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