State Budget:
Next Steps for the 2009-10 State Budget by Dan Carrigg, LOCC
Proposition 1A Borrowing/Securitization
Local agencies have three basic choices:

What’s Next
Highway User’s Tax Account (HUTA):
HUTA-Related Provision Remains In Final Budget –but obsolete
What’s Next

Local Highway Money is Target Again –Article By John Wildermuth, Journalist and Political Commentator
Redevelopment Raids
What’s Next

List of suspended mandates for 2009-2010

Redevelopment:

Redevelopment Agencies Prepare Second Lawsuit to Block Unconstitutional Raids of Redevelopment Funds by CRA
Timeline of State Raids of Redevelopment Funds and Litigation
FREQUENTLY ASKED QUESTIONS

Water Infrastructure:

Legislative Water Package –Updated August 19, 2009 by Kyra Ross, LOCCSB 3- Delta Conservancy and Delta Protection Commission (Wolk)
SB 1- Delta Governance (Simitian)
AB 1- The Delta Plan (Huffman)
SB 2 - Water Use Reporting (Pavley)
AB 2 - Water Conservation and Sustainable Management (Feuer/Huffman)

California Governance Reform:

CA-Forward constitutional reform letter  by California Forward

CA-Forward Constitutional Reform Proposals

Next Steps for the 2009-10 State Budget

Now that several weeks have passed since the conclusion of the most recent round of state budget revisions city officials are attempting to get their bearings. They are asking concrete questions about the impacts of various state decisions on local budgets, and what else they might expect as the Legislature reconvenes to conclude its session Aug. 17—Sept. 11.  With Democrats upset over some budget vetoes by the Governor, and a pending lawsuit over this matter filed by Senate Pro Tem Darrell Steinberg, the environment is expected to be tense.

Here is a brief list of where things stand on the major budget items important to cities:

Proposition 1A Borrowing/Securitization

The state will borrow approximately $1.9 billion, 8 percent of city, county, and special district property tax shares pursuant to AB X4 14 and AB X4 15.  The payments are required to be made in two equal installments:  Jan. 15, 2010, and May 1, 2010.  The repayment date listed in statute in June 30, 2013.

Local agencies have three basic choices:

1)       Carry the state borrowing on local books for the term of the loan and be repaid with interest. The interest rate has yet to be set by the Department of Finance (DOF), but can range as high as 6 percent.

2)       Request a hardship exemption from the DOF director. The director is authorized to grant exemptions that may total not more than 10 percent of the total amount eligible (calculated by the total value of 8 percent of all property tax received by local agencies within the county).

3)       Enter into an agreement with California Communities, a joint-powers financing conduit issuer, whereby the participating local agency would exchange their right to state repayment of the borrowed property taxes for an up front payment financed through bonds sold to investors.  California Communities would structure the financing, and investors would purchase the state’s commitment to repay the local shares of property tax receivables, including interest.  Interested cities should be ready to act quickly; once the program is operational. The timelines are expected to be tight.  See the Aug. 7 issue of City Advocate Weekly for more information.

What’s Next

The League, CSAC and the California Special Districts Association, along with financing experts from California Communities recently met with representatives of DOF to discuss a number of desired amendments to the securitization language contained in AB X4 15. These requested amendments are all oriented toward improving the prospects of a successful securitization. Investors will be evaluating the risks associated with the state’s commitment to repay by the repayment date. To ensure market success and reasonable interest rates, investors need to be made as comfortable as possible that the state will pay as scheduled. 

While the meeting with state officials was productive, the League is awaiting the proposed batch of language, which should come shortly. It is hoped that that language will reflect the prior productive discussions.  One issue that the DOF has raised is the potential of moving the hardship request process to follow the securitization effort, with the rationale that agencies that can recover full costs through securitization will not need a hardship exemption.  The League will be watching for this in the expected language.

Assuming agreement is reached on amendments, urgency legislation, requiring a two-thirds vote, is needed to ensure these changes take effect immediately.

Highway User’s Tax Account (HUTA): 

After much chaos in the Legislature during the final hours of the budget votes, local governments received welcome news when what had been a proposed unconstitutional $1.7 billion grab of HUTA funds, was transformed first into a loan with a proposed 10-year repayment plan in the Senate, then in the final hours, pulled entirely out of the budget package in the Assembly.  The final versions of the legislation that did not get adopted are AB X4 30 and AB X4 24, which remain in the Assembly.

HUTA-Related Provision Remains In Final Budget –but obsolete

Another HUTA-related provision however, that delayed the receipt of six months of local HUTA funds from July-December 2009, can be found in Section 16 of the cash deferral budget trailer bill AB X4 16. While this language is now operative law, in the context of the final budget package it can be viewed as potentially obsolete. There are several interdependent factors that explain this transformation:

1)       The original budget agreement was to take $1.7 billion in local HUTA funds.

2)       The budget agreement also contained a trigger mechanism that would have had the HUTA grab and the Prop.1A borrowing only occur if a complex redevelopment securitization scheme in ABX4 27, sponsored by the City of Industry, failed to produce sufficient revenues for the state General Fund.  This measure, however, also failed to move off the Assembly Floor.

3)       Because many parties involved in the budget agreement believed that the City of Industry proposal would fail for a number of reasons, it was viewed as prudent to defer local receipt of HUTA revenues, was so the state could easily grab the money for the FY 2009-10 budget once the Industry plan failed.

4)       Since neither the HUTA grab, nor the Industry proposal with its trigger, were included in the final package, the current language in AB X4 16, Section 16, can be viewed as obsolete.   

What’s Next  

The League and CSAC have had numerous conversations with DOF staff about the remnant HUTA deferral language in AB X4 16, Section 16. The League would prefer that this language is removed entirely, because it relates to legislation that was not enacted. Another option is to clean up the language so that it clarifies that repayment will occur in January.  The League is still waiting for a firm answer from DOF on if the Administration would allow the removal of this language. Since the enactment of the recent state budget agreement, DOF, the State Controller and the State Treasurer have been focused on developing a cash flow strategy for the state. This strategy should be complete in the next several days.

If the state’s cash flow needs can be met without this deferral, then removal of this provision may be possible. Another possible scenario is that the state may seek to shift the deferral window to the second half of the fiscal year, because March is when the state traditionally is short on cash. In that event, a deferral of HUTA revenues could be proposed similar to that enacted in AB X3 7 of 2008. 

Any change to this statute will also require an urgency clause with a required two-thirds vote.

Redevelopment Raids

 The proposed $2.05 billion grab of local redevelopment agency funds, contained in AB X4 26, will be devastating for many local projects and for local jobs. The California Redevelopment Association (CRA) is preparing to litigate this matter on a variety of constitutional grounds. While the CRA and other plaintiffs were successful in their recent litigation against a proposed $350 million take, the Legislature has inserted language that attempts to insulate this grab against some of the expected arguments.  CRA’s core arguments, however, is that the grab remains unconstitutional.

Should litigation not be successful, RDA’s must make payments by May 10, 2010.  Agencies that lack funds will incur various penalties, and borrowing from RDA housing funds triggers an increased allocation set aside to 25 percent. Cities have the ability to loan the agency funds to make the payment at terms to be agreed upon by the parties.

What’s Next

It is unclear to what extent any major changes to this redevelopment statute may be attempted.  CRA is currently focused on pursuing litigation.

Follow Up

The League will continue to report on all of these issues as more information becomes available.

Local Highway Money is Target Again

By John Wildermuth

Journalist and Political Commentator

Fri, August 14th, 2009

The $1 billion in local highway money the state didn't get in last month's budget agreement could be a target again when the Legislature comes back from its summer recess next week, Darrell Steinberg, the Democratic leader in the state Senate, suggested Wednesday.

Steinberg, joined by local Assemblyman Tom Ammiano, was at a neighborhood health center in San Francisco's Mission District, talking about his suit to recover nearly $500 million Gov. Arnold Schwarzenegger blue-penciled from state health and welfare programs before he signed the budget revisions.

"We could go back to (the highway money),'' he told the crowd of doctors, nurses, patients and various care providers. "That's one way to do this.''

Putting that highway money back into play also would give Steinberg and Senate Democrats a chance to stick it to their colleagues in the Assembly, who tabled the plan to borrow the highway money after Schwarzenegger and the four legislative leaders agreed to it as part of the overall budget deal last month.

More to the point, they dumped the $1 billion in highway funds out of the budget deal after Steinberg had pushed the bill though a reluctant Senate over the frenzied lobbying and loud complaints of mayors, council members and county supervisors from across the state.

Not only did the Assembly's decision force the senators to take the heat for a tough vote that ultimately came to nothing, it also opened the way for Schwarzenegger to recover some of that lost money by chopping even deeper into health and welfare programs that Steinberg and other Democrats had fought desperately to save.

Going back to the original budget deal also makes sense because the Senate already has agreed to borrow the highway money, Steinberg said. It would take a simple majority to approve it in the Assembly, which means the Democrats wouldn't need any Republican votes.

If those highway funds could restore the money taken from AIDS prevention and treatment programs, services for battered women and children's health care, what Democrat wouldn't make that choice, Steinberg added, casually turning up the heat on the Assembly.

While Schwarzenegger isn't saying yes to any new effort to go after those highway funds, he isn't saying no, either.

"The budget is over, the budget is done,'' said Aaron McLear, a spokesman for the governor. "But if the economy worsens, we will have to go back to do more cuts and look at other measures."

Translated from politicalese, that means that while Schwarzenegger won't guarantee to restore any of the current cuts, "other measures" that include another $1 billion in revenues could go a long way toward avoiding additional program trims if - or more likely, when - the Legislature has to go back into this year's budget to deal with more anticipated deficits.

Steinberg and the Democrats already are gearing up to battle any new call for more budget cuts. His suit arguing that Schwarzenegger's vetoes were illegal could go before a judge by the middle of September and he was talking tough to the crowd of supporters in San Francisco,

"At some point - and this point is right now - enough is enough,'' he argued. "People who need help have given up enough for the state budget.

"We're tired of playing defense," Steinberg added. "It's time to go on offense.''

2009-10 Suspended Mandates

1. Adult Felony Restitution (Ch. 11 23, Stats.1977) (04-LM-08)

2. Airport Land Use Commission/Plans (Chapter 644, Statutes of 1994) (CSM-4507)

3. *AIDSISearch Warrant (Ch. 1088, Stats.1988) (CSM-4392)

4. *Animal Adoption (Ch. 752, Stats. 1998) (04-PGA-01, 98-TC-11)

5. *Binding Arbitration (Ch. 906, Stats. 2000) (01-TC-07)"

6. *Conservatorship: Developmentally Disabled Adults (Ch. 1304, Stats. 1980) (04-LM-13)*

7. *Coroners Costs (Ch. 498, Stats. 1977) (04-LM-07)*

8. *Crime Victims Rights (Ch. 41 1, Stats. 1995) (CSM-96-358-01)*

9. Deaf Teletype Equipment (Ch. 502, Stats. 1980) (04-LM-1 I)*

10. *Developmentally Disabled Attorneys' Service(Ch.694,Stats.1975) (04-LM-03)*

11. *DNA Database &Amendments to Post-mortem Examinations (Ch. 822. Stats 2000; Ch.

467, Stats. 2001) (00-TC-27)

12. Domestic Violence lnformation (Ch. 1609, Stats. 1984) (CSM-4222)

13. Elder Abuse, Law Enforcement Training (Ch. 444, Stats. 1997) (98-TC-12)

14. Extended Commitment, Youth Authority (Ch. 267, Stats. 1998) (98-TC-13)

15. *False Reports of Police Misconduct (Ch. 590, Stats. 1995) (00-TC-26)

16. Filipino Employee Surveys (Ch. 845, Stats.1978) (CSM-2142)

17. *Fire Safety Inspections of Care Facilities (Ch. 993, Stats 1989) (01-TC-16)

18. *Firearm Hearings for Discharged Inpatients (Chs. 9 and 177, Stats. 1990) (99-TC-11)

19. Grand Jury Preceedings (Ch. 1170, Stats 1996) (98-TC-27)

20. GuardianshiplConservatorship Filings (Ch.1357. Stats. 1976) (04-LM-15)

21. Handicapped Voter Access lnformation (Ch. 494, Stats. 1979) (CSM-4363)

22. Inmate AIDS Testing (Ch. 1597, Stats. 1988) (CSM-4369)

23. *Judiciary Proceedings (Ch. 644, Stats. 1980) (CSM-4366)

24. Law Enforcement Sexual Harassment Training (Ch. 126, Stats. 1993) (97-TC-07)

25. Local Coastal Plans (Ch. 1330, Stats. 1976) (CSM-4431)

26. *Mentally Disordered Offenders': Treatment as a Condition of Parole (Ch. 228, Stats. 1989;

Ch. 706, Stats. 1994) (00-TC-28, 05-TC-06)

27. *Mentally Disordered Offenders' Extended Commitments Proceedings (Ch. 435, Stats.

1991) (98-TC-09)

28. *Mentally Disordered Sex Offenders' Recommitments (Ch. 1036, Stats. 1978) (04-LM-09)

29. *Mentally Retarded Defendants Representation (Ch. 1253, Stats. 1980) (04-LM-12)

30. Missing Persons Report (Ch. 1456, Stats.1988; Ch. 59, Stats. 1993) (CSM-4255. CSM-

4484, and CSM-4368)

31. *Not Guilty by Reason of Insanity (Ch.1114, Stats. 1979) (CSM 2753)

32. *Pacific Beach Safety (Ch. 961. Stats. 1992) (CSM-4432)

33. *Perinatal Services (Ch. 1603, Stats. 1990) (CSM-4397)

34. Personal Alarm Devices (8 Cal. Code Regs. 3401 (c)) (CSM-4087)

35. *Photographic Record of Evidence (Ch.875, Stats. 1985) (98-TC-07)

36. Pocket Masks (Ch. 1334, Stats. 1987) (CSM-4291)

37. *Post Conviction: DNA Court Proceedings (Ch. 943, Stats. 2001) (00-TC-21, 01-TC-08)

38. *Post Mortem Examinations (Ch. 284, Stats. 2000) (00-TC-18)

39. Prisoner Parental Rights (Ch. 820, Stats.1991) (CSM-4427)

40. *Senior Citizens Property Tax Deferral (Ch. 1242, Stats. 1977)

41. Sex Crime Confidentiality (Ch. 502, Stats 1992; Ch. 36, Stats 1994, 1" Ex. Session) (98-

TC-21)

42. Sex Offenders: Disclosure by Law Enforcement Officers (Ch. 908 and 909, Stats 1996) (97-

TC-I 5)

43. SlDS Autopsies (Ch. 955, Stats. 1989) (CSM-4393)

44. SlDS Contacts by Local Health Officers (Ch. 268, Stats. 1991) (CSM-4424)

45. SlDS Notices (Ch. 453, Stats. 1974) (04-LM-01)

46. SlDS Training for Firefighters (Ch. 11 11, Stats. 1989) (CSM-4412)

47. *Stolen Vehicle Notification (Ch. 337, Stats. 1990) (CSM-4403)

48. Structural and Wildland Firefighter Safety Clothing and Equipment (8 Cal. Code of Regs

3401 to 3410, incl.) (CSM-4261-4281)

49. Substandard Housing (Ch. 238, Stats. 1974) (CSM-4303)

50. Very High Fire Hazard Severity Zones (Ch. 1188, Stats. 1992) (97-TC-13)

51. Victims Statements-Minors (Ch. 332, Stats. 1981) (04-LM-14)

* Newly suspended mandates ide~itifiedb y the Legislature in fiscal year 2009-10.

Redevelopment Agencies Prepare Second Lawsuit to Block Unconstitutional Raids of Redevelopment Funds

In April 2009, a Sacramento County Superior Court ruled that State raids of redevelopment funds are unconstitutional, invalidating a 2008 state budget bill to take $350 million in redevelopment funds.  Despite the clear unconstitutionality, just three months later legislators and the Governor approved budget bill AB 26 4x which authorizes a devastating $2.05 billion raid of local redevelopment funds, including $1.7 billion in FY 2009-10 and another $350 million in FY 2010-11.  The California Redevelopment Association and its member agencies are preparing to file a lawsuit again to challenge the constitutionality of State raids of redevelopment funds.

The courts ruled it was unconstitutional four months ago, and raiding voter approved redevelopment funds is STILL unconstitutional today.

·         Article XVI, Section 16 of the California Constitution states that redevelopment tax increment funds can only be used for specified redevelopment activities, specifically “to finance or refinance … the redevelopment project.”  Taking redevelopment funds to balance the State’s budget – the unquestionable purpose of AB 26 4x – does not qualify as a constitutionally permitted use of redevelopment funds.

·         That’s why in April 2009, a Sacramento Superior Court invalidated a 2008 State raid of redevelopment funds, finding that it “violates the intent of section 16 (of the State Constitution), to allocate the tax increment to the financing of redevelopment projects.”

·         While legislative staff and lawyers changed the wording of the 2009 legislation in an attempt to get around the State Constitution and Superior Court Ruling, this raid is still unconstitutional. The clear purpose of AB 26 4x is to redirect redevelopment funds to school districts in order to reduce the State’s obligation to fund education. In other words, AB 26 4x is intended to reduce the State’s budget obligations – not to further redevelopment – which is a violation of the constitution. It’s important to note that the staff who advised the Legislature that the 2008 redevelopment raids were legal are the same staff who are telling them that the 2009 raid is legal.

State raids of redevelopment funds unconstitutionally impair bond and other contracts.

·         State and Federal Constitutions prohibit the Legislature from enacting laws that impair the obligation of contract.  Raiding $2.05 billion in redevelopment funds will jeopardize bond covenants and other contractual obligations entered into by many redevelopment agencies creating an unconstitutional impairment of contract.  Under Article XVI, Section 16 of the State Constitution, redevelopment agencies irrevocably pledge tax increment to pay bonds and other obligations that raise capital for the redevelopment project.  By redirecting funds that are pledged to pay back bonds and other creditors, AB 26 4x impairs the contractual pledge of revenues on which redevelopment financing is based.

Raiding $2.05 billion in redevelopment funds will kill tens of thousands of jobs, damage our economic recovery and harm local communities.

·         The magnitude of this redevelopment raid will force many agencies to stop work on important redevelopment projects, stalling or killing vital economic revitalization, affordable housing, infrastructure and other projects that are critical in a down economy.

·         According to an economic analysis prepared for CRA, $2.05 billion in redevelopment revenues could support 198,000 full- and part-time jobs in the construction and related industries. At a time when California unemployment is nearing 12%, these raids are job killers that will further stall our economic recovery.  

Timeline of State Raids of Redevelopment Funds and Litigation

September 30, 2008 – State Legislature passes and Governor signs AB 1389, budget trailer bill raiding $350 million of redevelopment funds for state purposes in FY 2008-2009.

December 4, 2008 – California Redevelopment Association (CRA) files lawsuit in Sacramento Superior Court, alleging AB 1389 and redevelopment raids are unconstitutional.

April 30, 2009 – Superior Court rules in favor of CRA, invalidates AB 1389 and says the redevelopment raid, “violates the intent of section 16 [of the State Constitution], to allocate the tax increment to the financing of redevelopment projects.”

June 15, 2009 – A month and a half after the Superior Court ruled that redevelopment raids for state purposes are unconstitutional, the legislative Budget Conference Committee votes to include a $1.05 billion raid of redevelopment funds in a budget trailer bill ($350 million/yr for 3 years).

June 2009 – CRA warns legislators and Administration that, despite altered language, budget bills still violate constitution and proposed redevelopment raids are illegal.

July 24-29, 2009 – Legislature passes and Governor signs AB 26 4x as part of budget package, a devastating $2.05 billion raid of redevelopment funds this year and next.

FREQUENTLY ASKED QUESTIONS

1)       Why is CRA filing this lawsuit?

We are seeking to invalidate AB 26 4x and block the unconstitutional transfer of $2.05 billion in local redevelopment funds to county Supplemental Education Revenue Funds (SERAF).

In addition to the unconstitutionality of these raids, they will hurt California’s economic recovery. Raiding $2+ billion in redevelopment funds will result in the loss of tens of thousands of jobs and kill needed economic revitalization, affordable housing, and other projects that communities desperately need in this down economy.

2)       On what grounds will you sue to invalidate AB 26 4X?

Article XVI, Section 16 of the California Constitution states that redevelopment tax increment funds can only be used for specified redevelopment activities, specifically “to finance or refinance … the redevelopment project.”  Taking redevelopment funds to balance the State’s budget – the unquestionable purpose of AB 26 4x – does not qualify as a constitutionally permitted use of redevelopment funds and is therefore unconstitutional.

Additionally, raiding $2.05 billion in redevelopment funds constitutes an unconstitutional impairment of contracts.  Under Article XVI, Section 16 of the State Constitution, redevelopment agencies irrevocably pledge redevelopment (tax increment) revenues to pay back bonds and other obligations that raise the capital to fund the redevelopment project.  By raiding funds that are pledged to pay back bonds and other creditors, AB 26 4x impairs the contractual pledge of revenues on which redevelopment financing is based.

3)       Didn’t a Superior Court just rule that 2008 raids of redevelopment funds are illegal? What has changed?

In April 2009, a Sacramento Superior Court invalidated a proposed 2008 State raid of redevelopment funds, finding that the State raid of redevelopment funds “violates the intent of section 16 [of the State Constitution], to allocate the tax increment to the financing of redevelopment projects.” 

Nothing has changed since that ruling in April. AB 26 4x is likewise unconstitutional, because it redirects redevelopment tax increment funds to finance the State’s obligation to fund education.

While legislative staff and lawyers changed the wording of the 2009 legislation in an attempt to get around the State Constitution and Superior Court ruling, this raid is still unconstitutional. The Legislature cannot change the constitution by statute.

4)       The Legislature, Administration and staff say they have written AB 26 4x to address the Superior Court ruling and that this year’s raid is legal because funds will only go to schools and students within a redevelopment project area, which furthers the purpose of redevelopment.

First, it’s important to note that the staff who claimed the 2008 raids were legal (which were later found unconstitutional) are the same staff who are claiming this year’s raids are legal.

And last year’s legislation (AB 1389) also claimed that the intent was to benefit schools, which purportedly furthers the purpose of redevelopment. The Superior Court judge rejected AB 1389 and found it unconstitutional. 

AB 26 4x is also unconstitutional because the unquestionable purpose of this budget bill is to help balance the State’s budget – which does not qualify as a constitutionally permitted use of redevelopment funds. Under AB26 4x, schools won’t receive one dime more than already guaranteed from the State. AB 26 4x simply shifts the obligation from the State to redevelopment agencies.

Further, it is not enough that tax increment be spent within a redevelopment project area. The constitutional requirement is that tax increment be spent to repay indebtedness incurred to finance the redevelopment project. AB 26 4x’s redirection of tax increment to SERAF fails the constitutional requirement because the revenues diverted are not related or proportional to the cost of any direct benefit to the redevelopment project.

5)       What happens to the 2008 case that is on appeal and will the new lawsuit be joined to the 2008 litigation?

The 2008 case, which was decided in April 2009, has been appealed by the State and will continue to move through the 3^rd District Court of Appeal. It will be many months before the Court of Appeal will ultimately rule.

It is important to note that the April Superior Court Decision had the effect of stopping the transfer of redevelopment funds, but only for the $350 million called for in the 2008 legislation (AB 1389).

The new lawsuit will not be joined to previous case.  The new law (AB 26 4x) is sufficiently different from the law passed last year (AB 1389) that a second lawsuit is required.

6)       Who are the plaintiffs in the case?

CRA and its legal team are doing an exhaustive analysis to evaluate the best plaintiffs. In the 2008 litigation, the California Redevelopment Association and two redevelopment agencies (serving as representatives of all agencies in the state) were plaintiffs, as was John Shirey, CRA Executive Director, in his role as a California taxpayer.

It is likely that we will again have a small number of agencies as plaintiffs in this litigation, though we are evaluating all options.

7)       Who are the defendants?

Very likely, as in the 2008 litigation, the State of California Department of Finance will be the principal defendant in the lawsuit. For technical reasons, we may once again include county auditors as defendants, since auditors are the ones charged with the transfer of payments from the redevelopment agencies into County Supplemental Educational Revenue Augmentation Funds (SERAF).

8)       If you’re victorious, won’t you blow a $2 billion hole in our already deficit-ridden budget?

It is the responsibility of state lawmakers to pass a responsible budget that does not rely on gimmicks or illegal raids of funds. We have repeatedly informed the Legislature and Administration that any proposal to shift redevelopment funds to SERAF is unconstitutional. 

And particularly in light of the recent Superior Court ruling just this past April, legislators and the Administration are fully aware of the constitutional issues surrounding redirecting redevelopment funds.

The Governor himself is on record agreeing that raiding redevelopment funds is unconstitutional. In 2004, Governor Schwarzenegger signed ballot arguments in the voter information guide in support of Proposition 1A (local government revenue protection). The voter information guide, which was sent to millions of California voters, read:  “Redevelopment agency tax increment revenues are already protected by the State Constitution.”

9)       Given the enormity of the State’s budget deficit, shouldn’t redevelopment be asked to pitch in to solve the crisis?

Redevelopment funds are locally-generated funds that have been constitutionally designated by voters to go toward local redevelopment and community revitalization projects.  Given today’s economy, these funds are needed in our local communities more than ever. 

Local governments are already facing severe financial hardships due to the down economy and have made difficult decisions locally to balance their own budgets, including laying off staff, eliminating projects and cutting services.  The State must balance its budget without illegally raiding local government funds.

10)   Will this impact redevelopment bond and/or credit ratings?

The impairment issue is of great concern to bondholders and redevelopment agencies alike. If the State can alter the finances of an agency after these agencies have entered into covenants/agreements with bondholders, it will have a negative impact on all future bonding.

In fact, a July 2009 analysis by Moody’s says “the proposed $1.7 billion shift from redevelopment agencies … is of a substantially greater magnitude than might have been anticipated, and it could have a material impact on some redevelopment agencies’ overall credit quality.”

What’s more, by illegally impairing bond contracts, State lawmakers are jeopardizing the integrity of all California state and municipal bonds. After all, bond holders are going to be much less willing to take on California bonds if the Legislature repeatedly jeopardizes repayment of these bonds.

11)   How will this impact funds for affordable housing?

For FY 2009-2010, the agency may suspend all or part of the required 20% allocation to its low and moderate income housing fund in order to make the payment.

The Housing Fund must be repaid by June 30, 2015. If the agency fails to repay the Housing Fund, the required allocation of tax increment to the Housing Fund is increased to 25% for as long as the project area continues to receive tax increment.

Many agencies will have no alternative but to borrow at least a portion of the SERAF payment from the current year payment that would otherwise go to its Housing Fund.  This will result in the delay or elimination of many affordable housing projects where redevelopment funding is a key component of the financing, leveraging other State and Federal financing sources. 

12)   Will schools lose money if you are successful?

No.  Schools are constitutionally guaranteed a minimum funding level. AB 26 4x simply (and illegally) shifts the burden from the State to redevelopment agencies. If we’re successful, the State will have to provide funding to the schools.

Legislative Water Package –Updated August 19, 2009

Last week, the Senate and Assembly Democrats released a legislative water package intended to deal with Delta restoration, water conservation and water use. 

The package contains 5 bills:

SB 3- Delta Conservancy and Delta Protection Commission (Wolk)

            • Delta Conservancy – creation & authority

            • Delta Protection Commission – modifications

§    Similar to SB 458 (Wolk)

This legislation makes modifications to the existing Delta Protection Commission (Commission), reducing its membership from 23 to 18 members, but retains 3 city members.  The Commission acts like a planning commission for the Delta.  The bill requires the Commission to adopt a resource management plan (to be adopted no later than 2011 by the Commission). It also requires cities and counties within the “primary zone” of the Delta to submit general plan amendments to the Commission to make sure they consistent with the resource management plan.  Cities designated to be in the “primary zone” of the Delta are Sacramento, Stockton, Tracy, Antioch, Pittsburg, Isleton, Lathrop, Brentwood, West Sacramento, and Oakley and any other cities that may be incorporated in the future in the primary zone.

SB 1- Delta Governance (Simitian)

            • General Provisions – policies & definitions (Div. 35, Part 1)

            • Early Actions – before adoption of Delta Plan (Div. 35, Part 2)

            • Delta Stewardship Council – creation & authority (Div. 35, Part 3)

            • Delta Water Master – creation & authority

            • Delta Independent Science Board – creation & authority

            • Delta Finance (Div. 35, Part 5)

§    Similar to SB 12 (Simitian)

As introduced, the legislation creates the Delta Stewardship Council, which would have the authority to pursue delta restoration work and a water conveyance facility. Four of the council's seven members would be appointed by the governor and two by the Legislature. The seventh would be the chair of the Delta Protection Commission.  None of the council’s seven members have specific appointment requirements (i.e., no specific city seats or county seats). The Council has no oversight by the Legislature or other state agency.  The legislation also creates a new “Independent Science Board” and a “Delta Water Master” that has new authority to enforce environmental regulations.

AB 1- The Delta Plan (Huffman)

            • General Provisions – policies & definitions (Div. 35, Part 1)

            • Early Actions – before adoption of Delta Plan (Div. 35, Part 2)

            • Delta Plan Development – completed by 2011 (Div. 35, Part 4)

            • Bay Delta Conservation Plan Requirements

§    Similar to AB 39 (Huffman)

SB 2 - Water Use Reporting (Pavley)

            • Water Diversion & Use Reporting – requirements & enforcement

            • Civil Liability for Water Trespass - modifications

            • Groundwater Elevation Monitoring

§    Similar to SB 229 (Pavley)

AB 2 - Water Conservation and Sustainable Management (Feuer/Huffman)

            • Urban Water Conservation – 20% by 2020

            • Agricultural Water Management Plans

            • Sustainable Regional Water Resource Management

§    Similar to AB 49 (Feuer)

This legislation requires the state and urban retail water suppliers to meet 20% water conservation by 2020.  Urban retail water suppliers (defined as supplying water to more than 3000 municipal customers) have several options for calculating their reduction targets and baseline numbers in the bill. 

Legislators had their first full day of discussion on the legislative water package at a joint hearing Aug. 18 in Sacramento. The Legislature has signaled that water policy will be a central focus in the final months of this year’s legislative session.

The pre-printed versions are available on the Assembly Water, Parks & Wildlife Committee Web site.

CA-Forward Letter –www.svcities.com

CA-Forward has drafted Constitutional and statutory language to enact each portion of our proposals, which we summarize below:

CA-Constitutional Reform Proposals

Responsible Budgets on Time

                        1.  Pay-As-You-Go. Require that new programs identify a funding source for any new spending they require.

                        2.  Base Budgets on Results. Require the Governor and lawmakers to set clear goals for programs, measure their results and effectiveness when making budget decisions, monitor performance to improve efficiency, and consider eliminating outdated and duplicative programs.

                        3. Two-year Budget. Require the Governor and Legislature to craft two-year budgets with midcourse correction authority, and provide long-term revenue forecasts and capital investment plans.

                        4.  One-Time Use of One-Time Revenues. Reduce future budget shortfalls by prohibiting the use of unexpected spikes in revenues to increase spending on programs that continue year after year.

                        5.  Reduce the Budget Vote Requirement. Reduce the likelihood of budget stalemates by changing the legislative vote requirement for state budget approval to a simple majority (to be adopted in conjunction with the plan’s other fiscal reforms, and while retaining the two-thirds majority vote requirement for tax increases).

                        6.  Provide Certainty Regarding Passage of Fees. Clarify the circumstances in which the Legislature and the Governor can impose fees without a two-thirds majority vote to those areas with a clear and justifiable nexus to the service provided.

Government that’s Closer to the People

                        1.  Protect Local Revenue. Give communities more control over community-related services and prevent the state from siphoning off local revenue by giving local governments legal ownership of specific funds for community services.

                        2.  Remove Barriers to Local Government Coordination. Encourage community-level governments to coordinate, consolidate districts when this makes sense, and give county governments authority to redistribute local property taxes to improve efficiency, improve services and deliver better results.

                        3.  Foster and Fund Long-Term Regional Collaboration. Allow cities, counties and school officials who craft long-term flexible plans to address community needs, to seek majority-vote approval to provide funds to pay for them, while retaining the vote thresholds established under Proposition 218.