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HomeMy WebLinkAboutMINUTES - 06232009 - C.36RECOMMENDATION(S): ADOPT Resolution against the State seizure of local gas tax and redevelopment funds, as recommended by the Redevelopment Director and the Director of Public Works. FISCAL IMPACT: CSAC has estimated the loss of gas tax and Proposition 42 revenue to Contra Costa County, as currently proposed by the Budget Conference Committee, to be $27,355,562 for FY 2009-10 and FY 2010-11. The California Redevelopment Association indicates that agencies should assume amounts to be taken are triple the amounts estimated for this year's ERAF shift that was overturned in court. BACKGROUND: Gas Tax and Proposition 42 Funds The Budget Conference Committee (BCC) acted on Thursday, June 11 to “take” two years APPROVE OTHER RECOMMENDATION OF CNTY ADMINISTRATOR RECOMMENDATION OF BOARD COMMITTEE Action of Board On: 06/23/2009 APPROVED AS RECOMMENDED OTHER Clerks Notes: VOTE OF SUPERVISORS AYE:John Gioia, District I Supervisor Gayle B. Uilkema, District II Supervisor Mary N. Piepho, District III Supervisor Susan A. Bonilla, District IV Supervisor Federal D. Glover, District V Supervisor Contact: L. DeLaney, 5-1097 I hereby certify that this is a true and correct copy of an action taken and entered on the minutes of the Board of Supervisors on the date shown. ATTESTED: June 23, 2009 David J. Twa, County Administrator and Clerk of the Board of Supervisors By: June McHuen, Deputy cc: C. 36 To:Board of Supervisors From:David Twa, County Administrator Date:June 23, 2009 Contra Costa County Subject:Resolution Regarding Unconstitutional Diversion of Local Share of Highway User (Gas) Tax and Redevelopment Tax Increment of nearly the entire local portion of the gas tax, or Highway User Tax Account (HUTA), funding for general fund relief. This is equivalent to about $1.7 billion, with this loss shared equally between cities and counties. A legal opinion has been issued challenging the Constitutionality of “taking” the local share of the gas tax, but the Governor and Legislature have not responded to this challenge. In addition to the HUTA loss, we understand that the Department of Finance (DOF) intends to borrow the first two quarters of the local portion of Prop 42 for cash flow purposes for an additional loss in FY 2009-10 of $288 million—shared equally by cities and counties. Based upon existing policy, CSAC has supported a 5-cent increase in the gas tax as an alternative to the HUTA loss. The BCC did not discuss this alternative in making their decision to take the funds for two years. During the February budget negotiations, there was agreement between the Governor and all caucuses to increase the gas tax (or HUTA) by 12-cents with a significant amount initially directed towards debt service on the transportation bonds. The remaining amount was dedicated to the State system only. This was a major and alarming departure from past increases in the gas tax where a portion has always been dedicated towards the local system, which represents 82 percent of the State’s maintained miles. This proposal was eliminated from the budget package at the very last moment in order to secure the last remaining Senate vote. The gas tax is considered a “user fee” with a strong nexus towards investment for transportation purposes related to automobile use. There is a concerted effort to revisit an increase in the gas tax in current budget negotiations. There is significant concern that the proposal from the Legislature will again only include a State share, with no local apportionment. This would be very problematic and contrary to existing CSAC policy, which states: “Existing funding levels must be maintained with historical shares of current funding sources ensured for counties (e.g. state and federal gas tax increases, etc.). Although significant transportation revenues are raised at the local level through the imposition of sales taxes, additional state and federal revenue sources are needed such as additional gas and sales taxes, congestion pricing, public-private partnerships, and user or transaction fees to provide a diverse financing strategy. Further, additional revenue raising authority at the local and regional level is needed as well as other strategies as determined by individual jurisdictions and regions.” Should a gas tax increase proposal be considered, counties are not expected to share in a portion of that increase without CSAC support. This would be detrimental to current efforts to seek an increase in funding to address an identified $71 billion shortfall over the next decade just to preserve the existing local system. Gas tax is not indexed and does not keep up with inflation. The cost of labor and materials is increasing while our revenue has remained flat. The last time the gas tax was increased was in 1994. If a gas tax increase is passed without a share for counties, it would be unlikely that we will ever see an increase in funding for the local system. From a Public Works Director’s perspective, we need additional revenue for our road program. This has been recognized by MTC in the regional transportation plan and is demonstrated by the needs assessment done jointly by the League of California Cities and CSAC. Furthermore, although the State is talking about a two-year take away, there is much concern that it will go beyond that. Even if limited to two years, it is unlikely that Contra Costa County could sustain our Public Works Department with the proposed reduction in revenue. BACKGROUND: (CONT'D) Redevelopment Funds On Monday, June 15, the Budget Conference Committee also agreed to include language in a budget trailer bill to take $350 million in redevelopment funds as ERAF shifts for each of three years-the current fiscal year plus fiscal years 2009-10 and 2010-11. The total take from redevelopment agencies would be $1.05 billion. The Committee apparently believes that language directing the money be spent on schools in redevelopment project areas would address the Constitutional challenge made by the California Redevelopment Association (CRA). CRA's attorneys disagree. The vote was 6-0, with 4 abstentions along party lines. All Democratic members voted for taking redevelopment funds for three years. All Republican members of the Committee abstained and did not announce their position on the take. Unfortunately, there is no bill language to review, no bill number, and no author. For the time-being, agencies should assume amounts to be taken are triple the amounts estimated for this year's ERAF shift that was overturned in court. ATTACHMENTS RESOLUTION 2009/321