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Home My WebLink About01/21/2003, C11 - RESOLUTION URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VEHIC council j acEnaa REpont emn/amu. C I T Y OF SAN LUIS O B I S P O FROM: Wendy George, ACAO !.VY Prepared By: Betsy Kiser, Principal Administrative Analyst SUBJECT: RESOLUTION URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VEHICLE LICENSE FEE (VLF) REVENUES AND TO HONOR THE 1998 COMMITMENT TO RESTORE THE VLF TO ITS NORMAL LEVEL CAO RECOMMENDATIONS: Adopt a resolution urging the California Legislature to reject the Governor's proposed shift of local VLF revenues and to honor the 1998 commitment to restore the VLF to its normal level. DISCUSSION Background Since 1935 cities and counties have received the VLF in lieu of locally collected property taxes on vehicles. In 1986 the voters, by an 81.8% margin passed Proposition 47, pledging the proceeds of the VLF to funding local government services. Today, VLF revenues constitute an average of 15-25% of city and county general purpose revenues. Because more than 60 percent of city general fund spending and more than half of county general funds go to police, fire, emergency medical and health care programs, the VLF is a critical component of funding these vital services. In the City of San Luis Obispo, about 50% of our operating budget is for public safety services. In 1998, in the midst of better economic times, the legislature approved the use of a portion of the rapidly growing state General Fund to reduce the VLF payments of vehicle owners by 67.5%. The reduction was enacted with a state "VLF backfill" to local governments in lieu of the reduced VLF payment and a promise to restore the VLF to its normal level if the state could no longer afford the reduction. Current Situation On January 10, 2003, in light of the current state budget crises, the Governor recommended shifting over $4 billion in VLF backfill funds away from cities and counties over the next 18 months to fund other priorities. On January 14, in response to the Governor's aggressive proposal to balance the budget on the backs of local government, Speaker Herb Wesson til - I Council Agenda Report—VLF Resolution . Page 2 announced his plans to introduce legislation to allow for restoration of the VLF funding for cities and counties. He said, "We're prepared to clarify the law to operate as intended—and restore the VLF to its normal level." Call for Action In response to the Governor's recommendation, the League of California Cities contacted all cities, urging local government to act immediately to protect VLF funding. Their "call for action" includes sending letters, resolutions, emails and phoning Assembly Members requesting them to reject the Governor's proposed shift of local VLF revenues and support restoration of the VLF to offset the reduction in the VLF backfill It also includes sharing what is at risk with employees, the media, residents and businesses in our city and working closely with the League's Regional Representative to conduct effective and timely lobbying efforts. To date, the City of San Luis Obispo has responded to this "call for action"through the following means: 1. Generating a list of all organizations that receive funding from the City and informing them of the imperiled funding and engaging them to actively lobby their legislators 2. Generating a list of top vendors that do business with the City who would be severely impacted by the revenue shift and engaging them to actively lobby their legislators 3. Adopting a resolution supporting the League's Action for Better Communities program(passed April 24, 2001) 4. Developing a lobbying letter template for distribution at the recent Community Goals Forum and the upcoming Chamber of Commerce Good Morning SLO program In addition to the above, at the January 21 Council meeting, the City will be designating a City liaison to the Grassroots network and adopting a legislative platform that will permit the City to generate letters on behalf of the City without having to wait for Council passage. Lastly, the League requested that the City adopt a resolution urging the California legislature to reject the Governor's proposed shift of local VLF revenues and to honor the 1998 commitment to restore the VLF to its normal level. The attached resolution accomplishes this latter task. Consistent with the adoption of the resolution, staff will also prepare a letter for the Mayor's signature supporting legislation to restore the VLF to its normal level. FISCAL IMPACT The City of San Luis Obispo receives approximately 2.7 million annually from the VLF; at 67.5%, the Governor's proposal would result in the loss of$1.8 million annually. Although there is no direct fiscal impact to passing the resolution, City services could be drastically curtailed as a result of the loss of VLF revenues on top of an already difficult budget outlook. CtPl Council Agenda Report—VLF Resolution . Page 3 ALTERNATIVES The Council could choose not to support the resolution. This is not recommended due to the timeliness of the legislation (a vote on restoring the VLF likely to occur within two weeks) and the irreparable damage of taking VLF funds from the cities at this crucial and critical budgetary juncture. ATTACHMENTS Resolution G:\Staff\Kiser\Legislation\CAR- Resolution for VLF 103.doc CA( - 3 AFACHMENT RESOLUTION NO. (2003 Series) A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR'S PROPOSED SHIFT OF LOCAL VEHICLE LICENSE FEE (VLF) REVENUES AND TO HONOR THE 1998 COMMITMENT TO RESTORE THE VLF TO ITS NORMAL LEVEL WHEREAS, prior to 1935, cities and counties collected property taxes on motor vehicles to fund essential local public health and safety services; and WHEREAS, in 1935, the Legislature first enacted the Vehicle License Fee (VLF) Act, replacing the property tax on vehicles with a 1.75 percent fee charged against the value of the motor vehicle; and WHEREAS, in 1948, the fate of the VLF was increased to 2 percent of the value of the vehicle;and WHEREAS, in 1986, the voters voted overwhelmingly to constitutionally dedicate the proceeds of the VLF to fund city and county services; and WHEREAS, in 1998, a period of strong economic growth, the Legislature approved the use of a portion of the rapidly growing state General Fund to reduce the VLF payments of vehicle owners. This amount, known as the "offset", grew in future years to a 67.5 percent offset against the amount owed. The amount paid to local governments in lieu of the reduced VLF payment is known as the"VLF backfill"; and WHEREAS, the 1998 legislation and subsequent enactments contain clear provisions that when insufficient funds are available to be transferred from the General Fund to fully fund the offsets and backfill amount that the VLF offset shall be reduced and VLF payments increased; and WHEREAS, VLF and backfill revenues constitute 15 to 25 percent of typical city and county general purpose revenues. On average, more than 60 percent of city general fund spending and more than half of county general funds go to front line law enforcement, fire, emergency medical services, and health care programs; and WHEREAS, revenues derived from the VLF and backfill are of critical importance in funding vital local public health and safety services; and WHEREAS, any failure by the Legislature to maintain the VLF backfill or restore the VLF will cause widespread disruption in local government services essential to the well-being of California citizens and their cities and counties; and �tL -� AT°ACHMEC, Resolution No. (2003 Series) Page 2 WHEREAS, Governor Davis' proposal to divert $4 billion in local VLF backfill payments over the next 17 months fails to honor the 1998 commitment and is a direct assault on local services that will be felt by every California resident; and WHEREAS, shifting $4.2 billion in locally controlled revenues for local services is neither equitable nor.fair. No state program or department has been asked to shoulder such a disproportionate share of the budget pain. These cuts come on top of the nearly $5 billion each year that is transferred from local services to fund state obligations. BE IT RESOLVED by the Council of the City of San Luis Obispo that if the . state General Fund can no longer afford the expense of part or all of the VLF "backfill" that the Legislature and Governor of California are hereby respectfully urged to implement the provisions of current law providing for the reduction of the VLF offset in bad economic times and to restore the VLF in an amount necessary to reduce the VLF backfill; and RESOLVED FURTHER, that the City of San Luis Obispo hereby expresses its profound appreciation to the legislators who support such VLF restoration legislation. Upon motion of , seconded by and on the following roll call vote: AYES: NOES: ABSENT: The foregoing resolution was adopted this day of 2003. David F. Romero, Mayor ATTEST: Lee Price, City Clerk AP VED AS TO FORM: Gilbert A Trujillo, ng City A rney