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HomeMy WebLinkAbout2009-06-23 - AGENDA REPORTS - HWY USERS TAX ACCOUNT (4)Agenda Item: 6 DA -f CITY OF SANTA CLARITA JOINT CITY COUNCIL / REDEVELOPMENT AGENCY AGENDA REPORT City Manager Approval:, CONSENT CALENDAR Item to be presented by: Marsha McLean DATE: June 23, 2009 SUBJECT: STATE BUDGET: POTENTIAL SEIZURE OF GAS TAX (HIGHWAY USERS TAX ACCOUNT) AND REDEVELOPMENT TAXINCREMENT DEPARTMENT: City Manager's Office I RECOMMENDED ACTION City Council/Agency Board adopt a resolution finding a severe fiscal hardship will exist if any seizure by the State of California of any local funds, specifically the City's Highway Users Tax Account (HUTA) (also known as gas tax) and Redevelopment Tax Increment. Direct staff to forward the resolution to the Santa Clarita legislative delegation, the Governor, the League of California Cities, and the California Redevelopment Association. BACKGROUND On May 5, 2009, the Department of Finance announced it had proposed to the Governor that the state "borrow" over $2 billion in local property taxes from cities, counties, and special districts to balance the state budget. On May 12, 2009, the City Council unanimously voted to adopt a resolution finding that the City would face a severe fiscal hardship if the state raided the City's coffers of local property taxes. The impact of that taking of City funds was estimated to be $3 million from the general fund. At this time, the State Joint Budget Conference Committee has voted to reject the borrowing of local property taxes. However, this idea can always resurface again if budgetnegotiationsbreak down on other issues. In his final May revision, the Governor proposed the seizure of almost $1 billion in city and county shares of revenues in the HUTA fund to fund past and future highway bond debt service payments out of the general fund. On June 11, 2009, the State Joint Budget Conference Committee approved the seizure of almost $1 billion' in city and county motor vehicle, HUTA, 441ed:Iest,. U4-103 -L or gas tax funds to help close the state's budget deficit. The proposal was approved on a party line vote with democrats voting AYE and republicans voting NO. If this state budget proposal is implemented, the City of Santa Clarita would lose approximately $2.8 million in HUTA funds. It is clear to attorneys employed and retained by the League of California Cities that this recommendation, if enacted into law, would be unconstitutional. In both 1974 and 1998, voters enacted limitations on the power of the Legislature to seize and use HUTA funds, allowing only loans to the general fund on a limited basis. The League of California Cities received a legal opinion from the Sacramento law firm Nielson, Merksamer, Parrinello, Mueller & Naylor, LLP that sets forth the legal analysis and conclusion that the Governor's proposal would violate Article XIX of the California Constitution. The City of Santa Clarita is currently in the process of approving its budget for Fiscal Year 2009-2010. When compared to Fiscal Year 2007-2008 general fund revenues are down over $14 million or 16 percent. To balance the budget the City has gone through an extensive process to reduce costs, postpone capital projects, freeze vacant positions and reduce services. In doing so the City reduced its general fund by $4 million or 8 percent. The Capital Improvement Program, Traffic Administration, and Street Maintenance are all currently funded with HUTA funds. If this State taking were to occur the City would have to determine how to replace the lost HUTA funds, which again total approximately $2.8 million. A loss of these funds would reduce the ongoing street maintenance and congestion relief programs which would result in growing deterioration of current pavement conditions. In addition to the potential taking of HUTA funds, the state is also considering the taking of redevelopment tax increment. Since the early 1990s the state government has seized $1.04 billion of redevelopment tax increment statewide, and the Governor and Legislature are now considering seizing $350 million each year for three years, beginning in the current fiscal year. The impact of this taking on the City of Santa Clarita's Redevelopment Agency would be approximately $234,301 per year for a total of $702,003. On April 30, 2009, in the case of CRA v. Genest, the Sacramento Superior Court found similar efforts by the State to seize redevelopment tax increment for the state general fund to be in direct violation of Article XVI, Section 16 of the State Constitution, added by the voters in 1952 as Proposition 18, which requires. that tax increment be used exclusively for the benefit of redevelopment project areas. The League of California Cities has developed the attached resolution for cities and requested that cities consider directing their city attorney to cooperate with the League, other cities, and counties, in planning litigation to challenge the constitutionality of the proposed taking of city and county funds. It does not commit the city to filing litigation, but directs the city attorney to cooperate and work with the League and other local governments in the planning process of possible litigation. The City Council/Agency Board is asked to join with other cities throughout California and the League of California Cities in opposing any efforts by the State of California to divert HUTA funds or Redevelopment Tax Increment. ALTERNATIVE ACTIONS Other action as determined by the City Council. FISCAL IMPACT No additional resources are required to implement the recommended action beyond those already included in the City's adopted 2008/09 budget. ATTACHMENTS Resolution 3 RESOLUTION 09- A JOINT RESOLUTION OF THE CITY COUNCIL AND REDEVELOPMENT AGENCY OF SANTA CLARITA AUTHORIZING THE CITY ATTORNEY/REDEVELOPMENT AGENCY GENERAL COUNSEL TO COOPERATE WITH THE LEAGUE OF CALIFORNIA CITIES, THE CALIFORNIA REDEVELOPMENT ASSOCIATION, OTHER CITIES AND COUNTIES IN LITIGATION CHALLENGING THE CONSTITUTIONALITY OF ANY SEIZURE BY STATE GOVERNMENT OF HUTA OR GAS TAX AND REDEVELOPMENT FUNDS WHEREAS, the current economic crisis has placed cities under incredible financial pressure and caused them to make painful budget cuts, including layoffs and furloughs of city workers, decreasing maintenance and operations of public facilities, and reductions in direct services to keep spending in line with declining revenues; and WHEREAS, the City of Santa Clarita has gone through an extensive process to reduce costs, postpone capital projects, freeze vacant positions and reduce services to balance the City's budget; and WHEREAS, any proposal by the State of California to borrow or take funds from the City of Santa Clarita, and other cities alike, would require cities to further reduce services vital to the community; and WHEREAS, since the early 1990s the state government of California has seized over $10 billion of city property tax revenues statewide, now amounting to over $900 million each year to fund the state budget even after deducting public safety program payments to cities by the state; and WHEREAS, since the early 1990s the state government also has seized $1.04 billion of redevelopment tax increment statewide, and the Governor and Legislature are now considering seizing $350 million each year for three years, beginning in the current fiscal year; and WHEREAS, on April 30, 2009, in the case of CRA v. Genest, the Sacramento Superior Court found similar efforts by the State to seize redevelopment tax increment for the state general fund to be in direct violation of Article XVI, Section 16 of the State Constitution, added by the voters in 1952 as Proposition 18, which requires that tax increment be used exclusively for the benefit of redevelopment project areas; and WHEREAS, in his proposed FY 2009-10 budget the Governor has proposed transferring $1 billion of local gas taxes (HUTA) and weight fees to the state general fund to balance the state budget, and over $700 million in local gas taxes permanently in future years, immediately jeopardizing the ability of the City of Santa Clarita to maintain the City's streets, bridges, traffic signals, streetlights, sidewalks and related traffic safety facilities for the use of the motoring public; and 9 WHEREAS, the loss of almost all of cities' HUTA funds will seriously compromise cities' ability to perform critical traffic safety related street maintenance, possibly including, but not limited to, drastically curtailing patching, resurfacing, street lighting/traffic signal maintenance, payment of electricity costs for street lights and signals, bridge maintenance and repair, sidewalk and curb ramp maintenance and repair, and more; and WHEREAS, cities and counties maintain 81 % of the state road network while the state directly maintains just 8%, and according to a recent statewide needs -assessment on a scale of zero (failed) to 100 (excellent), the statewide average pavement condition index (PCI) is 68, or "at risk." WHEREAS, in both Proposition 5 in 1974 and Proposition 2 in 1998 the voters of our state overwhelmingly imposed restrictions on the state's ability to do what the Governor has proposed and the Legislature is considering, and any effort to permanently divert the local share of the gas tax would violate the state constitution and the will of the voters. NOW, THEREFORE, THE CITY COUNCIL AND THE REDEVELOPMENT AGENCY BOARD OF THE CITY OF SANTA CLARITA DOES HEREBY RESOLVE: SECTION 1. The Santa Clarita City Council and Redevelopment Agency Board will oppose all proposals by the State of California that recommends borrowing or taking funds from cities and counties to balance the State of California's fiscal crisis; and SECTION 2. The City Attorney/Redevelopment Agency General Counsel take all necessary steps to cooperate with the League of California Cities, California Redevelopment Association, other cities, counties and redevelopment agencies in supporting litigation against the state of California if the legislature enacts and the governor signs into law legislation that unconstitutionally diverts the redevelopment tax increment and the City's share of funding from the Highway Users Tax Account (HUTA), also known as the "gas tax," to fund the state general fund; and SECTION 3. The city manager/agency executive director or clerk shall send this resolution with an accompanying letter from the mayor/agency chair to the Governor and each of the City's state legislators, informing them in the clearest of terms of the City's adamant resolve to oppose any effort to frustrate the will of the electorate as expressed in Proposition 18 (1952), Proposition 5 (1974) and Proposition 2 (1998) concerning the proper use and allocation of the redevelopment tax increment and the gas tax; and SECTION 4. That a copy of this Resolution shall be sent by the city manager/agency executive director or clerk to the League of California Cities, the California Redevelopment Association, the Iocal chamber of commerce, and other community groups whose members are affected by this proposal to divert funds from vital local services and projects. 5 SECTION 5. The City Clerk shall certify to the adoption of this Resolution. PASSED, APPROVED, AND ADOPTED this day of )2009. MAYOR ATTEST: CITY CLERK STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA) I, Sharon L. Dawson, MMC, City Clerk of the City of Santa Clarita, do hereby certify that the foregoing Resolution was duly adopted by the City Council and Redevelopment Agency of the City of Santa Clarita and at a regular meeting thereof, held on the day of , 2009, by the following vote: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: CITY CLERK STATE OF CALIFORNIA ) COUNTY OF LOS ANGELES ) ss. CITY OF SANTA CLARITA ) CERTIFICATION OF CITY COUNCIL RESOLUTION I, Sharon L. Dawson, City Clerk of the City of Santa Clarita, do hereby certify that this is a true and correct copy of the original Resolution 09- adopted by the City Council of the City of Santa Clarita, California on , 2009, which is now on file in my office. Witness my hand and seal of the City of Santa Clarita, California, this _ day of 12009. Sharon L. Dawson, MMC City Clerk By Susan Caputo, CMC Deputy City Clerk P