By Linda Taaffe

Los Altos officials are bracing for a possible $1.1 million cut in city revenues as a result of the two-thirds slash in the California Vehicle License Fee that Arnold Schwarzenegger approved during his first day as governor Nov. 17.

Schwarzenegger pledged to replace the funds, but local officials remain skeptical that the state will have the money to fulfill his promise. The vehicle registration fee is a prime source of local government revenue. With the cut, cities could lose as much as $4 billion annually.

Assistant City Manager Starla Jerome-Robinson said state officials had not provided cities any information last week.

“At this point we don’t have enough information to do anything but speculate on the total impact,” Jerome-Robinson said.

The vehicle registration fee is a personal property tax that motorists pay when they register their cars each year. Although the state collects the tax, it is a local fee that goes into each city’s general fund for basic services, including police, fire and other public safety services.

In 1998 the state slashed the vehicle registration fee by two-thirds as part of a tax reduction program for residents during its surplus budget years, with the promise to subsidize the difference.

In Los Altos, the tax represents about 5 percent of the city’s approximately $20 million annual operating budget. Jerome-Robinson said the Los Altos City Council prepared for the possibility of additional revenue cuts during the budget process last June, when former Gov. Gray Davis proposed redirecting car tax revenues out of the hands of local governments to help alleviate California’s $35 billion deficit.

Part of the plan includes putting more capital projects on hold for longer periods of time and keeping approximately $1.3 million from the Utility Users Tax typically transferred to the capital budget in the general fund.

Los Altos has already suffered a $100,000 dip in sales tax as well as a $312,000 decrease in interest revenues during this year’s budget.