HomeMy WebLinkAboutAgenda Statement 1980/05/27 Item 11
COUNCIL AGENDA STATEMENT
Item 11 '
Meeting Date 5/27/80
ITEM TITLE: Resolution /O!o f - Opposing Proposition 9
SUBMITTED BY:
Ci ty Attorney
(4/5ths Vote: Yes
No -L)
The City Council at its meeting of May 20, 1980 requested that a reso-
lution be prepared memorializing their opposition to Proposition 9,
the 50% cut in the state income tax.
RECOMMENDATION: That the City Council adopt a resolution opposing
Proposi tion 9
BOARD/COMMISSION RECOMMENDATION: N/A
DISCUSSION:
The City Council has indicated that after careful consideration of
the financial impact of Proposition 9 upon the City of Chula Vista
that even though tax reductions are universally popular, the wisdom
of Proposition 9 in combination with Propositions 13 and 4, is very
dubious and the Council wishes to record their opposition to the
passage of Proposition 9.
FISCAL IMPACT: See report on Proposition 9 dated 5/20/80 submitted
by the City Manager
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by tf13 Cit,; ',~:"""il of
Chula Vistu, C<,;ifornia
Dated
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Form A-113 (Rev. 11/79)
EXHIBITS
Agreement_____ Resolution~ Ordinance_____ Plat_____ Notification List
Other
ENVIRONMENTAL DOCUMENT: Attached
Submitted on
II
COUNCIL AGENDA STATEMENT
Item -16b
Meeting Date S-?O-RO
ITEM TITLE:
Report on Proposition 9
SUBMITTED BY: City Manager E (4/5ths Vote: Yes_ No~)
The Council received a request from-the Library Board to oppose Proposition 9 and
referred the matter to staff for its evaluation and recommendation. It is, therefore,
my
RECOMMENDATION: That the City Council go on record opposing Proposition 9.
BOARD/COMMISSION RECOMMENDATION:
The Library Board of Trustees has recommended opposition to Proposition 9.
DISCUSS JON
The attached memo from the Director of Finance indicates the potential loss of State
revenues in the range of $3 billion to $4.9 billion, depending upon possible State
Legislature actions. It also indicates that the City may stand to lose from $633,000
to $1,590,000, again depending on subsequent State Legislature actions if Proposition
9 passes. If the people of California are looking for a reduction in taxes which
will apply to everyone, then Proposition 9 is not the appropriate vehicle. There
are many Californians who pay no State income tax and, therefore, will receive no
benefits from the passage of Proposition 9.
Based on statistics from the State Controller, 43% of the savings will go to 5.6%
of the income tax payers of the State. The initiative is rather short and the
language is limited and, therefore, the definitive reductions in services are not
correlated to the tax relief. It seems to me that by rushing into further dramatic
tax cuts without giving Californians a chance to assess the full impact of Proposi-
tion 13 and Proposition 4, an unknown amount of risk is introduced into an already
uncertain California economy. Further, government flexibility in the use of its
taxing ability is taken away by locking a specific tax formula into the State Con-
stitution. There have been many arguments, pro and con, regarding Proposition 9.
But I believe the items stated above are sufficient to take a stand against Propo-
sition 9.
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Form A-113 (Rev. 11/79)
I ()) oct
EXHIBITS
Agreement____ Resolution Ordinance Plat
Memo from
Other X Finance Dir. ENVIRONMENTAL DOCUMENT:
Notification List
Attached.
Submitted on
e
DATE:
MaY 1 2, 1980
VEPARTMENTAL CORRESPONVENCE R E eEl V E D
CI . Y MANAGER
Cl ~ . A VISTA, CA
MAY 131980..
~~"'~.I.i'~l :t!i>~4~~
~
TO:
Lane F. Cole, City'Manager
VIA: Eugene R. Asmus, Assistant City Manager
FROM:~ Gordon K. Grant, Director of Finance
SUBJECT: Proposition 9 Evaluation
On March 7, 1980 I prepared my first report on the financial impact of
Proposition 9. The two projections in that report were based on the State
Legislative Analyst's estimate that a 50% reduction in State personal income
tax rates will result in a 4.9 ~illion dollar loss in State revenues in
fiscal year 1980-81.
Since that time a number of additional estimates have been made based on
various interpretations of the initiative. As we all know from past exper-
ience, most initiatives are not clearly written and in sufficient detail to
completely understand. Proposition 9 is no exception. For example, the
following summary illustrates the range of potential State revenue losses
depending upon the determination of the exact legal date the initiative
becomes effective.
Range of Potential State Revenue Loss
1980-81
Legislative Analyst's estimate - 50% rates, applied
to 1980 brackets, effective from January 1, 1980
through June 30, 1981
50% rates applied to 1978 brackets, effective from
January 1, 1980 through June 30, 1981
58 1464 (Campbell) -50% rates, applied to 1980 .brackets
effective from June 4, 1980 through June 30, 1981
50% rates,applied to 1978 brackets, effective from
June 4, 1980 through June 30, 1981
$4.9 billion
$4.3 billion
$3.5 bill ion
$3,0 billion
No doubt the actual loss to the State will be somewhere in between the
amounts shown above depending on any offset by growth in State revenues or
the use of existing or accumulated general fund surplus on June 30, 1981.
Since the passage of Proposition 13, State expenditures have exceeded
revenues by large amounts and, therefore, the States general fund surplus
has dropped from 3.7 billion to an estimated 1.8 billion on June 30, 1980.
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C~zy 06 Chula V~~za, Cal~60~n~a
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Proposition 9 Evaluation
Page Two
Considering the potential State revenue loss indicated in the previous
summary, the League of California Cities has indicated as shown below the
percentage range of loss cities can anticipate if Proposition g passes on
June 3, 19SO.
Range of Loss
Loss to
Chula Vista
Genera 1 Fund
Low 5.3%
Median 7.9%
High 13.3%
$ 633,619
944,450
1,590,024
It should be pointed out that the indication of the general fund shown above
applies only to the calculation of the dollar losses that we may expect.
It does not suggest which mechanisms the State Legislature will utilize
to pass on any reductions to cities. As indicated previously, those
alternatives available to the State include reductions in State bail-out
funds, business inventory reimbursement, motor vehicle in lieu fees, cigar-
ette taxes, liquor license fees, the AS 66 financial aid to local agencies
fund and sales tax.
It is important to realize that a loss of the magnitude indicated by the
Legislative Analyst represents a '25% loss in State general fund revenues.
Furthermore, I don't think most people realize'that'SO% of the State's
general fund budget is spent at the local level for public schools, county
services and property tax relief fo~tities and special districts.
It seems to me that with the passage of Proposition 13 and the loss of 1.9
million dollars in property taxes to the city and with the passage of
Proposition 4 limiting expenditures beginning in fiscal year 19S0-S1, that
we have already placed substantial controls on 'State and local government.
Especially when we realize that under Proposition 4, the Gann Initiative,
the law clearly provides refunds to the taxpayers of the State or any city
if tax revenues exceed their spending limit.which is based on the Consumer
Price Index plus population changes. This feature itself will guarantee
California residents adequate control over expenditures and will mandate
refunds to the taxpayer for any excessive taxes levied.
In my opinion the approval of Proposition 9 in such a short span of time
since Proposition 13 and Proposition 4 is not economically sound. It
does not give the State or local governments sufficient time to evaluate
the fiscal impact of the first two initiatives before enacting further
substantial reductions such as Proposition 9.
It is very clear to me that the passage of Proposition 9 at this time will
hurt local government at a time when it can least affbr.d' 'it and therefore
should be opposed by our elected officials.
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