City Attorney Finds Hahn’s Plan for Trust Fund Illegal

Mayor James K. Hahn’s plan to balance the city’s budget by using $5.8 million from a business tax trust fund is illegal, according to an opinion issued Monday by City Atty. Rocky Delgadillo.

Hahn had proposed using the money to hire tax auditors and set up a new computer system for the city’s finance office.

But several council members objected, saying that the money should be used only for direct reform of Los Angeles’ antiquated system of business taxes.

An influential business group, the Valley Industry and Commerce Assn., also condemned the proposal, saying it would hurt economic development in the city.

At council members’ request, Delgadillo weighed in with an opinion. He said a council ordinance prevented the transfer of money from the business tax trust fund to the city’s general fund unless the money was to be used for specified tax reforms.

“We shouldn’t do it,” Councilman Tony Cardenas said. “We can’t do it. And like I’ve been saying all along, it’s just not right.”

Hahn spokesman Yusef Robb suggested that council members could simply pass a new ordinance allowing the transfer.

But Councilwoman Wendy Greuel, who has led the effort to block the transfer, said that is unlikely to happen.

Council members are in the middle of their review of Hahn’s $5.3-billion spending plan for next year. They are expected to vote on the budget sometime this month.