Deal-making governor offers better deal for towns Deal-making governor offers better deal for towns (May 19, 2004)

Local government officials expect bad news from Sacramento -- it's not a question of whether the state will divert money from cities to shore up its budget deficit, but how much.

It's in this context that they greeted with equanimity the news that over two fiscal years -- 2004-05 and 2005-06 -- $2.6 billion would be taken from local governments under Gov. Arnold Schwarzenegger's May budget revision.

The governor's January budget had local governments losing $2.6 billion in fiscal year 2004-05 alone. The brighter picture is due to higher than expected tax receipts and some accounting adjustments that have increased revenues by about $3.6 billion, said Elizabeth Hill, the state's nonpartisan legislative analyst.

The governor hammered out a deal with the League of California Cities to make permanent the cut to the vehicle license fees -- 0.65 percent of the vehicle's value, instead of 2 percent. To replace this revenue source for cities and counties, the governor proposes increasing their share of property tax revenues by $350 million a year, only the revenue shift wouldn't kick in until 2006-07.

Redevelopment agencies and special districts, which also receive property tax revenues, would see them reduced -- by $250 million and $350 million, respectively -- to fund schools.

The deal also has local governments backing away from their own already qualified ballot initiative that would immediately limit the state's right to take local tax revenues and instead support the governor's measure to delay such actions for two years, said San Mateo County Supervisor Rich Gordon.

Menlo Park

Already facing painful budget cuts and possible layoffs, the city of Menlo Park would take two more hits under the governor's latest proposal, City Manager David Boesch said.

Menlo Park would lose about $544,000 in each of the next two fiscal years, Mr. Boesch said. It isn't yet clear what programs would be cut, but the City Council will be discussing the matter on May 18, he said.

The city is already proposing sweeping cuts and fee increases for city services to plug an anticipated $2.24 million gap in its $27 million general fund budget.

The second hit would be on redevelopment agency property tax revenues, which affect the Belle Haven neighborhood. The state may take $887,000 in each of the next two fiscal years, Mr. Boesch said, adding that he has already budgeted for such losses by cutting back on projects.

Woodside

The proposal would cut $78,000 in each of the next two years from the town of Woodside, said Town Manager Susan George. Expecting a state revenue-grab last year, the town tightened its belt and has a bigger budget surplus. For the coming fiscal year, Ms. George says she anticipates a surplus of about $125,000.

"If it really is just a two-year shift, we ought to be able to weather it," she said.

She said she has some concern about the governor's optimism about the economy in 2006. "If I'm to take him as an honorable man, and he really does believe that 2006-07 will find us in a much-improved economy, then this is a proposal that we can definitely live with," Ms. George said.

Atherton

The town of Atherton expects to lose $167,000, said City Manager Jim Robinson. Town officials were expecting this and have accounted for it in their budget projections, he said.

"It means we're going to continue to have two vacant police officer positions, and one vacant park maintenance supervisor position," Mr. Robinson said. "Someone, not me, described this arrangement as short-term pain for long-term gain."

He added: "I think the league has done a good job of putting together this agreement with Gov. Schwarzenegger."

Portola Valley

In Portola Valley, Town Administrator Angela Howard would not comment on the governor's proposal, saying that she didn't yet know enough about it.

As for the agreements the governor is crafting: "This governor is really a force to be reckoned with," she said. "It becomes rather attractive to look for some sort of alliance so that he does not actively campaign against (you)."

The governor's May revision is not a done deal -- the budget heads to the state Legislature for ratification.

-- Andrea Gemmet, Rebecca Wallace, David Boyce

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