Cities that provide officials with excessive pay would be subject to significant financial penalties, including a 50% income tax on city council members, under a proposal considered by state lawmakers Wednesday in response to the salary scandal in Bell.

The legislation would also require employee compensation and contracts with managers to be approved in open session at least seven days after the details were posted for the public on a city website. Those details would include such extras as bonuses and special vacation, insurance and pension benefits.

The measure would also hit cities in their pocketbooks by blocking their ability to borrow money by issuing bonds and to spend money for tax-generating redevelopment projects if the state attorney general determined their council members’ salaries to be excessive.

“It’s pretty clear in the case of Bell that the City Council put their personal interest ahead of the interests of taxpayers, taking advantage of the ability that they had as a charter city to pay themselves these outrageous $100,000 salaries,” said Assemblyman Hector De La Torre (D- South Gate), author of the measure, AB 1955.

State Sen. Louis Correa (D- Santa Ana) said he was planning to introduce a separate bill Thursday to require local administrators and elected officials, including school board members, county supervisors, water district board trustees and city council members, to annually disclose their salaries, benefits, reimbursement payments and other perquisites.

They also would have to disclose income from side appointments to commissions, an issue that arose in the Bell controversy.

Representatives of many of California’s 480 cities say they support the intent of the De La Torre bill but believe that attempts by the state to restrict city compensation may be illegal.

The state Constitution reserves for charter cities the power to control their employees’ pay, according to Chris McKenzie, executive director of the League of California Cities, whose attorneys are reviewing De La Torre’s proposal.

“We want what he is trying to accomplish to be effective and constitutional,” McKenzie said. “It’s not going to be effective if it’s illegal.”

The De La Torre measure would not set salaries; it would create financial disincentives for cities to approve excessive pay. It would allow the state attorney general to designate municipalities as “excess compensation cities” subject to sanctions.

The bill would subject the state’s 100-plus charter cities, including Bell, to the same standards that apply to general-law cities, where salaries are limited based on the size of the city.

A municipality would be considered an excess compensation city if council members received more than $300 a month in cities with up to 35,000 residents and more than $1,000 a month in those with a population of more than 250,000. Higher salaries would be allowed for full-time councils and pay approved by voters.

If a municipality is determined to be an excess compensation city, it would no longer be allowed to create redevelopment project areas — a key tool used to create tax-generating construction — or borrow or spend money to pursue redevelopment.

In designated cities, the measure also would increase the income tax rate to 50% on the portion of the council members’ gross income deemed excessive. That, De La Torre said, would be a “disincentive” for councils to approve excessive salaries for themselves without voter approval.

McKenzie supports the requirements in AB 1955 that compensation packages and contracts with managers who report directly to a city council be ratified by the council in public. At least a week before ratification, the city would have to publicly post the contract information, including the employee’s name, position, total salary, benefits “and any other compensation,” including contributions to pension funds on behalf of the employee.

The De La Torre proposal, scheduled to be taken up Thursday by the Senate Local Government Committee, was welcomed by Jon Coupal, president of the Howard Jarvis Taxpayers Assn., but he wondered why it took the Bell scandal to get state officials to see that more disclosure was needed.

“We’re glad some of our state elected officials are finally getting religion on this issue,” said. “But this is a little bit like closing the barn door after the horses have left.”

Meanwhile, the state’s pension system is under pressure to do more to prevent government pay abuses after The Times reported last week that state officials had become aware of exorbitant salary hikes in Bell four years ago and did nothing about it. State Treasurer Bill Lockyer, who sits on the board of the California Public Employees’ Retirement System, on Wednesday unveiled a proposal for the board to produce an annual public report comparing salaries across state and local agencies. The report would list the 100 top-paid public employees. Lockyer’s plan also calls for staff at CalPERS to inform the board of any excessive salary increases awarded to public employees and to implement new procedures to ensure that such salary hikes do not clip by the pension fund unnoticed.

The proposal will be considered by the board in the coming weeks.

“The Bell fiasco shows that when a few greedy public officials are allowed to operate outside the public view, they can turn taxpayers into their personal ATMs,” Lockyer said. “These recommendations have a simple goal: to help ensure taxpayers know how much they’re paying the folks who work for them, and how those payments affect their obligation to fund retirement benefits.”

patrick.mcgreevy@latimes.com