Bay city has new mayor, old money problem

San Francisco is in the midst of its worst financial crisis ever - and former Mayor Dianne Feinstein's successor, Art Agnos, says she is largely to blame. The problem is a projected $180 million deficit for the fiscal year beginning July 1, giving the new mayor less than two months to craft a balanced budget.

While Mayor Agnos has charged Ms. Feinstein with expanding services beyond the city's means, he also realizes she is not solely responsible for the shortfall. ``Certainly, the blame can be shared by voters, state and federal cuts, taxation and spending limitations, and so on, which [Mayor Agnos] recognizes,'' says his press secretary, Eileen Maloney.

Indeed, today's budget crisis is long in the making. Its roots date back to 1978, when California voters approved Proposition 13, the landmark property-tax limitation initiative. Within one year, property taxes in San Francisco dropped from 38 percent of all city revenues to 18 percent. Then, in 1979, the state's voters passed Proposition 4, also known as the ``Gann spending limit,'' which set caps on government spending in proportion to population growth and inflation.

Finally, cuts in federal aid during President Reagan's tenure in Washington have cost San Francisco more than $100 million.

Until now, the city has found ways around these restraints and aid cuts. Michael McGill, director of the San Francisco Planning and Urban Research Association, suggests the reason is that ``Feinstein became a hands-on, day-by-day administrative mayor. She found revenues and created fiscal reforms to meet the city's needs.''

Successful lobbying for state funds and reorganization of city finances eased fiscal pressure.

Unusually heavy rains in the early 1980s also helped San Francisco by increasing the hydroelectric output of the city's Hetch-Hetchy dam in Yosemite National Park. The city had more excess power than unusual to sell. But recent dry weather in California has cut the amount of electricity produced by the hydroelectric facility.

Funds from other, one-time sources are now depleted. Gone, too, is a budget surplus that topped out at $150 million in 1983. San Francisco has become a city with a large gap between its expenditures and its revenues, forcing it finally to come to grips with Proposition 13.

Mayor Agnos faces a formidable task. In his budget report, due for release within the next week or so, he is expected to spell out the need for structural reform of the budget. Feinstein cut the budget by reducing all programs at an across-the-board rate.

Ms. Maloney says that Agnos will ``assess each program and make specific cuts according to the importance of each.''

According to the mayor's staff, here is what the city can expect in coming months:

Wage freezes. City employees' wages are likely be frozen for the next fiscal year, reducing the deficit by as much as $40 million.

Tax increases. A number of levies are being considered, including a one-tenth of 1 percent hike in the current business tax rate, an annual business registration fee, and increased parking and municipal railway fees. Together, such measures could trim another $40 million.

Cuts in services. The ratio of public-service employees to residents in San Francisco, which has a city-county administration, is twice the average of California counties. The fire department and other services will undergo ``belt-tightening measures,'' Maloney says.

Opposition to these measures is evident. San Francisco has the highest business tax rate in California, and in a city with a reputation for not being terribly hospitable to business, many business people resent the idea of a tax increase.

Local labor unions also have scoffed at proposed wage freezes and possible layoffs, and have held rallies outside City Hall.

Former Mayor Feinstein has publicly jousted with Agnos over an issue that divided San Franciscans during, and prior to, last November's election - ``homeporting'' here of the USS Missouri, one of the World War II-vintage battleships recently reactivated by the United States Navy.

Proponents of the homeporting, including Ms. Feinstein, maintain that it would provide a significant number of new jobs and boost commercial activity. Opponents, including Agnos, say the result could actually be loss of jobs for the port.

There are indications, however, that San Francisco's new mayor has not completely closed the door to hosting the Missouri. And Agnos, in a gesture toward improving the City Hall-business relationship, has appointed a deputy mayor for business - a new position.

His staff also contends that Agnos will attempt to minimize layoffs by transferring many city employees to non-general-fund jobs.

Complicating San Francisco's financial situation is the fact that the state of California is anticipating a $1 billion revenue shortfall in the coming fiscal year, making bail-out funds from that source unlikely.

Planner Michael McGill points out that, with the new fiscal year starting July 1, the new mayor ``has less than two months to solve the crisis, or next year he will be responsible, not Feinstein.''