HomeMy WebLinkAbout1983-08-16; City Council; N/A; Opposing State Action to Confiscate Local Revenues0
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AB# ____ _ IlIJ.E; ESTABLISHING COUNCIL POSITION OPPOSING THE OEPT. HD. __
M'ro • ..a-16-83
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STATE'S ACTION TO CONFISCATE LOC/IL CITY ATTY--
GOVERNMENT f:EVENUES 2Jt1-.,_ CITYMGR,_
RECOMMENDED ACTION:
Adopt Resolution No. 7335 statin~ the Council's oooosition to recent state
legislation which confiscates local government revenues·.·
ITEM EXPLANATION:-
In July the State Legislature adop~ed a budget which included an $868 million
reduction in subventions to local governments. Th~se subvention reductions will
place almost all cities and counties in California in a "reverse bail-out" position
by the end of 1983-84. The term "reverse bail-out" indicates that the local
governments will be contributing more to the state roffers in subvention reductions,
than ,was received under the "bail-out" provisions of A3 8. (AB 8 was legislation
that provided for a shift of property tax reven.1e from school districts to local
governments in the first year after proposition i3.)
A copy of the League of California Cities legislative bulletin d~ted July 20, 1983
has been attached. This bulletin provides more detail on the action taken by the
State and its impact.
In summary. the position of local governments has been that the State should take
no more away from a governmental entity than was provided to that entity under the
AB 8 property tax shift. The resolution before the Council states this position and
indicates to the Legislature the Council's oppo$ition to the concept of reverse
bail-out.
FISCAL IMPACT:
This action in itself has no fiscal imp~ct. The Council should note, however, that
the City will lose over $1 million in state subventions this year alone due to the
adopted state budget bill. This loss was planned for in the budget process and
will not effect the present fiscal position of the City. The Council fnould also
note that Carlsbad is one of only two San Diego County cities who will remain in a
positive bail-out position after the reductions tak& place.
EXHIBITS:
Resolution No. 7335 opposing the action of the State Le!]islature to confiscate
lpcal government revenues.
League bulletin dated July 20, 1983.
Resolution from Mayor Reger Hedgecock dated Aug :st 9, 1983.
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EXHIBIT 2 , 6' "-
fj>f 9 S t·~1.J
Laague of California ·Cities
State Budget Adopted. Balanced By Activating Local Governrnent Subvention Deflator oi:,
Nine rvlonths. Key Issue In August Will Be Local Government Finance. AB 223. Budget 'frailer
Bill.
While the Legislature finally adopted a budget and adjourned for a 3-week recess until August
15, the status of local government finance is very much up in the air. In order to t"l,.ing the
state's revenues and expenditures into balance close to the $22 billion general fund target
which the Governor insisted upon, the Legislature purely and simply eliminated $868 million in
subventions {vehicle in lieu fee, cigarette tax and business inventory tax exemption
reimbursement) which cities and counties would otherwise receive under current law between
October 1, 1983, and June.30,..1984. The elimination was accomplished by suspending the AB 8
deflater for only the first 3 months of the fiscal year -July 1 to September 30, and then
permitting the deflater to take effect for the remaining 9 months. More spe<:ifically, tite
budget trailer bill (AB 223) provides:
1. Julv 1 to Seoternhet-30: City subventions will be reduced by $69.5 million pursuant
to the same formula and in the S&me proporti.,>n as provided by SB 1326 (1982), last
year's budget tt"ailer bill which cut back subventions. The attached computer run
from the Legislative Analyst gives city-by-city figures. The July-September
estimates should be divided by 3 for the monthly reduction.
2. October 11 1983. to June 30 1 1984: AB 223 also provides that the AB 8 deflator will
be activated beginning October 1 and will withhold all remaining subventions (VLF,
business inventory reimbursement, cigarette tax) fol:' the balance of the year. This
results in a cut for citie, of $384 million and "reverse bailout" for virtually all cities.
(Including county and special district cuts, $868 million in subventions are
~liminated.) Redevelopment agencies would also lose all business inventory
reimbursement for-this 9-month period.
Other Provisions of the,Bu~t Trailer Bill.
The business inventory tax exemption reimbursement will be distributed monthly
.rather than entirely in November. The automatic cost-of-living formula for this
subvention was repeal~ permanently. •
No-property-tax cities .1re not subject to subvention reductions from July-
September, but ere subject to the AB 8 deflator cuts beginning in October.
$12.5 million in funding for libraries was included in the budget, pursuant to SB 358
(the public library foundation program).
$2 million was restored in the budget for no-property-tax citie-s which lost
3l,bvenlions in AB 8.
Options Ooen to the Legislature I.l August.
:'he clea:-ly stated purpose of the Legislature in suspending the AB 8 deilator for only ~ months
1s to create support among city and county officials for a local option one cent sales tu:< which
would replace all state subventions. To elate most Republican legislators and the
'\, --.-' Administration have oppo J the local sales tax option as _ general tax increase but the\
Democratic leadership is anticipating a more favorable attitude by Republicans as pressure \
grows for decision on the deflator by October 1. ·
A critical element to the Augus~ debate on the use of the deflater for nine months is whether
the Governor will item veto appropriations deeply enough in the budget so that che state can
afford to suspend the deflator and restore $868 milli,..,n in October-June cuts. An altern&.tive
would be for the Legislature to adopt AB 1428, a tax loophole closing bill, to generate new
revenue in order to restore local subventions and the Governor's budget vetoes.
The local sales tax plan, which has been debated extensively by the budget conferees but never
formally amended into a bill, would operate as followc,:
(1) Cities would be required to adopt a resolution calling for the county board to levy a
county-wide one-cent sales tax.
(2) If the county declined by a date <:ertain, then those cities which had made the
request could levyStlch a tax~ and receive the revenue on the basis uf point of sale.
(3) If the county levied. U1e tax, it would be distributed to the county ana cities (which
adopted resolutions}on the basis of lost subventions due to the deflator.
(4) The local levy would be permanent.
(5) All subventions {VLF, cigarette tax and business inventory} would be eliminated
permanently.
League Position. Recommended Action.
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As AB 2'.?3 evolved over the past several weeks, the League indicated support for an
independe!!t and new revenue source (local option sales tax) which would permanently remove
city reliar.ce on the state1s budget. 'fnis was con~istent with Project Independence and the
League's Action Plan. At-the same time, the League opposed the use of the AB 8 deflator a!ld
the complete elimination of all subventions if they were not conditioned upon the.provision of
a new source of replecement revenue, such as local sales tax authority.
Obviouslv, AB 223 as adooted is completely unacceptable, because city officials will be unable
to complete their budzets with any certainty until September. Between now and Au~st 15:, all
cities should .schedule briefings with their .legislators to demonstrate the impact of the de!le.tor
for nine months and L'1e··unrent need to settle the issue as soon aftc.-August 15 as possible.
The League Beard will also meet this week to formulate a strategy for 'che August session. AB
223 is peri1aps the culmination of the 5-y'!ar transition since Proposition 13 in which the
budgets of each of the-state's 435 cities (and 58 counties) have become dangerously dependent
on the state budget Ov~the next 6·8 week:1 the primary issue in the Legislature will be local
finance and how to create an independent local revenue system outside the state budget. The
League and CSAC1s Proj~t Independence is more timely than ever.
The threshold issue for city and county locally elected officials will be whether or not to
endorse the local sales tax.option as a substitute for subventions.
The League invites your comment.
-2-July 20, 1983
ROGER HEDGECOCK
MAYOk
EXHIBIT ~
To: Govern.~, President pro Tempore, Speaker,
and S~n Diego Delegation · .
Be it resolved that we, the undersigned leaders
of San Diego County, believe that local government
should not be forced to subsidize state operations
at the expense of viLal local services and programs.
Further, it is totally inappropriate to finance
increased state expenditures beyond the current
budget by drastically reducing city and county
subventions and instituting a lor.al sales tax.
To this end, we strongly urge you to take the
following actions:
Suspend the AB 8 deflater for the
remainder of FY '84, effective
October l, and restore the $600
million in subvention cuts.
Oppose the local option sales tax.
subscribed August 9, 1983.
August 9, 1983
The undersigned support restoration of
the local opti n sales tax.
local subvention and oppose
w/___
YOR
CITY OF SAN DIEGO
\cbn: YAQ)l~ 41MY HE.ti~ON, MAYOR PRO Til1
'lY OF CORONAOO ' \.
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lAWRl>ICE B.'SllY 1-~-:...;.,--"-'-iG.-.---
CI'lY OF OCEANSIDE
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~ 'Gt'[JtM~ Y ;N, COUNCIL
CI'lY OF scmmID:l
JAl1ES H • .AHEfil , P SIDENT SAA{~=
LEE GRISS0.'1, ~ SIDENr
SAN DIEGO CHPl-IBER OF CCM}fil<"E .
~ o-~~or1
EDWARD D. PETERSON> PRESIDB-IT
S.AN DIEGO TAXPAYERS ASS'N.
mr/BAR'i'ELL, t·'.AYOR
CI'iY OF SANTEE
{2,JJ L,o,~
ROSALIND LORWIN, t1AYOR P!.\O TB1
CITI OF DEL MAR
LEONARD M. MOORE, COUNCIL
CITI OF CHULA VISrA
Continued .•..••
August 9, 1983 Page 2
The undersigned support restoration of local subvention _and oppose
the local option sales tax.
JO ~, HAYOR
CITY OF EL CAJON
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RESOLUTION NO. -~7.;;.;33;,.;;.5 __
A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CARLSBAD,
CALIFORNIA, OPPOSING THE STATE LEGISLATURE'S ACTION
CONFISCATING LOCAL GOVERNMENT REVENUES
WHEREAS, the Si~te tegislature has adopted and the Governor has signed a
' 6 a state budget which eliminates state subventions to cities and,
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WHEREAS, the City of Carlsbad will lose over $1 million in state
8 subventions inclu ,1g almost $600,000 in motor vehicle in lieu fees and
9 $100,000 in cigarette taxes and,
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WHEREAS; these revenue sources have been traditionally used by local
government to support health, welfare apd safety for local citizens and,
WHEREAS, the motor vehicie i~ lieu fee was established to replace a local
property tax on motor vehicles and was to be returned to local governments to
be used to benefit local citizens and,
WHEREAS, the cigarette tax was collected locally until 1967 and since
1967 has been collected at the state level and returned to local government
through subventions for the use of local governments to benefit their citizens
and,
WHEREAS, the shift of collection of both the motor vehicle in lieu fee
and cigarette tax to the state was defended to local governments as a measure
which would equalize the imposition of the taxes and improve the distribution
of the t~xes collected to local government for the benefit of local citizens
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WHEREAS, the confiscation of these funds by the state requires local
25 governments and therefore local citizens to bail the state out of its financial
26 difficulties at the expense of local programs and,
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~ . WHEREAS, legislation has been proposed which would force local governments
2 to do without these traditional local revenues or to increase local sales taxes
3. by one cent;
4 NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Carlsbad
5 that the City Council strongly opposes this unprecedented action by the State
6 Legislature and makes an appeal to the Legislature to overturn their prior
7 action by repealing the ABS deflater so that these local sources of revenue
8 can be returned to local government. Further, the Council urges the [egislature
9 to reject any legislation designed to offset th~se revenue losses by requiring
10 local governments to either accept the loss or impose a local sales tax.
ll PASSED, APPROVED AND ADOPTED at a regular meeting of the City Council of
12 the City of Carlsbad held the 16th day of August , 1983, hy the
13 following vote, to wit:
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AYES: Council ¥..enbers easier, U!Wis, Kulchin, Chicle and Prescott
~OES: None
ABSENT: None
19 ATTEST:
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23 (SEAL)
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