Cities fight for their piece of the pie Cities fight for their piece of the pie (October 20, 2004)

Proposition 1A seeks to protect local funds from state

by Bill D'Agostino

Palo Alto City Manager Frank Benest is frustrated the state has "balanced it budgets on the backs of local governments" and -- like numerous city leaders throughout California -- is pushing for the passage of Proposition 1A on the November ballot.

If the proposition passes, the state would be prevented -- except in extreme circumstances and only twice every 10 years -- from taking funds away from cities and other jurisdictions starting in 2006.

"It gives us the ability to plan for the future," Benest said.

The few opponents of the proposition don't dispute that claim, but complain about the lack of financial oversight while noting the measure won't give equal protection to school districts.

During the past decade, Palo Alto has lost more than $30 million to the state's reshuffling of California finances. Most of that stemmed from the state shifting city property tax revenues to school districts.

Last year alone, the city lost $4.8 million due to the state's action, which included a reduction in the Vehicle License Fee -- funds that typically go to local governments.

Proposition 1A, which would amend the state constitution, would also require states to reimburse cities for mandated programs and services, another frequent source of griping.

In exchange, local municipalities have agreed to give up $2.6 billion of their revenues during the next two years to help the state balance its projected $10 billion deficit. Palo Alto's share of that giveaway would be $3.1 million.

Cities and counties agreed to give up those funds for Gov. Arnold Schwarzenegger's support of the measure. Local governments were able to get that deal by first getting a similar, stronger measure, Proposition 65, on the November ballot, which the governor opposed.

To get the popular governor's support, cities and counties agreed to pull their support of Proposition 65.

Meanwhile, Proposition 1A is getting broad support from firefighters, police officers, State Controller Steve Westley and the League of California Cities. There are no organized opponents to the measure, although Carol Migden -- the chairwoman of the state Board of Equalization who is running for the state Senate in another district -- wrote an argument against the proposition for the official ballot pamphlet.

Migden complained about the lack of oversight for city finances. She also noted that school districts would not be protected from such funding pillages.

Most major California newspaper have supported Proposition 1A, including the Los Angeles Times, the San Francisco Chronicle and the Mercury News. The one exception is the Sacramento Bee, which complained the measure would "lock into the state constitution some financial incentives that punish cities that build adequate housing.

"How? Sales tax. These taxes don't go to where people live but where people shop. This is why cities love to build power centers and auto malls and why they frequently lose money if they build housing. This largely explains the state's chronic housing shortage and its retail glut."

Proposition 1A would "lock this destructive municipal money flow into the constitution," the Bee editorialized.

As of last week, advocates of Proposition 1A had raised more than $7 million in campaign donations to support the cause. Two Palo Alto city employees -- Senior Assistant City Attorney Wynne Furth and Human Resources Director Leslie Loomis -- have given money.
Staff Writer Bill D'Agostino can be e-mailed at bdagostino@paweekly.com.

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