The battle over Proposition 22 will come down to which public
services the majority of voters think can be spared first when the
state is struggling financially, and might have never started if
not for the current economic downturn.
The battle over Proposition 22 will come down to which public services the majority of voters think can be spared first when the state is struggling financially, and might have never started if not for the current economic downturn.
Prop 22, known as “The Local Taxpayer, Public Safety and Transportation Protection Act,” would prohibit the state from raiding existing local funds allocated to cities, redevelopment and transportation agencies, public safety and other local services.
Those encouraging a “Yes” vote say the state’s practice of borrowing money from local services to cover its own deficit is illegal, and the law is needed to keep funding in place for publicly-financed construction projects, transportation services, and housing and business assistance programs that help residents in tough times.
Promoting a “No” vote on Prop 22 are teachers’, education employees’ and public safety labor groups, anti-tax organizations, and the California Democratic Party. They say closing the RDAs to state borrowing would open up education, public safety and social services for state raids instead, and make it even more difficult to close the state’s current $20 billion deficit.
The proposition was filed by an alliance of California local government groups including the League of California Cities.
The cities of Morgan Hill and Gilroy have both passed resolutions in support of Prop 22. California voters will get to decide on Prop 22 in the Nov. 2 election.
The sharpest memory driving most California cities’ support of Prop 22 is the state’s decision last year to borrow more than $2 billion from municipal redevelopment agencies – which are funded by a property tax increment levied on owners within the RDA boundaries. That two-year takeaway includes about $10.9 million borrowed from the Morgan Hill RDA.
Last year, this practice by the state resulted in $5 billion borrowed from cities, counties, public transportation agencies, RDA’s and special districts, according to the “Yes on 22” website.
Mayor Steve Tate, who joined the rest of the city council last month in passing a resolution supporting Prop 22, said RDA funds are crucial because the money is used to complete large-scale construction projects such as Third Street.
“RDA money is the thing that’s putting people to work all over the state, and we want to help create those jobs,” Tate said.
Last year alone, the state took $8.9 million from the city’s RDA – about 40 percent of agency’s entire tax increment revenue for fiscal year 2009-2010, according to Morgan Hill director of business and housing services Garrett Toy. In the short term, the RDA can pay for existing services by borrowing money from another fund within the agency, but at the expense of existing programs.
“The impact of such loans (within the RDA) is that there would be significant reductions in resources for housing programs and projects during the next four-year period,” Toy said.
The loss of funding last year has already prevented the RDA from pursuing any significant new capital improvement or construction projects this year, Toy said. Even street repairs under the RDA’s purview have suffered, as the agency has delayed median improvements along Monterey Road.
The California Redevelopment Association sued the state in response to the most recent raid of RDAs, but the claim was denied in Sacramento County Superior Court in May. The CRA and the LCC maintain that the state’s borrowing is illegal.
The city of Gilroy doesn’t have an RDA, but it has joined the LCC in supporting a “Yes” vote on Prop 22. The state’s practice of borrowing money from cities has extended beyond RDAs in the past, Mayor Al Pinheiro said.
Also supporting Prop 22 is the South County business community, including the Morgan Hill and Gilroy chambers of commerce. Representatives from both chambers said the loss of state funding means fewer city services. In turn, when local businesses suffer, the city suffers because there are fewer sales tax dollars in the community.
“Diminished city services will increase the number of business closures and lessen the desire for new businesses to open in Morgan Hill,” said Morgan Hill Chamber of Commerce Vice Chair Jeff Burrus.
Specifically, most of the borrowed money is used for state public education funding, including in Morgan Hill and Gilroy unified school districts, and that’s where many opponents of the ballot initiative have based their argument.
While Assemblymember Bill Monning didn’t say which way he will vote on Prop 22, he has taken a neutral position publicly because of the balanced need for the different kinds of public services that would be threatened either way. He said he “fought” the taking of RDA money from Morgan Hill last year, but at the same time he is worried about the potential impact Prop 22 could have on education.
Even though Santa Clara County staff have recommended a neutral position, Supervisor Don Gage, who also sits on the Caltrain board of directors, supports Prop 22 because of its protection of local transportation funds. He said for several years the state has borrowed money from Caltrain and the Santa Clara Valley Transportation Agency, “and not paying it back.”
For next year alone, Caltrain has projected about a $2 million deficit, fed largely by reductions in state funding.
“We need something to protect the cities and counties from the state,” Gage said.
Because counties don’t have Redevelopment Agencies, which is where the state has turned first for loans in recent years, the county is further down the line of potential state lenders. However, Prop 22 could push county funds up to the front of the line, possibly threatening county services in future years, according to county staff.
“Creating greater protections for city and transit funding places the remaining state general fund programs under even greater pressure,” the staff report says.
Finally, some opponents of Prop 22 have sweeping criticisms of RDAs in general. The Silicon Valley Taxpayers Association is in the “No” camp, mainly because other public services could benefit from RDA funds.
“RDAs have been raiding school finances for quite some time,” said Doug McNea, president of SVTA. “In Santa Clara County, last fiscal year (RDAs received) $166 million worth of property tax that would have gone to education if RDAs didn’t exist.”
