LOSS OF CAR-TAX REVENUE COULD LEAVE CITIES SCRAMBLING SANTA CLARITA'S FINANCIAL MAP PREDICTED SHORTFALL, SAYS OFFICIAL.

Byline: Susan Abram Staff Writer

City governments big and small across the state are contemplating how Gov. Arnold Schwarzenegger's rescinding of the tripled vehicle license fee would create dents in their budgets, with some forced to consider slashing spending, cutting programs and laying off personnel.

In Santa Clarita, where 15 percent of the general fund relies on the license fee tax, the city had anticipated an extra $7 million to fill in the budget.

But the city also played it safe while balancing its $164.7 million budget this summer, after news of then-Gov. Gray Davis' proposal to halt payments from the state to local governments.

``We took a conservative approach and estimated what we were going to receive,'' said Barbara Boswell, interim director of administrative services. ``We took the approach that the state would probably not give us 100 percent of the $7 million and figured we were at risk to lose $4 million. When the state adopted the budget, they ended up rescinding the reduction for three months. We lost $2 million instead.''

Lancaster and Palmdale - which in normal fiscal conditions both get more than $7 million annually from the fee, their second-highest source of revenue behind the sales tax - could stand to lose $2.5 million over the next eight months if state lawmakers don't make up the difference.

Palmdale Mayor Jim Ledford said he believes state officials intend to compensate cities and counties from the reduced vehicle license fees by what government officials have come to term ``backfilling.''

``We've been led to believe that local government is going to be protected by the state's backfill,'' Ledford said. But he added: ``If you put it on local government, it will have a devastating effect to cities across the state.''

Lancaster Finance Director Gary Hill said a 1998 ballot measure guaranteed the state would make up the difference, but he isn't sure how that guarantee will be upheld.

``The real issue is: Will they, and when will they?'' Hill said. ``At this time we have no assurance that we will receive that backfill.''

Santa Clarita officials have been reiterating to state lawmakers the importance of the vehicle license fees for funding municipal services such as police protection and street repairs, Hill said.

Boswell said Santa Clarita stands in good shape compared with other cities.

``We're in good financial shape,'' she said. ``We've taken a stance to be conservative in our revenue. We've also had a good striving local economy. That has all helped.''

But some cities are under immediate stress. According to the California League of Cities, some municipalities must start shaving spending.

``There are some cities in California that rely on the vehicle license fee because it makes up 60 percent of their general revenue,'' said Megan Taylor, spokeswoman for the association. ``And then, there are cities who use 70 percent of that on police, fire and emergency services.''

The Los Angeles City Council, for example, must contend with a possible $150 million hit to this year's budget.

Other cities - such as Glendale and Burbank, both charter cities with populations of more than 200,000 and 100,000, respectively - stand to lose about $7 million each.

Already burdened by rising retirement costs for police officers and firefighters, Glendale's budget is $8 million in the red, despite cuts of $5 million last year.

The Burbank City Council sliced $7 million from its budget last year, and faces a $3 million deficit as well.

Schwarzenegger wants to ask voters in March to authorize the state to sell at least $15 billion in interest-bearing bonds to refinance California's $38.2 billion debt.

Staff writer Charles F. Bostwick contributed to this story.

Susan Abram, [phone]

susan.abram(at)dailynews.com

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(color) Gov. Arnold Schwarzenegger makes the thumbs-up sign after talking about rescinding the car tax last week at a Los Angeles Ford dealership.

Ann Johansson/Associated Press