Hearing near on bid by Libertarians to ax county '90 sales tax.

Los Angeles County stands to lose as much as $400 million a year for a host of transit projects if an appeals court next month overturns a ruling upholding a key 1990 sales tax.

The appeal, filed by state Libertarian Party leader John Vernon and nine other members of the group, challenges Proposition C, the half-cent sales tax measure narrowly approved by county voters in November 1990 to fund anti-gridlock programs.

Should the Libertarians prevail in court, it would be a major blow to the Los Angeles County Transportation Commission, which intends to spend Proposition C proceeds on expanded bus and rail services, freeway and highway upgrades and in refunds to local cities for their own pet projects.

The appeal, however, is something of a long shot, according to LACTC attorney Al Kaufer, a partner with downtown Los Angeles-based Nossaman, Guthner, Knox & Elliot. Back in March 1991, a Los Angeles Superior Court judge ruled the sales tax measure was legal.

Playing it "cautiously" because of the appeal, though, the LACTC has not spent any of the Proposition C money, separating it into a special account in the county's pooled fund, according to commission Treasurer Richard Dominguez. Since collection of Proposition C money began in June, $202 million has accrued. Roughly $500,000 in interest from that account has been spent, Dominguez confirmed.

The LACTC, which would appeal if Vernon's challenge succeeded, has programmed $1 billion each year to spend on projects countywide. If the Proposition C spigot was shut off, the commission would have to rely more heavily on federal and state funds as well as Proposition A, the original transit half-cent sales tax approved in 1980.

Vernon's appeal centers on the two-thirds vote requirement which became part of California's Constitution when Proposition 13, the landmark property tax limit, was enacted in 1978. Refining that concept in a San Diego case just last December, the state's Supreme Court ruled 5-2 that sales taxes collected by local districts -- for the purpose of replacing funds no longer available because of Proposition 13 -- are invalid unless approved by two-thirds of voters.

A total of 50.4 percent of county voters approved Proposition C.

But the LACTC is in the clear, Kaufer said, because the state Supreme Court ruling applies only to "districts" formed after Proposition 13. The transportation commission was formed by the state Legislature in 1976.

"That's a fiction, legal B.S.," Vernon said in an interview last week. "Nothing in Proposition 13 talks about (vote requirements) for districts formed before it."

The Libertarian Party opposes both Proposition C and the LACTC, Vernon added, because they are creating a "monopolistic, socialized transit system" that is costing taxpayers more than it benefits them. The appeal is slated to be heard Feb. 6.

Though the LACTC contends it is immune, the December state Supreme Court ruling may endanger an estimated $16 billion in sales tax revenues for 18 California transit authorities. Meanwhile, Proposition A money is expected to be off $30 million from last year because of sluggish retail sales caused by the recession.