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Home My WebLink About8.2 Severe Fiscal Hardshipti~~\ \~/~:' CITY CLERK File # ^~ C^-~~ AGENDA STATEMENT CITY COUNCIL MEETING DATE: May 19, 2009 SUBJECT: Resolution Finding Severe Fiscal Hardship Will Exist from Potential State Property Tax Raid Report Prepared by: Joni Pattillo, City Manager ATTACHMENTS: 1. Resolution RECOMMENDATION: That the City Council adopt the Resolution of the City Council of .~~ the City of Dublin 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 FINANCIAL STATEMENT: The proposed "borrowing" from the State of California would cost the City of Dublin approximately $2 million for FY 2009-10. DESCRIPTION: 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 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 impact of such a "loan" would be devastating to the cities and counties around the State, including the City of Dublin. Based on information provided by the State and the League of California Cities, Staff estimates that the "loan" from the City of Dublin would be approximately $2.37 million, which would further exacerbate the City's projected $5 million deficit for Fiscal Year 2009-10. From a historical perspective, this would not be the first time the State has "borrowed" from local governments. In 1992, facing a serious deficit position, the State of California began shifting local property tax revenues from cities, counties and some special districts into these funds to reduce the cost of education to the state general fund. These shifts have been called the Educational Revenue Augmentation Fund (ERAF) and it is estimated that these ERAF shifts have cost the City of Dublin over $10.8 million over the past five years and nearly $18 million in total since the early 1990s. Cities and counties today are making COPY TO: Page 1 of 2 ITEM NO. G:\Chris\Staff Reports 2009\State Budget May 2009.doc ) draconian budget cuts because of past and continuing property tax raids, and the proposed raid would require additional services cuts to this community. The League of California Cities has developed the attached Resolution (Attachment 1) 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 and the serious revenue losses due to the economic recession. The resolution, in effect states that the idea of the state taking property tax funds from already stressed city budgets is irresponsible and detrimental to the City's ability to provide service to the community. RECOMMENDATION: Staff recommends that the City Council adopt a Resolution of the City Council of the City of Dublin 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. Page 2 of 2 i~~ RESOLUTION NO. -09 A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF DUBLIN 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 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, 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; 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 would impose new costs on local governments that can neither be afforded nor sustained in this economic climate; and ATTAC~NT ~~ a ~~ 3 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, our city 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 DUBLIN 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, 2009 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, APPROVED AND ADOPTED this 19th day of May, 2009. AYES: NOES: ABSENT: ABSTAIN: 2 3eP3 rf ATTEST: Mayor City Clerk