AgdaPkt 2009-08-03 spc, clsd and jnt

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. � 8A Page 2 `Budget'Continued from Rage 1... "We were pleased that the Legislat�tre finally heard arguments ftom economists and legal experts that stealir�g local gas taxes not onCy violated the state constitution, bu#it wouid have devas#ated the maintenance of Iocal streets and crea#ed true tocal public safety problems.We continue, however,to be concerned that the budget contains a clearly unconstitutional diversion of local redevelopmen#funds, and we be[ieve ihe state shauld not count on that revenue materia(izing," saicf League President and Rolling Hills Estates Mayor Judy Mitchell. tn i#s early morning session,the California Sta#e Senate revised the legislation#hat provided for the unconstitutional seizure of local gas tax funds into a loan to the state general fund,which is allowed under the constitution. The California State Assembly,however, killed the gas tax loan legislation and removed the#hreat to pubfic safety posed by the legislativn. The�nal budget also included the so-called Proposi#ion 1A property tax loan, including legislation au#horizing the"securitizatio�"of the loan so foca!governments could borrow agains#the state's repayment commitment. � Ch�is McKenzie, League exect�tive director, rermarlced on why borrowing is dangerous. "Let there be no doubt,this is more borrowing by the state and it is no better for the state than it is for local governments. The success or failure of this(egislation depends on how clearly this legislation commits the state to repayment and how weil Wa�l Street reacts to#his budget. it is essentia!that focal potice and fire services not be sacrificed to ensure rnore borrowing by the s#ate.We ha�e not seen the most recent�ersion of this legislation,and we remain very concemed abo�t the ability to securitize this loan repaymertt in the current credit environment.We look forward to working on any necessary amendments to the IegisEation when the legislature returns. Like#he rest of the ftscal challenges facing the state,there is much left to be done." Below is a summary of the main budget provisions impacting cities. Uncons#itutionaf Redeve[opment Raids A totaf of$1.7 billion is proposed to be taken from redevelopment agencies through a seizure of $1.350 billion in FY 2009-10,and then an addi#ional$350 milfion in FY 2010-11.These funds will be deposited in county"Supplementaf"Educational Revenue Augmer�tation Funds(SERAF)#o be , distributed to meet the state's Proposi#ion 98 obiigations to schools.This proposai attempts to use the same mechanism that was rejec�ed by Sacramen#o Superior Court,when the Court he[d that a proposed take of$3�0 mi[fion from redevelopment agencies for FY 2008-09,via AB �389 of 2448,was unconstitufional. The Legislature has added new language in an effo�t to work around the court dec�sior�, buf redevefopment attomeys belie�e this effort remains uncons�tutional. The redevelopment ageney can use any available funds to make the SERAF payment. For FY 2009-1o,the redeveEopmenf .. agency may"suspend"all or part of the required allocation to its low and moderate income housing fund in order to make the payment. The Housing Fund must be repaid by June 30,20'I 5. lf the redevelopment agency fails ta repay the Mousing Fund,the required allocation of tax increment#o the Housing Fund is increased#0 25 percent for as long as the project area continues to receive tax increment.Also,the controversiaf�oluntary"City o#Indus#ry"bi1!died in the Assembly. Prop.1A Borrowing Under the budget agreement;the sta#e wi[i�borrow approximately$1.9 billion in proper#y#axes from local govemments,approximately S percent of the property taxes received per locai agency. The League has not seen fi�al language. However,the Administration insists that the language wi(I cover interest and issuance costs of an effort to securitize�he state's promise to repay. Prop. 1A's pro��sions require that a loan of Iocal property taxes be repaid within three years with ir�terest. z