Two major players in public transit last week reached agreement on a merger proposal that would create the Los Angeles County Metropolitan Transit Agency.

Board members of the Los Angeles County Transportation Commission and the Southern California Rapid Transit District agreed to the merger Wednesday following numerous meetings aimed at crafting a compromise.

The merger proposal -- if approved by the state Legislature -- would end years of debate over the best way to coordinate transit planning, development, and operations in the nation's most populous county.

Previous attempts failed for various reasons, including concern that one proposal failed to eliminate duplicate functions.

Under the proposal, members would be named to a single policy panel that oversees the proposed transit agency within 90 days of legislative approval for the plan, which could be approved next year. The existing commission and district would exist during a nine-month transition period.

A 13-member board would govern the new agency, which is to comprise the five Los Angeles County supervisors, four representatives of the city of Los Angeles, and four members from smaller cities.

The transportation commission is financing and building the county's ambitious rapid-transit rail system. The district's existing responsibilities include operating the county's massive bus system.

Transit officials have said previously that any merger proposal would accommodate existing debt obligations of the agencies.

Gray Davis, California's controller, cautioned last week that the state's budget shortfall could reach $4 billion in fiscal 1992, barring a turnaround in the economy.

Mr. Davis said declining business tax collections contributed to his gloomy forecast. Mr. Davis also noted that revenue from major tax sources in November actually declined from a year earlier, adding that such a year-to-year decline has not occurred since the Great Depression.

State finance officials already have said that California likely faces a $3 billion budget gap in fiscal 1992, which ends June 30. Legislators are scheduled to reconvene next month. Some politicians have suggested calling a special session before January to discuss the budget situation, but no one has yet acted on such a plan.

A California judge ruled Thursday that counties cannot seize local property taxes to cover new fees charged to other governmental entities for booking prisoners into county jails.

Sacramento County Superior Court Judge James T. Ford said that Ventura and San Bernardino Counties erred in seizing the funds. The judge also found that counties cannot impounnd taxes owed to local districts to cover property-tax collection fees imposed by counties.

Various cities have refused to pay the fees and are pursuing legal challenges to declare them unconsitutional. Ventura and San Bernardino Counties decided to confiscate the property taxes when localities refused to pay them.

Judge Ford denied counties the ability to impound the disputed funds, but a hearing on the constitutionality of the fees will not take place until February.

Legislators authorized the fees in 1990 to replace state funding cutbacks that affected counties. Localities have waged war ever since counties began imposing the fees.

Some cities, for example, argue that the jail-booking fees far exceed actual booking costs and also impose double taxation on city residents who already pay property taxes. Counties respond that they have little choice but to impose the fees, especially since the state authorized the revenue source to offset other funding cuts.

A Camarillo, Calif., school district on Thursday decided against holding a new bond election next spring after two defeats in recent months.

The Pleasant Valley Elementary School District Board of Trustees decided against scheduling another election in April, saying voters could be reluctant to support the measure until the economy improves. They also noted that April is when taxes come due, which would not improve voters' mood.

A majority of voters supported the district's $55 million bond proposal in November and a $75 million bond issue last June. In both instances, however, the district failed to achieve the two-thirds vote required under state law for local general obligation bond measures.

Officials say the district needs the bond funds to address overcrowding by upgrading elementary schools and building a new one in eastern Camarillo. The trustees will consider holding an election later this month or in 1993.

The Los Angeles City Council and the Department of Water and Power are continuing to spar over a proposed water rate hike requested by the city-owned agency.

After rejecting an 11% rate increase, the city council on Friday turned down a 6.85% hike that would have cost customers $18 million a year. The council will discuss the rate increase again on Wednesday.

The Department of Water and Power is facing a $98 million budget deficit. The agency has already cut more than $45 million from its current budget and eliminated more than 170 staff positions through a hiring freeze.

City council members said the department should trim high salaries and duplicate positions rather than bridge the budget gap with politically unpopular rate increases. Residents have cut water usage by 30% since April and city officials argue that a rate hike would hurt customers and send the wrong message about conservation.

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