CaliforniaCityNews.org

What Did We Learn on Election Day?

Strong national trends and the spin machines from both major parties are doing their best to make hay of the election contests on Tuesday night. Here at CaliforniaCityNews we know that the most telling election results come from the diverse set of local elections we have from throughout the state and often provide a glimpse into the future of coming elections…

First, here’s what we do know: City election results largely mirrored the results and trends we have seen over the past four election cycles. New revenue measures (tax increase) continued to pass at the two-thirds rate - a remarkable number given the continued economic doldrums and voter angst about government activities at the state and federal level.

TRENDS

Continued support for revenue measures in these difficult times largely continued. The trend to protect local communities from the economic recession and state takeaways remained a compelling case for voters to entrust their local governments with additional revenue.

The strategy of “reduce and renew” on Utility Users Taxes (UUT’s) continued to be a winning one. 11 cities successfully utilized this strategy continuing a perfect record of wins by cities seeking to modernize their UUT ordinances. Only Coachella and Redondo beach lost UUT measures, a new UUT and an expansion as it related to a local power plant respectively.

Transient Occupancy Taxes (TOT’s) also fared well with the vast majority passing. Losses only occurred in Artesia, Rancho Palos Verdes, Blythe and San Anselmo. Special note on a regional strategy employed by cities in San Mateo County that acted in unison to raise TOT rates together from 10-12%...all city measures in the county were successful.

What this tells us is that voters continue to be open to tax increases at the local level – especially if they are extensions of what they are already paying (maintaining services) or taxing someone else.

The most interesting change came in the results of sales tax measures. These measures are often a good gauge of voter sentiment because it’s the most tangible sign of voters willingness to pay more to maintain or enhance services in their local community. Three of the five measures lost Tuesday night -– not many to draw much of a conclusive analysis but from what we can discern the losses came about from local dynamics as opposed to larger statewide trends.

As we have always advised –- the most significant indicator of a sales tax measure passing or failing is the cohesiveness of the council and the confidence the community has in them. Contentious council races, split councils and a history of failed measures in the past are key indicators in the chances of a measures passage or failure. Losses occurred in the cities of Salinas (40% YES - 60% NO), Ventura (44% YES – 55 % NO) and San Carlos (44% YES – 55% NO).

Salinas has "gone to the well" perhaps bit too frequently in recent years with revenue measure campaigns, and the continued history of seeking new revenues in this climate makes passage in this city an uphill climb at best. Measure K was a full cent tax increase and the local dynamics and history of tax measures coupled with low voter turnout explain the low 40% voter threshold of support.

Ventura showed both early promise and potential challenges in late summer as the council voted to authorize a vote on measure A – a half cent sales tax increase. A couple of years ago voters narrowly rejected a special tax for law enforcement (Measure P6 garnered 62% of the vote) and polling has consistently showed voter support levels for new revenue in the high 50’s. Ventura endured a very acrimonious election cycle with the local POA spending 20K in negative attack mailers to knock off an incumbent who raised the public pension reform issue. Along with tepid support from the business community, the local paper and recent controversies surrounding 911 fees and utility surcharge increases, voter support collapsed.

San Carlos also had a split council. A very public debate between employee compensation levels and new taxes by council members proved to be enough to move voters into the NO column…eerily similar to Ventura. As early as this spring voter support levels were polling in the low 60’s.

The lesson remains…if your city council isn’t in unanimous agreement on moving forward with a tax increase - think hard about going forward. If the council can’t agree, don’t expect the voters to hand you new revenue to figure it out later.

Michael Coleman from CaliforniaCityFinance has his usual thorough rundown of the tax votes here. 

Assembly Pulls All Nighter, Water Deal Done

Capitol Insiders' Twitter fees lit up at around 4:30 a.m. Wednesday morning, leading some of us to question who was up too late, and who was up too early.  Turns out the Assembly decided to burn the midnight oil and bang out the water deal once and for all.  Now at an $11 billion bond, and with the Coastal Commission-esque oversight panel for the Delta, the package is now on its way to the Governor, and the voters.

Some other key points: Democratic lawmakers dropped an enforcement measure that would have imposed stiffer fines on water thieves.  This was seen as a big win for Republican lawmakers, while they agreed to add another $1 billion to the bond measure. 

As for a canal?  Met Water District in SoCal says the package "paves the way" for such a project.  As any long time watcher of this issue will know, however, there's still a ways to go before that golden shovel breaks earth.  In the near term, look for mandatory conservation measures across the state, coupled with regional projects and new Delta levies. 

Read more in the Cap Weekly.

LAO Issues Report on Bond Debt, Urges "Prioritization" of Future Proposals

As water talks progress (sorta) through the Capitol, one committee chair (Assm. Anna Caballero) decided to ask the State Legislative Analyst (LAO) to provide a report on the state's projected General Fund debt service obligations and the state’s currently authorized, but unissued, general obligation (GO) bonds.

That report is out, and the LAO reports that the state has over $130 Billion of outstanding bonds and authorized,but as yet unissued bonds.  They also project that payments on already issued bonds are likely to peak in the next decade, leading them to conclude that "Debt Service Is One of the State Budget’s Fastest-Growing Obligations." 

The LAO writes that the General Fund soon may have annual debt-service payment obligations that total about 9 percent of its revenues, and that the State Treasurer has forecasted that these payments eventually will exceed 10 percent of revenues for much of the next decade.

As such, the LAO dryly remarks that "Increasing Prioritization of Future Bond Issuance May Be Necessary."  Hint hint. 

Read the full report here. 

Redevelopment Assoc. Sues State for $2 Billion Raid

The California Redevelopment Association (CRA) announced Tuesday that it filed a lawsuit in Sacramento Superior Court to stop ABX4-26, a state budget trailer bill passed in July as part of the 2009/10 state budget. ABX4-26 authorizes a $2.05 billion raid of local redevelopment funds to use for state purposes. A PDF copy of the petition filed today is attached.

The lawsuit challenges the constitutionality of ABX4-26 and seeks to prevent the State from taking redevelopment funds for non-redevelopment purposes.

This is the second lawsuit filed by CRA.  In April 2008, the Sacramento Superior Court ruled in favor of CRA and invalidated 2008 budget language that would have shifted $350 million in redevelopment funds to the State. On September 28, the State dropped its appeal in the first case, making the April decision final and binding.

“We believe the second budget raid by lawmakers is just as unconstitutional as the first,” said CRA Executive Director John Shirey. “Lawmakers ignored the State Constitution and attempted to write state budget legislation around it. That’s simply irresponsible policy-making, and it illustrates why many have concluded state government is broken and needs fixing.”

Guv Signs Prop 1A Securitization Bill

Governor Schwarzenegger has signed SB 67 and SB 65, the HUTA and Prop 1A securtization legislation that was held up by legislative shenanigans at the end of last month's session.  Many (most?) cities are enrolling in the securitization program, which has a Nov. 6 Deadline.

California Communities, the Joint Powers Authority authorized by the Legislature to execute the securitization of the Prop. 1A loan, announced that as of Tuesday, 57 counties, 352 cities and 707 special districts had enrolled in the program. The total amount for cities and counties to date enrolled in the program is $1.5 billion.

The interest rate for the Prop. 1A loan has been set by the Department of Finance at 2 percent. Repayment from the state is due to local agencies that do not securitize by June 30, 2013.

It is extremely important that cities interested in securitizing the lost amount of property tax complete the required documents immediately. Bond counsel to California Communities, must receive local agency approved and signed documents by Friday, Nov. 6.

Local agencies can enroll in the securitization program online at the California Communities website.

Senate Votes Unanimously on Prop 1A Securitization, HUTA Clean Up

Good news out of the Capitol, for once, The Senate returned from its break and voted unanimously on a pair of local government bills it should've passed weeks ago.  But here we are. 

SB 65 – The cash management bill that includes clean‐up language to accelerate
payback of deferred payments of HUTA (Highway Users Tax Account) or gas tax funds to
cities. The $250 million in deferred gas taxes has already been paid by the
public and is owed to cities and counties.

SB 67 – The much‐needed clean‐up measure to ensure timely and cost‐effective
securitization of the Proposition 1A “loan."

The LA Times has more.  And if you're interested in how this whole nonsense got started (it has to do with TurboTax, of all things), read here.

Guv Signs and Vetoes

The Governor relented on his mass veto threat this weekend.  Citing progress on water negotiations, Schwarzenegger got the pen out and started signing on the dotted line. 

His total for the session stands at 632 new laws approved this session -- which sounds like a lot until you hear it makes him the "stingiest" Governor for signing bills in recent history.  His signing totals have declined in each of the last four years, but he's still not the Veto King -- that still belongs to Deukmejian, who axed 436 bills in 1990. 

Most importantly, if you wanna know what wasn't on the list of bills for the Governor to consider -- Prop 1A securitization and HUTA clean up language.  It's alleged that the Senate is coming back to finish up that piece of business this week.  

And back to the raw numbers of bills, for those of you wishing for a bygone era in which the legislature was less concerned with passing hundreds of bills, Dan Walters reminds us that in 1967, Reagns first year as Governor, the legislature passed over 1,700 bills, and the Guv vetoed just 83 of them.

Get a full list of the signed/vetoed bills here.  LA Times has a good rundown of the major legislation here.

Petaluma City Employees Make Case for City Services to Local Chamber

In an unusual gathering of the tribes, Petaluma's five employee unions met with the city's Chamber of Commerce recently in a discussion on the importance of local services.  The goal was to not only highlight the importance of city services and the implications of their loss, but to call on the Chamber with "specific actions" that the employee reps feel would boost city coffers. 

“Lack of revenue seriously threatens the ability of city staff to provide services and programs that residents and businesses have come to expect and depend upon," said the unions' formal presentation. "Our motto until recently was ‘doing more with less,’ but that has changed to ‘doing less with less.’”

Read more in Petaluma360.

Budget Doomsday Pushed Back?

You were warned... but perhaps prematurely. 

Political (and financial) watchers of the state budget have been tisk-tisking ever since the last budget was passed -- lo these many weeks ago -- that it would only hold up until about October.  But as the San Jose Merc wrote Monday, "A funny thing has happened on the way to doomsday."  Now don't get your hopes up too much, the budget will still disintegrate (we promise), but perhaps not as soon as expected. 

Economists are now suggesting that a semi-resurgent stock market, if coupled with at least a mildly successful holiday retail season, could keep this budget stabilized through the beginning of next year -- gasp -- maybe even until next summer.  Now that may be too much to hope for, but things are for the moment, looking a little bit brighter.

Read on in the San Jose Merc.

Locals Urge Legislature to Reconvene, Pass Prop 1A Clean Up Language

Last week, leaders of the respective local government associations in the state (CSAC, the League of Cities and the Special Districts' Assoc.) cosigned a letter to the Senate leadership urging them to reconvene in a legislative session that would give local governments the needed "clean up" language to facilitate their efforts to securitize monies borrowed by the state as part of its state budget solution.  An excerpt from the letter:

"Dear Senator Steinberg and Senator Hollingsworth:

On behalf of the League of California Cities, the California State Association of Counties,
and the California Special Districts Association, we are writing to respectfully request
that you take expedited action to reconvene the California State Senate immediately to
approve two budget cleanup measures of critical importance to both local government
agencies and the state. These measures were included among a number of urgency
measures that were approved by the state Assembly, but they did not receive the
required two-thirds vote in the Senate before recess early September 12, 2009.

The passage of SB 67 is of critical importance to local governments that desire to
securitize the state’s repayment obligation for the approximately $1.9 billion in property
taxes being borrowed by the state..."

Read the full letter here.