HomeMy WebLinkAbout06/05/1997, 7A - LEAGUE OF CALIFORNIA CITIES EFFORTS TO INCREASE FISCAL STABILITY/REFORM OF LOCAL GOVERNMENT FINANCE IN CALIFORNIA v !� ! �j
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MAY 1 k 1997
Date: May 12, 1997 is i FY C -i• i
To: Mayors and Council Members of the Cities of San Luis Obispo County
From: John Dunn,City Administrative Office
City of San Luis Obispo
Subject: League of California Cities Efforts to Increase Fiscal Stability/Reform of Local
Government Finance in California
Recommendation: That the City Councils of the Cities of San Luis Obispo County endorse the
suggested action steps and adopt the attached resolution.
As recent League Bulletins have documented, President Ron Bates and the Board of Directors of
the League of C96mia Cities have started up this year with a bang. Recognizing the deteriorating
financial condition of many California cities, there has been a new sense of urgency and more
focused leadership,and the creation of a League Task Force,to the end that a comprehensive fiscal
reform/stabilization program be created for cities. The emphasis has been on achievement and
success.
While dozens of ideas and concepts have been examined,the League has recen—fly concluded that"it
is clear that a finance package has to be formed around the central concept of returning property
taxes to local govemments"and that`cities have to unite in this concept."
So, while there are still many ideas and legislative bills-on this general topic floating around, by
now the main concentration is on:
AB 95 (Sweeney)and SB880(Crowe)would return property.tax revenues to local agencies
who lost a share of their 0operty taxes in 1992-94.
ACA 4 (Aquiar)would place before the voters the issue of returning the local government
property tax shifted away from the cities, counties and special districts in 1992-94
(necessitated by the assumption that the Governor would veto the above two bills, as he did
last year)
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So, all things considered, what are the best things to do to ensure the State legislature gives real
consideration of the financial needs of cities:
1. Stay in close contact with Senator Jack O'Connell and Assemblyman Tom Bordonaro and
let them know of your city's needs and fiscal situation, and what city needs aren't being
attended to due to your financial situation. A specific description of your special needs land
situation is more effective than a generalized statement about needing more money.
2. Write letters to the authors of desired legislation and to the Senate and Assembly committee
members considering them, thanking them for their work on behalf of cities. Again, cite
specifics of what can't be done in the present situation or what could be done if the former
property tax levels were.restored.
3. While the Governor vetoed the.return of property tax revenues last year, he and his office
need to be kept"in the loop"and letters and supporting materials should also be sent to him.
Keep the pressure on.
4. Read the League Bulletin carefully and do what is suggested so that we'll all do the best job
of increasing the revenues available to cities.
5. Have a meeting with your newspaper editor to gain editorial support for local government
revenue needs and to restore the property taxes previously taken away.
6. While it is most effective for each city to do what is suggested:above, there is also value to
collective action, and it is recommended that the seven cities of San Luis Obispo County,
and the County, adopt the attached resolution which will be forwarded on to State
legislators, the authors of principal pieces of legislation in this area, the League of
California Cities and to California State Association ofCounties(CSAC).
The first attachment is the "Goals and Ingredients for City Government Finance Improvement"
produced by the League's Task Force on Tax Stabilization/Reform, which is more of a long-term
effort, to augment the shorter term effort focusing primarily on the return of property taxes taken
from local government in 1992-94.
RESOLUTION OF THE SEVEN CITY COUNCILS IN THE
COUNTY OF SAN LUIS OBISPO AND THE BOARD OF
SUPERVISORS OF SAN LUIS OBISPO COUNTY
CONCERNING THE RESTORATION OF PROPERTY
TAXES TAKEN AWAY BY THE STATE OF CALIFORNIA
FROM 1992 THROUGH 1994
WHEREAS, the property tax has been the principal support for local government finance
in California since the creation of the State of California in 1850; and
WHEREAS,the State of California, under the home rule concept,has historically left the
property tax to California local governments to accomplish their responsibilities; and
WHEREAS,the severe State recession of 1991 to 1994, and the shortage of State
revenues, caused the State to solve their own financial problems by taldng away property tax and..
other revenues.from the cities and counties of California; and
WHEREAS,these actions,combined with the recession itself, caused severe financial
hardship among the cities and counties of California; and
WHEREAS,on November of 1996,Proposition 218 was approved by the voters of the
State of California which severely restricts the ability of local governments in California to raise
necessary revenues; and
WHEREAS,most cities and counties do not have the revenue necessary to continue
current operations, fiord an adequate capital facility budget,properly maintain streets and utility .
infrastructure,and set.aside an adequate reserve level for emergencies and contingencies.
NOW,THEREFORE,BE IT.RESOLVED by the Councils of.the seven cities of the
County and by the Board of Supervisors of San Luis Obispo County that restoring of previously
lost property tax will assist the local governments o> California in meeting their public service
obligations to their citizens.
BE IT FURTHER RESOLVED that the local governments in the State of California are
the level of government closest to the people and,therefore,most attuned to their needs;and that.
creating jobs through local economic development efforts is necessary both for the commimities
of California as well as to the State itself
THEREFORE,BE IT FINALLY RESOLVED that the cities and County of San Luis
Obispo County urge our legislators and the Governor of the State of California to restore
previously-taken-away property tax revenues.to the local governments of California .
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League of California Cities, 1400 K Street,Sacramento,CA 95814
phone:916/658-8200 fax 916-658-8240
Task Force on Tax Stabilization/Reform
April 4, 1997
Goals and Ingredients
for City Government Finance Improvement.
In January 1995, the League-of California.Cities published a discussion-paper entitled '
"Making California's Governments Work." The report was the product of the League's
Committee on Local Government Reform and followed on the heals of several other
urgent calls for the reform of California state and local government. The League's report
noted "there appears to be some unanimity of opinion among well informed observers
that something must be done if public agencies in California are to serve their respective
publics in anywhere near an effective manner."
The opportunity for action is here. The Task Force on Tax Stabilization/Reform
recommends the following goals and ingredients to improve California city government
finance.
GOALS
Protect to stabilize local government revenues and help' ensure reliable
service delivery,to city.residents;
Reform to improve the equity and efficiency of state and local
government finance; and
Restore to prevent the continuing erosion city and county finances and
the important services they fund.
lAmm q
TASK FORCE ON STABILIZATIONIREPORM
GOALS&INGREDIENTS FOR CITY FINANCE IMPROVEMENT
April 4, 1997
INGREDIENTS
T
❑ Constitutionally prohibit any other level of.government from tampering with ..
city revenues.
❑ Enact Guardino Protection. Protect local governments from financial loss that
resulted from changing judicial interpretations of Proposition 62.
❑ Make Mandate Reimbursement Meaningful. Article XIII•B of the California
Constitution requires the State to reimburse local agencies when the State mandates a
new program or a higher level of services. Meaningful provisions must be made by
the State to reimburse mandates without resort to "poison pills" and other clever and
creative dodges to avoid the provisions of the Constitution.
❑ Strengthen Home Rule Authority. Establish a rebuttable presumption in favor of
home rule authority for charter cities, and require challengers to make findings that
the local action constitutes local interference with State administration of programs,
has significant extraterritorial effects, or is a state policy interest requiring statewide
uniformity. The courts have been inconsistent in applying standards for resolving
conflicts over what constitutes a municipal affair versus a matter of statewide
concern.
❑ Remove barriers to the reorganization of local agencies which promote greater
efficiencies in the delivery of services.
(3 Authorize locally enacted increases of special taxes with the approval of a
majority of voters voting in an election, thereby eliminating the distinction between
general and special taxes. Under current law, if local officials pledge the specific.use
of a.proposed tax increase, a 67% voter approval is needed This has created the
undemocratic situation where one voter can thwart the-desires of two of his neighbors.
❑ Authorize majority voter approval for the issuance of general obligation bonds.
Under current law, local governments, including cities, counties and school districts,
must receive a 67% voter approval to issue general obligation bonds for critically
needed facility improvements.
❑ Authorize countywide 1R¢ sales tax increase for locally-determined purpose.
The tax increase would require: 1) approval of ballot measure and revenue allocation
by city councils of cities representing a majority of the population in the county and
the county board of supervisors; 2) voter approval pursuant to constitutional
provisions. All counties have at least ''/:0 available under the 8.75% sales tax limit
(Iimit is higher in San Francisco and San Mateo). .
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TASK FORCE ON STABILIZATION/REFORM
GOALS&INGREDIENTS FOR CITY FINANCE IMPROYEMF.NT
April 4.,1997
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❑ Extend the sales tax to catalogue, TV and internet sale's, leveling the economic
playing field for California business and enhancing revenues. The loss of California
sales tax revenues to these marketing sectors has been conservatively estimated at
$200,000 - and growing. Federal legislation is needed.
❑ Extend sales tax to services by gradually increasing the number of services included
in the sales and use tax base. The total sales-and use tax rate could be gradually
lowered,making this revenue neutral initially.
❑ Return moving vehicle fines to cities. The reduction in revenue return has reduced
the incentive for city and county law enforcement to enforce vehicle code violations.
Following the reduction in the proportion of fine revenue going to the citing agency,
moving vehicle citations dropped 24%. -Returning the distribution of fine revenue to
pre-1991 amounts would result in an increase in moving vehicle citations,and thereby
increase revenues to cities, counties and the State.
❑ Return property tax revenues taken via ERAF to cities and.counties. The State
has shifted$3.6 billion of local property tax revenues from cities,counties and special
districts,to fund a portion of its obligations to schools. Greater access to property tax
revenues will improve incentives for sound land use decisions.
O Allocations'to local agencies to be made in proportion to net loss (ERAF and
Proposition 172).
❑ Allocate 1 cent of the State share of sales tax to cities and counties. The State has
routinely raided city and county finances in order to balance its own budget. Cities
and counties should now share in the State's improving fiscal condition.
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#15-1997
April 25,.1997
TO. California City Officials
FROM. Ron Bates,President,Mayor Pro Tem,Los Alamitos
RE. League Board Adoyts Fiscal Poliry Asking the Legislatureand the Governor to Restore.
Reform and Protect Local Government Finance.
At the recent meeting of the League Board of Directors held in Huntington Beach, California,the
Board adopted a policy to more precisely direct League efforts on the issues of local government
fiscal reform. This update to League policy was necessary to address the growing number of
issues and the changes that.have taken place in the Legislature, with the Administration and
through statewide ballot measures directed at local government finance issues.
Previously, the League Board appointed a Task Force on Fiscal Stabilization/Reform. The
membership of the task force consisted of representatives from the Board of Directors and other
interested city officials from different geographic areas of the state and with a representative
sample of large and small cities. The taskforce was given the charge to develop a direction for
the. League in dealing with the short term issues of local government finance, the Diger-term
directions for city governments and the stabilization of local government finance in order to
weather future economic downturns. The Board adopted the recommendations of the taskforce
which were to seek changes to the local government finance structure in California that Protect,
Reform and Restore city revenue bases. The specifics of this policy adopted by the Board are
as follows:
* Constitutional Protection. Constitutionally prohibit any other level of government from
tampering with city revenues.
* Guardino Protection. Enact legislation to protect local govemments from financial loss
that resulted from changing judicial interpretations of Proposition 62.
* Mandate Reimbursement. The current constitutional.prohibitions against the state
mandates does not provide the protection needed to stop mandates without proper
reimbursement. The current constitutional"protections"need to be strengthened.
* Strengthen Home Rule Authority. Through the courts, ballot measures and state
legislative action, local home rule authority through the adoption of a local charter has
League of California Cities 7A-7
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been eroded to.the point where there is little advantage for a community to consider a
charter. A constitutional presumption in favor of home rule authority should be adopted.
* Removing Barriers to Efficiencies. Any barriers to the reorganization of local agencies
should be removed in order to ensure a more efficient delivery of services.
* Majority Vote on Special Taxes. Under current constitutional provisions, one voter can
cancel out the votes of two other voters when casting a ballot on "special taxes". This is
contrary to the one person - one vote principle. The majority vote standard established in
Proposition 218 should be applied to special taxes.
* . General Obligation Bonds. The majority vote principle in Proposition 218 should also
be established for local general obligation bonds. It will assist in building infrastructure to
make California competitive. It makes local government general obligation bonds
consistent with the majority vote for state general obligation bonds.
* Jointly Authorized Countywide 1/2 Cent Sales Tax. Utilize existing authority for 1/2
cent countywide sales tax with approval of a majority of cities representing a majority of
population and a majority of county board. of supervisors: Majority voter approval
required-for imposition of tax. One-half of revenues go to jurisdictions in county based-on
population. Remaining half of revenues.go to jurisdictions based on formula negotiated
by jurisdictions.
* Sales Tax Equity. Extend sales tax to catalogue sales leveling the economic playing field
for California businesses. Federal authorization is required.
* Sales Taxes and Emerging Economy. Apply sales tax to transactions in service based
businesses while reducing overall sales tax rate. This captures changing trends in
California economy and establishes a more equitable base for sales tax imposition.
* Fines to Enforce State Motor Vehicle Laws. Return the revenues from moving _
violations taken from local government in the early 1990's to help fund trial courts: This
transaction returns the incentive.to enforce traffic laws passed by the Legislature and
signed by the Governor.•
* Return Local Government Property Tax. Shift the $3.6 billion in property taxes taken
by the state is 1992-93 and 1993-94 back to cities,counties and special districts.
* Shift State Sales Tax to Local Government. In recognition of the state's improved
financial condition and the revenue shifts away from local government to the state to
assist the state's financial condition during the early 1990's, shift up to I cent of the
state's sales tax to cities and counties.
The policy adopted by the Board provides a direction on immediate local government finance
issues in the Legislature and targets longer-term goals for the League to address. It provides the
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basis to reestablish the ability and strength of local governments to respond to its citizens by
offering critical local services, including'public safety services. It would provide for a stable
financial base and offers the opportunity to reestablish the credibility of local government.with .
its citizens. It is the hope of the League Board of Directors, that League Divisions and other
gatherings of city officials can agendize these issues for discussion and provide feedback to the
Board
Thanks to the League Task Force on Stabilization/Reform for their long and dedicated work on
this issue and thanks to the League members who voiced support for the Board's efforts. It has
taken more time than we wanted, but any process worth the effort will take careful deliberation.
Thanks again.
****+*****+++*** **LEGISLATIVE ACTIVITIES********************
1 Community Care F ilities: Group Homes-AB 323 (Baca), Support.
Smoking and Tobac Control. Bars and Bar Areas-AB 869 (Floyd),Oppose..
O' v Booking Fees- (Knight), Support.
4 Booking Fees -AR 211 aca), Support.
5 Local Agencies: Prope Tax Exchange- SB 466(Rainey), Support.
State Mandated Local C sts -AB 972 (Torlakson), Oppose.
Regulatory Takings. Res urants. Hours of Operation- SB 689(Johnson), Oppose.
T0408 Local Agency Contracts: 'gibility- SB 994(Johnson), Oppose.
9} Design Professionals Indem ification-AB 1070(Campbell),Oppose.
Impoundment,Vehicles- (Mountjoy), Oppose.
11 Solid Waste Franchises. Inde nification- SB 1179(Polanco),Oppose.
Hazardous Materials. Certi ed Unified Program Agencies - SB 659 (She ), -
)k Sponsor/Support.
13 Parks and Recreation. Fin erprinting. Fees - AB 1223 (Strom-Martin),
Sponsor/Support.
4. School Facilities-SB 1227 (O'Co ell),Neutral.
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#15 3 4/25/97
15. Welfare Reform. Leagu Board Adopts Policy Guidelines-Information.
1. Community Care Facilities: roup Homes.
[AB 323 (Baca)- Support]
Baca Group Homes Bill Clears . t Hurdle—More Support Letters Needed!!!
Pending in Assembly Appropriati ns Committee
Assembly Member Joe Baca's AB 323 was approved by the Assembly Human Services
Committee on Tuesday, April 22. Assem ly Member Baca's AB 323 will allow city police
departments to provide information to the partment of Social Services about existing crime
problems associated with the proposed loca 'on of the group home or other group homes.
operated by the proposed licensee. The bill been amended to allow the Department to
consider this information in making a licensin determination rather than requiring denial if
asked by the local agency.
Assembly Member Baca resisted Committee Chair. 'on Aroner's efforts to stall the bill and hold
a hearing after the legislative year. AssemblyMe er Baca argued forcefully that there has
already been studies of this issue and bills held up fo years without resolution and that it wasr
time to begin empowering local communities to deal 'th group home problems.- Cities have
long complained about the lack of consideration of to al conditions in siting group homes:"
AB 323 addresses some of these important issues.
Opponents argue that any local efforts to regulate oup homes, including existing
overconcentration standards, violate the Federal.Fair Housing endments Act. However, they
have never successfully challenged California's standards. it most compelling drgument is
that group homes are homes for protected classes such as.chil nand the disabled and that no
one should attempt to regulate how you or a member of the prot ed class live. This argument
completely ignores the facts that these group homes are businesse making a profit for someone`
and should be regulated to protect the interests of the busine ' clients and surrounding
community. A323 recognizes this and requires examination of the usiness owners past record'
of managing other group homes.
The lobbying effort on AB 323 'was serious. The hour was late. bly members were
attending multiple hearings. For a while it looked as though AB 323 ould be killed. The
League's lobbyist worked to provide the necessary votes as did Assembly ember Baca's staff.'
However, the most effective lobbyist on the bill was Assembly Member JoBaca himself. He
made several trips between committee rooms encouraging Assembly Human S ces Committee
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#14-1997
April 18, 1997
ERAF Bills Move Out of Committees with Full Bipartisan Support; SB 1310 (Johnson) Held in
1Y the Senate Revenue and Taxation Committee; League Continues to Seek Full Restoration of$3.6
Y billion in Property Taxes Shifted to the State.
The Senate Local Government Committee unanimously passed SB 880 on April 16, with no opposition
present and complete bipartisan support. The California Teachers' Association was listed in
opposition, but did not appear at the meeting. This legislation is one of several.proposals that attempts
to return to local government the property taxes shifted to the state in 1992-93 and 1993-94. SB 880
does the following:
1. ERAF Com, In 1997-98, the bill prohibits a county auditor from allocating property tax
revenues to ERAF in amounts that exceed the fund's 1996-97 allocations. SB 880 requires an
auditor to allocate any amounts not allocated to ERAF to local agencies in proportion to the
agency's original property tax shift.
2. Baseline ERAF Reduction. 'The legislation requires a county auditor to allocate only'the
percentages specified of a local agency's property tax shift amount to ERAF. This amounts to
a 10 percent annual reduction in the ERAF contribution - thus providing 10 percent annual
allocations.back to local agencies. .
3. "Excess" ERAF. Beginning in 1996-97. SB 880 requires a county auditor to allocate any
"excess" ERAF revenues pursuant to a writteri agreement between the county board of
supervisors and the county superintendent of schools. Local agencies receive their si are of the
"excess" ERAF revenues based on their proportion of the original tax shift. The.bill also
prohibits"excess"ERAF fiords from offsetting state aid for special education programs.
The Senate Local Government Committee passed this legislation in-the morning. In the Afternoon, the
Assembly Local Government Committee unanimously passed ACA 4• legislation introduced by
Assembly Member Fred: Aguiar that places before the voters the issue of returning the local
government property tax shifted away from cities, counties and special districts in 1992-93 and 1993-
14. This bill has fall bipartisan support and is jointly authored by Assembly Member Aguiar(R-Chino
Hills) and Assembly Member Sweeney (D-Hayward).
League of California Cities •
Avoll
1400 K Street Sacramento CA 95814 916.658.8200 fax 916.658.8240 http://wwwcacities.org
In the Senate Revenue and Taxation Committee, Senator Johnson had his SB 1310 heard by that policy
committee. This legislation would have shifted up to one cent of the state's sales tax revenue to cities
and counties based on population, approximately$3.5 billion. 'The full amountwould be shifted over a
period of five years. Each community would have to receive approval from the voters to institute the
shift.
League President Ron Bates testified in support of the measure as a vehicle to address the problems of
local goverment finance. He was joined by the Mayor of Covina, Tom O'Leary, who also urgedAhe
committee to pass the legislation.
The bill was opposed by the California Teachers' Association, the California State Association of
Counties, and the California Taxpayers' Association. Several committee members expressed their
serious concerns about SB' 1310, while still supporting some alternative effort to address local
government finance problems. The Department of Finance also testified that they were opposed to the
legislation. This means that even if the bill was passed by the Legislature, it faces a likely veto in the
Governor's office.
Given the lack of sufficient support to pass the legislation, the author requested that the bill be held by
the committee without a vote in order that the concept in the legislation could be addressed as
discussions over a local government finance package progress throughout the session. The bill itself
remains in the possession of the committee and will likely not be heard before the legislative deadlines.
Procedurally, this turns the measure into a "two-year" bill that can be taken up by the committee next
session.
With each step in the legislative process, the local government finance picture is taking on greater
(form. It is clear that a. finance package has to be formed around the central concept of returning
property taxes to local government. This does not preclude other subproposals or proposals to address
unique circumstances. It simply means that a.consensus is forming or has formed around a property
tax package that will.likely be a central piece of any proposal. Now that we have emerged from Round
one of the discussions over a finance -package for local government, cities need to unite on the
concept of a property tax proposal while. continuing to seriously entertain any
modifications/amendments to make that happen. The message is simple - CITIES HAVE TO
STAY TOGETHER!
It is also clear that until the Administration is seriously engaged in the discussion, the success of a local
government finance package is*unlikely. The package has to be shaped in such a wWthat the
Administration can demonstrate a consistent policy on local government finance and can have
reasonable expectations on the financial impacts of any such package on the general fund of the State.._
This is the challenge. -
In the meantime, the League continues to hold with the position that it seeks full restoration of the
property tax lost in 1992-93 and 1993-94. That figure is$3.6 billion!
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#14 2 4/18/97
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#13-1997
April 11, 1997
Property Tax Shift/ERAF Legislation Moves with Bipartisan Support in the Assembly;
Senate ERAF Legislation in Senate Local Government Committee on April 16, 1997 -
SB 880 (Craven); Bill to Shift Sales Tax to Cities and Counties, SB 1310 (Johnson) to be
Heard in Senate Revenue and Taxation on April 16, 1997.
As communicated in a FAX message to all cities last week, the Senate Local Government
unanimously passed AB 95a measure to return the property taxes to local government that were
shifted to the state in 1992-93 and 1993-94. Among the encouraging events at the meeting was
the complete bipartisan nature of the Committee's action. Shortly before the hearing, the two
primary leaders on this issue, Assembly Member Mike Sweeney (D-Hayward), Chair of the
Assembly Local Government Committee and Assembly Member Fred Aguair (R-Chino Hills) ..
agreed to put out a bipartisan package from the Committee.
36-i-eldopplish this, Assembly Member Aguiar joined on to Assembly Member Sweeney's.
AB 95 as principle co-author. In addition, the agreeme ve ommitrn&t for Assembly
Mem Sweeney to join on Assembly Member A az's ACA 4 as a rinciple co-author when
t legislation is moved at a later date. As you will ast descriptions, ACA 4.by
Assembly Member Aguiar takes the approach of returning property taxes to local government
and securing the return through a constitutional amendment. This bipartisan agreement sets the
correct approach to the local government finance issue in the Legislature. City officials should .
Iencourage Assembly Members and Senators from their areas to hold fast on this bipartisan
approach.
While the Assembly vehicles have been launched,the Senate will have its first round of hearings
on major local government finance issues on 97. In the morning of that date, the
Senate Local Government Committee will heAr SB M,a authored by Senator Bill Craven. It..-
is a Senate vehicle that returns property taxes a State to local governments. It is similar ,
in structure to the Sweeney and Aguiar bills.
n the afte on of April 16, 1997, the Senate Revenue and Taxation Committee will hear
SB 1310, a 11 with Senator Ross Johnson as the author. This proposal shifts.up to 1 cent of the
state's s tax to cities and counties over a five year period of time.'The shift to any.one `
• community has to be first approved by the voters of the local community.
7A3
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Please contact the members of those respective committees and deliver the message that.the
Legislature has to address the problems of local government finance this year. It is time to return
the revenue take by the state in the early 1990's.
********************LEGISLATIVE ACTIVITIES********************
AA Ol. Return o Property Taxes,Local Agencies- SB 880(Craven),Support.
l2. Sales Tax ' t to Local Agencies-SB 1310 (Johnson),Support.
Certificates Participation. Vote Requirement-SB 147(Ayala), Oppose.
Fuel Taxes: In ation-AB 653 (Pagan),Support.
Public Employe Mediation and Factfinding-AB 673 (Floyd), Oppose.
' Alcohol Beverages ales to Minors: Local Enforcement Grants - AB 783 (Brown),
Jam' Support.
7. Public Contracts - (Baca), Oppose.
Off-Sale Beer and Wine icenses -AB 849(Sweeney),Support.
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Alcoholic Beverages: Com unity Alcohol Enforcement Fund - AB 900 (Cardenas),
Support. '
10. Alcoholic Beverages: Minors. enalties-AB 1002(Thompson),Support.
11. Alcoholic Beverages: Sale to Min -AB 1177(Caldera),Support.
�1l^' 12 Alcoholic Beverages: Licenses- (Hughes),Support
3 Alcoholic Beverages..Retail License- (Katnette),Support.
4. Temporary Restraining Orders and Inju ctions--AB 1274(Goldsmith),Support..
15. State Gambling Commission-AB 28(Tbo son and Ortiz),Oppose. _ ..
16 Public Contracts-SB 479(Alpert),Oppose.
17. Retention. Local Limitation-AB 940(Miller), pose.
1S Public Works: Contracts- •
SB 874(Calderon),Op se. 7WIJ
#13 2 4/11/97
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#11-1997
March 27, 1997
URGENT! URGENT! URGENT!
.League of California Cities Executive Committee Announces Support for a Package of
Local Government Finance Measures; Legislation Scheduled for Early-to-Mid April
Hearings; Committee on Revenue and Taxation Reviews and Debates Work by Consensus
Project, Allies for Cities, Counties and Special Districts, and Department of Finance/Local
Government Representatives Meeting.
FINANCE LEGISLATION
Following a lengthy discussion of the League of California Cities Policy Committee on Revenue
and Taxation, occurring at a special two-day meeting, the League of California Cities Executive
Committee voted to support a number of different local government finance proposals that
promise to be the focus of attention this legislative session. The positions of the Executive
Committee follow the recommendations of the Committee on Revenue and Taxation. Although
the full Board of Directors will take up the recommendations from the Committee on Revenue
and Taxation at its April 18-19, 1997 meeting, the Executive Committee wanted to ensure that
the League was on record in support of all the key legislative proposals which are scheduled for
early-to-mid April hearings, prior tothe meeting of the Board. The positions of the Executive
Committee are subject to review by the full Board.
Discussions on local government finance reform are the focus of activity for a number of interest
groups in Sacramento. A general outline of some of the more important discussions'is contained
later in this Bulletin. The discussions are important because they will undoubtedly shape any
final package that's developed. Because these discussions with other interest groups,the business
community and the Governor's office are still on-going, the action of the Executive Committee
was directed at allowing the greatest amount of flexibility for the discussions to be completed.
This also allows all parties to pursue broader.based revenue reform measures rather than-a
narrow, "quick-fix".proposal.
It also allows the League, along with other organizations, to take a hard look at the annual May
revision of revenue estimates that is published by the Department of Finance. This serves as the
basis for assembling the final state budget product. The release of the May figures is important
League of California Cities 7AwIS
iAnn u ctT..t r QG91A Q1 4W Q7nn c,,, 014 FSQQ')dn
because it will set realistic parameters for discussion or define the "art of the possible"for a local
government finance reform package.
City officials are vigorously encouraged to send letters and contact the members of the
appropriate committees prior to the hearing dates listed - ASKING FOR SUPPORT OF THE
LOCAL GOVERNMENT FINANCE LEGISLATION LISTED BELOW. Please
communicate the needs and positive impacts of these proposals on your city services, but more:
importantly, city officials must communicate that 1997 has to be the year to reform and correct
the problems with local government finance. City services were reduced to assist the state
general fund during the recession. The recession is over. It is time to make the difficult choices
and set local government finances and services straight
The local government .finance legislation supported by the Executive Committee includes the
following proposals:
* AB 1 (Agaiar). ERAF Can and Reverse the hift Hearin nl 2 1997--Assembly
g�A �
Local Government Committee, This bill has two principal features:
1. It caps the property tax shift at the dollar amount shifted in 1996-97, thereby allowing
local government to keep any future growth in property taxes.
2. It reduces the amount shifted each year by a schedule of unspecified percentages until
the shift reaches zero.
This proposal would result in the return of the amount of property tax originally shifted
away from local government to the benefit of the state general fund, approximately $3.6
billion. This amount of property tax revenue would be a direct state general fund impact.
Currently this measure contains an urgency clause, requiring a 2/3 affirmative vote in
both houses of the Legislature. The urgency clause could be removed making the measure
a majority vote bill. The signature-of the Governor is required to make this proposal law.
* ACA 4 (Aguiarl Constitutional ERAF Cap and Reverse the Shift. Hearing. No
Hearing Da e e onatitutional Measure Not Su ject to Regular Legislative
Deadlines. This measure is similar in concept to AB 1, but would place the EW 'cap
and reverse shift in the state constitution. This measure requires a 2/3. vote of the
Legislature and subsequent approval of measure by the voters on a statewide ballot. It
does not require the Governor's signature to go on the ballot.
* AB 95 (Sweenev) Reversing the Shift and Other Congod.erations, Hearing: April 2.
1997 - Aa_gemhly i.nc91 Governn- Committee,---- ommitteP_ .'Phis measure has two principal
features:
7A- !6
#11 2 326/97
1. It reduces the amount shifted by a schedule of unspecified percentages until the shift
reaches zero.
2. It requires the reduction in the amount of the shift to have no impact on K-12 schools
and community colleges.
While not amended into the legislation at this date, Assembly Member Sweeney is
considering other features including: 1) a cap on the property tax shift, allowing the
future growth in property taxes to go to local government, and 2) provide state income tax
revenues to local governments as a means to encourage job development and job-housing
balance by local governments.
The bill is currently an urgency measure requiring- a 2/3 affirmative vote by the
Legislature and the Governor's signature to become*law. The urgency clause could be
removed if necessary making the proposal a majority vote measure.
* SR RRO 'Craven). ERAF. Cap and Reverse the Shift. Hearing: April 16. 1997 -
Senate Local Government Committee. This bill takes essentially the same approach as
* SB 889 (Hayden), ERAF Reversing the Shift. Hearing: No Hearing Date Set. This
measure takes essentially the same approach as X95. There is no indication that the
other considerations being discussed around AB 95 are part of the plan for SB 889.
* SR 1310 (lyhnson). Sales Tax Shift to Local Government. Rearing: April 16. 1997 -
Senate Revenue and Taxation Committee. This measure allows cities and counties,
individually, to place a sales tax. measure before their local voters by a 2/3 vote of the
governing body. If approved by the voters, state sales taxes would be shifted over a five
year period to the city or county approving the measure. The overall sales tax rate would .
remain the same. The new revenues from the sales tax shift would be distributed to the
communities approving the shift on a per capita basis. The measure leaves the current
Bradley-Bums sales tax law in place.A total of 1 cent of the state's sales tax would be set
aside for this community-by-community approved revenue. The total exposure of the
state general fund, if all.communities approved this measure, would be approximately
$3.5 billion when fully implemented over the five year phase-in period. The exact impact
on the state general fund would depend on the number of communities approving the
transfer.
This measure requires a-majority vote in the Legislature for passage as well as the
Governor's"signature.
UmR
#11 3 3/26/97
LOCAL GOVERNMENT FINANCE REFORM-DISCUSSIONS _
There are definitely encouraging signs that the local government finance issue is rising on the
Legislature's agenda, but more importantly on the agendas of other influential interest groups.
The signs are good because it means that Local Governments are not al6ne or isolated in this
effort. It is going to take this support to be successful in the Legislature. The "groups" or
deliberations to watch in this debate over local government finance include the following:
The Consensus Project, The "Consensus Project" is a group of over 30 Sacramento-based
interest organizations attempting to address the dysfunctional nature of the state and local
government finance in this state. It is a group that grew oui of the work of the Constitution
Revision Commission and.contains representatives from many of the groups which actively
participated in the Commission deliberations. Sacramento Bee, Contributing Editor,Peter Schrag
noted in a recent article about the Consensus Project that:
. . . given the inability of the Constitution Revision Commission and other such bodies.to
generate any motion toward reform, [the Consensusprnject]may be a forlorn hope. But it
surely represents far and away the most promising reform effort on the horizon - indeed,
the only game in town.
Mr. Schrag goes on to observe:
The state's tax and governance system, many [in the Consensus Project] will tell you
privately, discourages new development as well as long-tern investment in health, safety
and education; unfairly taxes new business.and residences; creates mounting stress
between agencies and levels of government, and alienates a public that "feels powerless
to influence government through its representative institutions."
The final recommendations of the Project have not been finalized, however, the group has
listed a range of state and local goverment finance options for consideration. There will be an
attempt to bring the recommendations.to a close within the next few months. The more serious
options being discussed include a reexamination of the voter approval requirements for general
obligation bonds and other taxes; strengthening home rule protections against state efforts to shift
local revenues to Sacramento; a realignment of revenues and responsibilities between the state
and local government with'the intent to create greater accountability.
Local Government/Dens ent of Financ Dia nasions In addition to the Consensus Project efforts, -
discussions are taking place on a regular basis between representatives of local
government (cities and counties) and representatives from the Department of Finance to explore
options for strengthening local government finance. These discussions are simply that:
"discussions"; and, do not yet have a stamp of approval from the "comer office" but are
nonetheless important and recognizes that the Governor's office is a critical step to success. The
discussions are .examining a number of alternatives and include some of the same revenue
options being discussed by the Consensus.Project; exploring new and existing countywide
authority for local revenue options that can be directed at the countywide priorities of local
#11•
4 3/26/97
7Amis
governments in the county; and exploration of revenue options that are consistent with the
direction of the state's economy and business activity.
Allies for Caties. Counties and Special Districts. As mentioned in previous Legislative
Bulletins, a strong coalition of business interests continues to push each week with Legislators on
the issue of returning the property tax shift of the early 1990's to local government. The coalition
has met with strong support for the resolution of local government finance issues within the
Legislature. The alliance will continue throughout the session.
CONCLUSION
The local government finance question is definitely on the radar screen in Sacramento. It will
take an extraordinary effort on the part of city officials to keep it on the screen.That effort started
before the legislative session convened for its regular business in January, but goes into full gear
- NOW! A clear, distinct and consistent message is needed between now and the end of the
session: 1997 is the year to restore local government finance to a stable and responsible level.
********************LEGISLA IVE ACTIVITIES********************
( 1.1 Local Agency Borrowing- (Ayala), Oppose.
Prop. 172 Sales Tai Allocati n; Repeal of AB 1191 - AB 339 (Takasugi), AB 334
(Wildman), Support.
li4School Facilities-RB 1227 'Connell), Oppose.
Public Safety Officers. In rrogation- SB 546(Johannessen),Oppose.
Multi-Family Rental Ho 'ing= SB 11 S6(Costa); Oppose.
Dept. of Forestry and ire Protection:, Fire Prevention and Control, Staffing -
AB 319(Machado),Op se.
� 77 Local Government Fin nce: Date of Application:AB 1362 (Mazzoni), Support.
8 Public Employees. M iation and the Factfinding Panel-AB 673 (Floyd), Oppose.
Skateboarding. Mun ipal Liability-AB 1296(Morrow),Support.
10. Public Beach Enhanc ent-AR 172$(Ducheny), SB 1122(Craven),Information.
911 5 3/26/97
RSTRATIVC.ACTTVTTrE.R
11. Meyers Group Presents I w Housing Forecast- Information. .
Al
12. IMTIFS
Welfare Refo Iderly. Legal Immigmrits. S 392 (Feinstein, p-cA)-. pending i
Cong=ss. Send of Support. .
LEGISLATIVE ACTIVTIUS
1. Local Agency Bo g.
fSB 147(Ayala)- O pose]
Measure Fails Passa a in Senate Local Government Committee.
With a strong show of re t, the Seaate Local Government Committee did not approve
SB 147 regarding local issu. nce of Certificates of Participation. The measure was vehemently
opposed by local governme it groups including the education community, cities and municipal
treasurers. SB 147 receivec two votes (author and co-author), while the remaining committee
members abstained. received reconsideration and is technically still alive for this
session, however, the author indicated he has no interest in pursuing this measure further. The
League will keep you post if any new developments occur. Thanks to the hundreds of city
officials who sent letters, a phone calls and helped stop this measure in its first committee.
Great effort, better result, k up the good work!!! (Referred to previously in Bulletins #6-1997,
7-1997, and 8-1997.) [League Staff: David Jones]
2. Prop. 172 Sales Tax All cation; Repeal of AB 1191.
[AB 339 (Takasugi), (Adman)-Support] .
Hearing: Wednesday,Ap 2,Assembly Local Government Committee
AB 339 (Takasugi),will essentially AB 1191 (Takasugi)of last year. AB 1191,sponsored
by the League, sought to address an interpretation of the allocations of Prop. 172 funds
distributed by counties to cities. a to a technical drafting error, AB 1191 resulted in
significant reductions of revenues alio d to cities. AB 1191 results in an unintended windfall''
for counties at the direct expense of ci 'es which was clearly not the intent of the author or the
sponsor. AB 339 seeks to retroactively AB 1191 by removing the original language added
by the measure and establishing an eff a date for AB 339 of January 1, 1997. Counties who
have withheld allocations or given cities duced allocations would readjust their distribution
formulas to make cities"whole"for the curre ear under AB 339,
7 -Ao
.
#11 6 326/97
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#10-1997
March 14, 1997
TLegislative Analyst Perspectives and Issues Report Raises Interesting Issues on Property
� Tan Shift; Bill Introduction Deadline.Produces an Array of Local Government Finance
Legislation; Proposition 218 Implementation Legislation Introduced.
PERSPECTIVES AND ISSUES
Each year the Legislative Analyst Office issues its PeaWcctives and Issues_(P&I) report on the
state budget. This-yew,the-P&I report examinectthe property tax shift issue and explored options
for the Legislature when considering the return to local governments of all or a portion of the
money shifted in the early 199Ws. The report makes some interesting observations for city
officials as we enter the debate over the return of these property tax revenues or any other
method of recognizing that local government needs some help.
The report starts with background pointing out that the shift of property tax in 1992-93 and 1993-
94 from cities, counties and special districts permanently redirected= about 17 percent of
California property taxes to the schools through something called the Education Revenue
Augmentation Fund (ERAF)..VAiiv the schools-were the direct recipients of the property tax,
school programs did not benefit from the shift, because the state reduced its financial payments
to the schools in an amount equal.to the property tarp shift. The ultimate beneficiary of this
transaction is the state general fund 7.
While.this shift of property tax relieved fiscal pressures on the state it had two direct impacts on
local government:
1. It caused cities, counties and special districts to reduce a wide variety of
programs.
2. It strained the fiscal conditions of many local governments.
The report goes on to say that while data summarizing the exact impact is not available, the
services hitthe hardest have been park and recreation programs, library services, and programs
for the indigent(including general assistance
In.addition, the report points out that the shifts have also had detrimental effects on economic
development and property tax administration efforts. The report concludes:
League Californiaa of Calif Cities APA )
Ann r, e—__- me n[OI r nit Zra o•inn' r_.. e•c LEO oeen ti,...../L...........,.:a-. .....
1. Cities and counties have less of an incentive to promote new business and
residential land developments in their communities.
2. The property tax shift has reduced incentives to counties-to manage the property
tax collection system in a manner that ensures all property owners pay their fair share.
This is because counties now receive 20 cents of every dollar of property tax, yet pay
more than 70 percent of the cost of property tax administration.
The Legislative Analyst goes on to suggest that any proposal to modify the property tax shifts of
the early 1990's poses two difficult choices for the Legislature. Specifically, in order to provide
any significant local relief,the Legislature would need to:
L. Reduce state program expenditures or increase state revenues.
2. Choose which local governments would receive the property taxes.
The Legislative Analyst recommends points out to options two return the property tax to local
governments. The first is a"freeze shift" that places a cap on local property tax shift amounts.
The second approach is a "baseline reduction" whereby the property tax shift is reduced by a
fixed amount.
Freeze Shift. Under the freeze shift approach, local governments would begin to receive
about $130 million in 1997-98. This figure would grow to an amount exceeding $1
billion by 2002-03. Under this proposal, the communities with the greatest property tax
growth would benefit the most Also, the local governments with the largest ERAF
obligations would benefit. . .
Baseline Reduction. Under this approach to returning property taxes to local
government, the "base" amount of local government property tax shift obligations are
reduced by a fixed amount or percentage. Local government property tax shift obligations
would continue to grow under this approach, however, the shift obligations would grow
from a lower base. Under this approach, a$130 million baseline reduction grows to$170
million in fiscal-relief in six years. This $170 million is compared to the$1 billion figure
in the Freeze Shift approach after six years. TIO communities benefiting the most under a
Baseline Reduction proposal could be entirely decided by the Legislature.
The Legislative Analyst makes two conclusions:
1. The Freeze Approach only makes sense on a permanent basis and is more
unpredictable as to its ultimate impact on the state general fund
2. The Baseline Reduction poses the least threat to the state general fund and gives
the Legislature the opportunity to make further adjustments in future years,depending on
the state's financial situation.
#10. - 2
3/14/977A..
�
In. the P&I, the Legislative Analyst also'explores the differences between and among local
government jurisdictions in the amount of property tax they receive. The analysis is used as a
perspective on the issues of the Legislature attempting to "equalize" the disparities in the state
due to Proposition 13 and the subsequent legislation to distribute proparty taxes among local
governments. For those with an interest in this question, we highly recommend this section for
your evening reading.
LOCAL GOVERNMENT LEGISLATION
February 28, 1997 was the deadline date for introducing legislation for the 1998 session. After
having reviewed close to 3,000 proposals, we now have a snapshot of the local government scene
for 1997. The most prominent bills on local government finance are summarized below:
Prom Tax
ABI(Aguiar): ERAS. Capping and Reversing the Shift. This bill has two principal
features:
1. It caps-the property tax shift at the dollar amount shifted in 1996-97, thereby
allowing local government to keep any future growth in property taxes
2. It reduces the amount shifted each year by a schedule of unspecified percentages
until the shift reaches zero.
ACA 4(Agniart:ERAF. Capping and Reversing the Shift. Similar to ABLL except that
the measure is a proposed constitutional amendment. It does not require a signature from
the Governor. It does require a 213 vote by the Legislature. It does require the voters to
approve it on a statewide ballot.
AB 95(5weeneD!�FILAF,etc,.R ersing the hi This bill has two principal features:
1. It reduces the amount shifted by a schedule of unspecified percentages until the
shift reaches-zero.
2. It requirm that the reduction.in the amount of the shift is to have no impact on K
through 12 schools and community colleges.
In addition,Assembly Member Sweeney is exar,mmg an approach in the bill that will 1)
establish a dollar cap on the property tax shift, thereby allowing the future growth in
property taxes to go to local government, and 2) provide state income tax revenues to
local governments as a means to encourage job development and job-housing balance by
local governments.
#10 3 3/14/97
SB 880(Crsven) RRAFm Capping and Reversing the hi This bill has two principal
features:
1. It caps the dollar amount of the property tax shift at the amount shifted in 1996-
97, thereby allowing local government to keep any growth in property taxes.
.2. It reduces the amount shifted by a schedule of unspecified percentages until the
shift reaches zero.
SB 889(Hayden) ERAF_ Reversin the Shift. Two principal features in this bill
include:
1. It reduces the amount shifted by a schedule of unspecified percentages until the
shift reaches zero.
2. It requires that the reduction in the amount of the shift is to have no impact on K
through 14 schools.
AR 661(Breeweer), Minimum Prove Tsx Allocation, Under this bill, county
government would be allocated a minimum.of 23 percent of property taxes collected
within the county for 1997-98. The 23 percent figure would increase or decrease in
uniform steps to the year 2002-03 to a fixed (not a minimum) percentage that is also
unspecified in the bill. Thereafter, the county percentage remains at that percentage. This
legislation appears to be an attempt at"equalizing"the property taxes betweenlamong the
counties.
A1R 393(Richter). ERAF Proper Tax to "Frontier" COunties. The bill specifies
that, in 1997-98 and thereafter,a county government specified as a"frontier"county shall
not contribute to the property tax shift.-to schools - ERAF. This applies only to the
designated"frontier"county and not the cities or special districts in the county.
AB 864(3:hom. ERAF. Yolo CoumLM This bill specifies that fora 1997-98 and
thereafter, the amount of property taxes shifted'from the County of Yolo to the county
ERAF fund shall not exceed 40 percent of the'property taxes collected in the county and
shall not exceed 10 percent of the county's revenues,regardless of the source.
Ala 1069(CardQW ERAF Reversing the Shift for N native Sum Counties-.This bill
reduces the ERAF shift each year for the "negative sum counties by the amount of the
"take-away" computed for 1994-95. It is not entirely clear how this measures would
work
SB 303 urto AF ttecial Education This bill limits the ERAF contribution to
special education by"basic aid"counties to the 1995 and 1998 fiscal years.
A1044
##10 4 3/14/97
SB 854(0' Connell). ERAR Transit Districts. This excludes single-county transit
districts from ERAF. The bill would appropriate $569,000 from the General Fund to the
Department of Finance for allocation to K-14 schools.
SB 1294(Leslie), ERAF. Alternative Transfer - Qualified Counties. Under current
law, the ERAF shift is decreased where counties make increased allocations to certain
educational entities. A county is "qualified" for this decrease if the county adopted this
alternative distribution system for the first time in 1994-95. This bill allows any county to
become a"qualified"county.
Other Local Government Finance Options
SB 1 10(, ohn on). Sales Tax Shift to Local Government. This billallows cities and
counties to place a sales tax measure before their local voters' by a 2/3 vote of the
governing body. If approved by the voters, a one percent local sales tax would be phased
in over five years. The imposition of the local sales tax would reduced the state-imposed
sales tax.by the same amount, thereby leaving unchanged the sales tax paid by the
consumer.
AB 945(Wrjgh-4 Local Government Efficiency and Cost Reduction Bond Act. This
bill would place a$100 million bond act before the voters. Bond proceeds would be used
to provide loans to cities, counties,and special districts for projects that reduce the cost of
government or improve the effectiveness of government services.
ACA 10(Runser), Local Sales Tax Sharing Agreements. This constitutional
amendment has two parts:
1. Under the state constitution, the Legislature may authorize cities, cities and
counties and counties to share sales taxes. This proposed amendment would authorize all
cities and counties to enter into sales tax sharing agreements.
2. Under the state constitution, before a sales tax sharing .agreement becomes
operative, the agreement must be approved by the voters of each jurisdiction at a general
or direct primary election. This proposed.constitutional amendment would also allow the
agreement to become operative. if the agreement is approved by a 2/3 vote of the
governing body of each jurisdiction.
AB 972(1[orlaksonl. Local Government Efficiency. This bill will be a collection of
proposals that will relieve local governmentsof unnecessary and burdensomemandates. _The measure will establish a seed fund to match local resources dedicated to local agency
consolidation studies.
AB 719(:Eorlakson). Property Tax Administration Loan Program. This bill requires
the stateto pay its portion of the costs of property tax administration.
Awo 5
#10 5 3/14/97
Most of this legislation will be reviewed at the upcoming policy committees of the League on
March 20 and 21. While the proposals are varied and to some extent confusing, and in some
cases perhaps even contradictory, this is somewhat of a signal that local-government finance is an
issue that promises a great amount of activity this session.
PROPOSITION 218 LEGISLATION-SB 919/AB 1506
Last, but certainly not least, the League-sponsored legislation to address the ambiguities,
inconsistencies and contradictions in Proposition 218 has been introduced for the session. There
are two proposals sponsored by the League. In.the Senate, SB 919 has been introduced by
Senator Dick Rainey from the Contra Costa County area. Senator Rainey 's bill is an urgency
measure that will be used to deal with the more immediate questions in Proposition 218. The
other measure is AB 1506 which has been introduced by Assembly Member Deborah Ortiz from
the Sacramento County area. The Ortiz measure is intended to be the vehicle to address some of
the more long-term issues in Proposition 218.
While the measures are now in print, the language is not very representative of the status of the
discussions and negotiations that have been going on with the Howard Jarvis Taxpayer's
Association and other"taxpayer" groups. These discussions have been underway for months and
will likely continue throughout the session. We will keep*you closely informed about the
progress of negotiations and the current status of the provisions in the legislation.
#tit•it•####t#•##t•i
*******L GISLATIVE ACTIVITIES****�'**+***********
1. School Facilities -All 2 eonard),Oppose.
P3.
Public Works. Force Ac t-SB 874(Calderon),Information.
400
Armories, homeless Shelte - SB 255 (Lee),AB 242 (Honda), Support.
le4. Sexually-Oriented Business. oval Regulation-AB 726(Baugh), Support:
5 UCLA Extension Program: 21st entury California; Anticipating and Planning for.
Growth and Environmental Quah -Information.
6.
Smoking andInbacco. New A on Access to Minors. Information.
74 w
#10 6
3/14/97
• '• "`, ■ Last November, voters passed
Proposition 218, which made it even "or.
big mess I more difficult to enact local fees;such
"t as fire protection fees, without voter! '
c.. approval. - ,el:
for local B In January, a Los Angeles court'=
'� invalidated a measure enacted by
''t Wilson and the Legislature to shift S50.'
million in local sales tax funds,.
• ;.`; ;'• originally raised to enhance bus sery
agencies ices, to. the Los Angeles..County� _
�� government, which was facing bank-
,. ruptcy. The money must now. bei`n
SACRAMENTO — Administrators ;t returned,'with interest, to the Metro- �
and elected overseers of.California's..;s.- politan Transportation Authority.- :-im
ing
cities and counties are beginnto ;3 ■ bast week,a state
Put together their 1997-98 budgets this . ' appellate court
spring and few like .what they're C7' ruled that Los Angeles County's sharp;
seeing. �! cut in "general assistance" welfare
California's overall economy may ,
grants, enacted in 1993 as part of the
be pulling sharply out of the worst "�" effort to stave off fiscal collapse,was
recession in a half-century but for-• lr illegal. The county now faces .the' y
those who operate prospect of paying back 90,000 general
local governments,: relief recipients some$140 million.
the fiscal squeeze v:` :u ■Another appellate court in North :t
has become ever- + " ern California ruled, meanwhile;that
tighter. :'Mt' a special"panel tax"imposed by East.
Although sales `. Palo Alto;
tax revenues have '. i a very poor community-in l. .,n;
'. ::a San Mateo County, was also illegaal
perked up with the
East Palo Alto may have to repay-.• �-
economic recovery, .n taxpayers up to$5 million,the equiva-
property taxes re- -; a' lent of its annual budget, and city- ;-r
main flat, even de- : officials say bankruptcy may be their;
dining in some 10- only option. . • .. 7 "
cales, because 10- n only, These developments are merely the
recession clobbered values andthe''^ latest indications that the hodgepodge
much-awaited resurgence of residen-: system of local finance is teetering on
tial and commercial construction has !--JU the brink of total disaster.
yet to materialize. -,.ti: The governor and the Legislatuti"A
That would be tolerable were it not' " cannot ignore the plight of local: .
for a series of unrelated decisions by '.''4 governments because they assumed direct the governor, the Legislature, voters-- direct responsibility for local fmances .
and the courts that have had the t in the wake of Proposition 13,the 1978
combined effect of putting local gov property tax reduction measure.What -m
ernments in a vise,to wit :( J was supposed to be a temporary•i.
■ Gov.Pete Wilson and lawmakers,�',� ."bailout" to ease. the transition to i-_pa.
simply grabbed several billion dollars is lower property tax revenues became a •'
a year in local property tax revenues...t,e morass that defies understanding,_..
to balance the state's budget during';:., much less rationality.
the recession and have been unwilling , The governor and Legislature can,:,..,,t
to return the money even though state : and often do,simply starve the locals .oa
revenues have surged. Wilson even.I.:Ir. whenever the state's own fumces are i':�'=
vetoed a bill that would have put a cap;; ,• squeezed.Nobody in local government ':s
on the property tax shift and allowed-i.4 knows more than a few months'in .,,A:4
local governments to recover taxes-: a advance what revenues can be expect::,i�
from future development `W ed. And there's constant tension be
■ In 1995, the state Supreme Court" '- tween legally mandated services and
reduced local revenue flexibilityb those with popularsupport
Y -- 1 If those in the state Capitol di
invalidating invalidating a Santa Clara County nothing more this year than. bring;:r, �
sales tax for transportation and de.':� some sense to this nonsensical situs•,? `
treeing that any new local tax must y. tion, they would be.earning theirZiN
obtain voter approval,'thus putting a �e money: = ,
cloud on billions of dollars in non-;`IZ5
Property taxes imposed by localgov-1':E
ernments during the preceding dec-':
ade.
07 A 7