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Home My WebLink About2009-05-12 - AGENDA REPORTS - STATE BUDGET LOCAL FUNDS (2)SUBSEQUENT NEED DATE: SUBJECT: DEPARTMENT Agenda Item: I ki -j}— CITY OF SANTA CLARITA AGENDA REPORT City Manager Approval: Item to be presented by: May 12, 2009 Marsha McLean STATE BUDGET: LOCAL GOVERNMENT FUNDS City Manager's Office RECOMMENDED ACTION City Council adopt a resolution finding a severe fiscal hardship will exist if additional local property tax funds are seized and additional unfunded mandates are adopted by the State of California. Direct staff to forward the resolution to the Santa Clarita legislative delegation, Governor, and the League of California Cities. 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, causing deeper cuts in local public safety and other vital services. In order to start that process, the Governor would have to issue a proclamation declaring the existence of a "severe fiscal hardship." The legislature would then have to implement the "borrowing" program by passing urgency legislation (2/3 vote) which identifies how the "loan" will be repaid with interest. The League of California Cities has developed the attached resolution finding a severe fiscal hardship will exist if this proposed state property tax raid is added to the pressures of the ongoing property tax losses; sales tax, and the serious revenue losses due to the economic recession. The resolution states that the idea of the state taking property tax funds from already stressed city budgets is ludicrous and irresponsible. It demonstrates that part of the reason cities are cutting their budgets today is because of past and continuing property tax raids. Property tax losses of cities statewide since the -state began taking these funds in the early 1990s totals $8.6 billion. To date the City of Santa Clarita has lost a total of $10.3 million from these state raids. Adopted: 16 -so 09 _ The City of Santa Clarita is currently preparing its budget for the fiscal year 2009-2010. General fund revenues are down more than $4 million or 4 percent. 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. It is estimated that an additional state taking of property taxes as proposed would result in excess of $3 million. Such a taking would require the City to further reduce services vital to the community. The City Council is asked to join with other cities throughout California and the League of California Cities in opposing any effort by the Governor to declare a "severe financial hardship" which would allow the Legislature to initiate borrowing of local government revenues. Subsequent Need This item is a Subsequent Need Item as the need for the City Council to take action is immediate as the recommendation of the Department of Finance to the Governor is pending and the Governor may act on it at any time. TERNATIVE ACTIONS Other action as determined by the City Council. FISCAL IMPACT No addition resource are required to implement the recommended action beyond those already included in the City's adopted 2008/09 budget. ATTACHMENTS Resolution RESOLUTION 09- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SANTA CLARITA, CALIFORNIA OPPOSING ANY PROPOSAL OF THE GOVERNOR OF THE STATE OF CALIFORNIA OR THE CALIFORNIA LEGISLATURE TO TAKE, BORROW OR OTHERWISE CONVEY LOCAL GOVERNMENT FUNDS TO THE STATE OF CALIFORNIA WHEREAS, the current economic crisis has placed cities under incredible financial pressure and caused city officials to reopen already adopted budgets to make painful 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, since the early 1990s the state government of California has seized over $8.6 billion of city property tax revenues statewide to fund the state budget even after deducting public safety program payments to cities by the state; and WHEREAS, in FY 2007-08 alone the state seized $895 million in city property taxes statewide to fund the state budget after deducting public safety program payments and an additional $350 million in local redevelopment funds were seized in FY 2008-09; and WHEREAS, the most significant impact of taking local property taxes has been to reduce the quality of public safety services cities can provide since public safety comprises the largest part of any city's general fund budget; and WHEREAS, in 2004 the voters by an 84% vote margin adopted substantial constitutional protections for local revenues, but the legislature can still "borrow" local property taxes to fund the state budget; and WHEREAS, on May 5 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, causing deeper cuts in local public safety and other vital services; and WHEREAS, in the past the Governor has called such "borrowing" proposals fiscally irresponsible because the state will find it virtually impossible to repay and it would only deepen the state's structural deficit, preventing the state from balancing its budget; and WHEREAS, the Legislature is currently considering hundreds bills, many of which would impose new costs on local governments that can neither be afforded nor sustained in this economic climate; and WHEREAS, state agencies are imposing, or considering, many regulations imposing unfunded mandates on local governments without regard to how local agencies will be able comply with these mandates while meeting their other responsibilities; and WHEREAS, the combined. effects of the seizure of the City's property taxes, increasing unfunded state mandates, and the revenue losses due to the economic downturn have placed the City's budget under serious fiscal pressure; and WHEREAS, the City of Santa Clarita simply can not sustain the loss of any more property tax funds or to be saddled with any more state mandates as they will only deepen the . financial challenge facing our city; and WHEREAS, a number of the City's financial commitments arise from contracts, including long term capital leases and debt obligations which support securities in the public capital markets, that the City must honor in full unless modified by mutual agreement of the parties. NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY OF SANTA CLARITA has determined that the City will experience a severe fiscal hardship if the recommendation of the Department of Finance to "borrow" $2 billion of local property taxes is supported by the Governor and the Legislature; and RESOLVED FURTHER, that the City Council strongly and unconditionally opposes the May 5 proposal of the Department of Finance and any other state government proposals to borrow or seize any additional local funds, including the property tax, redevelopment tax increment, and the city's share of the Prop. 42 transportation sales tax; and RESOLVED FURTHER, that the City Council strongly urges the California Legislature and Governor to suspend the enactment of any new mandates on local governments until such time as the economy has recovered and urges the state to provide complete funding for all existing and any new mandates. RESOLVED FURTHER, that the City Clerk shall send copies of this resolution to the Governor, members of Santa Clarita's State Legislative delegation and the League of California Cities. ADOPTED this day of , 2009. 2 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, so hereby certify that the foregoing Resolution was duly adopted by the City Council of the City of Santa Clarita at a regular meeting thereof, held on the 12th day of May 2009, by the following vote: AYES: NOES: ABSENT: 3 CITY CLERK