THE STATE BUDGET: LOCAL IMPACT : City Grateful It Can Tap Harbor Reserves to Ease Its Fiscal Crunch

LONG BEACH —  While most cities were trying to figure out how to cut spending last week, Long Beach officials gave thanks that the state allowed the city to take money from its wealthy harbor to pay for police, fire and other services.

“We are going to be made whole again,” said Mayor Ernie Kell, who had feared deep cuts would have to be made to make up for a loss in state funds.

The city plans to use $5.2 million in harbor reserves to make up for the money it will lose in property tax revenue under the new state budget, officials said.

Port of Long Beach officials were thankful too. The $5.2-million bailout, at one point in the state budget negotiations, would have been $72 million.

Officials of the city and the port agree that the bailout will be a savior for the financially ailing city, but it did not come without controversy that at times divided city and port officials.

The port--or Harbor Department-- is part of the city. But it is governed by an appointed board of commissioners that jealously guards income from pier rentals and tariffs for harbor improvements. In fact, it has been against state law for the city to dip into port funds.

But the Legislature, recognizing the hardship caused by the recession, authorized Long Beach and other cities with ports to use harbor money for the next two years to make up for losses in property taxes.

The state is taking property taxes that would usually go to cities to balance California’s budget, which was signed by Gov. Pete Wilson on Wednesday.

David L. Hauser, president of the Board of Harbor Commissioners, said he is glad the port was able to help the city. But he said such bailouts could sap the port of funds it needs to expand and improve to stay competitive.

The port flexed its lobbying muscles earlier this week to limit its losses.

The legislation that provided for the bailout originally would have allowed the City of Long Beach to take as much as 25% of the port’s reserves, about $72 million.

Port officials were outraged, thinking that such a large loss would threaten port improvement projects, including the proposed $500-million transportation corridor between Los Angeles and the ports of Los Angeles and Long Beach.

Jill Lawrence, a lobbyist for the Port of Long Beach, sparked the legislative action that put a cap on the amount of money Long Beach could take from its port.

“It was just way over and above what the city was losing in property taxes,” Lawrence said last week.

The outcome was a proposed legislative change that allows the city to take only as much as it lost in property taxes: $5.2 million.

Back in Long Beach, the City Council met Tuesday to discuss the proposed cap.

The council voted 6 to 0 to oppose the change. After all, the city has been hurting for years, reasoned Councilman Warren Harwood, who led the opposition. In fact, the city is already scheduled to spend about $6 million in surplus pension funds to pay for police, fire and other city services this year.

After the meeting, City Manager James C. Hankla quickly called Assemblyman Dave Elder (D-San Pedro), who advised that it would not be in the best interests of the city to oppose the cap, officials said.

That would have given the city a windfall of more than $66 million at a time when government agencies throughout the state are facing deep cuts. There could have been a backlash.

“In my judgment, Long Beach would have wound up with nothing,” Elder said in an interview last week.

After his conversation with Elder, Hankla polled eight of the council members, who decided 7 to 1 to drop their opposition to the port’s lobbying effort. Councilman Douglas S. Drummond could not be reached, Hankla said.

The Legislature ended up approving the cap later Tuesday.

Harwood was the only councilman who voted to fight the port for the rest of the $72 million, saying the port could afford the loss and the city could use the money.

“I don’t think it would hurt anybody,” Harwood said.

Kell said the outcome was equitable.

“We feel fortunate to come out of this whole,” Kell said. “I think we should be thankful.”

Long Beach will still lose about $345,000 in cigarette taxes and $100,000 in mobile home fees under the state budget. But those cuts represent a small part of the city’s $292-million general fund budget and will not require significant cuts in services, Assistant City Manager John F. Shirey said.

The city’s Redevelopment Agency also will lose an estimated $2.5 million this year, but officials are still trying to figure out how those cuts will affect projects in the city’s five redevelopment areas. But the redevelopment cuts will not affect general city services.