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From: Leola Russell <>
Subject: [SCGS-L] FYI from CSGA-L
Date: Mon, 15 Mar 2004 11:31:07 -0800

Subject: Oakland Tribune Newspaper article
Oakland Tribune

 

East Bay cities say hands off to state
Municipalities sue over bond plan that would take away local tax revenue
By Glenn Chapman
STAFF WRITER

Friday, March 05, 2004- OAKLAND -- Alameda and Hayward are among 38
cities that sued California on Thursday to prevent local taxes from
being skimmed off to pay for the $15 billion in state deficit reduction
bonds authorized by passage of Proposition 57.

The suit doesn't try to block the issuance of bonds, but does ask an
Alameda County Superior Court judge to stop the State Board of
Equalization from trimming municipal sales tax rates by 0.25 percent, an
amount equal to the tax increase the state will impose to repay the new
debt.

"The bottom line is that charter city tax receipts are not a piggy bank
the state can dip into whenever it likes because it doesn't want to make
the painful choices of raising taxes or cutting services," said San
Francisco attorney Steve Mayer, who represents the 38 cities. "We are
going to see this thing through to the end."

The suit targets a statute the Legislature enacted to cut the amount of
sales tax cities can charge. Most of the cities named as plaintiffs get
1 percent of local sales tax revenue. For Alameda and Hayward, the
percentage is 0.95, according to the suit.

Mayer expects more of California's 107 charter cities to join the suit.
A hearing regarding the suit is scheduled for May 14 in Judge James
Richman's courtroom in Oakland.

"It is my hope that the lawsuit will not impede our efforts, as we move
forward to prepare for the sale of the Economic Recovery Bonds," state
Treasurer Phil Angelides said Thursday in a prepared statement.


http://www.latimes.com/news/local/la-me-
budget5mar05,1,2185691.story?coll=la-headlines-california

THE STATE

Suit Targets State's Use of Sales Tax

Three dozen cities seek to prevent seizure of their revenue to repay
$15-billion deficit bond. A tax scholar says success is unlikely.

By Evan Halper and Jeffrey L. Rabin
Times Staff Writers

March 5, 2004

SACRAMENTO - Three dozen California cities filed a lawsuit Thursday
seeking to block a key part of Gov. Arnold Schwarzenegger's $15-billion
deficit reduction borrowing plan approved by voters earlier this week.

The governments, led by the Los Angeles County suburb of Cerritos, are
asking an Alameda County Superior Court judge to bar the state from
raiding their sales tax revenues to repay the bond.

Under the plan voters approved Tuesday as Proposition 57, the state
would dedicate a quarter-cent of the sales tax, which cities normally
would keep, toward repaying the bond. The cities in turn would be
reimbursed with a larger share of property taxes that usually goes to
the state.

Officials who filed the lawsuit said that they don't trust the state to
reimburse them, after past experiences in which billions of dollars of
property taxes were taken to close a budget deficit and never returned.

"We didn't cause the budget crisis and we shouldn't be used as a
convenient source of money so the state can avoid making the hard policy
choices," said Steven Mayer, attorney for the cities.

State officials said the lawsuit was unlikely to threaten the bond sale.

"While we need to await further study of the lawsuit by our attorneys,
it does not appear that the intent of the lawsuit is to interfere with
issuance of the" bonds, said California Treasurer Phil Angelides. Even
if the court strikes down the sales tax provision, the state could sell
the bonds and repay them with other revenue.

Tax experts said the lawsuit appeared to be a longshot.

"It's just not a serious claim in my view," said Tom Campbell, dean of
the Walter A. Haas School of Business at UC Berkeley. "I don't think
it's serious."

Campbell, a former state legislator from the San Francisco Peninsula,
said that there is no legal question because the state has the right to
control sales tax.

But budget analysts and investors warned that the suit could interfere
with the state's ability to secure the bond money in time to pay off $14
billion in short-term loans due in June. And if the courts decide to
block the state from using the sales tax to repay the bond, the risk to
investors would increase, and along with it the cost to the state of
borrowing.

Many of the cities involved in the litigation have shopping malls or
auto dealerships and rely heavily on sales taxes to pay for government
services.

Cerritos, which has both, raised $24.4 million in sales tax revenue in
fiscal 2001-02, accounting for 37% of its general fund. Fresno, another
city that is a plaintiff, collected $52.7 million in sales tax revenue
that year, accounting for a third of its budget. Other plaintiffs
include Burbank, Cypress, El Monte, Glendale, Irvine, Norwalk, Pasadena,
Palm Springs, Pomona and Torrance.

The lawsuit filed Thursday comes at a critical time for state and local
governments.

Although the voters approved issuance of up to $15 billion in deficit
bonds Tuesday, the state's fiscal crisis is far from over.

A shortfall of as much as $17 billion remains in the coming fiscal year,
and Gov. Arnold Schwarzenegger has proposed taking more than $1 billion
in city and county property taxes to balance that budget.

Local officials fear that the financial problems may worsen. Fresh in
their minds is the deep recession of the 1990s, when Sacramento raided
local property taxes, costing cities billions of dollars in revenue that
was never replaced.

"We believe they will leave the cities in the lurch again," said Art
Galluci, Cerritos city manager.

The lawsuit is part of an effort by city and county leaders to mobilize
to protect their money. They are hoping to place an initiative on the
November ballot that will limit the state's ability to take money from
them.

Galluci argued that the state should use its own share of sales tax
money to repay the bond.

But state officials said constitutional restrictions on how different
tax monies can be spent forces them to pledge the local sales tax money
to investors as part of a complex revenue swap known in the Capitol as
the "triple flip."

The portion of the sales tax that goes to the state cannot be dedicated
to bond repayment, they said, because schools have first claim on it
under state law. So the state is tapping sales taxes that go to the
cities and replacing them with an increase in their share of the
property tax.

That property tax money, however, is now going to schools. As part of
the deal, the state is pledging to make the schools whole with payments
from its general fund.

Department of Finance spokesman H.D. Palmer said the governor would make
good on his promise to repay the local governments.

"Everyone was doubting that he would come in and pay back the locals
after the car tax was rolled back," Palmer said of the governor's
vehicle license fee reduction in November, which threatened $4 billion
in annual payments to cities and counties. "He did."

Palmer said that although the lawsuit would not stop the bond from being
sold under any circumstances, it could force a quarter-cent sales tax
hike in all California cities.

"Unless the Legislature took action to undo that, the cities could get a
windfall," Palmer said.

If you want other stories on this topic, search the Archives at
latimes.com/archives.
<File attached: image.tiff>Click here for article licensing and reprint options

Here is the latest information regarding the state budget and california
library funding.
Unfortunately, I will not be attending the California Library Association
(CLA) Legislative Day in Sacramento- I will be in Salt Lake City that
week.
Anyone can attend the CLA Legislative Day to lobby our legislators for
library funding. In lieu of attendence, letters are great! rememeber the
squeaky wheel adage.
Thanks.
Norma

March 11, 2004


TO: CLA MEMBERS/ SYSTEMS/ NETWORK CONTACTS

FROM: Mike Dillon, CLA Lobbyist; Christina Dillon, CLA Lobbyist

RE: NEWS FROM THE CAPITOL


BUDGET SUBCOMMITTEE DISCUSSIONS BEGIN - PLF HEARING DATE SET

This week, the Senate Budget Subcommittee on Education Finance Number
One, held its first hearing on the Governor's 2004-05 Budget, receiving
overviews from the Legislative Analyst's Office and Superintendent of
Public Instruction. While the Senate appears to be in full swing, their
colleagues in the Assembly did not begin their education hearings this
week as the Assembly Democrats were at a retreat in San Diego to discuss
the Budget and workers compensation proposals.

In several weeks, the Senate and Assembly Budget Subcommittees on
Education Finance will hear the issue of the Public Library Foundation
(the Governor is proposing to make no further reduction in the PLF, and
would maintain the program's baseline at $15.8 million). The Senate has
set its hearing for Monday, May 10th at 1:30 p.m., which will allow CLA
members time to write letters of support, and lobby legislators on CLA
Legislative Day. The Assembly schedule has not been set as of this
writing.

Please take a moment today and write the members of the Budget
Subcommittees. The recommendations of the subcommittees are crucial to
the Budget process, as the members may choose to 1) reject the
Governor's proposal relative to the PLF, 2) accept the Governor's
proposal to keep the PLF at $15.8 million, or 3) offer a compromise
proposal of some dollar amount in between. Success at the subcommittee
level is a critical first step.

Senate Budget Subcommittee Number One on Education Finance

Chair, Senator Jack Scott
Senator Bob Margett
Senator John Vasconcellos

Assembly Budget Subcommittee Number Two on Education Finance

Assemblyman Joe Simitian, Chair
Assemblyman Joe Canciamilla
Assemblywoman Wilma Chan
Assemblywoman Lynn Daucher
Assemblywoman Jackie Goldberg
Assemblywoman Carol Liu
Assemblywoman Sharon Runner


Sample address:
The Honorable Jack Scott
Chair, Senate Budget Subcommittee on Education Finance Number One
State Capitol
Sacramento, CA. 95814


Next week we will instruct you on how to write the members of the
subcommittees who will be considering local government finance issues in
the Budget. We know that many of you are concerned about the Governor's
ERAF shift proposal, as well as the LAO's alternative proposal.










 

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• [SCGS-L] FYI from CSGA-L by Leola Russell <>