GILROY
– More than 10 years of habitual local revenue yanking by the
state is making Gilroy leaders and California’s premier city
government advocacy group cringe at Arnold Schwarzenegger’s first
official act as governor.
GILROY – More than 10 years of habitual local revenue yanking by the state is making Gilroy leaders and California’s premier city government advocacy group cringe at Arnold Schwarzenegger’s first official act as governor.
Monday, immediately following his inauguration – and to no one’s surprise, Schwarzenegger repealed the tripling of the state’s car tax – a revenue source that was going to funnel $2.5 million into Gilroy’s general fund and help the city avoid spending cuts that could include shutting down the Sunrise Drive fire station.
Without its $2.5 million portion of the vehicle license fees, Gilroy will have to lay off 43 city staffers and crush city programs and services, such as closing the youth and senior centers and the city museum.
“There’s a sense of heightened concern for us,” City Administrator Jay Baksa said. “We have an absolute distrust of the state Legislature and what they’re going to do.”
With no firm plan by the governor to fill the subsequent $4 billion revenue gap at the state level, the League of California Cities is telling member agencies to continue their lobbying campaigns in the hopes of getting some guarantee that locally earmarked revenue – like the vehicle license fees – finds its way to city coffers.
“This clearly is not a funding solution,” League of California Cities spokeswoman Megan Taylor said regarding Schwarzenegger’s order. “This executive order reduces fees and creates a funding gap. If the state doesn’t increase the vehicle license fee, then there has to be some source of revenue in its place and so far there really is none.”
Schwarzenegger wants the Legislature to reimburse local governments for the car-tax money, but the governor’s order forces the state to find a way to pay cities their share of those fees despite a 2004-05 budget deficit estimated at $24.8 billion over the next 18 months.
The governor’s reimbursement plan hinges on a $15 billion “pay-off-the-debt” bond he wants lawmakers to put on the March 2004 ballot. It is unknown if a bond of that magnitude would be supported by voters in these tough economic times.
“I wish he would have sat down with the Legislature first to see if there was a solution they could agree on,” Gilroy Mayor-elect Al Pinheiro said. “It’s easy for Mr. Schwarzenegger to just cut the (fee increase). A bond just puts the burden right back into the pocket of the citizens.”
California was supposed to repay Gilroy and other cities with general fund money after the state reduced vehicle license fees in the early ’90s. It hasn’t paid off the “loan” yet, and the now-axed plan to hike the car fees was supposed to make that happen.
Taylor, the spokeswoman for the League of California Cities, says vehicle license fees are just one form of local revenue the state siphons off when it gets in financial trouble.
“The vehicle license fee situation is just a symptom of a larger problem,” Taylor said.
In order to not raise income taxes and to keep education cuts at bay, state lawmakers drew up a plan to swap property tax and sales tax revenues with cities in future budget years. It sounds like a wash on paper, but over time sales tax revenue will outgrow property tax revenue.
According to city estimates, Gilroy will lose $139,000 in 2004-05, $302,000 in 2005-06, $632,000 in 2006-07, $718,000 in 2007-08 and $1 million in 2008-09.
Taylor said the League is pushing forward legislation in Sacramento that would require the state to get voter approval before borrowing local revenue sources or reducing the amount of revenue promised to cities.
“In the future, if they take, borrow, reduce or do anything to change local revenue, they first have to propose it to voters,” Taylor said.
The initiative could land on the March 2004 ballot.
Meanwhile, Gilroy officials are swallowing the latest news with renewed frustration and worry.
Baksa says he has no faith the state Legislature will carry out any plan to pay back cities. Baksa, who is known to watchdog even the most parsimonious of budgets, said he will have Council look at two versions of the city budget as it puts together a 2004-05 spending plan over the next several months. One version will assume vehicle license fees get paid back, the other will not.
By as early as January, Baksa will ask the new City Council to take a fresh look at the city’s three-tier system of spending cuts. While the proposed cuts within each tier do not figure to change substantially, Council must approve which cuts happen first, Baksa said.
“The tiers still need prioritizing,” Baksa said.
For instance, the city’s most extreme cost cutting plan – tier 3 – calls for terminating 43 full-time positions, but it doesn’t spell out which jobs get cut sooner than later.
“Department heads are looking at that sort of thing right now,” Baksa said.
The first tier of cuts saves $77,405 as early as this fiscal year. The third tier of cuts, which assumed the vehicle license fee revenues would be lost outright, could save more than $2 million in future years.
