HAHN UNVEILS CITY'S BUDGET.

Byline: Rick Orlov Staff Writer

Mayor James Hahn proposed on Friday a $40 million overall cut in city spending for the coming year, relying on an optimistic view of economic recovery and a deeper slice of Department of Water and Power revenue to balance his budget.

The proposed $4.81 billion budget for the fiscal year beginning July 1 relies on a continued hiring freeze and reductions in administrative programs to solve what had been a projected $250 million shortfall as recently as three months ago.

``It is frustrating that in my first budget that we have to do this,'' Hahn said at a City Hall news conference. ``I had hoped to spend more on neighborhoods, but this is the best we could do under the circumstances.''

The mayor said his vision for the city had to be curtailed by the economic slowdown and the impact of the Sept. 11 terrorist attacks.

``While the terrorist attacks exacted a sharp and visible human toll on the East Coast, the economic ripples were much more far-reaching.''

Hahn also said the budget does not deal with the potential impact of secession.

``You can't prepare a budget for such a situation,'' Hahn said. ``This is a budget prepared for one city. If secession happens, we will have to adjust for it. But I don't think a new city will be able to provide the services we are able to provide.''

While he received wide support for the package from most city officials, some council members served notice that they plan to closely look at the budget.

``I have some very serious concerns about how he was able to balance this budget,'' said Councilman Nate Holden, who had been at odds with the mayor over the decision against giving Police Chief Bernard C. Parks a second term.

``You can't do this with mirrors and I'm not sure services aren't being cut to the public.''

Councilman Nick Pacheco, who heads the council's Budget and Finance Committee, which will review the package beginning April 29, said he also wanted to look at how the budget treats different parts of the city.

``My issue is equity,'' Pacheco said. ``I want to make sure no parts of the city are being ignored.''

And Councilwoman Jan Perry said she had reservations about whether budgeted programs - such as for sidewalk repairs and animal regulation - are actually carrying out the work for which they are budgeted.

``We still have packs of wild dogs running loose in this city,'' Perry said. ``I'm going to have a lot of questions when this comes to council.''

Hahn insisted the budget will not affect services to the public and will increase spending for the police and fire departments while not involving any layoffs of city workers or any increase in taxes.

One of the biggest factors in covering the shortfall was winning approval from the DWP to increase its contribution to the city from 5 percent to 7 percent a year from electricity sales, meaning it will give the city nearly $163 million this year, a $46.5 million increase over last year.

``We have analyzed this and are doing so well with our power sales that we believe we can easily afford it,'' said Frank Salas, assistant general manager of the utility. ``We talked with the various rating agencies and they approve of it and, we think, will improve our bond rating.''

Hahn defended the transfer - criticized in the past by several officials as being a hidden tax that should be used to reduce rates.

``The Department of Water and Power has the lowest rates of any utility,'' Hahn said. ``The people of the city are entitled to a return on their investment. The DWP is the best, most efficient utility and we want people to feel good about being a customer.''

Other revenue increases to help balance the budget include an additional $28.6 million in various revenue sources, $12 million from an increase in ticket fines, $14 million in federal and state grants and $34 million in bond revenue.

In addition, the reserve fund from this year's budget is expected to be more than $120 million, Hahn said, allowing him to carry over $64 million in reserves for his proposed budget and use the remaining funds for new programs. The $64 million represents 2 percent of the general fund budget.

Hahn said the city also was able to reduce spending by $100 million in the present budget through the hiring freeze, salary savings, deferral of internal city programs and other savings.

``We will keep the hiring freeze in place until we begin to see some change in the economy,'' Hahn said. ``We aren't sure how long that will be, but we expect it for several months.''

The mayor also is deferring maintenance on some buildings and proposed new programs, such as more than $40 million for a botanical garden at the Los Angeles Zoo and planting on street medians.

The freeze applies to all departments except police, fire and sanitation.

As he has done previously, during a series of news conferences over the past week, Hahn pointed to his efforts to expand programs to the public or maintain them at their current levels.

The budget proposes a 3.8 percent hike in the LAPD budget, increasing its operating budget from $859 million to $927 billion, and allows for the hiring of 360 new officers. It also sets aside $39 million to comply with the federal consent decree.

``I have said from the day I took office that public safety is my top priority,'' Hahn said. ``If we are able to hire more officers, I will find the money for them.''

The proposal also calls for a 4.9 percent increase for the Fire Department, boosting its spending from $385 million to $404 million and allowing the LAFD to purchase 10 new ambulances - leaving only 10 of 103 fire stations in the city without such a vehicle - and the hiring of 48 new firefighters as well as increasing the number of paramedics from 549 to 573.

Hahn also is proposing a $7 million increase in the Recreation and Parks budget to $152 million, as the city's share, to build or refurbish 50 new parks in the city.

Libraries will receive an extra $2 million, increasing the city portion to $60 million, to provide staffing and materials for 17 new or refurbished branch libraries, each with a minimum of 30 computer workstations.

Other items to be funded included a job program to work with 17,000 young people and expansion of the L.A. Best after-school program.

Hahn also pointed to the fact that the budget calls for continuing the same level of street paving - 260 miles - the repair of 78 miles of sidewalks and the trimming of more than 123,000 trees.

The biggest new expense in the budget will be for salaries on existing contracts - adding $137 million in costs. In addition, employees are entitled to cost-of-living adjustments - expected to be about $60 million - but departments will be required to cover those costs through savings and other cuts.

The mayor also is including $3.6 million to provide funding for the neighborhood prosecutor program in the City Attorney's Office and a 27 percent increase in the new Department of Neighborhood Empowerment, with $3 million earmarked for neighborhood council grants.

Hahn aides said the budget also does not expect to receive much help from Sacramento, where Gov. Gray Davis is dealing with a deficit projected to be up to $17 billion.

Jack Kyser, chief economist of the Economic Development Corp. of Los Angeles County, said it is a proper strategy.

``The state is in a tough situation and it would be best not to rely on Sacramento this year or next,'' Kyser said.

CAPTION(S):

photo, 3 boxes

Photo:

L.A. Mayor James Hahn presents his $4.51 billion budget proposal - shored up by an increased DWP contribution - at City Hall.

Tina Burch/Staff Photographer

Box:

(1) CLOSING THE $250 MILLION GAP

(2) WHERE HAHN WILL CUT

(3) WHERE HAHN WILL ADD

SOURCE: City of Los Angeles, Daily News research