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HomeMy WebLinkAboutItem 8.6 LocalGovReformRecmndtions (2) .' . . CITY OF DUBLIN AGENDA STATEMENT CITY COUNCIL MEETING DATE: February 28, 1994 consideration of League of California Cities Committee on Local Government Reform Recommendations (Prepared by: Lou Ann Riera-Texeira, Asst to the City Manager) EXHIBITS: /League of California Cities Committee on Local Government Reform Recommendations RECOMMENDATI~:~eive report. (fN FINANCIAL Undetermined. STATEMENT: SUBJECT: BACKGROUND The upcoming 1994 legislative session marks the fourth consecutive year that the State of California has faced substantial budget deficits. The same economic difficulties which plague the state budget have also produced local budget deficits proportionately equivalent to those at the state level. California's recent economic downturn coupled with conditions faced by the state have prompted the California, both at the local and state levels, to into the governmental structure of this state, public services delivered. the preexisting fiscal elected leadership of make serious inquiries its finances and the Consequently, there are several "venues" in which the merits of state and local government restructuring is being debated. The first effort resulted in a report from the state Legislative Analyst entitled, Making Government Make Sense. This report was presented to the Dublin City council on November 8, 1993. Briefly, the report identified a number of problems and reasons for the "dysfunctional nature of service provision by the State and local governments." Further, the report proposed a restructuring of local government through various changes including: 1) changes in the assignment of program responsibilities for both state and local government; 2) changes in revenue sources; and 3) the establishment of various incentives and solutions. These recommendations were intended to make the various levels of state and local government more accountable and responsible for the programs and services delivered. The Dublin City council supported the concept of restructuring local government, however, did not support the Legislative Analyst's proposal. In addition to the work by the legislative Analyst, the state Assembly has appointed a Select Committee on Restructuring Government. This group has conducted a series of hearings around the state seeking the advice of government officials, academics and private citizens about how to best deliver public services in California. The Governor appointed his own advisory group called the Restructuring Advisory Panel (RAP) to make recommendations on restructuring state and local government. A number of city officials served on that panel as well. Lastly, in 1993 the Legislature passed legislation establishing a California Constitutional Revision commission. This Commission may also serve as a forum for addressing the dysfunctional nature of public service in California. The Commission is scheduled to issue its recommendations _in mid-to-late 1995. r _ I The recommendations from the Governor's RAP are - being considered for inclusion in the proposed 1994-95 state budget. The work completed for the Governor's RAP served as a starting point for the recommendations contained in the attached League of California Cities Committee on Local Government Reform Report. - - ---- {)'J-_ _ _ 1/\ a /- Jh..~f.;nthJ'V O. ~ CITY CLERK FILE ~ ,. . . THE LEAGUE'S REPORT The problem of state and local government finance/restructuring requires both short- and long-term solutions. Recognizing this short/long-term dilemma, the Officers and Board of Directors of the League of California cities appointed a League committee on Local Government Reform. This group was charged with developing initial recommendations for consideration in the League pOlicy process. Those individuals serving on the Committee are many of the same managers and finance directors who participated in the Governor's RAP. The Committee began its task by taking a broader look at local government finance. Consequently, the Committee took the following approach: 1) Identified problems with the existing system of local government finance (similar to those identified in the Legislative Analyst's report "Making Government Make Sense"); 2) Established principles to be followed on any proposed reforms; 3) Outlined long-term measures; and 4) Enumerated short-term recommendations. PROBLEMS WITH THE EXISTING SYSTEM OF LOCAL GOVERNMENT FINANCE The Committee identified the following problems with the current system of local government finance: o Lack of Predictable Revenue o Revenues Tied to an Industrial Economy o Loss of Local Control o Deterioration of Local Economic Base o "Fiscalization" of Land Use Decisions o Difficulty in Meeting Long-Term Infrastructure Needs o Lack of Understanding by the Electorate of Government Finance o Lack of Flexibility Due to Rigid categorical Funding o Lack of Nexus Between Service Needs and Available Funding o Constraints on Efficient Local Management FOUNDATION ~OR THE REFORM The basic principles of reform proposed by the Committee are as follows: 1. Revenue Neutral - Any changes and realignments made should not result in a cumulative tax burden on businesses and residents. 2. Restoration of Home Rule - This calls for reestablishing home rule in California through amendment of the state constitution. Such an amendment would 1) recognize the importance"o'f local government services; 2) prohibit State action to take local revenue sources or mandate local government programs without funding such programs; and 3) restore home rule. 3. Broad Based Tax Structure - This principle would attempt to correct the inequities in the current tax structure by spreading taxes over the widest base while keeping tax levels or rates as low as possible. 4. Understandable - The Committee proposes reexamining California's tax system to eliminate the numerous complexities which make understanding it problematic. 5. Nexus Between Revenues and services Provided - The Committee indicates that it is critical that any proposal for restructuring government contain a nexus between revenues and the services provided by each level and entity of government. the following principles should be used to evalua~~_~py restruct?ring proposal: -- -- -'-- - , i a. Program funding responsibility should be 'consolidated at the level of government which has program control b. Each level of government should have control over its own revenue raising authority. Local government bodies should have the authority to increase revenues without a vote of the people c. Shared revenues among various levels of government should be minimized. . . LONG-TERM MEASURES The structure and financing of local government has been deemed dysfunctional. It is a system which will not adequately or equitably serve the people of California as we move into the 21st Century. The short-term recommendations listed below will only help "buy time" to develop and put in place more functional reforms. The following long- term measures were identified: 1. Assemble a forum of city, county and school board officials to explore questions and recommend policies which improve the common areas of local government involving criminal justice, youth, education, health and human services; and 2. Develop specific recommendations to the California Constitutional Revision Commission for long-term constitutional changes designed to focus on the most efficient delivery of services. SHORT-TERM RECOMMENDATIONS Having identified the problems and having set forth the underlying principles of reform, the larger task of developing specific financial reform measures began. The Committee developed a number of short-term/ survival strategies for consideration in the 1994 session. The expectations are that 1) a governmental restructuring debate will take place; 2) city government will play an integral role in that debate; and 3) these short-term measures will "buy time" for the Governor and the Legislature to develop and put in place the longer term solutions. The short-term measures, as detailed in the attached report, are summarized below: 1. COMMUNITY/ECONOMIC DEVELOPMENT a. Local Permitting Authority b. Annexations/Incorporations/Spheres of Influence c. Telecommunications Authority - Franchise/Operating Concessions 2 . GOVERNANCE a. Encourage Cooperative Programs Among all Levels of Local Government b. Redirection for Special Districts c. Allow Greater Flexibility Over Use of Local County Revenues and Administration d. CEQA Reform e. State Strategic Plan f. Regulatory Agencies 3. REVENUE AND DISTRIBUTION a. Maintain Current Funding Levels b. Multi-Year Deficit Reduction Plan c. Specific Mandate Repealers d. Gross Receipts Tax on Service e. Revenue Alternatives/Options f. Benefit Assessment Reform g. Maximize Pursuit of Federal Funds h. Improved Financial Reporting 4. PUBLIC SAFETY a. Electronic Court Reporting b. No Jury Trial for Petty Misdemeanors c. Eight-Person Juries in Municipal Court civil cases d. Consolidation of Court-Related Services provided by Sheriff and Marshal e. Juvenile Justice System , The Committee has forwarded the abovQ~~reC9mmendatibns to the League Policy Committees and the Board of League of 'California for review. STAFF RECOMMENDATION Staff concurs that a major restructuring of all levels of government (state, schools, special districts, counties and cities) is necessary if the best interests of the public are to be served. . . The attached report contains a number of recommendations which will impact nearly every area of city government, ranging from issuing permits, regulating franchise fees and CEQA reform to revising the current taxing system, benefit assessment reform and consolidation of the justice system. Consequently, staff has not fully examined the impacts these recommendations would have on the City of Dublin. Further, document continue the City it should be noted that and is currently undergoing to monitor the progress of this Council informed of changes. the attached report is a working modifications. city staff will report and will continue to keep At this time, it is recommended that the city Council receive the attached report and provide the appropriate comments. J ' ,J Ca/llorma CIties WorK Together . . .... .... ..... .... .... ........ League of California Cities 1400 K STREET . SACRAMENTO. CA 95814 · (916) 444-5790 RECE\VEO JAM 2 4 1994 erN OF LAfA'f'ETl'E December 22, 1993 League of California Cities Committee on Local Government Reform RECOMMENDATIONS Back~round It is no surprise that the difficult economic times in California have had a direct and detrimental effect on governmental finances and services. The upcoming 1994 legislative session marks the fourth consecutive year that the State Legislature and the Governor have faced substantial state budget deficits. The same economic difficulties which plague the state budget have also produced local budget deficits proportionately equivalent to those at the state level. Even prior to the economic downturn we are now experiencing, the fiscal integrity of the state budget was undermined by a "structural" problem which saw expenditures in case load driven programs greater than the projected revenue intake could support. This "preexisting condition" coupled with the severe economic recession has not only produced huge budget deficits, but it has prompted the elected leadership of California, both at the state and local levels, to make serious inquiries into the governmental structure of this state and the public services delivered. There are several 'venues" in which the merits of state and local government restructuring is being debated. The first, and to date perhaps the foremost effort was developed by the Legislative Analyst's office in the report entitled, Makin~ Government Make Sense. That report begins with the premise that the state and local governmental structure in California is "dysfunctional" and proceeds to recommend several very specific and to some extent monumental changes in programs and revenue shifts between and among state and local governments. The recommendations are intended to make the various levels of state and local government more accountable and responsible for the programs and services delivered. While there are many solid recommendations in the Legislative Analyst Report, several recommendations have been met by objections from 1 r J . . city government officials who argue that cities are more functional than dysfunctional and are better prepared to meet the goals of accountability and responsibility than other levels of government. In addition to the work by the Legislative Analyst, the Assembly has appointed a Select Committee on Restructuring Government which has held a series of hearings around the state seeking the advice of government officials, academics and private citizens about how to best deliver public services in California. The Governor appointed his own advisory group called the Restructuring Advisory Panel (RAP) to make recommendations on restructuring state and local government. A number of city officials served on that panel Governor. Last, and certainly not least, the Legislature in 1993 passed and the Governor signed legislation establishing a California Constitutional Revision Commission. Many observers see this commission as a key forum for addressing many of the dysfunctional provisions in California's constitution which impede the efficient delivery of public services. The Commission is scheduled to issue its recommendations in mid.to-Iate 1995. The reconunendations from the Governor's RAP are being considered for inclusion in his proposed 1994-95 state budget. The Governor is scheduled to deliver his State-of-the. State address on January 10, 1994. The release of the actual budget will immediately follow. The work completed for the Governor's RAP served as a starting point for the recommendations in this report. Recommendations The problem of state and local government finance/restructuring requires both long-term and short-term solutions. It is critical for any individual or group examining the restructuring of California state and local government to take a broader perspective than simply that of parochial city, county, school or state government interests. There are many broader societal and public policy questions than those dealt with in city halls across this state. On the other hand, in the short-term, cities have to first survive to be involved in the larger, more long-term public policy problems faci~~ California. Recognizing this short-term/long-tenn dilemma, the Officers and Board of Directors of the League appointed a League Committee on Local Government Reform to develop initial recommendations for consideration in the League policy process. Those serving on the Committee are many of the same managers and finance directors who participated in the Governor's RAP. This provided an opportunity to maintain a continuity of ideas and dialogue on the restructuring issue. The Committe recommends the following: 2 .~ . } . "I.' ,.... . ,. . "..1. ,,< . _, _.:"',' t. ;. ',.- ...' . . . 1. Lon~-term Issues The long-term questions in state and local government restructuring can best be addressed in a forum with a broader base of interest than simply city officials. It is recommended that the League take the following action to best address the broader public policy issues: a. Proceed with plans to assemble a forum of city, county and school board officials to explore questions and recommend policies which improve the common areas of local government services involving criminal justice, youth, education, health and human services; and ~ b. Develop specific recommendations to the California Constitutional Revision Commission for long-term constitutional changes designed to focus on the most efficient delivery of services, with the following recommendations for initial consideration: o Clarification of municipal affairs over which cities have plenary authority. o Strengthen prohibition against the state preempting those defined municipal affairs. o Consideration of a constitutional amendment allowing cities and counties within each county to reorganize/strearnline/consolidate/make- efficient local government institutions to accomplish agreed upon service delivery goals on a county.by.county basis. o Modification of the super-majority vote requirement for General Obligation Bonds to either a majority vote or a reasonable vote threshold less than the current two. thirds requirement. 2. Short.term Issues The Committee recognizes the need to have a number of short-term/survival strategies developed for consideration in the 1994 session to the extent that a governmental restructuring debate takes place and city governments are an integral part of that debate. The short.term strategies are outlined below. 3 '~ . i . . COMMUNITY jECONOMIC DEVELOPMENT 1. Local Pennittine Authority All permits should be consolidated at either the city level, or in the unincorporated area at the county level. Special districts, regional authorities, the state, joint powers authorities would not be allowed to issue permits. Review actions taken to facilitate permitting after the Los Angeles riots. , . . 2. Annexations/Incor:porations/Spheres of Influence' , " a. Remove current impediments to annexation of "pockets" containing housing andj or manufacturing b. Automatic formula for property tax distribution when annexation is housing and/ or manufacturing , I c. Reexamine criteria for incorporations including the possible need for restrictions on incorporations in urban areas; and, revert to prior law which gives greater flexibility for incorporations in "non-ur~an" areas. . ' : I " ).! L,' ;,." :. .'.:" ~ , : ' \.~ ".' ., :, ,.' ., ~ .} " , - . d. More' direct city authoritY outsi~e, the, LAFCO proces~' to 'control urban development in "sphere of influence". ':Cities should have building and zoning responsibility within their sphere of influence~ :. " !: ", ,':: ,;.. e. Stricter criteria for LAFCO to follow when determining sphere of influence; no sphere to be coterminous with boundaries of city. " f. More restrictions on cities annexing land with only major retail areas, Le., big box retailers ' '-c' 3. Telecommunications Authority. Franchise/Operatini Concessions \ ..' ~ - .-1 The Committee recommends that the correct public policy direction in this and other similar areas is one whereby regulatory authority over certain utilities be centralized, but that local governments receive franchise fees for any use of public right.of.way, regardless of the nature of the utility. In addition, the Committee recommends examination of the following more immediate questions: 4 -- ---,- l 1 . . a. A complete examination of the entry of telephone companies into the cable and information "highway" should be examined with the intent of defining the proper role for cities, including an examination of the questions of franchise fee exemptions for telephone companies and questions of spectrum access. b. As part of reforming the phone franchise fee problem, the state should impose and collect a 5 percent in';'lieu franchise fee on all phone lines installed on railroad right-of.way. GOVERNANCE 1. Encoura~e Cooperative Pro~ams Amoni All Levels of Local Government. All statutory and regulatory barriers and impediments should be eliminated so as to encourage and enable local agreements to consolidate or to operate cooperative programs among cities, counties, school districts and special districts. The League shall pursue this issue by surveying cities to identify specific barriers and impediments. 2. Redirection for Special Districts The following four recommendations are made for redirection of special districts: a. City Councils and boards of Supervisors that control dependent special districts should be allowed to shift property tax revenue between entities under their control at their discretion. Local elected officials should be allowed to shape public programs under their jurisdiction in the most reasonable manner under the local revenue structure. b. Eliminate property tax allocations to enterprise activities of special districts. c. General reduction in number of special-districts through' consolidation or transfer of responsibilities to cities, counties or regional organizations. d. Actions of special districts must be consistent with general plans of local governments. 3. Allow Greater Flexibili\)i Over Use of Local County Revenues and Administration The State should suspend or reduce requirements, such as maintenance of effort provisions in state.sponsored/ county.administered programs, which are impediments 5 "i"-- 1 ---.>...~ . . to funding services of highest priority to the citizens of the state. In addition. counties should be given full authority to centralize/restructure the administration of county governments with the goal being a better and more rational delivery of services. 4. CEOA Reform Cities and counties should be required to formulate a new (or updated) general plan every five years. A full EIR would be required as part of that update. No other EIRs would be required for those projects that conform to the general plan. No duplication of NEP A/CEQA regulations. - 5. State Strategic Plan There should be a state strategic plan with clearly articulated state goals and policies. 6. Re~latory A~encies Regulatory agencies of the state and local government should be reviewed to determine if mission and results are being achieved or whether the focus is rules and process. REVENUE AND DISTRIBUTION 1. Maintain Current Fundin~ Levels It is unacceptable to continue to balance the State budget by cutting local government. The State must deal with those shortfalls within its own budget. .j.~ 2. Multi-Year Deficit Reduction Plan The State got into this fiscal dilemma over a period of years and it is unrealistic to try to get out in just one or two years. The State should consciously implement a multi-year budget approach to the deficit problem. 6 -.....,.. --~ f-' ; . . 3. Specific Mandate Repealers a. Reduce salary in-lieu of temporary disability payments to 75 percent of full salary rather than the current law provisions of non-taxable full salary. b. Give all local agencies the authority to either enact or repeal the state prevailing wage standards. c. Repeal penalties for not achieving the AB 939 recycling goals. d. Restore off-set for dual death benefits under PERS and Workers' Compensation. e. Institute an apportionment system for industrial vs. non-industrial pensions. f. Pursue permanent PERS Golden Handshake legislation encouraging early retirements to assist in dealing with layoffs during economic downturns. g. Allow all PERS agencies to offer two-tier retirement, rather than just PERS agencies which also participate in social security. h. The League should once again examine the area of mandate relief in anticipation of this being a priority issue in the 1994 State legislative session. 4. Gross Receipts Tax on Services The current taxing system is outmoded; it is based on an industrial economy structured to fit a manufacturing-based society. For example, the current sales tax laws date back to 1933 and rely on the taxing of retail sales of tangible goods. This type of sales tax system was adequate over the decades until the mid-1970s when it became evident that California had become an increasingly service.based economy. The nation's share of personal consumption spent on services increased from 31 % in 1950 to 51% in 1990. As the State's economic system continues to shift to a services and information based economy, the taxing system must also shift if we are to effectively finance governmental services. Imposing a gross receipts tax on services would expand the base and potential growth of California's tax system. As an example a gross receipts tax of one percent on all services, other than medical and educational, would increase revenues by about $1.2 billion annually. Serious examination should be given to adopting this broadene-d tax base as "revenue neutral". This could be accomplished by reducing the sales tax rate on other goods while including the tax on services. The state and local governments would then be better positioned for this growth area in the economy. 7 - -- ---,- . f" 1 . . 5. Revenue Alternatives/Options The Revenue and Distribution Task Force of the Governor's Restructuring Advisory Panel stressed that new revenues were not a viable option at this time in budget discussions. The League does not view revenue increases as a priority, however, some members of the Legislature will always at least consider this option. For this reason, it is always prudent to have revenue alternatives as an option. It is within this context that the following revenue options are provided. a. Suspend Income Tax Indexing for One Year ($1 billion) Suspend indexing for personal income tax brackets, exemption credits and standard deductions. The revenue impact would be over two fiscal years. b. Tax Income for Out~of-State Retirees ($1 billion) Currently, only public employees who retire and move out of state are required to pay income tax in California for retirement income based on California employment. This proposal would extend this treatment to all retirees. " c. Increase Tax on Alcohol to National Average ($80 million) Increase tax on all alcoholic beverages to the average rate imposed by all states. d. Create Revised Income Tax Brackets ($500 million) Provide a rate of 10 percent for incomes over $150,000, 11 percent for incomes over $200,000 and 12 percent for incomes over $400,000. e. Municipal Income/Payroll Tax (Revenue depends on rate) f. State Enterprise Business Opportunity Districts - Base Closure Model (Revenue depends on local utilization) g. Transaction Tax - A TM transactions (Revenue unknown) 8 t ," $ . . 6. Benefit Assessment Reform There are many who criticize the increasing use of the benefit assessment process to finance local government projects and services. Reform considerations include: a. Disallow the use of benefit assessments for enterprise activities. b. Require majority vote of the people for all benefit assessments levied for public services, if ten percent of the voters protest the imposition of the benefit assessment. c. Limit the use of ~ benefit assessments for services to a core group of essential local services such as police, fire suppression, parks and libraries. d. Cap benefit assessments. 7. Maximize Pursuit of Federal Funds State and local governments should work aggressively with California's Congressional delegation, the Clinton Administration and key Congressional leaders to increase Federal funding to California for the costs related to Federal immigration policies. Other potential sources of federal funding should also be pursued by state and local governments in California. 8. Improved Financial Reporting Improved fmancial reporting is needed which includes uniform financial reporting among local agencies and timely release of financial data from the State Controller. PUBLIC SAFETY ". .)- 1. Electronic Court Reportini Either by statute or Rule of Court, electronic recording should be authorized as means of making the official verbatim record of oral proceedings. 2. No Jury Trial for Petty Misdemeanors Amend the California Constitution to provide there is no right to a jury trial in cases in which the possible term of incarceration is less than six months. 9 r } . . ~ 3. Eiiht-Person Juries in Municipal Court Civil Cases Authorize eight-member juries in municipal court civil cases. Such legislation should include safeguards to assure that racial and ethnic groups are not excluded from juries. 4. Consolidation of Court-Related Services Provided by Sheriff and Marshal In order to expedite and implement appropriate cost effective and efficient consolidated court-related services in all counties, it is recommended that the State specifically allow each county to detennine if, which and how it will consolidate court-related services currently performed by the Marshal in the Municipal Court and the Sheriff in the Superior Court. . 5. Juvenile Justice System The League should begin an immediate examination of the delivery of service in the juvenile justice system through the policy conunittees and the Board's Investing in Our Youth Task Force. Conclusion The Conunittee forwards these recommendations to the Policy Conunittees and the Board of the League of California Cities for review and recommendatio?S.. Thank you for the opportunity to develop these recommendations and make this contribution to the League's debate of this critical issue. . . 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