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Alameda County Mayors, and Councilmember Lena Tam Fight Using Redevelopment Money to Fund Schools

According to a release on the City of Alameda’s website, local mayors voted unanimously at the June 10th Alameda County Mayors’ Conference to oppose Sacramento’s plans to borrow municipal tax dollars.

The announcement states that Alameda County cities stand to lose $42 million or more in local property taxes which are used to pay for police, fire and emergency medical services. Discussions in Sacramento have centered on the State of California appropriating roughly 8% of municipal property taxes to balance the budget.

A July 2 newsletter from the League of California Cities noted that two bills to appropriate local tax dollars passed by the Senate in the last legislative session were not approved by the Assembly before the June 30th fiscal year end. A third bill that was passed by the Assembly failed to pass in the Senate before the year-end.

AB3X 4 would have appropriated $1.7 billion of Highway Users Tax Account (HUTA) dollars – gas tax money – over two years from California cities. Addressing Alameda City Council on Tuesday night, Deputy City Manager Lisa Goldman said that as she understood the law, if the State of California appropriates HUTA funds from municipalities, the State might not have to pay it back.

Redevelopment agency funds are different. Bill SB 80 and SB 3x 29 provided for the State to borrow a total of $350 million from the over 400 California local redevelopment agencies over three fiscal years, or just over $1 billion in total. But redevelopment agency funds aren’t used to pay for police fire and emergency medical services. Instead, they are used to subsidize local construction projects. The two bills would re-direct the money to county Educational Revenue Augmentation Funds (ERAF) to help balance the State budget for K-12 school districts.

The League of California Cities, and City of Alameda Councilmember Lena Tam, have been working closely with the California Redevelopment Association, a Sacramento lobby group, to oppose the State’s attempts to borrow local money, including redevelopment money. The Redevelopment Association’s website says that the associations members include redevelopment agencies and “allied firms” as well as “more than 300 private sector companies such as financial institutions, redevelopment consultants, developers and law firms that are involved in the redevelopment process.” Last year, the California Redevelopment Association successfully sued the State of California over a similar attempt through bill AB1389 to re-direct local redevelopment agency funds to local education funds. In that appropriation, the Community Improvement Commission of the City of Alameda – the City’s redevelopment agency – was facing a mandatory loan to the State of $916,000 out of approximately $12 million in annual revenue.

Alameda County Mayors accuse the state of financial mis-management by using borrowing to just “kick-the-can-down-the-road” but the fierce opposition to the borrowing and claims of “fiscal hardship” from municipalities raises the question of whether or not California’s cities can adequately manage their financial houses with sufficient cash reserves to sustain occasional state borrowing.

In early March, 2009, CNN reported that the City of Citrus Heights, near Sacramento, was in “the catbird seat” with a $35 million surplus – certainly a rarity among California cities. How did Citrus Heights City Manager Henry Tingle explain the surplus? “Common sense” according to the CNN transcript.

Tingle told us this morning that the state takeaway would amount to $823,000 but that it “wouldn’t impact us significantly because of our reserves.” He confirmed the $35 million surplus and said that the state borrowing would not cause any budget cuts.

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