural gas have soared the last three months, well beyond what finance directors expected last summer when they were compiling the budgets for fiscal 2004-05.

``It's a problem for everybody,'' said Megan Taylor, spokeswoman for the League of California Cities.

``Local governments are hit by this just as are other consumers of gas. You can't stop picking up the garbage. You can't stop sending the police cars out. What it can mean is that the services that you and I depend upon are cut back in certain areas.''

In Los Angeles, which is desperate to hire more police officers, the high price for fuel is costing the city the equivalent of 75 cops' salaries. Its main fuel budget is expected to go from $12.6 million to $18.7 million by the end of the fiscal year on June 30. In addition, the Los Angeles Police Department has already surpassed its $4.7 million fuel budget for police cruisers and other vehicles by $100,000 - with three months still to go in the fiscal year.

Los Angeles County's fuel costs are about 15 percent higher, a spokeswoman said. The Metropolitan Transportation Authority is paying twice as much as it budgeted for diesel, and 45 percent more for compressed natural gas to run its 2,490-bus fleet.

And Metrolink officials said they will consider raising fares by 1.5 percent - on top of a previously announced hike - partly because of the soaring price of diesel for its commuter trains.

``We're being hit like anybody else,'' said Angela Sherick, director of Los Angeles' Fuel Services and Environmental Compliance Division, which buys nearly 10 million gallons of fuel each year to run 9,000 city vehicles - everything from trash trucks to council office sedans.

Last week, the City Council drew $5.7 million from its $100 million reserve fund to keep the vehicles running through June 30. It was the second such transfer this fiscal year.

``It's kind of like getting to work - the price is so high for a tank of gas, (but) you still have to go,'' Sherick said.

Even though most government agencies are able to buy gas at a discounted rate, the price they pay still fluctuates with the changes in the oil market, so most get a new rate each week.

The price of crude oil closed at a new, all-time high last week of $57.27 a barrel, then dropped to $53.32 by Friday.

Retail prices soared to $2.54 a gallon for regular unleaded in the Los Angeles area. Diesel rose to $2.68 a gallon, compared with $2.11 a year earlier, according to the California Energy Commission.

Last week, the city of L.A. was paying $2.21 a gallon for unleaded and $2.28 a gallon for diesel.

Sherick said the hit would be worse had the city not reduced consumption - diesel usage is down 8 percent over last year - thanks, in part, to the largest municipal hybrid fleet on the West Coast.

``We're actually looking at a downturn with consumption,'' she said. ``But with the prices going up, it's impacting our budget.''

When Carolyn Flowers fills up her personal car at the neighborhood gas station, she can't help but worry about the impact of rising prices on the $33.2 million fuel budget she handles for the MTA.

Already, the MTA board has approved spending $8 million more to keep vehicles running through June - and she hopes that will be enough.

The agency budgeted $1 a gallon for diesel, but is paying more than $2. The cost of the compressed natural gas used to fuel most of MTA's buses is 45 percent over budget.

``We're going to have to manage the rest of the budget very tightly,'' Flowers said. ``It's going to be a challenge if the prices continue to go up.''

Metrolink, which buys nearly 6 million gallons of diesel a year, announced Friday it will hold public hearings to consider a 1.5 percent fare increase - on top of the 3.5 percent fare hike coming in July.

The agency is facing a 29 percent increase in fuel costs, spokeswoman Denise Tyrrell said.

Some agencies have turned to long-term contracts, mainly for compressed natural gas, to help keep costs in check.

Los Angeles World Airports uses CNG to fuel half of its fleet. Because it has a fixed-price contract, it has been able to keep its $2 million budget on track this fiscal year.

The city Department of Water and Power, which relies on CNG for 26 percent of the fuel for its power plants, started buying the fuel under long-term contract several years go.

Other agencies have been skeptical of getting into long-term contracts - sometimes called price hedging - because of concern they'll be locked in at higher rates, much like California was during the state's 2002 energy crisis.

DWP spokesman Randy Howard said the department is 10 percent over its $140 million fuel budget this fiscal year, but he suspects it would have even been higher without its long-term contracts.

``Our price hedges this year have been successful and helped limit our exposure,'' he said, noting that the price difference cannot be passed along to customers.

Flowers, the MTA official, said the agency has talked in the past about long-term pricing arrangements and plans to consider them again.

``The advantage is, you can basically smooth your cash flow,'' she said. ``The fear is if you lock in at a high rate, and the rates go down, you can lose your advantage.''

Lisa Mascaro, [phone]

lisa.mascaro(at)dailynews.com

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Photo:

(color) Jesse Palacios of the city of Los Angeles' fleet services fills up a city vehicle Friday at a pump station underneath City Hall East.

David Sprague/Staff Photographer