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08-26-2008 CC Rpt A18 COUNCIL AGENDA STAFF REPORT CITY CLERK USE ONLY Meeting Date: August 26, 2008 RECEIVED Public Hearing: L 2008 AUG 22 PM 3: 37 ICt tp: CLERK ..„4 Discussion Item: r! Consent Item OFF CHIHO HU I C August 19, 2008 TO: HONORABLE MAYOR AND CITY COUNCIL MEMBERS FROM: CITY MANAGER SUBJECT: APPROVAL OF A RESOLUTION OPPOSING FISCALLY IRRESPONSI- BLE STATE BUDGET DECISIONS THAT WOULD "BORROW" LOCAL GOVERNMENT, REDEVELOPMENT, AND TRANSPORTATION FUNDS. RECOMMENDATION: Adopt a resolution entitled: A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS OPPOSING FISCALLY IRRESPONSIBLE STATE BUDGET 11111 DECISIONS THAT WOULD "BORROW" LOCAL GOVERNMENT, REDEVELOPMENT AND TRANSPORTATION FUNDS. BACKGROUND/ANALYSIS: As the City Council is aware, California is in the midst of a state budget stalemate. In recent weeks, a number of rumors have been circulating that state officials are consider- ing borrowing Proposition 1A local government revenues (including redevelopment) and Proposition 42 transportation revenues to help close the $15.2 billion deficit. The City of Chino Hills, with the League of California Cities and our state lobbyist, has been carefully monitoring this rapidly developing situation in Sacramento. Through the enactment of Prop 1A in 2004 (property tax protection) and Prop 1A in 2006 (transportation funding protection), Californians expressed their opposition to taking local and transportation funds to address the state's short term budget problems. However, Prop 1A also contained a provision for"loans"from local government and transportation if a "severe state fiscal hardship" is declared. The loans are permitted up to two (2) times in a 10-year period and are repaid with interest. Despite efforts by the League of California Cities and cities across California including Chino Hills, it is believed that Legislative leaders (leaders of each party from both the Assembly and Senate) may be near agreement on a budget package that would rely on these loans, in addition to diversion of other revenues and other as yet un-detailed provi- sions. It is also believed that there may be some serious consideration being given to a state takeaway of Redevelopment Agency funds, possibly in exchange for an extension of current agency time limits. Agenda Date: August 26, 2008 Page 2 SUBJECT: APPROVAL OF A RESOLUTION OPPOSING FISCALLY IRRESPONSIBLE • STATE BUDGET DECISIONS THAT WOULD "BORROW" LOCAL GOVERNMENT, REDEVELOPMENT, AND TRANSPORTATION FUNDS. Because these discussions are happening behind closed doors, very little in terms of specific details are known, however, the abovementioned are believed to encompass the major outlines of the discussions presently underway. These rumors were confirmed in a recent interview of Governor Arnold Schwarzenegger in a Los Angeles Times newspaper article. As these rumors continue to gain traction,the League of California Cities is mobiliz- ing local officials to oppose such moves and is asking cities to formally adopt resolutions (attached) opposing any and all efforts by the state government to "borrow" or seize local tax funds, redevelopment tax increment and transportation sales tax funds by the state government to finance state operations as well as continue to express our appreciation for the Governor's and any supportive legislators' steadfast opposition to further borrowing or seizure of these funds. FISCAL IMPACT: None as a result of this action. However, if the State decides to"borrow" local funds, there could be an adverse effect on City funds. The total effect has not been determined at this time. Respectfully submitted, Recommended by: /- -dee Douglas K. La Belle, City Mgnager Ka hleen Gotch, Assistant City Manager • • RESOLUTION NO. 08R- A RESOLUTION OF THE CITY COUNCIL OF THE CITY OF CHINO HILLS OPPOSING FISCALLY IRRESPONSIBLE STATE BUDGET DECISIONS THAT WOULD "BORROW" LOCAL GOVERNMENT, REDEVELOPMENT AND TRANSPORTATION FUNDS. WHEREAS, on July 1, 2008 the State Legislature missed its Constitutional budget deadline; and WHEREAS, both the Governor and the Legislative Budget Conference Committee have recommended balanced budgets without resorting to "loans" or seizures of local government property tax, redevelopment tax increment and transportation sales tax funds; and WHEREAS, in 1952 the voters of California approved n 1952 the voters approved Article XVI, Section 16 of the California Constitution, providing for tax increment financing for community revitalization—not balancing the state budget, and the voters never authorized the legislature to take or "borrow" community O redevelopment funds for state programs; and WHEREAS, in 2004 by an 84% margin of approval the voters of California approved Proposition 1A and sent a loud and unambiguous message to state leaders that they should stop the destructive and irresponsible practice of taking local government funds to finance the state budget and paper over the state deficit; and WHEREAS, in 2006 by a 77% margin of approval the voters of California also approved Proposition 1A, providing similar protections to transportation funding for state and local transportation projects, including important street maintenance and public transit programs; and WHEREAS, both ballot measures allow the Governor to declare a "severe state of fiscal hardship" and "borrow" these funds if they are repaid in three years with interest, but the Governor believes it would be irresponsible to "borrow" such funds because it would deepen the state's structural deficit and cripple local government and transportation services; and WHEREAS, refusal by the Legislature to carryout its constitutional obligation to compromise on a balanced budget is not a "severe state of fiscal hardship" and would not justify reductions in critical local services,community revitalization programs and infrastructure maintenance at a time when cities are struggling to balance their own • budgets during this economic down turn; and _ WHEREAS, city investments in infrastructure, affordable housing and basic public safety and other community services will create needed jobs and speed our economic recovery; and WHEREAS, the Legislature should balance the state budget with state revenues and respect the overwhelming support of voters for not using local property taxes, redevelopment tax increment and transportation sales tax funds to fund the day-to-day operating cost of state programs; and IPWHEREAS, it would be the height of fiscal irresponsibility to paper over the state structural deficit with more borrowing, and Californians deserve state leaders who will tell them honestly what needs to be done to produce a balanced budget; and WHEREAS, it is time for the state of California to cut up its local government credit cards and deal with the budget deficit in a straightforward way. Balance the state budget with state funds. NOW, THEREFORE, THE CITY COUNCIL OF THE CITY OF CHINO HILLS DOES RESOLVE, DETERMINE, AND ORDER AS FOLLOWS: SECTION 1. The City of Chino Hills opposes any and all efforts by state government to "borrow" or seize local tax funds, redevelopment tax increment and transportation sales tax funds by the state government to finance state operations. Such a move would be fiscally irresponsible for the state and hamper effective local services and infrastructure investments; and SECTION 2. That upon passage, the City Clerk is hereby directed to send this resolution and communicate this Council's strong and unswerving opposition on this matter to our Legislators and the Governor along with an expression of our continued appreciation for the Governor's and any supportive legislators' steadfast opposition to further borrowing 4110 or seizure of these funds; and SECTION 3. The City Clerk shall certify as to the adoption of this Resolution. PASSED, APPROVED AND ADOPTED this 26th day of August 2008. CURT HAGMAN, MAYOR ATTEST: MARY MC DUFFEE, CITY CLERK APPROVED AS TO FORM: 0 MARK D. HENSLEY, CITY ATTORNEY 1 of 2