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HomeMy WebLinkAboutCM Local Property Tax Fund SeizureAgenda Item No: 9 Meeting Date: May 18, 2009 SAN RAFAEL CITY COUNCIL AGENDA REPORT Department: CITY MANAGER Prepared by: Terri Hardesty, City Manager Approval: Assistant to the City Manager SUBJECT: 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. RECOMMENDATION: Adopt Resolution 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 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 national economic crisis has been taking its toll on the City of San Rafael's budget for some time. The City is currently projected to have a deficit of over $3 million for Fiscal Year 2009/10. ANALYSIS: 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 City of San Rafael will experience a larger budget deficit. This resolution in effect states that the idea of the State taking property tax funds from already stressed city budgets is ludicrous and irresponsible. It helps demonstrate that part of the reason cities are cutting their budgets today, in fact, is because of past and continuing property tax raids. FISCAL IMPACT: Staff projects that the City stands to lose an additional approximately $2 million in Fiscal Year 2009/10 if the State borrowing is approved. As indicated in the Department of Finance proposal the City may borrow funds against that State's Constitutional obligation to repay the loan, to diminish the loan's impact on local programs. As the State report also indicates, short tern borrowing may be difficult for local governments and terms will probably be unfavorable. This increases the likelihood for the need for even greater program reductions in the City to keep pace with declining revenues. ACTION REQUIRED: Adopt Resolution. FOR CITY CLERK ONLY File No.: Council Meeting: Disposition: RESOLUTION NO. A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF SAN RAFAEL FINDING A SEVERE FISCAL HARDSHIP WILL EXIST IF ADDITIONAL CITY PROPERTY TAX FUNDS ARE SEIZED AND ADDITIONAL UNFUNDED MANDATES ARE ADOPTED BY THE STATE OF CALIFORNIA THE CITY COUNCIL OF THE CITY OF SAN RAFAEL RESOLVES as follows: 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 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 San Rafael simply can not sustain the loss of any more property tax funds or be saddled with any more state mandates as they will only deepen the financial challenge facing the 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 SAN RAFAEL 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 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; and RESOLVED FURTHER, that this resolution shall be accompanied by a letter signed by the Mayor expressing City concerns; and RESOLVED FURTHER, that staff shall send copies of this resolution to the Governor, our state senators, our state assembly members and the League of California Cities. I, ESTHER C. BEIRNE, Clerk of the City of San Rafael, hereby certify that the foregoing Resolution was duly and regularly introduced and adopted at a regular meeting of the City Council of the City of San Rafael held on Monday, the eighteenth day of May, 2009 by the following vote, to wit: AYES: COUNCILMEMBERS: NOES: COUNCILMEMBERS: ABSENT: COUNCILMEMBERS: ESTHER C. BEIRNE, City Clerk