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ADMINISTRATIVE
COMMITTEE |
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1. |
CONSIDER AUTHORIZING BOARD
CHAIR TO SEND LETTER TO STATE LEGISLATORS URGING PROTECTION OF DISTRICT
PROPERTY TAX REVENUES IN RESPONSE TO STATE’S FISCAL PROBLEM |
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Meeting
Date: |
January 15, 2008 |
Budgeted: |
N/A |
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From: |
David A.
Berger, |
Program/ |
N/A |
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General
Manager |
Line Item No.: |
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Prepared
By: |
Rick
Dickhaut |
Cost Estimate: |
N/A |
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General Counsel Approval: N/A |
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Committee Recommendation: The Administrative Committee considered this item on January 15, 2008 and recommended _____________. |
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CEQA Compliance: N/A |
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SUMMARY: Governor Schwarzenegger has announced plans to proclaim a “fiscal emergency” when the State Legislature reconvenes in a special session this month. Given the magnitude of the estimated $14 billion State budget deficit for Fiscal Year 2008-09, everything is likely to be on the table including borrowing additional property tax revenues from local governments, which is permitted under Proposition 1A as discussed in the background section of this report. Although the formula to determine how much would be borrowed from each local government agency is unknown, it is estimated that the amount withheld from the District could range from $110,000 to over $200,000. Even though these borrowed funds, plus interest, would need to be repaid by the State within three years, this temporary loss of funding would put a strain on the District’s general operating reserve. The is especially relevant given the fact that the Board recently approved staff’s recommendation to draw the District’s general operating reserve below the 5% established minimum in order to fund completion of Phase 1 of the Aquifer Storage & Recovery Project on a pay-as-you-go basis. Even though it is still early in the budget process, the Association of California Water Agencies and the California Special Districts Association are encouraging each of their member district’s to contact their legislators to urge them to oppose suspension of Proposition 1A, and to provide them with specific information relative to what losing additional property tax revenues would mean to each District and its ability to maintain adequate service levels.
RECOMMENDATION: District staff recommends that the Board Chair be authorized to send a
letter to the District’s state legislators expressing the impacts that a
temporary borrowing of property tax revenues would have on the District, and
urging protection of those revenues.
BACKGROUND: In
the twelve years prior to the passage of Proposition 1A in 2004, the State transferred
over $30 billion of tax revenues collected by local governments (cities,
counties and special districts) to cover State budget shortfalls. While Proposition 1A, which became effective
in 2006, offered legislative protection against such raids in the future, it also
provided that the provisions of the Proposition may be temporarily suspended if
the Governor declares a severe fiscal hardship
and two-thirds of the Legislature approves the suspension. If suspended, Proposition 1A contains
language that allows the State to “borrow” not more than 8 percent of the total
property tax revenues, currently estimated at $2 billion. If such borrowing takes place, the
Legislature must enact a statute providing for the full repayment of the
“borrowed funds” plus interest within three years.
U:\staff\word\committees\Admin\2008\20080115\01\item1.doc