HomeMy WebLinkAboutItem 8.2 Severe Fiscal Hardshipti~~\
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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
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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 ~~
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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:
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ATTEST:
Mayor
City Clerk