CC - Item 4H - Fiscal Hardship if State Elects to Borrow City Property Taxes & Approve Unfunded ManadatesROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY COUNCIL
FROM: MATTHEW E. HAWKESWORTH, ACTING CITY MANAGER
DATE: JUNE 9, 2009
SUBJECT: STATEMENT OF FISCAL HARDSHIP IF STATE ELECTS TO BORROW
CITY PROPERTY TAXES AND APPROVE UNFUNDED MANDATES
SUMMARY
On May 5th 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 service. 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 a draft resolution, to be modified by
member cities and sent to their legislators and the Governor, finding that a fiscal
hardship will exist if this proposed state property tax raid is added to the pressures of
the ongoing property tax losses and the serious revenue losses due to the economic
recession.
Staff Recommendation
Staff recommends that the City Council approve the attached Resolution, No. 2009-28
and direct the City Clerk to send copies of the resolution to the City's legislators, the
Governor and the League of California Cities.
ANALYSIS
The attached resolution helps demonstrate that part of the reason cities are cutting their
budgets today is because of past and continuing property tax raids. The attached
resolution cites the cumulative property tax losses of cities statewide since the state
began taking these funds in the early 1990s- which is $8.6 billion statewide. Since FY
1992-93 Rosemead's cumulative contributions to the ERAF totaled $3.1 million.
APPROVED FOR CITY COUNCIL AGENDA: ITEMNUMBER:
City Council Meeting
June 9, 2009
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PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
Steven Brisco
Finance Director
Attachment: Resolution No. 2009-28
RESOLUTION NO. 2009-28
A RESOLUTION FINDING A FISCAL HARDSHIP WILL EXIST IF
ADDITIONAL LOCAL PROPERTY TAX FUNDS ARE SEIZED AND
ADDITIONAL UNFUNDED MANDATES ARE ADOPTED BY 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
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 5th 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 of bills, many of which
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RESOLUTION NO. 2009-28 (Cont'd.)
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
NOW, THEREFORE, BE IT RESOLVED THAT THE CITY COUNCIL OF THE CITY
OF ROSEMEAD has determined that the City will experience 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 5th 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 state 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, our state senator(s), our state assembly member(s) and the League of
California Cities.
PASSED AND ADOPTED, by the City of Rosemead City Council, County of Los Angeles, of
the State of California this 9`h day of June 2009.
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RESOLUTION NO. 2009-28 (Cont'd.)
Mayor
Approved as to Form:
City Attorney
ATTEST:
City Clerk
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