CC - Item 4C - State Budget Crisis Impact - UpdateROSEMEAD CITY COUNCIL
STAFF REPORT
TO: THE HONORABLE MAYOR AND CITY OUNCIL
FROM: JEFF ALLRED, CITY MANAGER
DATE: JULY 28, 2009
SUBJECT: STATE BUDGET CRISIS IMPACT - UPDATE
SUMMARY
The Governor and party leaders announced late in the evening on July 20'n that a deal had
been reached to balance the State's $26 billion defecit. Unfortunately, despite all of our
lobbying efforts, the proposal includes significant hits to local government. While details are still
being finalized, staff has been able to determine that the budget proposal includes the following:
1. Ubilization of Proposition 1A to borrow Property Tax from local government. The State
will borrow 8% of each city's property tax revenue based on actual receipts for the 2008-
09 fiscal year. For Rosemead, this equates to a loss of approximately $600,000 from
the General Fund. The State is obligated to repay these funds within three years with
interest.
2. The seizure of $1.7 billion in Highway Users Tax (Gas Tax) from local government. This
is a proposed two year seizure with $986.6 million in fiscal year 2009-10 and $750
million in fiscal year 2010-11. Staff believes that this equates to a complete taking of all
of our 2009-10 Gas Tax of approximately $900,000 and 75% of our 2010-11 Gas Tax.
3. The seizure of $1.35 billion in redevelopment tax increment funds through a straight
taking of $350 million and an ERAF shift of $1 billion. Rosemead's portion of the $350
million seizure is approximately $300,000, and approximately $850,000 for the $1 billion
ERAF shift.
There are also some discussions developing about a possible alternative to the utilization of
Prop 1A and seizing Gas Tax funds through the long-term taking of additional redevelopment
tax increment funds; however, it is too early to tell whether or not this idea will be feasible or
desirable.
Staff will continue our close contact with our state elected officials and work to gain opposition
from Senate and Assemblymembers for the proposal. We hope to have additional details
regarding the State budget that can be presented at the Council meeting and will continue to
seek details regarding all of the plan. In conjunction with this, staff will also begin working on a
contingency plan including additional budget adjustments and new revenue options especially
along the lines of business license and development related fees for our own budget to account
for these potential losses.
Staff Recommendation
Provide direction to staff regarding future steps to account for revenue losses from the State of
California.
ITEM NO. y
APPROVED FOR CITY COUNCIL AGENDA:
City Council Meeting
July 28, 2009
Paae 2 of 2
PUBLIC NOTICE PROCESS
This item has been noticed through the regular agenda notification process.
Submitted by:
TY-
Matthew E. Ha kesworth
Assistant City Manager