The URL can be used to link to this page

Home My WebLink About05/21/1998, A-2 - LOCAL GOVERNMENT FISCAL INDEPENDENCE AND STABILITY memomnbum May 21, 1998 TO: Board of Supervisors, County of San Luis Obispo City Councils, San Luis Obispo County Cities FROM: Allen Settle, Mayor, City of San Luis Obispo ' SUBJECT: LOCAL GOVERNMENT FISCAL INDEPENDENCE AND STABILITY RECOMYT,NDATION Adopt a joint resolution urging the Governor and State Legislature to oppose the phase-out of vehicle license fees (VLF), but to support the concept that if this occurs, any phase-out of VLF must be linked to: ■ A constitutionally-guaranteed back-filling of these revenues from other sources. ■ The return of property taxes taken away from.cities and counties by the State through the Education Revenue Augmentation Fund(ERAF). DISCUSSION As you know, there are serious proposals before the legislature (AB 1776, McClintock and SB 1723, Haynes) which would phase-out VLF revenues over the next five years. Since 1935, VLF has been a dependable revenue source for cities and counties. Traditionally, it is assessed by the State on behalf of cities and counties "in-lieu" of assessment and collection of local personal property taxes on vehicles. Why is this proposed phase-out of critical concern to cities and counties? VLF revenues are an essential source of funding for key General Fund services like police and fire protection. The typical city in California spends 65% of its discretionary revenue on public safety services. Statewide, VLF is the third most important General Fund revenue for cities (after sales and property taxes). This is an equally important revenue source to counties: statewide, $2.6 billion annually is at risk with this phase-out; of this amount, $1.8 billion annually (70%) goes to counties. If the State takes these revenues away from us, they will severely jeopardize our ability to provide basic services to our communities, and to financially plan for the future. We need greater fiscal independence, not greater reliance upon the State. While "assurances" have been made that cities and counties will be "made whole" in the event that VLF is phased- out, the history of State and local government fiscal relationships over the past 20 years (and underscored by the past 5 years) tells us that trading a stable, dependable revenue source for a State-controlled one is the exact opposite direction from where we want to go. Our fiscal future -� lies in greater fiscal independence from the State,not in greater reliance upon it. V Local Govemment Fiscal Independence and Stability Page 2 In short, it does not make sense for the State to take away from us a secure revenue source, and to then suggest (not guarantee) replacing it with one that will immediately be in harm's way the next time the State faces fiscal pressures. This a fair source for funding local vehicle-related services. VLF revenues are a fair source of funding the vehicle-related costs that local agencies incur in servicing motorists, such as traffic enforcement and street maintenance. Enforcing traffic and parking laws, designing and building safe streets, and maintaining them well after they are built, are some of the largest costs that cities and counties incur, and far exceed VLF revenues. It is fair for motorists to pay directly for some of these costs. The State should return take-sways first. The discussion of phasing-out VLF largely stems from the State's radically improved financial condition. However, a large a part of the State's fiscal improvement is a direct result from the revenues taken away from cities and counties by the State under ERAF. For this reason, a strong case can be made that any surplus should go to repaying local agencies for these take-aways — $3.6 billion annually — before Sacramento contemplates a substantial giveaway. There are better places to look for tax relief. If the State believes that its improved fiscal condition warrants a tax cut, this is certainly a legitimate topic for public policy debate. However, there is no need to draw local government finances into this discussion — especially given the battering we have received from the State over the past few years. There are many other broad-based taxes that could be reduced— such as sales and income taxes —without again placing local governments at risk by needlessly involving them in the State budget process. Conclusion. Executive and legislative efforts should be directed to restoring revenues taken away from us by the State under ERAF — however, if this is not going to happen, at m;n 1 7 the State should not be making things worse by causing even greater fiscal uncertainty and instability at the local level. Proposed Resolution While cities and counties should be unequivocally opposed to any VLF phase-out — as well as any other revenue measure that would reduce our fiscal independence and increase our reliance on the State—the reality is that support for this phase-out is gaining. For this reason, we propose adopting the attached resolution which links any VLF phase-out to: M A constitutionally-guaranteed replacement of the lost revenue. ■ The return of property taxes taken away under ERAF. SUNEVIARY The proposed VLF phase-out places all cities and counties at serious risk in their ability to fimd critical services, and in taking responsibility for their fiscal futures. If this happens, it needs to be clearly linked with assurances that our fiscal outlook will be enhanced, not further threatened, as a result. r � JOINT RESOLUTION OF THE BOARD OF SUPERVISORS OF THE COUNTY OF SAN LUIS OBISPO AND CITY COUNCILS OF ALL THE CITIES IN SAN LUIS OBISPO COUNTY URGING THE GOVERNOR AND THE STATE LEGISLATURE TO OPPOSE THE PHASE-OUT OF VEHICLE LICENSE FEES WHEREAS, the Governor and the State Legislature are considering a phase-out of vehicle license fees (VLF) over five years as proposed in AB 1776 (McClintock) and SB 1723 (Haynes); and WHEREAS, vehicle license fees are an essential source of funding for key city and county services like police and fire protection, and if the State takes these revenues away from local government— on top of property tax revenues already taken away from cities and counties by the State through ERAF — this will severely jeopardize local government's ability to provide basic services to our communities, and to financially plan for the future; and WHEREAS, vehicle license fee revenues have a long tradition as a local government funding source, and are a fair source of funding the vehicle-related costs that local agencies incur in servicing motorists, such as traffic enforcement, safe street design and street maintenance; and WHEREAS, although "assurances" have been made that cities and counties will be "made whole" in the event that VLF is phased-out, the history of State and local government fiscal relationships over the past twenty years (and underscored by the past five years) tells us that trading a stable, dependable revenue source for a State-controlled one is the exact opposite direction from where State and local governments should go. The fiscal future of cities and counties lies in greater fiscal independence from the State, not in greater reliance upon it; and WHEREAS, the discussion of phasing-out VLF stems from the State's improved financial condition, and a large a part of this improvement is a direct result from the revenues taken away from cities and counties by the State under ERAF. For this reason, any State fiscal surplus should go to repaying local agencies for these take-aways ($3.6 billion annually) before Sacramento contemplates a substantial giveaway; and WHEREAS, if the State believes that its improved fiscal condition warrants a tax cut, there is no need to draw local government finances into this discussion. There are many other broad-based taxes that could be reduced—such as sales and income taxes—without again placing local governments at risk by needlessly involving them in the State budget process; and WHEREAS, in conclusion, executive and legislative efforts should be directed towards restoring revenues taken away from local governments by the State under ERAF; however, if this is not going to happen, at minimum, the State should not be making things worse by causing `; } even greater fiscal uncertainty and instability at the local level. r1 Joint Resolution of the County and Cities of San Luis Obispo County Page 2 NOW, THEREFORE, BE IT RESOLVED by the Board of Supervisors of the County San Luis Obispo and by all the City Councils of the Cities in San Luis Obispo County that we urge the Governor and the State Legislature to: SECTION 1. Oppose phasing-out VLF revenues. SECTION 2. Support the concept that if this occurs, any phase-out of VLF must be linked to a constitutionally-guaranteed replacement source as well as the return of property taxes to cities and counties taken away by the State through ERAF. PASSED AND ADOPTED by the Board of Supervisors of the County of San Luis Obispo and the City Councils of all the Cities in San Luis Obispo County at a joint special meeting held on the day of , 1998. ATTEST: City Clerk, City of Arroyo Grande Mayor, City of Arroyo Grande City Clerk, City of Atascadero Mayor, City of Atascadero City Clerk, City of Grover Beach Mayor, City of Grover Beach City Clerk, City of.Morro Bay Mayor, City of Morro Bay City Clerk, City of Paso Robles Mayor, City of Paso Robles City Clerk, City of Pismo Beach Mayor,City of Pismo Beach City Clerk, City of San Luis Obispo Mayor, City of San Luis Obispo County Clerk, County of San Luis Obispo Chair, County Board of Supervisors 77�