HomeMy WebLinkAboutAgenda Statement 1987/03/03 Item 11 COUNCIL AGENDA STATEMENT
11
Item
Meeting Date 3-03-87
ITEM TITLE Resolution i j( Supporting Findings of SANDAG Regional
Governmental Responsibilities and Revenues Report
SUBMITTED BY City Manager (b (4/5ths Vote: Yes No X )
In December 1986, the draft report on "Regional Governmental Responsibilities and
Revenues" was approved by the SANDAG Board of Directors for circulation among its
members. This report is the result of a year long study of a SANDAG Task Force
which included five City Managers, a Deputy County CAO, the Executive Director of
the San Diego Tax Payers Association, the Executive Officer of LAFCO, a member of
the League of Women Voters, a water district manager, a university professor, and
a representative from the City of San Diego Manager's Office. The Task Force was
chaired by the Chula Vista City Manager. Basically the report recommends a number
of major changes in the revenue structure that affects local government, as well
as several cooperative ventures related to City and County legislative programs
and planning and development standards in urbanizing unincorporated areas. It
basically provides an agenda for future discussion and development of an
implementation plan in the region.
RECOMMENDATION: Adopt resolution.
DISCUSSION:
Nearly two years ago, certain City Managers in the County became concerned over a
change in policy regarding annexations and new incorporations. The County's I-55
policy, adopted in 1974, encouraged annexations and incorporations. The County,
however, proposed to change this policy to encourage urban development in
unincorporated areas, primarily because of the County's substantial revenue
problems. The City Managers within the County set up an ad hoc committee to react
to this proposed County policy shift. As discussion of this committee evolved,
the seriousness of several major City/County issues began unfolding, with the
result that in October 1985, SANDAG formed a Task Force to study the region's
local revenue sources and public service responsibilities. That report was
concluded a year later, at which time the draft report was submitted to the SANDAG
Board, which then approved it for distribution for review and comment by the
various jurisdictions in the County. The study itself grew into a larger analysis
of the competition among local governments for limited tax revenues. The general
conclusion of the study is that it makes little sense for cities and counties and
other local government agencies to fight over limited local tax revenues, and
that, secondly, the Statewide property tax system is inequitable and ill designed
to meet public service requirements at the local level.
Page 2, Item 11
Meeting Date 3/3/87
A brief summary of the findings and recommendations of this report are included in
Attachment "A". Also attached is Attachment "B", which was a speech presented
at the League of California Cities City Managers Conference by the Chula Vista
City Manager, which goes into a little more detail in presenting the findings and
recommendations, as well as their rationale. Finally, copies of the report are
available in the Mayor/Council Office for review.
As the presentation at the City Manager's Conference indicates, this report
presents a difficult agenda of items to be discussed locally and Statewide. It is
recommended that this report be supported in terms of encouraging further public
discussion of the recommendations, i.e. , public agenda, presented in this report.
It is probably not possible to develop any meaningful set of recommendations, all
of which can be supported by any one public official. The report attempts to
provide a balance of issues and recommendations, in order to get beyond periodic
squabbling that occurs between cities and the county over land use and fiscal
issues, so that we can work constructively toward solving some of these issues.
Obviously, San Diego County has difficult financial problems, which leads to
proposals like modification of the I-55 policy, which could have adverse effects
on land use development in urbanizing unincorporated areas on the perimeter of
cities. This report attempts to address those fiscal problems, realizing that
cities also have fiscal concerns, although not as great as the County. The report
also strongly recommends that we work toward better cooperation in development of
plannning and development guidelines in urbanizing areas, principally in city
spheres of influence.
It should also be pointed out that San Diego County's fiscal situation is not as
bad as in other parts of the State, with Humboldt County, for example, adopting a
May Day budget. This means that they have budgeted funds through the end of May,
with no funds available for many programs in the month of June. It's an attempt
to obtain additional State support for their drastic financial problems. Other
counties are looking at the cutting back or elimination of library services and
law enforcement services. The point is that counties like San Diego will
continually slide toward the extremely severe problems that the State's rural
counties already face if steps are not taken to correct the fiscal problems which
we find among the counties, including San Diego.
Finally, the Committee concluded that the fiscal problems of the County impact
cities in the sense that if County functions are underfunded there is greater
pressure on the expenditure part of a city's budget. Examples of this include
lack of jail facilities, which is undoubtedly a factor in the need for cities to
add officers to address an increasing crime rate, and the request by many social
servicve agencies to obtain City rather than County support for some of their
programs.
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Page 3, Item 11
Meeting Date 3/03/87
Again, it is recommended that this report be supported in order that an
implementation program can be developed to address some or all of the
recommendations in the report. This process is viewed as setting forth these
recommendations as a public agenda for further discussion and possible
implementation.
FISCAL IMPACT: N.A.
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by the City Council of
Chula Vista, California
Dated (9-3— g
San Diego ATTACHMENT A
ASSOCIATION OF
GOVERNMENTS
Suite 524,Security Pacific Plaza
1200 Third Avenue
San Diego,California 92101
(619) 236-5300
November 4, 1986
TO: Executive Committee, San Diego County Division, League of
California Cities
FROM: SANDAG Staff
SUBJECT: Summary of Conclusions and Recommendations, Draft Report,
Regional Governmental Responsibilities and Revenues,
October 20, 1986
Presented below is a summary of findings from the draft report referenced above.
The conclusions and recommendations are summarized here to give the League's
Executive Committee a convenient format to review the study.. The Study Advisory
Committee will meet again on November 20, 1986 to review input obtained from local
agencies and committee consultants to the State Legislature. A revised draft might
be prepared after that meeting.
MAJOR CONCLUSIONS -
1. Local governments compete for tax revenues.
2. The County's revenue base is less adequate than that of cities.
3. County finances are negatively impacted by annexations/incorporations.
4. Delivery of local urban services is more expensive in the unincorporated area than
in the incorporated areas.
5. Local governments are interested in resolving the County's revenue difficulties
and in cooperating on planning and service delivery.
6. The statewide property tax system is inequitable and ill-designed to meet the
needs of local government.
MEMBER AGENCIES: Cities of Carlsbad, Chula Vista, Coronado, Del Mar, El Cajon, Escondido, Imperial Beach, La Mesa, Lemon Grove,
National City, Oceanside, Poway,San Diego,San Marcos, Santee, Vista and County of San Diego.
ADVISORY/LIAISON MEMBERS: California Department of Transportation, U.S.Department of Defense and Tijuana/Baja California Norte.
RECOMMENDED ACTIONS IMPLEMENTATION; REVENUE IMPACTS
A. Local Government Finance
1. Reform the Statewide Property Tax
System
a. Revise Property Tax Transfer for State legislation required; saves County
Annexations $400,000/year;cities gain$600,000/year.
b. Modify Property Tax Transfer to State legislation required. County ultimately
New Cities saves $6 million/year, assuming future new cities
account for 150,000+people.
c. Amend State Constitution to allow Constitutional amendment required. Offers
Property Tax Overrides in New revenue flexibility to new cities if Lb., above,is
Cities enacted.
d. Reallocate Property Tax Revenue State legislation required. County would receive
received by Water and Sewer $7 million during first full year of implementation.
Agencies
e. Eliminate Statewide Inequities in State legislation required. County claims it loses
Property Tax Support for School up to$80 million/year.
Districts
2. Support the County's Suit challenging the State legislation required. County claims it loses
State's Funding of County-provided $19-24 million/year.
Services.
3. Support Direct State Funding of Trial State legislation required.
Courts.
4. Allocate a Larger Share of State Sales State legislation required to distribute more of
Tax Receipts to Counties state's 5 cent share to counties.
5. Support 1/2 cent Sales Tax Increase for Local 2/3 voter approval required. Tax would
Courts and Jails generate $400-500 million over 5 years.
6. Support 1/2 cent Sales Tax Increase for Local voter approval required (majority). Tax
Transportation would generate $80+ million in the first year;$1
billion in 10 years; $2.4 billion over 20 years.
7. Support 'Home Rule' Authority for Constitutional amendment required. Local voter
Charter Counties(e.g., San Diego approval possible. County could generate $5-6
County) million/year.
8. Support Reimbursement to County by State legislation required. County could ulti-
New Cities for First Year Costs. mately save up to $32 million, assuming four new
cities with 150,000+ population.
9. Support County expenditure of excess State legislation required. County could use
TDA funds for roads in rural areas. $600,000+/year on roads.
10. Negotiate with County on Allocation of Local action required.
Tax Increment Revenues in City
Redevelopment Areas
B. Intergovernmental Planning and Cooperation
1. Improve Joint Planning and Development Local action required.
efforts in Cities'Spheres of Influence.
2. Retain Board of Supervisors'Policy I-55 Local action required.
(Government Structure) in its present
form.
3. Coordinate positions on proposed legis- Local action required.
lation when appropriate.
4. Study the efficiency of Public Service Local action required.
Delivery in the Region.
ATTACHMENT B
• SPEECH AT LEAGUE CITY MANAGERS CONFERENCE
FEBRUARY, 1987
JOHN D. GOSS
CITY MANAGER, CHULA VISTA
The broad purpose of this panel, as I understand it, is to look at City/County
relationships. Specifically, my task is to report on a recently completed
study prepared by the San Diego Association of Governments, entitled,
"Regional Governmental Responsibilities and Revenues".
What I would like to cover this morning is:
1. How and why the study was conducted.
2. Our findings.
3. Our recommendations.
4. And some personal observations interspersed at the beginning and the
end.
2.
The study process started nearly two years ago when some of the City Managers
in San Diego County became alarmed over a shift in County policy regarding
annexations and new incorporations. The County's original policy, adopted in
1974, was intended to encourage annexations and incorporations. Two years
ago, the County proposed changes to this policy which would encourage urban
development in the unincorporated areas, principally because of the County's
staggering revenue problems. In response, the San Diego County-City Manager's
Association set up an ad hoc committee to react to this proposed County policy
shift. From this informal beginning, the seriousness of local City/County
issues began unfolding, with the result that SANDAG, in October 1985, formed a
task force to study regions' local revenue sources and public service
responsibilities. While the study began in response to proposed changes in
County policy, it grew into a larger analysis of the competition among local
governments for limited tax revenues. In general, the study concluded that
the statewide property tax system is inequitable and ill-designed to meet
public service requirements at the local level.
The task force consisted of five City Managers, including yours truly, Bob
Acker (El Cajon) , Frank Aleshire (Carlsbad) , Rich Gittings (San Marcos) , Vern
Hazen (Escondido) . It also included the Executive Director of the San Diego
Taxpayers Association, the Executive Officer of LAFCO, a representative from
the City of San Diego's Manager's Office, a member of the League of Women
Voters, the County Deputy CAO, a special district manager, and a university
professor. It was staffed by SANDAG, which committed $60,000 to the overall
result. In addition to the staff work that was done, the committee also took
public testimony and conferred with staff of the League of California Cities
and the Local Government Committees of the State Assembly and Senate.
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3.
Just briefly, before outlining the study's findings and recommendations, let
me offer a personal perspective regarding what we were about and what we did.
First, I had personal pessimism that we would solve any of the ills created by
Proposition 13 nearly nine years ago. But there was also the gut wrenching
fear that if we did not attack the broader issues which underlie the periodic
annoyances and conflicts between cities and counties, these annoyances and
conflicts would only get worse. In fact, in some areas they are worse. The
reaction we have had locally to the report so far is that it must be pretty
good because it has something in it for everyone -- to hate. Some cities
don't like it because we are soft on counties. We don't nail the counties to
the cross enough because of perceived inefficiencies on their part, density
gifts to developers, inadequate infrastructure in developing areas, etc.
Counties could dislike it because they may feel it is soft on cities because
it doesn't address their concerns over redevelopment enough.
Special districts don't like it because it doesn't leave them alone and
proposes to take away some of their property taxes used for operations.
The schools don't like it because we don't leave them alone and they would be
forced to rely more on State aid.
Up to a point, all these criticisms are valid, but it is important to realize
what the study is and is not. The study is an examination and a factual
determination in one county alone of how local and regional revenue is spent,
and who is providing regional and local services in the area It also offers
a number of recommendations and discards others on how these imbalances can be ` W
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corrected. It is testimony that Proposition 13 is finally catching up with
us, that we are being forced to fight over local revenues and that there is
not enough locally for all of us. It is an agenda of issues, the discussion
of which might lead to subsequent solutions to our revenue problems. it is
not an analysis on how to restructure the entire tax system and solve all
local and state revenue issues among special districts, schools and the state,
in addition to the problems between cities and counties.
FINDINGS
Turning to the report itself, the major conclusions of the study are as
follows:
1. Local governments compete for tax revenues produced by urban development.
Given the County's revenue problems in other areas, it is logical that
they would plan for and encourage urban types of land development, with
high tax ratables in the unincorporated areas, just as the cities would
expect that boundary to ultimately be in their boundaries. The problem
here is that the revenue pressure is creating, in my view, an illogical
and inappropriate urban development in the unincorporated areas.
2. The County's revenue base is less adequate than that of cities, making it
relatively more difficult for the County to pay for local services in the
unincorporated area while maintaining its regional service
responsibilities.
State funding of mandated regional services is inadequate, we found. As a
result, the County has had to use a major portion of its locally generated
revenues to fund its regional service responsibilities, leaving
insufficient monies to pay for local services in the unincorporated areas.
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3. In general, we found that County finances are negatively impacted by both
city annexations and new incorporations. We found that were the entire
urbanized area in the County to annex to cities, the County would lose
$3,000,000 to $9,000,000 annually. If the entire area became
incorporated, there would be a net loss of $20,000,000 annually.
4. Local services in unincorporated areas, as provided by the County, are
more expensive than the average cost of local services provided in
incorporated areas. This argues, then, that local services in urban areas
should be provided through cities.
5 The first four findings lead to the fifth one, which is that local
governments in the San Diego region are interested, or at least should be
interested, in resolving the County's revenue difficulties and in
cooperating on planning and service delivery in the City spheres of
influence. This finding screams to say that local governments must
cooperate if they are to avoid conflict and if they are to continue to
provide public services efficiently and at the lowest possible cost.
6. The last finding is that the statewide property tax system is inequitable
and ill-designed to meet the changing service responsibilities and funding
needs of local government.
4
6.
Very early in our study it became apparent that local measures would not raise
sufficient funds, although some should be tried, nor would transferring monies
from one agency at the unfair expense of another, do little to offset the
inequities inherent in the statewide property tax system. We found that
nearly a decade ago when Proposition 13 was implemented, besides reducing tax
receipts, local agency and school district tax receipts were frozen, with the
result that the property tax system has been rendered rigid, unresponsive to
evolving local needs. We found that payors of the local property tax in half
of California's counties, including San Diego, subsidized state funding of
public schools. The issue here is not equalization of school expenditures but
rather the state's reliance on the local property tax in meeting its legal
obligations. In effect, the state has subtly usurped a hefty portion of the
local property tax.
RECOMMENDATIONS
After reviewing these findings, we looked at a very large array of possible
solutions which might help correct the inequities in local government finance
and, in the meantime, help resolve the squabbling over locally produced
revenue and/or service functions. Some are recommended, and some are not.
Two have been acted on, the rest have not. In effect, it is an agenda for
discussion and evaluation. It is certainly a difficult agenda. It reminds me
of Spud Webb, the high jumping, 5'7" Atlanta Hawk guard. He was asked by a
Seattle reporter„ who was 5'6", how he could learn to dunk. Spud said, "Grow
an inch." That is how difficult, and maybe unrealistic, some of our
recommendations are, many of which require changes in state law, state
consitution or locally approved initiatives. Some of the recommendations ;L
pertain primarily to San Diego County and not to many other counties, others
have drastic implications for all of us.
7.
The report's recommendations are:
1. That California's system of property taxation should be reformed.
Specifically, it is recommended that the method of property tax transfer
upon City annexation of unincorporated territories be revised, and that
the state formula for property tax transferred to newly incorporated
cities be modified, with the state constitution being amended to enable
general property tax overrides in newly incorporated areas.
It is also recommended that the property tax revenue received by water
and sewer agencies used for operations, not debt service, be reallocated
to the County.
2. It is finally recommended that statewide inequities relating to
inter-County disparities in property tax support for school districts be
removed. This relates to two lawsuits filed by the County, which claims
that it is being penalized as much as $80,000,000 annually because it
allocated a greater percentage of property taxes to schools prior to the
passage of Proposition 13, which with the implementation of that
proposition has locked in pre-existing property tax allocations,
perpetuating that inequity ever since. We support the lawsuits'
objectives if not the lawsuits themselves.
3. In addition to statewide property tax reforms, the report supports local
governments supporting direct state funding of trial courts, a major issue
of this session of the Legislature.
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4. The state should allocate a larger share of state sales tax receipts to
County governments, a proposal subsequently embodied in the Governor's
budget proposal to the State Legislature. We certainly don't believe it
came from our study, but we' re happy that he is recommending that
one-fourth of each cent collected from the sales tax be transferred from
the State to the counties, along with some additional programs.
Obviously, County officials are skeptical about believing that for every
$3.00 they receive from the State, there will be $4.00 worth of programs.
To me, however, the most ominous reaction came from Assembly Speaker
Willie Brown, who said, 'I don't like the funds to shift to counties and I
don't think it will move through my house. " Like I said, what we
recommended will be an interesting but difficult public agenda.
5. Locally, we recommended that the voters support a local sales tax increase
of 1/2 cent up to five years to finance courts and jails. This is a major
local need, which was defeated by the voters last November. Whereas a
majority vote was obtained, a two-thirds vote was not.
6. The report also supports a 1/2 cent local sales tax increase to finance
regional and local transportation improvements, which has been
accomplished in other parts of the state but not in San Diego County.
7. The report also recommends that efforts of San Diego County and other
California charter counties be supported to give them the flexibility and
the constitutional authority to levy business license and utility users
taxes. This issue was discussed last year at this conference, where
County CAO's were saying, "Just give us the flexibility you have.* We
support that point of vied.
1
9.
8. The report proposes that local governments should support legislation
which would require new cities to reimburse the County for services
provided to the area during the remainder of the fiscal year in which
incorporation occurs.
9. We recommend that local governments support legislation which would permit
the expenditure by the County of excess Transportation Development Act
funds for roads in certain rural, unincorporated areas.
10. Finally, we propose that cities negotiate with the County on allocation of
tax increment revenues in city redevelopment areas. How is that for
getting past a tough issue.
In addition to our revenue recommendations, we had four intergovernmental
planning and cooperation recommendations. These are:
1. It is proposed that the County's annexation/incorporation policy remain
unchanged.
2. That the County and the cities should approve a formalized joint planning
and development effort in cities spheres of influence.
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3. That local governments develop coordinated positions, where possible, on
state and federal legislation. Instead of battling each other's
legislative proposals in Sacramento, this really speaks to a grass roots
effort by locals to engage in joint problem solving, to review each
other's respective legislative programs prior to each legislative year to
see if there are areas of mutual support.
4. It is recommended that the County City Managers Association appoint a task
force, to study the efficiency of delivery of public services in the San
Diego region.
In addition to these positive recommendations, there are a number of other
areas that we examined and did not recommend. We did not analyze in any depth
the effects of the Williamson Act since it was of little consequence in our
area. We rejected a proposal that sales taxes should be modified to be
distributed partly on the basis of point of sale and partly on population.
Also rejected was a proposed sales tax formula which would yield to the County
a level of sales tax revenue that would not vary as a result of jurisdictional
changes such as annexations and incorporations. Rejected also was a proposal
for a County-wide assessment district to finance the criminal justice system,
at least in the near term.
11 .
The committee also recommended against increasing the real property transfer
tax and a revision to the motor vehicle license fee distribution formula which
would allocate more money from current city share to counties based on their
unincorporated population..
The committee also evaluated the impact of the Gann Initiative on the
recommendations and concluded that it co ill ha idq l;_i_lg r-lCi_Or in
reallocation of revenues among agencies. But it was not used as a reason for
recommending or rejecting a particular revenue source in this report.
SUMMARY AND CONCLUSIONS
We didn't just brainstorm issues and revenues or lock ourselves in a padded
room to come up with a recommendation. While there was some of that, perhaps
the major benefit of this report is the research methodology which was
utilized to obtain the data from which our conclusions were drawn. You can
use this methodology in your county. The committee spent a substantial period
of time in defining, and then identifying, regional and local services as well
as regional and local revenues, and then allocating those expenditures among
the local government jurisdictions in our county. I believe I can speak for
the entire committee regarding the outstanding work that was done by the
SANDAG staff.
12.
Where do we go from here? We believe the report provides suggestions for
discussion. These general City/County issues are being discussed by one of
the committees which Dick DeLong has established for his presidential term.
My personal admonition is, "Cooperation is necessary for our collective
survival." Scraps over local revenues don't help either side very much,
except in disgusting the general public that we collectively don't have enough
common sense to work out our mutual problems. So, even though this report has
something in it for everyone to hate, even though the report is soft on
counties and called soft on cities and is partially (and maybe even totally)
unacceptable to special districts and schools, I think we should get on with
trying to realistically discuss this public agenda either as proposed or as
may be modified. Instead of the County or the cities expecting the other side
to clean up their act before working together on solutions, we should realize
that we are not necessarily on different sides. We are all part of local
government, providing local and regional services, many of which are
inter-related like police and jails. If we don't get beyond past and current
differences and work toward common solutions on a statewide basis now, then
our past and current differences will escalate from annoyances to possibly
open warfare. It certainly ain't going to get any better. Remember --
COOPERATION IS NECESSARY FOR OUR COLLECTIVE SURVIVAL.
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