New State Budget Costs Local Cities

The state has finally come to an agreement and now has a balanced budget. But to what cost to the cities in San Gabriel Valley?

California will be taking 2 billion from cities and counties through property tax revenues, plus $1.7 billion from local redevelopment agencies by suspending Prop 1A.

Prop 1A was passed in 2004 to protect property tax revenues of local governments. Under Prop 1A, the state is allowed to borrow local government property taxes on the condition that they be paid back within three years and with interest. Prop 1A cannot be suspended more than twice in ten years, and cannot be suspended the second time unless all previously borrowed funds are completely repaid.

The following figures are the estimated amount that will be borrowed this fiscal year:

* Arcadia – $1,202,358
* Arcadia Redevelopment Agency – $1,547,696
* Monrovia – $847,421
* Monrovia Redevelopment Agency – $2,551,385
* Pasadena – $4,588,400
* Pasadena Community Development Commission – $10,843,529
* Sierra Madre – $319,926
* Temple City – $481,751
* Temple City Community Redevelopment Agency – $329,837

Every county and city uses its own method for allocating property tax revenues, so the impact of these borrowed funds will be felt differently in every city.

Most municipal governments put property tax revenues into their General Fund, which means that most cities will have to budget less for their overall spending. Those cities who had budgeted to use the now-taken money will be hit the hardest as they scramble to find ways to limit their spending or get more revenue.

Many cities and counties have said that they will challenge the state in an effort to keep their money.

Monrovia’s City Manager Scott Ochoa is against the state relying on city governments, saying that “all they did was pass their problems downstream.”

Duarte’s Community Redevelopment Association is expected to file a lawsuit immediately.

However, Sierra Madre has no intention to block the seizure of the funds, according to City Manager Elaine Aguilar.

Pasadena City Manager Michael Beck hopes that L.A. County’s lawsuit against the state will be successful and result in the funds being returned to local cities.

Calls to other local cities have not yet been returned.

The seizure of redevelopment funds will result in cities forced to stop current and future redevelopment projects. These projects are critical public projects that provide construction jobs.

The California League of Cities is preparing a lawsuit against the state to prevent the seizure of redevelopment funds.

The Los Angeles County Board of Supervisor has already voted to sue the state if they pursue local redevelopment and highway taxes.

All around the state people are calling the seizure of redevelopment funds illegal, a claim that was upheld in the case of CRA v. Genest.

By Morgan Carpenter

August 5, 2009

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