HomeMy WebLinkAbout05/18/2004, BUS 4 - BACKGROUND MATERIAL FOR DISCUSSION OF STATE BUDGET NEGOTIATIONS MEETING AGENDA
DATEif o ` ITEM #
c o u n a L m c m o Ra n o u m
Icity of san Luis osis o. aammistization ae aatment
DATE: May 11, 2004
TO: City Council
FROM: Ken Hampian, CAO i
SUBJECT: Background Material For Discussion of State Budget Negotiations
The situation in Sacramento is so fluid, that I am sure that aspects of the attached material will be
dated by the time the City Council discusses this matter on May 18`h. However, the material is
very helpful in outlining the "gist" of the dilemma for cities and counties throughout the state.
COUNCIL MEMO TEMPLATE
y /
May d7 Z004 17:56:12 Via Fax j` -> 8857817189 Ken 8, ian Page 881 Of 881
C;.M
LEAGUE
OF CALIFORNIA 1400 K Street, Suite 400• Sacramento, California 95814
CITIES Phone: 916.658.8200 Fax: 916.658.8240
www.cacities.org
s • s
1 Page
To: City Officials
From: League Communications Director Megan Taylor
RE: Scheduled Conference Calls re. Budget.Questions
Date: May 7, 2004
Earlier today we faxed you a memo from League Executive Director Chris McKenzie entitled
"Update: Proposed Constitutional Amendment, Two-Year Budget Agreement". In the memo we
provided information about 3 conference calls scheduled next week with Chris, so that members
can ask questions about this proposal..
Please note the following correction to the dates of these conference calls -and my apologies
for any confusion this error may have caused. Here is the information about the calls, with the
correct dates:
OPPORTUNITY TO ASK QUESTIONS
In order to ensure that you have an opportunity to ask additional questions about this
proposal, I am scheduling a phone-in conference call for members at the following times:
Monday, May 10;,.3:30-.4:30_p.m.
�Tues`day,,May.1A; 8:30- 9:30,a.m.
Tuesday,_May, 11_,, _:0O=_4't)D p.m_, y
Members who would like to participate on one of these calls may call me on the League's
conference line at 916.658.8212. 1 urge you to call in at the start time because there is a
physical limit to the number of callers (approx. 25). Please note that the call will begin at the
appointed start time, but may conclude prior to the designated ending time.if_the_discussions_.
conclude early. Because it is sometimes difficultfor everyone to,be heard oh.a large conference
calm I'also dricourage-yov-to please send youF_quest ons.in.advance of the call to League
- ..
;Communications Directoor.Megan Taylor via email: mtayiorCDcacities.org. I will provide a
summary of the proposalVbefore us and address all your questions.
1j -Z
May 87 Z004 16:24:00 Via Fax '- -> 0857817189 Ken He' - ian Page 081 Of 884
1400 K Street, Suite 400•Sacramento, California 95814
LEAGUE CAL1fUl Phone: 916.658.8200 Fax: 916.658.8240
LC I T I E S wvrw.cacrties.org
TO: City Officials
FROM: Chris McKenzie,Executive Director
DATE: May 7, 2004
RE: Update on Proposed Constitutional Amendment. Two-Year Budget Agreement
A few weeks ago we advised you that the Governor had approached the League Board of
Directors and the LOCAL Coalition with a proposal for an alternative to the Local Taxpayers
and Public Safety Protection Act (the "LOCAL_ Initiative') that he could support actively in
conjunction with a two-year budget package local governments could support. Since that
communication, we have been working intensely with the Administration and our LOCAL
Coalition partners to clarify the actual details of the proposal. One more detail remains, but we
wanted to update you on the current status of the discussions and negotiations. A second update
may come early next week with more details, depending on the outcome of a special League
Board of Directors meeting this weekend.
The Proposal In Brief. Rather than oppose the LOCAL Initiative,the Governor has indicated a
willingness to lead the campaign in support of a constitutional amendment on the November
2004 ballot with equivalent or better revenue and mandate protections that would be tied legally
to a two-year budget contribution of$1.3 billion for each of two years by cities and other local
governments to help the state with its budget crisis..In return for local government support for
the two-year budget contribution, the Governor has personally committed to bring the same
leadership as he exercised with workers' compensation reform and Proposition 57 and 58 to the
passage of the new constitutional amendment equivalent to the LOCAL Initiative through the
legislature and on the November 2004 ballot. On the other hand, if we fail to reach agreement,
he also has made it clear he will have to oppose the LOCAL initiative.
League Board's Review. As the details of the package become clearer over the past few weeks
the League Board has convened in a formal meeting and conferred by conference call two more
times to review the proposal. . When the Board last conferred by conference call on May S,only
one detail remained to be fleshed out--the possible allocation of each city's share of the budget
reduction package. The Boardmembers agreed to meet this Saturday, May S. to develop a
recommendation on that matter. On_Monday=we'hopeao'sendyou-a.subsequentcominunication
with;the:details'of-theL-eagae.Board's rrecoinmendation
THE PROPOSAL IN DETAIL
VLF Reduction Perm anent/Additional Property Tax to Cities and Counties. The centerpiece
of the proposal is a permanent reduction of the VLF rate from 2%to 0.65%(its current effective
rate). This would trigger elimination of the VLF backfill (approximately$4 billion)which
would be replaced with a like amount of property taxes, dollar-for-dollar,except for a two year
"contribution"by cities and counties of 5700 million($350 million each)in both 2004-05 and
2005-06. In the third year,cities and counties would`receive the-fullamount ofthe-new=property
;'�t_ax=in-exchange for the V-F'backfill,and it would grow as propertytaxgrows;i%i the.fiiture-
- .,--..;ul.. .:..:...ate.._
Tliis wod increase every-city s anil every county-s_share of the property tax.
N3
May 07 Z004 16:24:34 Via Fax —> 8057817189 Ken He ian Page 802 Of 884
Broader Constitutional Protection. The LOCAL Initiative is providing the basis of the
constitutional amendment that is being drafted right now by a team of attorneys, but the new
amendment would provide somewhat greater revenue protection and broader mandate relief
than the LOCAL Initiative. Specifically:
• Unlike the LOCAL Initiative,the new measure would:
o Protect the new local option sales tax authority granted to all cities and counties last
legislative session.
o Require repayment by the state of its deferred unfunded mandate obligations to
local governments over five years,beginning in 2006-07.
o Require that mandates automatically expire if the legislature fails to fund them. The
LOCAL Initiative requires local government action to "suspend" unfunded
mandates.
• It will have all the other revenue protections of the LOCAL Initiative, including:
o Require repayment of the current year's $1.3 billion VLF backfill "loan" in 2006-
07.
o Guarantee the payment of the property tax backfill for the sales tax lost due to the
state's "triple flip".
o Guarantee that the '/.cent sales tax is returned to cities when the state deficit bonds
are retired.
• Finally, the constitutional amendment would limit the ability of the state to take local
government property, sales and VLF funds in excess of $1.3 billion annually during the
next two fiscal years and completely prohibit such raidsin the future. It will not contain a
property-sales tax exchange and would require subsequent voter approval statewide if one is
adopted.
Budget Agreement Contingent On Passage of Constitutional Amendment. The state's ability
to have the 51.3 billion for two years would be contingent on the passage of the constitutional
amendment_ This would create a strong incentive for the Legislature and Governor to help pass
the alternative constitutional amendment. Further, after two years the state would not be able to
turn to our protected revenues again to balance the state budget.
Two-Year Cost. The proposed "contribution" for cities in 2004-05 and 2005-06 of $350
million came initially from the Administration as part of its proposal to withhold $700 million
(split 50-50 between cities and counties) and is similar in nature to the $528 million VLF
backfill "loan" that cities made to the state in the current (2003-04) fiscal year. Independent
special districts would make a $350 million contribution as well for two years and
redevelopment agencies would contribute $250 million, both on a traditional ERAF basis. The
League Board is meeting Saturday to discuss and adopt a recommended way to allocate the
$350 million among cities. Counties have already recommended it be allocated on a VLF basis.
The California Redevelopment Association and the California Special District Association have
already worked out an allocation formula for RDAs and independent special districts.
The data below compare the cost for cities of this proposal to the current fiscal year.
Contributions(millions) 2003-04 2004-05 2005-06 2006-07 Repayment
City ($528) ($350) ($350) $528
RDAs(ERAF) (135) ($250) ($250)
City/RDA Combined' ($658) ($.590) ($590)
Other Budget Cuts Proposed for Counties ($250-500)
'This combines city contribution and 96%of the RDA contribution,which is from city RDAs.
2
114
May107 2004 16:25:02 Via Fax -> 8057817109 Hen Hr ian Page 083 Of 004
KEY QUESTIONS AND ANSWERS
1. Why Would We Consider This Alternative Rather Than Proceed With the LOCAL
Initiative? There are three possible reasons.First,we could secure better revenue protection
and mandate relief than through our own measure. Further,we have the opportunity to write
the title and summary that will appear on the ballot in November rather than use the one
provided by the Attorney General for the LOCAL Initiative. Second, the Governor's
leadership and support could substantially enhance the chances for passage of the measure.
Third, the Governor's opposition to our LOCAL Initiative could seriously harm its chances
for success. Our political consultants have told us we cannot win just by qualifying the
initiative for the November ballot. We will need substantial funds ($10 million or more)to
win.If the Governor is opposed to us,we will need more.
2. Why Does A Decision Need To Be Made Now? A decision needs to be made now because
the Governor is about to submit a revised budget to the Legislature. If he is going to
propose this, it needs to be put in the May Budget Revision that will be released May 13.
That is the first decision that needs to be made. He wants to know if we will strongly
support the proposal and help secure its approval by the legislature. So, in order to secure
his support and legislative approval,we need to make an agreement now.
3. Why Did the Governor Propose This Now? There should be no doubt that the League's
and the LOCAL Coalition's efforts to qualify the LOCAL Initiative have led to this
opportunity. Filing 1.1 million signatures is a major step in achieving our goal of long-term
revenue protection. With our measure on the ballot, the Administration has offered a
compromise that achieves both of our goals. We need to decide if it is worthwhile enough.
4. Will the LOCAL Initiative Still Be On the Ballot As An Insurance Policy? Yes. It is in
the process of being qualified right now and we have no doubt it will. It will be on the
November ballot and is still the focus of our fundraising efforts and campaign work
Nothing will change that until the alternative, in a form acceptable to the LOCAL
Coalition,is approved by the Legislature.
5. Has A Final Decision Been Made? Not yet, but one is imminent. If the League Board of
Directors approves the proposed agreement in the next few days, we will advise the
Governor of the Board's support and that action will be forwarded to the League General
Assembly for ratification at its special meeting on May 13 in Sacramento. Details on this
meeting have been sent already. Our LOCAL Coalition partners will be making the decision
entirely at the Board level. If your City is represented at the General Assembly, your city
will have a voice in the final decision.
6. What method will be used to allocate the$350 million cut to cities? The Legislature will
ultimately decide this, but the League Board is meeting this weekend to devise the most
equitable formula possible. Their recommendation will be shared with cities and the
Administration as soon as it is available.
7. Why has the city share increased from the original $190 million recommended by the
Governor's budget in January? Shortly after the budget was released, many legislators,
city officials and the Administration acknowledged that a $900 million reduction for
counties was fundamentally unfair. Moreover, counties are facing $250 - $500 million in
additional cost shifts and program reductions by the state beyond this package. The division
of cost between
3
Li-s
[lay '07 2884 16:25:31 Via Fax -> 8857817189 Hen 8r 'ian Page 884 Of 884
� VV YYWVJ \WW.JV ���a W' v,W lI�VlIVYVV V�' WV �WYY�JW YW V� . VY�VV WY.J
billion is the amount necessary(and we have been told consistently it cannot be reduced), it
was necessary to allocate the balance of the funding between special districts and RDAs.
The League's priority was to keep the RDA reduction lower than the others, so it was
agreed that the special district contribution would be equivalent to cities and counties at
5350 million and the RDA reduction would be 5250 million. Even with higher city, special
district and RDA allocations, counties still face additional losses in the programs they
administer for the state.
8. Hasn't the State Collected More Revenues Recently?Yes, it has,but it is one-time money
due to one-time tax amnesties, and the Administration estimates it still must close a S7
billion structural deficit by the end of next fiscal year. The Administration expects to
achieve this through many recommended reductions in the May Budget Revision.
9. Will the Public Still Get to Vote If The State Wants to Take More Local Funds? Yes.
Like the Local Initiative, any change in the revenues protected by the alternative
constitutional amendment will require voter approval. The change would require an
amendment to the state constitution. Like the LOCAL Initiative,constitutional amendments
require a 213 vote of the legislature and a majority vote of the public. Changes could also be
proposed by initiative,but a majority of the voters would have to approve them.
OPPORTUNITY TO ASK QUESTIONS
In order to ensure that you have an opportunity to ask additional questions about this proposal,I
am scheduling a phone-in conference call for members at the following times:
Monday, May 11,3:30-4:30 p.m.
Tuesday,May 12, 8:30-9:30 a.m.
Taesday, May f2;3x"00'.4-00_p m
Members who would like to participate on one of these calls may call me on the League's
conference lute at 916.658.8212. I urge you to call in at the start time because there is a
physical limit to the number of callers (approx. 25). Please note that the call will begin at the
appointed start time, but may conclude prior to the designated ending time if the discussions
conclude early. Because it is sometimes difficult for everyone to be heard on a large conference
call, I also encourage you to please send your questions in advance of the call to League
Communications Director Megan Taylor via email: mtal.-loreicacities.ora. I will provide a
summary of the proposal before us and address all your questions.
CONCLUSION
The League and its LOCAL Coalition partners have reached a major milestone in gathering
signatures for the Local Taxpayers and Public Safety Protection Act thanks to you and many
like you. It will be on the ballot. Nothing can change that. We have now entered the next stage
of the process in which we must solidify our coalition and raise fluids for a successful campaign.
We have been presented the opportunity to form a partnership with the Governor—perhaps the
most successful campaigner in recent California history. How we react to the opportunity can be
expected to affect our prospects for success in the next six.months. If you have questions,please
join our conference calls next week or contact the board or directors (see
http:%.www.cacities.ore..doc.asp?id=734)or me (916-658-8275). Thank you.
4
y-�
B6 SATURDAY, MAY 8, 2004 1
eal Could End
State S ihonin The potential
p g compromise with
Schwarrenegger would allow
of Local 'axes the state taking
continue tang
property tax money — but
only for the next two years.Af-
ter that,the practice would be
- prohibited under a proposed
The governor might The annual transfer; amendment to the state gnCon-
. awed away atstitution.
agree to ban the money that other--, _ The deal, which would be
shifting of property wise would have part of Schwaizenegger's bud-
paid for police pa- get and require approval by
levies from cities and troll,jails, health- It MUM . . the Legislature, would re-
counties to the state— I care,road mainte- a=mpjish our shape how local goverment is
Parke and �r financed in California
after two years. libraries. �'I'he-tax )Vo.I smalG'*, For the new governor, the
shin affiects call_ ,�,,.1 Wor deal would buy time and
By Suz Fox forma dtiea, spe- ¢""` money as he labored to close
n" stgTw'ite' Pial districts and Pjeased the an estimated$14-billion bud-,
redevelopment gomwris get shortfall For local govern-
SACRAMY-TITO — Since agencies, • but meats, the short-term sacri-
1992, state lawmakers have counties beer most i71tC/6tPd in, fice — they face their own
,taken more than$33 bion in of the burden- hejPirigthe, difficult budget cuts too —
property taxes away from lo- A�.local gm,_ could yield long-term protec-
cal governments, using the ernments,particu- . .sW&bakits, tion. And both parties also
money instead to support larLy cities,became would avoid a contentious,
public schools. reliant on gener- costly campaign over a No-
Loral officials,who call that ! itting sales tax rev- IQ&McKee, vember ballot measure that
practice`tax jacking,"have re enue they could League of local officials have been press-
peatedly voiced.outrage and keep fol' them: Cal'rfolnia,Citie4 ingtoend the tax transfers im-
ffied lawsuits accusing state s" mediately.
leaders of endangering local Under the plan,in 2006 the
services. state would have to stop tak-
But now they think they' big local money and start pay-
might be able to cut a deal big back about$1 billion owed
with Gov.Arnold Schwatzen- for state-ordered programs,
egger — a deal some think such as mental health services
would be their best opportu- for severely emotionally dis-
nity in decades to regain a abled children. The proposal
measure of control over their also would give local govern-
finances. ments a greater share of prop-
Before 1978, local govern- erty taxes to replace revenue
meats relied heavily on prop- lost last fall when the governor
erty taxes. When voters reduced the state vehicle li-
capped those taxes with cense fee.
Proposition 13,state lawmak- But the $2.6 billion taken
ers provided billions of surplus from local governments would
dollars to help cities and coun- never be repaid In the near
ties cushion the blow. term, counties, cities, special
Then,during a recession in districts and redevelopment
the early 1990s, the state be- agencies across California
gan siphoning away that probably would have to reduce
money to meet its obligation services or raise fees as a re-
to public schools.This year,lo- sult. Many local governments
cal governments will transfer have already been forced to
more than$5 billion— about cut law enforcement and other
one-sixth of total property tax services to meet their own
revenue—to schools. budgets.
In Los Angeles County,
whose 10 million residents
make it the state's largest lo-
cat jurisdiction, officials re-
main wary of a deal still in the .
discussion stages. Supervisor
Zev Yaroslaysk y said he wants But in recent
to see the proposed alterna- . weeks, counties
tive constitutional amend- _ and cities also Be-
ment and other elements of gan making head-
the plan in writing to make way on another
sure they offer"airtight"pro- track, meeting privately with
tections. the governor's stafftobargain.
`Them is no trust,and for "We made it clear that if Io-
good reason," said Yaroslav- cal governments had alterna-
sky,who has served as a Los tives,we were more than will-
Angeles city councilman or ing to work with them," said
county supervisor for almost H.D. Palmer, deputy director
30 years. "Anybody who be- of the Department of Finance
lieves you can trust the state and Schwarzenegger's budget
to pay you back believes in the spokesman.
Tooth Fairy." So,the administration be-
And in the California Legis-. gan a series of closed-door
lature,some lawmakers object meetings with the California
that the agreement would do State Assn.-of Counties, the
little to discourage cities from League of California Cities and
trying to generate new sales other local government
tax revenues by building big groups.
box retail stores. The deal they are'consider-
"My view is that,ifwe're go- ing includes"a guarantee that
ing to grant constitutional the governor would support a
protection to cities and coun- [different] constitutional
ties—which will last 20 or 30 amendment,swing we would
years before anyone looks at not use local governments as a
this again—we better get it rainy-day Hind,"Palmer said.
right,"said Assembly Budget But for the next two years,
Committee Chairman Darrell the cash-starved state would
Steinberg (D-Sacramento). again raid the piggy bank
Tm working hard to make Counties,cities and special
sure there is real reform." districts would altogether lose
Steinberg wants to change $350 million more per year in
the tax structure so local gov- property taxes; redevelop-
ernments could keep more ment agencies would lose$250
property tax and less sales meson.
tax. In exchange,Schwarzeneg-
He said that would encour- gerwould back the alternative
age cities and counties to ap- ballot measure asking voters
prove more housing—which to amend the Constitution so
is sorely needed throughout the state could not take prop-
the state—instead of big-box erty or sales taxes from local
stores that generate sales governments again.
taxes. "It would accomplish our
In January,when Schwarz- No.1 strategic goal,which is to
enegger proposed taking an prevent the state from ever
additional$1.3 billion per year again—after two years—Lak-
in property taxes, ung local governments' rev-
local governments enue," said Chris McKenzie,
were primed to executive director of the
fight back. They League of California Cities.
have since col- "We're pleased the governor is
lected 1.1 million interested in helping the state
signatures to place kick its bad habit."
their measure on The governor is expected
the November bal- to unveil the proposal in his re-
lot, which would vised 2004-05 budget, due to
prevent the state be released in a few days.The
from diverting local budget then will go to the Leg-
tax dollars without islature.
a vote ofthe people. Times staff writer Evan
If it passed, the Halper ccmtributed to this re-
state would have to Port
return the money it
takes from local
governments in
comingyears.
y"
I
SATURDAY, MAY 8, 2004�i
beal Could End
State- Siphomng compromise witb
Schwarzenegger would allow i
of Local TaxeS the state to continue taking
property tax money — but �
only for the next two years.Af,
ter that,the practice would be
prohibited under a proposed
The governor might The annual- tfansters^ amendment to the state Con-
agree to ban the gnawed �r- stitution.
moe
The deal, which would be
shifting of property i wise would have part of Schwarcenegger's bud- i
paid for police pa- get and require approval by
levies from cities and I trols,jails, health- It would '. theLegislature, would re-'
IL4h
care, road mainte- aCpmP shape howlocal government is
counties to the state— nance pars and oun financed in California.
after two years. libraries. The tax No.1 SIraliTic, For the new governor, the j
shift affects Cali- i deal would buy time and
goaL . . . Were
T�SStaffWritter forma cities, ape leased the noestim�athed Labored
bud� I
. Ciel districts and P
redevelopmentoris get shortfall.For local govern- I
SACRAMENTO — Since agencies, but �n ments, the short-term sacri-
1992, state lawmakers have counties bear most interested in fice — they face their own
taken more than$33 billion in of the burden. helping difficult budget cuts too —
property taxes away from to And local gov- Pig the
could yield long-term protec-
cal governments, using the ernments,particu- state Id&its tion. And both parties also
money instead to support larly cities,became bad habil. would avoid a contentious
public schools. reliant on gener- costly campaign over a No-
Local officials who call that sting sales tax rev- Chris McKelwe,, i vember ballot measure that
practice"tax jacking,"have re- enue they could League oflocal officials have been press-
peatedly voiced.outrage and 11keep for them- ingto end the taxtransfers im-
filed lawsuits accusing state selves. California Cities l mediately.
leaders of endangering local ——-- .._ Under the plan,in 2006 the
services• state would have to stop tak-
But now they think they ing local money and start pay-
might be able to cut a deal ing back about$1 billion owed
with Gov.Arnold Schwarzen- ;' for state-ordered Programs,
egg& — a deal some think such as mental health services
would be their best opportu- for severely emotionally dis-
nity in decades to regain a : abled children. The proposal
measure of control over their ; ! also would give local govern-
bnances• meats a greater share of prop
Before 1978, local govern- erty taxes to replace revenue
meats relied heavily on,prop lost last fall when the governor
arty ' taxes. When voters reduced the state vehicle li-
capped those taxes with cense fee.
Proposition 13,state lawmak- But the $2.6 billion taken
ers provided billions Ofsurphrs from local governments would
dollars to help cities and corm- never be repaid In the near,
ties cushion the blow. term, counties, cities, special
' Then,during a recession in districts and redevelopment
the early 1990s, the state be agencies across California J
be-
gan siphoning .away that probably would have to reduce
money to meet its obligation services or raise fees as a re-
to public schools.This year,lo- sult. Many local governments
cal governments will transfer I have already been forced to
more than$5 billion— about cut law enforcement and other
one-sixth of total property tax i . services to meet their own
_revenue—to schools. budgets.
In Los Angeles County,
whose 10 million residents
make it the state's largest lo-
cal jurisdiction, officials re—
main wary of a deal still in the
discussion stages. Supervisor
Zev Yaroslaysky said he wants — Butirecent—
to
recent—
to see the proposed alterna- . weeks, counties
five constitutional amend- / and cities also
be-meat and other elements of gan making head-
the plan in writing to make way on another
sure they offer"airtight"pro- I track meeting privatelywith
tections. the governor's staff tobargain.
`Where is no trust, and for "We made it clear that if Io-
good mason," said Yaroslav- l cal governments had alterna- i
sky,who has served as a Los fives,we were more than will-
Angeles city councilman or mg to work with them," said
county supervisor for almost H.D. Palmer, deputy director
30 years. "Anybody who b, of the Department of Finance
lieves you can trust the state and Schwaraenegger's budget. j
to lay you back believes in the I spokesman
Tooth Fairy.- So, the administration be-
And in the California Legis- gan a series of closed-door
latus°,some lawmakers object j meetings with the California
that the agreement would do State Assn. of Counties, the
little to discourage cities from League of California Cities and
trying to generate new sales other local government
tax revenues by budding big- gimps
box retail stores. The deal they are'consider-
"ley view is that,if we're go- ing includes"a guarantee that
ing to grant constitutional the governor would support a
protection to cities and coun- [different] constitutional
ties—which will last 20 or 30 amendment,saying we would
years before anyone looks at not use local governments as a
this again —we better get it rainy-day flied,"Palmer said.
right,"said Assembly Budget But for the next two years,
Committee Chairman Darrell the cash-starved state would
Steinberg (D-Sacramento). again raid the piggy bank
'I'm working hard to make Counties;cities and special
sure there is real reform." districts would altogether lose
Steinberg wants to change. $350 million more per year in
the tax structure so local gov- I property taxes; redevelop-
ernments could keep more meat agencies would lose$250
property tax and less sakes million.
tax In exchange,Sehwarzeneg-
He.said that would encour- + gerwould back the alternative
age cities and counties to ap- ballot measure asking voters
prove more housing—which to amend the Constitution so
is sorely needed throughout the state could not take prop-
the state—instead of big-box erty or sales taxes from local
stores that generate sales governments again.
taxes. "It would accomplish our
In January,when Schwarz- No.1 strategic goal,which is to
enegger proposed taking an prevent the state from ever
additional$1.3 billion per year again—after two years—tak-
in property taxes, ing local governments' rev-
local governments enue," said Chris McKenzie,.
were primedto executive director of the
1 fight back. They League of California Cities.
have since col- "we're pleased the governor.is
I lected 1.1 million . interested in helping the state
j signatures to place Idek its bad habit."
their measure on i The governor.is expected
the November bal- to unveil the proposal in his re-
lot, which would vised 200405 budget, due to
prevent the state be released in a few days.The j
from divertinglocal budget then will go to the Leg-
tax dollars without j lslature.
a vote of the people. f I Times stop" writer Evan
If it passed, the Halper contributed to this re-
state would have to �port-
return the money it
i takes from local
j governments •in
L�mingyears.
May 11 Z001:-18:51:S8 Via Fax 0057817109 Fen a, %n P, 001 Of 019
M E:E IN k AGENT
DATE ITEM # gvs �
1400 K Street, Suite 400 a Sacramento, California 95814
'LEAGUE Phone:
916.658.8200 Fax: 916.658.8240
.. .CA.. .. . ... www.cacites.orgI. .. . [
I E..s.
V. C.
URGENT PLEASE-DELIN"ER B"INIEDLALTELY
Pagelof19 1A ,-*S
TO: City Officials
FROM: Chris McKenzie, Executive Director
DATE: May 11,2004
RE: Update 2--Proposed Constitutional Amendment/Two-Year Budget Agreement;
Board Working Group's Recommended Allocation.Method; Draft General
Assembly Resolution;and Summary of Proposed Agreement With Governor
This memo supplements one sent to each city on May 7, outlining the Governor's proposal to
local governments of an alternative to the Local Taxpayers and Public Safery Protection Act(the
"LOCAL Initiative") tied to a two-year budget agreement It describes the method that is being
recommended for allocating the city share of the $1.3 budget reduction that was developed by a
working group consisting of League board members an Saturday, May 8 in Sacramento. The
League Board of Directors will consider the working group's recommendation when it meets an
Wednesday, May 12, 2004 prior to the start of LOCAL Legislative Action Days. Attached also is
a draft resolution for the May 13 General Assembly meeting, beginning at 8:30 a.m., at The
Grand, 1215 J Street, Sacramento. Also attached is a one-page overview of the proposed
agreement PLEASE NOTE THAT THE SPREADSHEET ATTACHED TO THIS MEMO
IS IN DRAFT FORM. IT WILL BE UPDATED WITH MORE RECENT GENERAL
REVENUE DATA AND THE REVISED VERSION WILL BE SENT TOMORROW.
SUMMARY OF PROPOSED AGREEMENT
The Governor has proposed that cities, counties, special districts and redevelopment agencies
make a two-year contribution to solving the state's budget deficit of $1.3 billion per year. In
exchange, he pledges to lead a campaign to secure legislative and voter support in November
2004 fora constitutional amendment with revenue and mandate protections equivalent to or better
than the LOCAL Initiative. The Governor has personally committed to bring the same leadership
as he exercised with workers' compensation reform and Proposition 57 and 58 to the passage of
the new constitutional amendment. In the absence of an agreement, the Governor is expected to
oppose the LOCAL initiative.
VLF Reduction Permanent/Additional Property Tax to Cities and Counties.The centerpiece
of the proposal is a permanent reduefion of the VLF rate from 2%to 0.65%(its current effective
rate). this would trigger elimination of thie VLF backfill (approximately$4 billion)which would
be replaced with a like amount of property taxes, dollar-for-dollar, except for a two year
"contribution" by cities and counties of$700 million ($350 million each) in both 2004-05 and
2005-06. In the third year, cities and counties would receive the M amount of the new property
tax in exchange for the VLF backfill,and it would grow as property tax grows in the future. This
would increase every city's and every county's share of the property tax.
F01 COUNCIL 1 CDD DIR
I. CAO FIN DIR
ACAO FIRE CHIEF
ATTORNEY PW DIR
CLERK/ORIG POLICE CHF
IL Dy
�HEAIDS REC DIR
UTIL DIR
Ej- HR [)in
May 11 Z00,r18:5":27 Via Fax -> 8857817189 Ken He ''an Page HHZ of 819
Alternative Constitutional Amendment. The new constitutional amendment would contain the
same revenue protection features as the LOCAL Initiative as well as sante new features that
enhance the level of revenue and mandate protection:
• Property Tax. Protect the property tax allocations of local governments', including the new
property tax received as a result of the VLF Backfill-Property Tax.Swap and the property tax
received by cities and counties in lieu of the '/4 cent local sales tax suspended as part of the
Prop. 57"triple flip."
• VLF. Protect the remaining VLF and rewire repayment of the current year's $1.3 billion
VLF backfill"loan"in 2006-07.
• Sales Tax. Protect the authority and method of distribution of the local sales tax, and
guarantee that the '/4 cent sales tax is returned to cities when the Prop. 57 state deficit bonds
are retired. A new provision would protect the new local option sales tax authority granted to
all cities and counties last legislative session.
• Unfunded Mandates. New provisions would require: (1)repayment by the state of its deferred
unfunded mandate obligations to local governments over five years, beginning in 2006-07;
and(2)that mandates automatically expire if the legislature fails to fund them.
• Amendment And Two-Year Budget .Agreement. Legally Linked. The two-year budget.
agreement can only take effect if the new constitutional amendment is approved by the
legislature and passed by the voters. After two years, cities would get back the VLF backfill
loan and the state could no longer take the protected revenues to balance the state budget..
Two-Year Cost for Cities. The proposed "contribution" for cities in 2004-05 and 2005-06 is
$350 million for each of two years and is similar in nature to the $520 million VLF backfill
`-`loan"that cities made to the state in the current(2003-04)fiscal year. In its meeting on Saturday
the Board working group concluded the multi-year impact of the two-year budget agreement and
the new constitutional amendment should factor in both the repayment of the 2003-04 VLF loan
and the effect of the constitutional protections provided by the new constitutional amendment.
They advise city officials to consider the proposal in this way:
Contribution/Refund(millions) 2004/05 2005/06 2006/07 2007/08 2008/09/Thereafter
($350) ($350) $520 0 0
0
RECOMMENDED ALLOCATION METHOD
Allocation Principles. The Board working group met on Saturday, May 8 in the League's
Sacramento offices. A number of other city officials and their representatives attended as well.
The directors reviewed a wide range of options for allocating the proposed $350 million
reduction. The group agreed at the outset it was essential to develop a recommended allocation
method that was based on the following principles:
• Fiscal capacity(e.g.,ability to pay)
• Fairness
• Simplicity and consistency
• Relevancy
Diversity of Cities Poses Challenges.The working group reviewed allocation methods based on
the VLF (the revenue being replaced dollar-for-dollar), ERAF, sales tax, total property tax, and
total general revenues. The group concluded early in its review that the diversity of revenues of
California cities suggested that reliance on a.single revenue source or method alone was likely to
' Like the LOCAL Initiative,the alternative would protect city,county,special district and RDA revenues.
May 11 Z804 18:52:55 Via Fax -> 8857817.189 Ken Ha 'an Page 883 Of 819
cause extreme hardship for some cities. For example, cities with high reliance on the VLF (new
cities and some others)would experience a disproportionate share of the burden that could not be
justified. The group also concluded that ERAF should be rejected as a basis because it bears no
relationship to the actual reduction and it is an obsolete basis for any allocation.
A Blend of Revenues Approach Is Recommended. As the working group made its way
Saturday through over six possible methods of allocating the$350 million,a strong consensus
emerged to base the allocation on a blend of the three largest discretionary city revenues: VLF,
property tax and sales tax,with a minimum.and a maximum tied to the total general revenues of
each city so no one city fails to pay their fair share or pays too much in relationship to their fiscal
capacity. This approach was selected unanimously because all cities receive these three revenues,
variations among cities generally reflect each city's relative fiscal capacity or ability to pay, and
the floor and ceiling ensure that cities with the fiscal capacity make a minimum contribution and
that cities with the least fiscal capacity have their liabilities capped. Specific details of the
formula are as follows:
• The Board working group by overwhelming consensus recommended that the Board approve
a recommendation to the Governor and Legislature that the $350 million be allocated as
follows:
o One-Third on VLF. One third of the $350million on the basis of cities' proportionate
share of the VLF;
o One-Third on Property Tax. One third of the $350 million on the basis of cities'
proportionate share of the property tax;and
o One-Third on Sales Tax. One third of the $350 million on the basis of cities'
proportionate shares of the Bradley Burns sales tax.
o Minimum_ and Maffimum. No city shall have a contribution of more than 4% or less
than 2% of their general revenues.The fiscal impacts of the cap and floor will be
allocated proportionately.
A DRAFT spreadsheet accompanies this memo that-shows the recommended allocation method
and the long-terns impact of the adoption of the proposed constitutional amendment protecting
local revenues. City officials can see the effect of the repayment in 2006-07 of the VLF backfill
loan on the three-year cost of the contribution. Over two years cities will pay in$700 million, but
in the third year they will get back$520 million, for a net three-year cost of$180 million. Future
contributions would be prevented by the amendment. A REVISED SPREADSHEET BASED
ON UPDATED INFORMATION FROM THE STATE CONTROLLER'S OFFICE ON
GENERAL.REVENUES WILL BE SENT TOMORROW!
KEY QUESTIONS AND ANSWERS
1. Why Didn't the Working Group Recommend A VLF or ERAF Based Allocation
Method? The Board working group concluded that a VLF based method would work for
some cities, but for many it imposed an unfair burden, especially those that very dependent
on the VLF. They rejected the ERAF method as totally unrelated to the loss and as an
obsolete methodology. In fact, with the VLF backfill—property tax exchange, local
governments will be paid from m the county ERAF fund rather than paying into it. The Board
working group concluded that an approach based on a mix of revenues was fairer and better
reflected the financial realities of the cities of the state.
At the time the spreadsheet was prepared,.2001-02 city general revenue information was not available
from the State Controller's office. All other data are 2001-02. An update will be sent tomorrow.
May 11 ZBB4 18:5325 Via Fax -> 8857817189 Ken He 'an Page 004 Of 819
r
2. Why Is An Allocation Method Needed Now? The Governor's Office asked each local
government group to develop a recommended allocation system for their respective share of
the$1:3 billion contribution. Each group did it differently, but each approach reflects the best
fit for their type of local government. For special districts and redevelopment agencies, an
approach based on a percentage of revenues is being used, but because they are highly
property tax dependent it heavily influences the result.Ultimately,the Legislature will decide
how this will be done, but the League needed a recommended approach to share with member
cities, the Governor and the Legislature. The League Board of Directors will review this
recommendation on Wednesday,May 12.
3. Why Were Minimum and Maximum Levels Recommended? The Board working group
really wanted to recommend an approach that doesn't have any extremes and that treats cities
as much alike as possible. The blended revenues approach avoided most,but not all extremes,
so the ceiling and floor were included to accomplish that goal. The group concluded it was a
fair allocation and itis relatively easy to understand.
4. Why Isn't There A Specific "Hardship City" Allocation? The Board working group
believes the final recommended allocation method based on blended revenues with a
minimum and maximum provides that protection. This approach significantly softens the
impact on cities of limited means and new cities that receive a three-fold share of the VLF
based on registered voters during the early years of their existence.
5. What If The Legislature Fail to Approve the New Constitutional Amendment? If the
Legislature fails to act, the two-year budget agreement would not take effect. In that event,
efforts may be made to secure a one-year local government contribution in some other way
which the League would oppose. The new constitutional amendment and the two-year budget
agreement are interconnected in such a way that it requires passage in the legislature and in
November for the budget agreement to stand. In any case,the LOCAL Initiative will serve as
the backstop in case the legislature fails to act.
6. Will the LOCAL Initiative Still Be On the.Ballot As An Insurance Policy? Yes. It is in
the process of being qualified right now and we have no doubt it will. It will be on the
November ballot and is still the focus of our fundraising efforts and campaign work. Nothing
will change that until the alternative, in a form acceptable to the LOCAL Coalition, is
approved by the Legislature.
CONCLUSION
The League Board of Directors will review this recommendation and act on it when it meets on
Wednesday, May 12, prior to LOCAL Legislative Action Days. City officials with questions
about the method are urged to contact the Board of Director; (see
http://www.eacities.org/doc.asa?id=734)or me(916-658-8275). Thank you.
May 11 2804 18:53:51 Via Fax 8857817189 Hen He Ian Page 005 Of 019
1400 K Street, Suite 400 - Sacramento, Califomia 95814
LFAGYU•E Phone: 916.658.8200 Fax: 916.658.8240
-CITI E.',.S vmwcacitiesorg
Proposed Agreement With Governor Arnold Schwarzenegger
November 2004 Constitutional Amendment
• VLF Repayment Require repayment in 2006-07 of 2003-04 VLF Backfill Loan
($520 million back to cities).
• VLF Reduction/New Property Taxes to Cities. Lower the VLF permanently to
0.65%from 2%, and provide property taxes to cities and counties to offset VLF
backfill(less $700 million for 2 years—$350 million city and $350 million county).
• No Future Tax Raids. Prohibit the state from taking the property tax, sales tax, and
the remaining VLF of local governments.
• Mandate Reimbursements. Require payment of deferred.mandate reimbursements
to local government,beginning in 2006-07.
• Automatic Repeal of Mandates.Require that failure to pay mandate
reimbursements in timely way will trigger repeal.of law imposing mandate.
• Property Tax Backfill. Guarantee payment of the property tax backfill to cities and
counties due to the Prop. 57 "triple flip"(which suspended 1/4 cent local sales tax).
• Sales Tax Returned. Guarantee that the 1/4 cent sales tax is returned to cities and
counties when the Prop. 57 bonds are repaid.
• No Property-Sales Tax Exchange. Oppose addition of property-sales tax exchange.
• Governor to Chair Campaign. Governor advocates legislative approval of the
proposed amendment and serves and chairman of the campaign to secure voter
approval in November 2004.
• LOCAL Initiative Still on Ballot. The Local Taxpayers and Public Safety
Protection Act remains on the November 2004 ballot in the event legislature does not
approve"agreement". If legislative approval were secured,the League and the
LOCAL Coalition would devote all of our efforts to passage of the new constitutional
amendment.
May 11 2884' 18:54:14 Via Fax -> 8857817109 Hen Hr ian Page 006 Of 019
RESOLUTION RATIFYING CERTAIN ACTIONS OF THE BOARD OF
DIRECTORS OF THE LEAGUE OF CALIFORNIA CITIES
Source: Board of Directors
WHEREAS, on September 10, 2003 the General Assembly of the League of
California Cities (the "General Assembly") adopted a resolution, ratifying the action of
the League Board of Directors in July 2003 to sponsor a statewide ballot initiative to
empower the voters to limit the.ability of state government to confiscate local tax fimds
to finance state government; and
WHEREAS, in concert with its partners in the LOCAL Coalition, the League
Board of Directors authorized the formation of a campaign committee, the filing of a
proposed initiative in December 2003 entitled the Local Taxpayers and Public. Safety
Protection Act (the "LOCAL Initiative"), and part of the necessary funding of such
campaign with non-public funds of the League; and
WHEREAS, in early February the Attorney General approved the title and
summary for the LOCAL Initiative and the process of circulating petitions to collect
signatures to qualify the measure for the ballot began; and
WHEREAS, throughout the next two months over 125,000 signatures were
collected ons volunteer basis and over 1 million paid signatures were collected; and
WHEREAS, on Friday, April 16 over 1.1 million signatures were filed with the
respective county election officers, an amount likely sufficient to qualify the LOCAL
Initiative for the November 2004 ballot; and
WHEREAS, Governor Arnold Schwarzenegger has offered to collaborate with
the League and its LOCAL Coalition partners to secure legislative and voter approval of
a proposed alternative November 2004 constitutional amendment. with equivalent or
better revenue and mandate protection for local agencies; and
WHEREAS, in exchange for his leadership of the campaign for the alternative
constitutional measure, the Governor has proposed that the League and the LOCAL
Coalition support a two-year budget package that would provide for contributions of$1.3
billion by cities, counties, special districts and redevelopment agencies each year for two
years,with the VLF Backfill Loan of 2003-04 constitutionally guaranteed to be repaid to
cities and counties in 2006-07 and repayment of previously deferred mandate
reimbursements to local governments commencing in 2006-2007; and
WHEREAS, on April 17, 2004, the League Board of Directors adopted a two-
part motion, formally (1).reaffirming the League's strong support for the just-filed Local
Taxpayers and Public Safety Protection Act (the "LOCAL" Initiative"), including
fimdraising; and (2) authorizing the Executive Committee of the League Board of
Directors to enter into discussions at the invitation of the Governor concerning an
alternative constitutional amendment package, consistent with the.LOCAL Initiative,that
would protect the same local revenues and agencies and respond to the Governor's
May 11 2884 18:54:41 Via Fax -> 8857817189 Ken 8e ;an Page 887 Of 819
budget proposals. The motion authorized the Executive Committee to move forward on
the alternative proposal following consultation with the Board of Directors; and
WHEREAS, since April 17,the League Executive Committee has consulted with
the League Board of Directors on three occasions, and after the final consultation on May
11, the Executive Committee took the following action on behalf of the League Board of
Directors:
(1) Reaffirm the League Board's strong support for the passage of the Local
Taxpayers and Public Safety Protection Act on the November 2004 ballot and
continue with fundraising and other activities to support its success;
(2) Accept and support the. Governor's proposal to advocate the passage of an
alternative constitutional amendment by the Legislature which provides
equivalent or better local revenue and mandate protection in conjunction with a
two-year budget package, providing for a $1.3 billion contribution by local
governments is to the state budget deficit for no more than two years, after which all
contributions by local governments of their general revenues to the state budget
would cease and the 2003-04 VLF Backfill Loan would be constitutionally
guaranteed to be repaid;
(3) In the event the alternative constitutional amendment and two-year budget
package secures legislative support, the League will work with Governor
Schwarzenegger and the LOCAL Coalition to secure passage of the alternative;
and
(4) If the alternative constitutional amendment and two-year budget package fails to
receive legislative support, the League will devote its exclusive efforts and
energies to the passage of the Local Taxpayers and Public.Safety Protection Act.
WHEREAS, in a special meeting of the League Board of Directors on May 12
2004, the Board has ratified the above action and respectfully submits this resolution for
approval by the General Assembly of the League on May 13, 2004 in Sacramento,
California; now,therefore be it
RESOLVED, by the General Assembly of the League of California Cities
assembled at a special meeting in Sacramento, May 13, 2004, that the above action of the
Board of Directors of the League of California Cities be approved and ratified; and be it
further
RESOLVED, that all city officials are again called upon to unite and lend their
personal time and support to the campaign to secure permanent constitutional protection
of city revenues on the November 2004 ballot..
2
May 11 2884 19:00:26 Via Fax -> 8857817189 Ken Hr" `ian Page 816 Of 819
D R A F T ESTIMATES
11 May 2004
NMF Backfill
Loss Loss Gap Repayment
FY04-05 O5-06 FY06-07 FY07-08 FY08-09
TWENTYNINE PALMS 7629 �, A;�05
0 0
_ ... .... .. ........_ . . _..................................UPLAND -754,977 .754,977 0 0
VICTORVILLE .723,057 .723,057 +1,356;390 0 0
......._...._....,......_._..._.........._..........._.._._..._.._._..... .....,.........,,......,..................,,.................................,........_.. .. .._.......,,........................................................................
YUCAIPA .339'636 .339,636 +788,536 0 0
YUCCA VALLEY .208,450 -208,450 +316,158 0 0
CARESBAD _ .1,825,366 . 1,825,366 + 1,594,886 0 0
...0 H U LA V I STA......................_................._...._...._.....1762 754................. ..1,762,754._.................._.....+3,460,191_....._......._..._................0 ...............................0..
CORONADO .522,057 .522,057 +470,041 0 0
DEL MAR - 127,510 . 127,510 +81,527 0 0
EL CAJON - 1,129,658 1,129,658 + 1,751,941 0 0
ENCINITAS -1,145,330 1,145,330 + 1,135,180 0 0
.ESCONaI DO_...._........ .._._._._._..... ..._.1,529,202 1,529ioi..._.. ..._.._... +2,492,997
2,432992 .._.. .___._...o.................._. .......o..
IMPERIAL BEACH 199,903 .199,903 +499,778 0 0
LA MESA 688,459 _ .688,439 + 1,008,308 _. o o_.
LEMON GROVE •275,165 -775,165 +.460,564 0 0
NATIONAL CITY 725,309 -725,309 + I,o52,958 0 0
OCEANSIDE •1,713,379 - 1,713,379 +3,030,560 0 0
POWAY .653,478 •653,478 +899,854 0 0
... . ._. . ...
..............................
SAN
SAN DIEGO 17,070,387 17,070,397 +22,755,329 0 0
_. . . _._ .. _._._.__...._._ . . . __._._._...................................................................
SAN MARCOS -659,343 -659,545 + 1,151,181 0 0
SANTEE •614,120 .614,120 +972,972 0 0
SOLANA BEACH .250,615 •250,615 +251,463 0 0
VISTA •389,719 •888,719 + 1,668,421 0 0
SAN FRANCISCO -9,536,288_......_._.........9 36,288................._...... .._....
+I4,383,18I0o
. ......_.
................... ..........................,, ...
SAN • • •
.._........................................._._....................................._....._.........._...................................................._.............._............
ESCALON .66,806 -66,806 + 115,214 0 0
LATHROP - 160,235 - 160,235 +209,950 0 0
LODI .695,193 .695,193 + 1,076,951 0 0
MANTECA •517,268 .517,268 +996;203 0 0
RIPON • 106,762 .106,762 +202,140 0 0
STOCKTON .2,640,354 .2,640,354 +4,599,116 0 0
TRACY -762,037 .762,037 + 171897518 0._..._... ...._...._.0..
ARROYO GRANDE •235,158 .235,158 +295'64 0 0
ATASCADERO -334 9Z .334 392 +489,941 0 0
EL PASO DE ROBLES .366,136 .366,136 +467,740 0 0
GROVER B CH • 123,339 • 123,339 +240,249 0 0
._.._._ .. . ....._._.._ __ _.. ._...... .._............ .......__....... ...__..........................__.... _....... ..._... . .................................................................
MORRO BAY 189,906 189,906 + 190,452 0 0
.............._.. ._. .. ... .......... ..._......_._._._._.............._........._...............................-,............,.,........,,...................,,...............................................................................,...,,.,....................
PISMO BEACH 0 0
SAN LUIS OBISPO -671,823 671,823 +805433 0
ATHERTON - 156,480 156,480 + 131,631 0 0
BELMONT •244,546 .244,546 +460,926 0 0
BRISBANE - 124,161 - 124,161 _ +66,251 0
BURLINGAME •734,682 •734,682 +517,899 _ 0 _0
COLMA •.264,039 •264,039 +22,987 0 0
mjgc 5/10/2004 californiacityfinalu0.com page 9 of 12
RED FILE
'MEETING AGENDA
DATE S &TEM #-"
council mcmoizanbum
May 14, 2004
TO: Council Members
FROM: Dave Romero ��,V�
SUBJECT: State Budget Negotiations
On May 13 City representatives at the "General Assembly" meeting in Sacramento
overwhelmingly approved the resolution presented by the Board of Directors, recognizing that
there is short term pain over the next 2 years in exchange for long term gain provided by a
constitutional amendment. City staff has already included a copy of the proposed agreement
with Governor Schwarzenegger and a copy of the resolution in the agenda report (see Red File).
Attached is a graph (presented at the General Assembly meeting) indicating a generalized
example of the financial implication for a typical city.
Although there are a number of unanswered questions, I believe the vote indicated our
confidence that the Governor will continue to be able to follow through as he has promised and
that the League staff will adequately protect cities interests.
A] COUNG} �CDDDIR
CAO FIN DIR
I❑ ACAO FIRE CHIEF
❑,ATTORNEY PW DIR
❑ CLERK/ORIG POLICE CHF
❑ D T EADS REC DIR
❑ UTIL DIR
❑ ---�-- HR DIR
ACTUAL CffY EXAMPLE
PROJECTED TEN-YEAR TOTAL LOSS FOR
CITY GENERAL FUND + REDEVELOPMENT
$45
$40 Likely No-Deal
Loss is over
$35 8 times that
of Proposed
$30 Compromise
c
$25 - --
Compromise is
C $20
1/5 the Loss $411 M1,
$15 of Original
$10
$24 MI. Budget
$5
$0
Governor's Original Governor-LOCAL Likely Loss With
Budget Compromise No Deal
(Annual Loss in Millions of Dollars)
Governor's
Original Budget: 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Total
General Fund $0.7 $0.8 $0.8 $0.9 $0.9 $1.0 $1.0 $1.0 $1.1 $1.2 $9.4
Redevelopment 1.1 1.2 1.2 1.3 1.4 1.4 1.5 1.6 1.7 1.7 14.2
Total 1.9 2.0 2.1 2.2 2.3 2.4 2.5 2.6 2.8 2.9 23.5
Governor-LOCAL
Compromise: 04/05 05/06 06/07 07/08 08/09 09/10 . 10/11 11/12 12/13 13/14 Total
General Fund $1.1 $1.1 ($1.8) - - - - - - - $0.4
Redevelopment 2.1 2.1 - - - - - - - - 4.2
Total 3.2 3.2 (1.8) - - - - - - - 4.7
Likely Loss
With No Deal: 04/05 05/06 06/07 07/08 08/09 09/10 10/11 11/12 12/13 13/14 Total
General Fund $1.1 $1.2 $1.2 $1.3 $1.4 $1.4 $1.5 $1.6 $1.7 $1.7 $14.2
Redevelopment 2.1 2.2 2.3 2.4 2.6 2.7 2.8 3.0 3.1 3.3 26.6
Total 3.2 3.4 3.6 3.7 3.9 4.1 4.3 4.6 4.8 5.0 40.7
Notes: Includes impact on property taxes and VLF; excludes state mandated cost reimbursements.
In 06/07, Govemor-LOCAL Compromise returns VLF loss incurred in 03/04.
No Deal means no Compromise Plan and either(a) LOCAL initiative fails, or(b) LOCAL initiative
passes, but subsequent voter referendum on state-enacted local revenue takeaways also passes.
No Deal assumes ERAF loss in 04/05 for both City and RDA at same level as Compromise Plan,
but loss is permanent