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 CITY COUNCIL AGENDA ITEM NO. 14


Meeting Date: January 28, 2003

Subject/Title: Approve a Resolution urging the California Legislature to Reject the Governor’s Proposed Shift of Local VLF Revenues

Submitted by: John Stevenson, City Manager



RECOMMENDATION
Approve a Resolution urging the California Legislature to reject the Governor’s proposed shift of local VLF revenues and to honor the 1998 commitment to restore the VLF.

PREVIOUS ACTION
None.

BACKGROUND
The State’s current financial difficulties are common knowledge and do not need to be readdressed here, other than to say that if they take the Cities’ VLF fees, that will reduce Brentwood’s General Fund Revenues by approximately 10%. Other cities’ revenues may be reduced by up to 25%. This overnight reduction of revenues will be devastating to many local agencies.

On January 16, the City Manager sent the attached letter to the Governor. The attached Resolution urges the Legislature to either continue the backfill funding of the VLF or to reinstate the full VLF taxing as required by law.

FISCAL IMPACT
VLF constitutes approximately $1.6 million worth of revenues in Brentwood’s annual Budget. The VLF backfill normally sent to Brentwood by the State is approximately $900,000, and staff has budgeted for the loss of these funds in the mid-year budget adjustment. The remaining $700,000 would be an unanticipated loss. However, there is no reason to accept the loss of this funding without urging the Legislature to reinstate the full measure of the tax.


Attachments:
Resolution
City Manager’s Letter to Governor Davis
E-mail from the League of California Cities


RESOLUTION NO.

A RESOLUTION URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR’S PROPOSED SHIFT OF LOCAL VLF REVENUES AND TO HONOR THE 1998 COMMITMENT TO RESTORE THE VLF


WHEREAS, prior to 1935, cities and counties collected property taxes on motor vehicles to fund essential local public health and safety services; and

WHEREAS, in 1935, the Legislature first enacted the Vehicle License Fee (VLF) Act, replacing the property tax on vehicles with a 1.75 percent fee charged against the value of the motor vehicle; and

WHEREAS, in 1948, the rate of the VLF was increased to 2 percent of the value of the vehicle; and

WHEREAS, in 1986, the voters voted overwhelmingly to constitutionally dedicate the proceeds of the VLF to fund city and county services; and

WHEREAS, in 1998, a period of strong economic growth, the Legislature approved the use of a portion of the rapidly growing state General Fund to reduce the VLF payments of vehicle owners. This amount, known as the “offset”, grew in future years to a 67.5 percent offset against the amount owed. The amount paid to local governments in lieu of the reduced VLF payment is known as the “VLF backfill”; and

WHEREAS, the 1998 legislation and subsequent enactments contain clear provisions that when insufficient funds are available to be transferred from the General Fund to fully fund the offsets and backfill amount that the VLF offset shall be reduced and VLF payments increased; and

WHEREAS, VLF and backfill revenues constitute 15 to 25 percent of typical city and county general purpose revenues. On average, more than 60 percent of city general fund spending and more than half of county general funds go to front line law enforcement, fire, emergency medical services, and health care programs.

WHEREAS, revenues derived from the VLF and backfill are of critical importance in funding vital local public health and safety services; and

WHEREAS, any failure by the Legislature to maintain the VLF backfill or restore the VLF will cause widespread disruption in local government services essential to the well-being of California citizens and their cities and counties; and

WHEREAS, Governor Davis’ proposal to divert $4 billion in local VLF backfill payments over the next 17 months fails to honor the 1998 commitment and is a direct assault on local services that will be felt by every California resident; and

WHEREAS, shifting $4.2 billion in locally controlled revenues for local services is neither equitable nor fair. No state program or department has been asked to shoulder such a disproportionate share of the budget pain. These cuts come on top of the nearly $5 billion each year that is transferred from local services to fund state obligations.

NOW, THEREFORE, BE IT RESOLVED by the City Council of the City of Brentwood, that if the state General Fund can no longer afford the expense of part or all of the VLF “backfill” that the Legislature and Governor of California are hereby respectfully urged to implement the provisions of current law providing for the reduction of the VLF offset in bad economic times and to restore the VLF in an amount necessary to reduce the VLF backfill.

BE IT FURTHER RESOLVED that the City of Brentwood hereby expresses its profound appreciation to the legislators who support such VLF restoration legislation.

PASSED, APPROVED AND ADOPTED by the City Council of the City of Brentwood at a regular meeting held on the 28th day of January 2003 by the following vote:




January 16, 2003

Honorable Gray Davis
State Capitol Building
Sacramento, CA 95814

Re: Reject Proposed Vehicle License Fee Raid; Keep VLF Promise

Dear Governor Davis:

I am writing to urge you to keep a promise---one the legislature made to the people of California and its cities and counties five years ago. It was made in 1998 when the VLF reduction was enacted during better economic times. The promise was simple: if the state could no longer afford to fund the VLF reduction, the VLF would be restored so vital city and county public health and safety services would not be threatened.

Since 1935 cities and counties have received the VLF in lieu of locally collected property taxes on vehicles. VLF revenues constitute an average of 15-25% of city and county general purpose revenues. On average, more than 60 percent of city general fund spending and more than half of county general funds go to police, fire, emergency medical and health care programs. The VLF, therefore, is a critical component of funding these vital services.

In 1986 the voters passed Proposition 47 by an 81.8% margin, pledging the proceeds of the VLF to funding local government services. The 1998 law that created the VLF tax holiday did not change this policy; it simply committed the state general fund to financing an offset against the VLF payment obligation of a vehicle owner. The same law provides for the restoration of the VLF if insufficient funds are available in the state general fund to afford the VLF “offset. By all indications, that time has come.

In the near future, you will have the chance to keep the promise made by the 1998 legislature and found in state law. I strongly urge you to reject the Governor’s proposed raid of more than $4 billion in Vehicle License Fee (VLF) backfill payments to cities and counties and to support legislation to restore the VLF to its full level if the state general fund can no longer afford the VLF tax holiday.

We recognize that during these difficult times, sacrifices are necessary. But raiding more than $4 billion in VLF backfill funds would disproportionately shift the state’s fiscal problems onto our local governments and would jeopardize essential locally delivered public health and safety programs and services. Clearly, a state grab of VLF funds will leave many localities with no option but to take police officers and firefighters off the street or reduce public health and safety programs, services and equipment. In Brentwood, this would amount to a $1.6 million loss in annual revenues, which could mean the loss of 16.6% of our sworn police officers, a reduction of $200,000 to $300,000 in contributions to the county fire district for fire services, the loss of $85,000 towards library services, a $50,000 loss to our PAL program, and a severe reduction in recreation and senior service programs.

In the five years of state budget surpluses, local governments did not receive a proportionate benefit or any significant funding increases. Instead, local governments and our local services continued providing more than $4 billion each year to fund state obligations. Raiding an additional $4 billion in VLF backfill payments over the next 18 months is neither equitable nor fair. No state program or department has been asked to shoulder such a disproportionate share of the budget pain.

In light of the state’s current economic climate, I urge you to support legislation to restore the VLF. It’s the right thing to do, and it keeps the promise made in 1998.

Sincerely,






John E. Stevenson
City Manager

JES/jb

cc: Brentwood City Council
Department Directors

From: Stacey Wells [mailto:swells@cacities.org]
Sent: Wednesday, January 15, 2003 4:48 PM

To: Al Huezo (E-mail); Beth Pollard (E-mail); David Berger (E-mail); Deborah McKeehan (E-mail); Geoff Grote (E-mail); James Flint (E-mail); Jan Perkins (E-mail); Jesus Armas (E-mail); John Flores (E-mail); John Jermanis (E-mail); Linda Barton (E-mail); Richard Ambrose (E-mail); Robert Bobb (E-mail); Weldon Rucker (E-mail); Bill Lindsay (E-mail); Brock Arner (E-mail); Ed James (E-mail); Gail Waiters (E-mail); Gary Napper (E-mail); Joe Calabrigo (E-mail); Stevenson, John; June Catalano (E-mail); Karen Stein (E-mail); Leveron Bryant (E-mail); Linda Pappas Diaz (E-mail); Marc Grisham (E-mail); Mike Oliver (E-mail); Mike Parness (E-mail); Mike Ramsey (E-mail); Mike Sakamoto (E-mail); Scott Hanin (E-mail); Steve Falk (E-mail); Will Casey (E-mail)
Cc: Arietta Chakos (E-mail); Christa Johnson-Seely (E-mail); Estelle Clemons (E-mail); Jason Behrmann (E-mail); Jim Piper (E-mail); Karen Hemphill (E-mail); Kathy Ornelas (E-mail); Lisa Goldman (E-mail); Nelson Fialho (E-mail); Tony Acosta (E-mail); Bill Gegg (E-mail); Brad Nail (E-mail); Brad Rovanpera (E-mail); Elizabeth Warmerdam (E-mail); Lianne Marshall (E-mail); Peter Dragovich (E-mail); Rochelle Flotten (E-mail); Ronald Kiedrowski (E-mail); Suzanne Murray (E-mail)

Subject: VLF reso and sample letter to Legislators
Importance: High

Here we go... Speaker Herb Wesson announced plans Tuesday to quickly introduce legislation to allow for restoration of the VLF funding for cities and counties. Wesson has asked that cities and counties take action to support this effort. The League is asking cities to adopt a resolution (attached) and for each elected official to sign a letter to each of their Legislators and Gov. Davis (attached) urging the full restoration of the VLF fee for local government, thereby rejecting the Governor's budget proposal to eliminate the VLF backfill. Contact fax and address for Legislators are here:
http://www.cacities.org/doc.asp?intParentID=345

I have sent the attached letter to city officials as well, so you may get some questions. Feel free to direct them to me.

You allegedly can also access these materials online by visiting the League's Advocacy Center at:
www.cacities.org/advocacycenter

If you have any questions or concerns, please let me know. Apologies in advance for any duplicates. The League will be blast faxing and emailing this packet today or tomorrow.

Stacey

<<SAMPLE_VLF_LETTER.doc>> <<SampleVLFResolution.doc>> 
~~~~~~~~~~ 
Stacey Wells 
East Bay Representative, League of California Cities 
c: (510) 206-7253 
f: (510) 530-3002 (call first)
e: swells@cacities.org 

The League of California Cities: Enhancing the quality of life for all Californians. Online at www.cacities.org.
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