LOS ANGELES -- The Los Angeles city council last week approved a $4.3 billion spending plan for fiscal 1995, fulfilling Mayor Richard Riordan's goal of increasing funding for public safety by tapping the coffers of four independent departments.

The budget won passage on an 11-to-0 vote Thursday afternoon.

The approval came following four days of deliberations in which council members slashed a proposed reserve fund by $12 million to pay for last-minute spending programs. The fund is now set at $26 million, down from $38 million.

The reserve fund downsizing should not have "an immediate rating impact," Chris Irwin, a director for Standard & Poor's Corp., said Friday.

"If there had been zero reserves, we might have had a problem" with the final budget, because it would have raised questions about the city's "financial stability for the rest of the year," Irwin said.

But the $26 million reserve "will provide a little bit of flexibility" if the budget assumptions do not work out, he said.

Standard & Poor's, which has maintained an AA rating on Los Angeles general obligations bonds since 1965, has a negative outlook on the city. Moody's Investors Service last July revised to Aa1 from Aaa its ratings on the city's GO and lease obligation bonds.

A key to the spending plan for the fiscal year beginning July 1 as to add an extra $83 million to the police department budget to hire 450 new police officers. The money also would provide additional overtime for the department's current 7,700-member force.

To fund the expanded police budget and other city programs, the council approved the transfer to the general fund of $262 million in revenues from the city's four semiautonomous, proprietary departments.

A total of $197 million will be shifted from the water and power department, $25 million from the community redevelopment agency, $20 million from the airports department, and $20 million from the harbor department.

"While the transfers put quite a bit of pressure on those agencies, the agencies are strong to begin with, so we don't expect it to affect their ratings," said Barbara Flickinger, a vice president and assistant director for Moody's Investors Service.

The water and power department transferred amount could change if cash proceeds from the proposed sale of vacant land are not received by the fiscal yearend, said Phyllis Currie, chief financial officer for the department.

"We will have ongoing discussions with the city about the transfer," Currie said. "We're trying to address the fiscal problems the city is having by being responsive, but we're also restructuring ourselves so we can be competitive in the future."

On Feb. 7, Standard & Poor's revised its outlook to negative from stable on the department's $2.7 billion of power revenue bonds outstanding.

The outlook change was in part based on the rating agency's concern about whether the department "can truly afford" to make the transfer without eroding its competitive position, said Bill Cox, a rating agency director.

The community redevelopment agency transfer of $25 million is contingent upon the city attorney issuing an opinion that the transfer, affecting money earmarked for housing, would not run afoul of state redevelopment law, said Ed Corser, assistant city administrative officer.

The harbor department transfer of $20 million could fuel litigation by port tenants if the city does not use the money for port-related purposes, said Jim Preusch, chief financial officer for the port. But, Preusch said, "Our intent is to be cooperative because we want to be a good member of the city family."

An airports spokeswoman declined to comment Friday on the department's $20 million transfer.

Mayor Riordan's proposed budget would have consolidated eight city departments, including the redevelopment agency, and created two large departments. It also would have eliminated the board of public works. But the council delayed those actions pending further study.

For now, Riordan, a strong proponent of privatization, placed on the back burner controversial proposals to sell or lease Los Angeles International Airport and to assign routine municipal functions such as trash collection to private firms.

The council's action last week closes a projected $198 million short-fall identified by city budget planners earlier this year. The original budget deficit forecast of $130 million ballooned after the Jan. 17 Northridge earthquake, which is expected to contribute to a decline in general fund revenues.

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