HomeMy WebLinkAbout08/19/2008, C5 - OPPOSITION TO STATE BORROWING OR CONVERSION OF LOCAL REVENUES council Mme'
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CITY OF SAN LUIS OBISPO
FROM: Jonathan P.Lowell, City Attorney
SUBJECT: Opposition to State Borrowing or Conversion of Local Revenues
CAO RECOMMENDATION
Adopt a resolution opposing proposals by state government to borrow or convert local tax
and other revenues in order to temporarily balance the state budget.
DISCUSSION
In 1952, the voters of California approved Article XVI, Section 16 of the California
Constitution, providing for tax increment financing for community revitalization. While that
provision did not authorize the legislature to appropriate such community redevelopment funds
for state programs, the legislature took a series of actions over the years that, in fact, diverted
such revenues to state programs and away from local governments. In response to the state
actions, California voters, in 2004, overwhelmingly approved Proposition IA to place limits on
the pattern of state borrowing and send an unambiguous message to state leaders that they should
stop the destructive and irresponsible practice of taking local government funds to finance the
state budget and temporarily balance the state deficit. In 2006, by a 77% margin of approval, the
voters of California also approved Proposition IA, providing similar protections for
transportation funding for state and local transportation projects, including important municipal
street maintenance and public transit programs.
Both ballot measures reflected a drafting compromise, which allows the Governor to
declare a "severe state of fiscal hardship" permitting the state to borrow locally allocated funds,
on the condition that are repaid in three years with interest. On July 1, 2008, the State
Legislature missed its Constitutional budget adoption deadline and discussions in certain
legislative circles have turned to borrowing local funds as a means to balance the state budget.
Notwithstanding his authority to invoke the fiscal hardship provision, the Governor has
expressed that such action would be irresponsible because it would deepen the state's structural
deficit and cripple local government and transportation services at a time when those services are
becoming increasingly important to local communities.
Staff supports the Governor's conclusion that it would be fiscally irresponsible
temporarily to support the structural deficit at the state level with more borrowing. Such a course
of action simply delays the inevitable at the state level, while unfairly placing the burdens of the
state's growing deficit on local governments that have fulfilled their duties to their constituents
by making consistently responsible budget decisions. Cities' investments in infrastructure,
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Opposition to State Conversion of Local Tax Increment Funding
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affordable housing and basic public safety and other community services will create needed jobs
and speed an economic recovery which will, in turn, benefit the state, but those efforts would be
severly curtailed by legislative action to covert local funds to state programs. Instead, the
Legislature should fulfill its constitutional budget obligations by utilizing state revenues,
respecting the overwhelming support of California voters for not using local property taxes,
redevelopment tax increment and transportation sales tax funds to fund the day-to-day operating
cost of state programs. Accordingly, staff recommends that the Council adopt the attached
resolution encouraging the Legislature to carryout its constitutional obligation to compromise on
a balanced budget without unfairly appropriating vital local funds.
FISCAL IMPACT
There is no fiscal impact related to opposing state action, but state borrowing (or conversion, as
there no certainty these funds will be returned to local governments) of local funds could amount to
loss in revenues to the City well in excess of$1 million.
Attachment:
Draft Resolution
G:Wgenda-Ordinances-Resol\Legislative Platform\Agenda Report.State-local budget borrow.2008.8.12.DOC
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-'� - ATTACHMENT
RESOLUTION NO. (2008 Series)
A RESOLUTION OF THE COUNCIL OF THE CITY OF SAN LUIS OBISPO
OPPOSING PROPOSALS BY STATE GOVERNMENT TO BORROW OR
CONVERT LOCAL GOVERNMENT,REDEVELOPMENT AND
TRANSPORTATION FUNDS IN ORDER TO TEMPORARILY BALANCE THE
STATE BUDGET
WHEREAS,on July 1, 2008 the State Legislature missed its Constitutional
budget adoption deadline; and
WHEREAS, both the Governor and the Legislative Budget Conference
Committee have recommended balanced budgets without resorting to "loans" or seizures
of local government property tax, redevelopment tax increment and transportation sales
tax funds; and
WHEREAS,in 1952 the voters of California approved Article XVI, Section 16
of the California Constitution, providing for tax increment financing for community
revitalization—not for balancing the state budget— and such action of the voters never
authorized the legislature to take or"borrow" community redevelopment funds for state
Programs; and
WHEREAS,in 2004 by an 84% margin of approval the voters of California
approved Proposition lA and sent a clear and unambiguous message to state leaders that
they should stop the destructive and irresponsible practice of taking local government
funds to finance the state budget and temporarily balance the state deficit; and
WHEREAS,in 2006 by a 77% margin of approval the voters of California also
approved Proposition 1A, providing similar protections for transportation funding for
state and local transportation projects, including important municipal street maintenance
and public transit programs; and
WHEREAS,both ballot measures allow the Governor to declare a"severe state
of fiscal hardship" and "borrow" these funds if they are repaid in three years with
interest, but the Governor believes it would be irresponsible to borrow such funds right
now because it would deepen the state's structural deficit and cripple local government
and transportation services; and
WHEREAS,refusal by the Legislature to carryout its constitutional obligation to
compromise on a balanced budget is not a"severe state of fiscal hardship" and would not
justify reductions in critical local services, community revitalization programs and
infrastructure maintenance at a time when cities are struggling to balance their own
budgets during an economic down tum; and
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WHEREAS,cities' investments in infrastructure, affordable housing and basic
public safety and other community services will create needed jobs and speed an
economic recovery which will in turn benefit the state; and
WHEREAS, the Legislature should balance the state budget utilizing state
revenues and respect the overwhelming support of California voters for not using local
property taxes, redevelopment tax increment and transportation sales tax funds to fund
the day-to-day operating cost of state programs; and
WHEREAS, it would be fiscal irresponsibility to temporarily support the
structural deficit at the state level with more borrowing; and
WHEREAS,it is time for the state of California to cut up its "local government
credit cards" and deal with the budget deficit in a straightforward way; and
WHEREAS,California voters are counting on state leaders to balance the state
budget using state funds;
NOW,THEREFORE, BE IT RESOLVED, that the City of San Luis Obispo
hereby declares that it:
i. Opposes efforts by state government to borrow or otherwise
convert local tax funds, redevelopment tax increment or
transportation sales tax proceeds to balance the state budget and
finance state operations; and
2. Believes any such actions would be fiscally irresponsible for the
state and would substantially negatively impact local government
services and infrastructure investments.
BE IT FURTHER RESOLVED that the City Clerk is hereby directed to send a
copy of this resolution, expressing the City Council's strong opposition to the borrowing
or conversion of local government funds for state government purposes, to the Governor
and appropriate state legislators.
On motion of seconded by and
on the following vote:
AYES:
NOES:
ABSENT:
the foregoing Resolution was passed and adopted this 19`x' day of August, 2008.
David F. Romero, Mayor
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ATTEST:
Audrey Hooper
City Clerk
APPROVED AS TO FORM:
CJ than P. Lowell
City Attorney
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