June 26, 2009
Issue #24-2009
IN THIS ISSUE:
Page 4: Local Government Summit on Governance and Fiscal Reform
Senate Local Government Committee Set to Hear Municipal Bankruptcy Bill on July 8
Page 5: SaveYourCity.net Reaches 500 Video Testimonial Milestone
Page 6: New and Improved WesternCity.com Launches June 27
Support Needed for SB 268 – Legislators Ask to Hear from City Fire Departments
US EPA Announces Climate Showcase Communities Grant Opportunity
Page 7: Registration Open for ILG Annual Conference Luncheon Symposium
LEAGUE OF CALIFORNIA CITIES’ BOARD VOTES UNANIMOUSLY TO
CHALLENGE RAID OF LOCAL GAS TAX FUNDS
Bypass of Voter-Approved Ballot Propositions at Issue
More than 100 city officials joined with the League of California Cities’ board of directors to
announce the board’s unanimous vote to take legal action, if necessary, to challenge the
constitutionality of a key component of the budget proposed by the Budget Conference
Committee to seize $1.7 billion of the local share of the highway users, or gas, tax that is used to
maintain local streets and roads. The announcement was made at a press conference on
Thursday, June 25, in the Sacramento Convention Center during the League’s policy committee
meetings. For more, see Page 2.
••••••••••••••••••••••••••••••••••••
NEW FISCAL YEAR LOOMS WITHOUT BUDGET
Stopgap Bill Proposed One-Year Transfer of Redevelopment Funds
As the League convened its June policy committee meetings in Sacramento, across the street at
the Capitol the Assembly passed, but the Senate halted, three bills intended to keep the state
from having to issue IOUs. The three bills would raise approximately $5 billion, enough, according
to Budget Chair Assembly Member Noreen Evans (D-Santa Rosa), to provide the state the ability
to pay its bills through July and August. For more, see Page 3.
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2009 ANNUAL CONFERENCE RESOLUTIONS DUE BY JULY 17
Policy development is an integral part of the League’s annual conference. While the principal means
for determining League policy is through the League’s eight standing policy committees and the
board of directors, the League also accepts annual conference resolutions. These resolutions should
address areas not already covered by existing policy. For more, see Page 4. 2
‘Raid’ Continued from Page 1…
The action comes as close to 130 cities have already passed resolutions directing their respective
city attorneys to cooperate with the League, other cities and counties in pursuing litigation to have
any raid of local gas tax funds declared unconstitutional and invalid.
City Advocate Weekly reported last week about the opinion prepared by Nielsen, Merksamer,
Parrinello, Mueller & Naylor, LLP, a law firm specializing in ballot measure and election matters,
on the proposal to seize the gas tax. The firm concluded that in both 1974 and 1998 voters
imposed restrictions on the state’s ability to use gas taxes for debt service on bonds and to divert
local gas taxes for the state general fund.
State leaders have proposed bypassing the voter-imposed restrictions to use local gas tax funds
to pay off the state’s highway bonds and reimburse the state general fund. This is a questionable
move that seems designed to give the appearance of having a balanced budget. The League has
shared the legal opinion with all legislators, the Budget Conference Committee, and Gov. Arnold
Schwarzenegger. The opinion has been posted online at www.cacities.org/HUTAopinion.
“As a lawyer and an elected official who has taken an oath to defend the constitution of the state
of California, it is pretty obvious that it is illegal to steal local gas tax funds when the voters have
twice restricted such raids,” said Judith Mitchell, League of California Cities president and Rolling
Hills Estates mayor. “After the voters’ strong rejection of the May 19 ballot measures, I hope state
leaders will avoid budget gimmicks like this that are blatantly unconstitutional and raise serious
questions about the credibility of the state budget,” added Mitchell.
Cities have advised the League that the seizure of local gas tax funds will force some to eliminate
part or all of their street maintenance operations while others will cut back in other areas,
including police and fire services, to pay for basic street repair and maintenance. Poorly
maintained streets will mean delays in emergency response times and increased costs for drivers
whose vehicle repairs will rise because of worsening street and road conditions. Reductions in
street sweeping will increase water pollution runoff to nearby streams, and reduced street
maintenance will increase vehicle idling times, greenhouse gas emissions, and respiratory
problems for vulnerable populations like children and the elderly.
“Attempting to take local gas tax funds ignores the long-term state-local partnership in which
cities and counties are responsible for the maintenance of more than 80 percent of the state’s
road system that is currently rated ‘at risk,’ by the California Statewide Local Streets and Roads
Needs Assessment. Balancing the state budget in this way isn’t going to inspire confidence in
California, but it will cause more traffic jams, vehicle damage and water pollution,” said League
Executive Director Chris McKenzie.
Press Conference Details
Thursday’s press conference carried a simple yet strong
message: DON’T KICK THE CAN DOWN THE ROAD!
During the press event, President Mitchell was flanked by a very
large group of city officials all holding “Save Your City” signs.
President Mitchell told reporters that the Legislature should
adopt a credible budget that is balanced with a realistic mix of
state, not local, revenues.
When she finished her remarks she passed Modesto Mayor and
League Second Vice President Jim Ridenour a can labeled with
Save Your City on one side and a quote from the Governor on
the other side that read: "I urged the legislature to take this
seriously and to not ... kick the can down the road, as they have
done in the past but let's solve the problem." Fresno Bee, June
11, 2009.
3
Mayor Ridenour said that his city will literally go dark if gas taxes are seized because they will be
forced to shut off 12,000 street lights. He told reporters that cities are not a state program but
separate governments that have suffered the same drastic revenue losses as the state.
The Modesto mayor ended his remarks by giving the can to Clovis City Council Member Nathan
Magsig. The council member explained to reporters how his county’s (Fresno) unemployment
rate has skyrocketed to 15.4 percent and that the public works projects funded with gas tax are
imperative to keeping folks working. He ended his remarks by urging the Legislature to reject
these unconstitutional job killing proposals because the promised savings are illusory and will
only cause widespread economic harm.
League Executive Director Chris McKenzie was the final speaker and summarized the following
points about the proposed seizures of local funds for the state budget:
• They will undermine investor confidence;
• They are illegal; and
• They will kill jobs.
The press conference was well covered with representatives from both print and electronic news
outlets including:
• The Sacramento Bee
• Capitol Weekly
• KFBK-AM
• KCRA-TV
• Fox 40-TV
• Public CEO
• Capitol Television News Service
Capitol Public Radio also conducted a phone interview with Chris McKenzie following the news
conference. The Riverside Press Enterprise is running a story as well on June 26.
_____________________________________________________________________________
‘Budget’ Continued from Page 1…
While the redevelopment bill, SB 80, passed the Assembly, the scope of the bill has been
reduced from the previous three-year $1.050 billion proposal to a one-year hit of $350 million.
The language in the bill contains provisions that try to work around the recent successful lawsuit
by California Redevelopment Association (CRA), and collect $350 million from redevelopment
agencies for the FY 2008-09. Gov. Arnold Schwarzenegger has already vowed to veto these
money-raising bills, because they do not represent a complete solution to the state’s budget
problems.
Attorneys are just beginning to review the language of SB 80. CRA however contends that this
action would still be unconstitutional. Many cities have adopted resolutions expressing strong
opposition and concerns about the proposed redevelopment fund take. Cities rely on these funds
as an important economic development tool and the loss of these funds amounts to an “anti-
stimulus” action by the state at a time when one of the most important things government can do
is promote job growth and stability.
The Senate and Assembly are meeting Friday. Senate President Pro Tem Darrell Steinberg (D-
Sacramento) says he is committed to working every day until the state has a budget.
Next Steps
Negotiations between the Democrats and Republicans appear to be far apart with no budget
compromise yet in sight. As developments occur, the League will communicate with our members
about the actions city officials can take to help protect local funds from a state budget raid.
4
City officials that have not yet made a video testimonial for www.SaveYourCity.net are
encouraged to contact their regional public affairs manager. The Web site, launched in May, now
has more than 500 testimonials from city officials, state lawmakers and concerned citizens.
_____________________________________________________________________________
‘Annual Conference Resolutions’ Continued from Page 1…
Annual conference resolutions may be introduced by individual city officials or cities, League
departments, divisions, policy committees, board members, or by petition. League policy that is
adopted through an annual conference resolution can only be changed by a subsequent annual
conference resolution, not by the board.
Resolutions to be considered at the 2009 Annual Conference must be submitted no later than Friday,
July 17 by 5 p.m. for submittals by U.S. mail or Saturday, July 18 by midnight for electronic
submittals.
While electronic submissions are preferred, resolutions may be mailed to the League’s Office or
faxed to (916) 658-8240. Please be sure to include the sponsor’s contact information.
For more information, visit www.cacities.org/resolutions or contact Linda Welch Hicks at (916)
658-8224 or lhicks@cacities.org.
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Local Government Summit on Governance and Fiscal Reform
City officials are invited to attend and participate in a historic summit meeting of city, county and
school officials in Sacramento, July 17-18 at the Hyatt Regency to discuss and debate the
emerging proposals to reform California’s governance and fiscal systems.
Co-sponsored by the League through the City County School Partnership, the event is a great
opportunity to help influence the future direction of the state. The summit was originally proposed
by the League’s board of directors.
Summit participants will:
• Hear from experts;
• Consider whether we need a constitutional convention; and
• Work with peers to create a plan for reform local governments need.
Details
Registration for the summit is $80 for elected and senior appointed city and county officials and
school board members, $120 for others.
Register online at www.cacities.org/events. County officials should register through CSAC and
school board members through CSBA.
Hotel reservations can be made through Hyatt. Call (800) 233-1234 and ask for the special Local
Government Summit room block rate of $99 (reduced from $124) plus taxes for the night of July
17.
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Senate Local Government Committee Set to Hear Municipal Bankruptcy Bill on
July 8
The municipal bankruptcy bill, AB 155 (Mendoza) is scheduled to be heard in the Senate Local
Government committee on Wednesday, July 8. The bill requires a local government to secure
state approval, from the California Debt and Investment Advisory Commission (CDIAC) before
filing for bankruptcy in federal bankruptcy court. This would require a local government to make
its case before a commission of mostly state politicians rather than a competent bankruptcy 5
judge. The bill is adamantly opposed by the League and other local government associations. It
constitutes an unwarranted intrusion into what is a very local decision.
The League is opposed to AB 155 for the following reasons:
Offers little in solutions to local fiscal crises and likely causes greater harm: AB 155
undermines the principal benefits of federal bankruptcy: the automatic stay of financial obligations
and time to allow a debtor some “breathing space” to formulate a debt restructuring plan. The
state has no expertise on local finance issues.
Bankruptcy judges have financial expertise that CDIAC cannot offer: CDIAC does not bring
anything to the bankruptcy process that is not already present. Unlike other courts, bankruptcy
courts are under the direction of judges trained in finance and bankruptcy. These judges are
competent to render a decision about a local agency’s solvency, the state is not. The bill turns a
financial decision into a political decision.
Sponsors say local governments will use bankruptcy to break union contracts—Simply
not true: Bankruptcy is not a decision that is made lightly. Bankruptcy judges are tasked with
rendering a decision as to whether an entity is solvent, which requires a rigorous examination of a
local government’s fiscal condition. Only after a bankruptcy judge finds an entity insolvent may
they proceed into bankruptcy. Furthermore, once in bankruptcy proceedings, a municipality must
meet several tests in order to abrogate labor contracts. In other words, municipalities have the
burden of proof in order to seek and receive abrogation of labor contracts.
Bankruptcy is not taken lightly by any locally-elected official: The decision to go into
bankruptcy is a difficult decision under any condition. An agency teetering on fiscal viability does
not take such decisions lightly; bankruptcy is a “solution” of last resort.
Recent amendments are irrelevant and do not remove the League’s opposition: The state
cannot afford to be liable to a local agency’s creditors in the event the CDIAC denies an entity’s
petition. By simply stating in statute that the state is not liable for its decisions, does nothing to
relieve the state’s potential liability. Assessing a fee for a mandated process is absurd during a
time that an agency’s financial obligations are expected to be met when they are unable to meet
them.
For these reasons, the League opposes AB 155 and asks that cities contact the member of the
Senate Local Government Committee and ask for their NO vote on the bill on July 8.
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SaveYourCity.net Reaches 500 Video Testimonial Milestone
Opposition to State Proposals to Raid Local Funds Continues
SaveYourCity.net reached a monumental milestone this week when the 500th video testimonial
was loaded on the site. The site serves as a platform to tell policy makers how communities will
be devastated if the state raids local Gas and Redevelopments funds. Local elected city and
county officials, state legislators, members of labor and public safety groups as well as concerned
citizens, have all recorded testimonials asking the Legislature to save California cities.
Launched by the League in May, www.SaveYourCity.net automatically sends each video to the
legislators of the person who made it and Gov. Arnold Schwarzenegger. More than 8,000 visitors
have already flocked to the site, spending an average of four minutes watching videos and
exploring the resources. The Web site also features an interactive forum where visitors can
search for videos relevant to their local community, a form for groups wanting to join the Save
Your City Coalition and a tool kit with fact sheets for how budget cuts will affect the affordable
housing community, public safety, the environment, labor, builders and business.
SaveYourCity.net has attracted considerable attention from the Legislature with a growing
number of members making their own videos including: Senate Republican Leader Dennis
Hollingsworth, Assembly Member Anna Caballero, Assembly Member Curt Hagman, Assembly
Member Tom Berryhill, Sen. Jeff Denham, Sen. Dave Cogdill, Assembly Member Paul Cook and 6
Assembly Member Van Tran. Republican Gubernatorial Candidate Tom Campbell has also
posted a testimonial.
Stay updated on the campaign and network with others who are concerned about the devastating
impact a state raid of local property tax revenues would have on their city services by becoming a
Save Your City fan on Facebook - just type “Save Your City” in the search function.
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New and Improved WesternCity.com Launches June 27
The new and improved www.WesternCity.com offers a fully searchable archive of information.
Are you looking for an article or articles by topic? You’ll find what you need in a snap.
Our Job Opportunity Board has never been easier to search. Let us help you find your dream job.
Posting a job opportunity now allows for more flexibility. If you’re an employer, you will appreciate
the control you have over your listing. Create a listing and you can make changes 24/7. Plus,
you’ll now have the ability to track your hits.
Check out the new and improved www.WesternCity.com this weekend!
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Support Needed for SB 268 – Legislators Ask to Hear from City Fire Departments
The League encourages cities to support SB 268 and respond to requests from legislators who
want to hear from local fire authorities about the importance of this group home regulations
legislation.
SB 268 would require an applicant for an alcohol or drug recovery and treatment facility, serving
seven or more individuals, to certify that the facility complies with local zoning ordinances as well
as being up to fire code (based on the year the facility was first licensed) upon approval by the
local fire marshal.
This measure will help ensure that operators of group care facilities have current fire clearance
and that their clients are being treated in a facility that reflects current standards for personal
safety protections. In addition, this bill will not only benefit the residents of licensed facilities but
also the communities in which they are located by taking preventative steps to protect life and
property in the surrounding neighborhood.
This bill will be heard in Assembly Health Committee on July 7. A sample letter can be found on
the League’s Web site at www.cacities.org/billsearch. Enter “SB 268” into the search field to
locate the letter.
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US EPA Announces Climate Showcase Communities Grant Opportunity
The U.S. Environmental Protection Agency (EPA) has announced the availability of up to $10
million in “Climate Showcase Communities” grants for local governments to establish and
implement climate change initiatives that will help reduce greenhouse gas emissions.
EPA is requesting proposals that create replicable models of sustainable community action;
generate cost-effective and persistent greenhouse gas reductions; and improve the environment,
economic, public health, or social conditions in a community. A 50 percent cost-match is required
for this program, which can be in the form of cash or in-kind contributions, such as the use of
volunteers, equipment, expertise, etc.
Proposals are due by July 22 at 1 p.m., Pacific Time. An optional notice of intent to apply is
requested by July 1. EPA expects to award a total of 30 cooperative agreements ranging from
approximately $100,000 to $500,000, with approximately 5 percent of the funds to be set-aside
for tribal governments. Awards are expected in January 2010 and may run through January 2013. 7
For more information on the Climate Showcase Communities Grant Program, visit:
http://epa.gov/cleanenergy/energy-programs/state-and-local/showcase.html.
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Registration Open for ILG Annual Conference Luncheon Symposium
The Institute for Local Government (ILG) will present its annual Luncheon Symposium at the
League’s annual conference in San Jose on Sept. 17. “Local Leaders Creating Healthy
Neighborhoods for All” is the topic for this year’s event.
Dr. Robert S. Ogilvie, program director of Planning for Healthy Places at Public Health Law &
Policy, will speak about ways that cities can use planning, economic development, and
redevelopment tools to create healthier neighborhoods.
The symposium presentation will be followed by an afternoon workshop on “Local Strategies for
Creating Healthy Communities.” Both the symposium and the workshop are being organized by
ILG’s Healthy Neighborhoods Project.
Local leadership related to neighborhood planning and development can have a profound
influence on public health.
The connection between health and the environment present both challenges and opportunities
for community leaders and residents including:
• More than 50 percent of Californians do not meet recommended guidelines for physical
activity. Better community planning and design can help make walking, biking and other
forms of physical activity a regular part of daily life for residents of all ages and backgrounds.
For example, building parks within walking distance increases the likelihood that people will
exercise by 25 percent.
• On average, California neighborhoods have four times more fast food restaurants than
grocery or produce stores. Communities that increase access to healthier foods enjoy lower
rates of obesity, diabetes, heart disease and other serious nutrition-related health conditions
according to a number of scientific studies.
Please visit www.cacities.org/events to register online, or contact Carmen Pereira for information
at (916) 658-8208 or cpereira@ca-ilg.org.
ILG is the nonprofit research and education affiliate of the League of California Cities and the
California State Association of Counties.
_____________________________________________________________________________
July 2, 2009
Issue #25-2009
IN THIS ISSUE:
Page 5: American Clean Energy and Security Act Moves to the U.S. Senate
Federal Stimulus Funding Workshops Scheduled—Register Now!
Page 6: Observations on PERS Rates and Impacts of Pension Obligations on Local Budgets
NEW STATE FISCAL YEAR BEGINS WITH BUDGET OUT OF BALANCE
CITY FUNDS REMAIN AT RISK
July 1 came and went without a resolution to the state budget crisis. Democrats, Republicans,
and Gov. Arnold Schwarzenegger now remain staked out in scattered positions. Little clarity
exists on how a political and fiscal chasm – appearing at times as wide as the Grand Canyon –
can be bridged. City funding remains vulnerable through a variety of pending budget proposals
and scenarios. Legislative leaders and Governor continue discussions, while legislators headed
home for the holiday weekend. For more, see Page 2.
••••••••••••••••••••••••••••••••••••
INVITATION TO LOCAL GOVERNMENT SUMMIT ON GOVERNANCE AND FISCAL
REFORM JULY 17-18, SACRAMENTO
City officials are invited to attend and participate in a historic summit meeting of city, county and
school officials in Sacramento, July 17-18 at the Hyatt Regency to discuss and debate the
emerging proposals to reform California’s governance and fiscal systems. For more, see Page 3.
••••••••••••••••••••••••••••••••••••
LETTERS NEEDED OPPOSING FEDERAL LEGISLATION LIMITING LOCAL TAXING
AUTHORITY OVER MOBILE PHONES
California cities, which are already facing historic budget deficits and the potential of additional
state raids on local funds, may be surprised to learn some members of Congress are actively
pushing legislation that would further limit local revenue authority. For more, see Page 4. 2
‘Budget’ Continued from Page 1…
With the Governor promising to veto any budget proposals that did not address the entire
projected $24.3 billion deficit, Senate Republicans withheld votes for a three-bill package
designed to score budget savings in the FY 2008-09 and provide temporary cash flow
adjustments to forestall the need for the State Controller to issue registered warrants (IOU’s).
One of the measures that failed passage was a proposal to attempt to work around the recent
successful redevelopment lawsuit and take $350 million from redevelopment agencies.
Because of the failure to adopt a comprehensive solution prior to the beginning of the fiscal year,
the Governor says that (due to complicated education funding formulas from Proposition 98) the
size of the state deficit has grown by $2 billion. Some Legislative estimates, however, project that
the deficit may be as much as $7 billion higher.
All this means that for the first time since 1992, the Controller is now scheduled to issue IOU’s for
various state obligations that are paid out of the general fund. IOUs will be paid to private
businesses, taxpayers and local governments (primarily counties). Because cities receive very
little from the state’s general fund, it is not anticipated that this will have a substantial impact on
cities.
The Controller’s Web site has additional information on IOUs.
http://www.sco.ca.gov/eo_news_registeredwarrants.html
While the details of state budget proposals can be confusing, the choices remain simple: it will
take more cuts, new taxes, or a combination of the two and/or the use of borrowing. The
Governor and Republicans say they won’t support tax increases, and the Democrats –up to this
point—say that the $11 billion in cuts they have already agreed to are already decimating the
social safety net too far, so they won’t agree to further program reductions.
The Democrats also voted to support a revised majority vote budget proposal that did not include
the previously proposed $2billion in new taxes
Proposed HUTA and RDA Grabs Not Yet Approved
On a positive note for local governments, the Assembly did not take up the bills passed by the
Senate that include the three-year $350 million annual redevelopment agency (RDA) funding
seizure or the proposed $1.7 billion Highway User Tax Account (HUTA) gas tax grab. The three
bills in play with the RDA and HUTA takes are:
• SB 80 includes the one-year RDA grab of $350. The Assembly passed it last week but
the Senate failed to pass it Wednesday night. It is unclear whether this bill can be taken
up again now that the 2008-09 fiscal year has expired. http://info.sen.ca.gov/pub/09-
10/bill/sen/sb_0051-0100/sb_80_bill_20090625_amended_asm_v98.html
• SB 3x 29 contains a three-year take of $350 RDA funding. It passed the Senate
Wednesday night as part of the Democratic majority vote package (the Governor
promised to veto) but needs to be approved by the Assembly.
http://info.sen.ca.gov/pub/09-10/bill/sen/sb_0001-
0050/sbx3_29_bill_20090629_amended_sen_v98.html
• AB3x 4 contains the $1.7 billion two-year HUTA grab. The Senate passed it Wednesday
night as part of the Democratic majority vote package (the Governor promised to veto)
but needs Assembly approval. http://info.sen.ca.gov/pub/09-10/bill/asm/ab_0001-
0050/abx3_4_bill_20090629_amended_sen_v96.html
League Maintains Opposition to Borrowing—Local Funds at Risk
Of great concern for cities is the fact that the longer the state goes without a budget and the
larger the deficit grows, the more at risk are city funds. The Governor’s spokesperson, Aaron
McLear made an erroneous statement on Tuesday, June 30, by telling reporters that California
cities are ‘okay’ with the state borrowing local property taxes to balance its budget. The League 3
has maintained throughout the past months that it’s reckless and irresponsible to balance the
budget with borrowing or seizing local funds. It will devastate city services and only “kicks the can
down the road.”
In the news release issued by the League Tuesday afternoon, League Executive Director Chris
McKenzie said the following: “Contrary to recent statements from the Governor’s office, California
cities remain adamantly opposed to the state borrowing local government property taxes. In many
cities, critical services have already been cut to the bone as a result of the recession. How would
anyone think that cities would support a loan to the state when they are making such deep cuts in
vital local public safety and other services? We also were surprised to hear Mr. McLear say last
Thursday that borrowing from cities is not ‘kicking the can down the road.’ Won’t the state’s
structural deficit be worsened by borrowing today and having to repay in four years? The obvious
answer is it will.”
Cities are in a precarious position because if the state borrows property taxes, it will be extremely
challenging for cities to secure financing to securitize the loan against the state’s repayment
promise. State Treasurer Bill Lockyer has warned that Wall Street rating firms are poised to
downgrade the state’s bond rating again. This news means that it will be even more expensive for
cities forced to securitize a Proposition 1A loan.
Transit Lawsuit
One positive development for cities this week was the Third District Court of Appeal decision that
found the Legislature violated the constitution when it seized public transportation funds for
general fund relief. This decision bolsters the League’s legal position on the illegality of a gas tax
raid and may make lawmakers reconsider before trying to take local gas taxes. It also shows that
local transit agencies are entitled to get money for their operations.
The news wasn’t all positive because if this decision is upheld on appeal to the California
Supreme Court, raids on other local funds will be more vulnerable.
The League has posted a copy of the decision online.
http://www.cacities.org/resource_files/28168.Transit Decision 3rd District Court of Appeal 06-30-
09.pdf
Governor Holds News Conference on Budget Crisis
During a news conference on Thursday, July 1, the Governor said he is imposing a third state
furlough day and declared a state of fiscal emergency pursuant to Proposition 58 to call a special
session of the Legislature. He reiterated his vow to veto any budget bills that fail to solve the
whole budget deficit and said that he won’t be signing other legislation until the state has a
budget.
The Governor promised during the news conference that the state will have the cash on Oct. 1 to
repay the IOUs. He told reporters that he is proud of California even in the midst of the crisis. The
Governor reminded reporters that there are 30 other states that are starting the new fiscal year
without a budget. http://gov.ca.gov/press-release/12633/
Next Steps
The League is monitoring the budget very closely and will continue to alert members through
Calls to Action. It’s important for city officials to be in contact with their regional public affairs
manager to take action when necessary to help protect city funds.
_________________________________________________________________________
‘Summit’ Continued from Page 1…
Co-sponsored by the League through the City County School Partnership, the event is a great
opportunity to help influence the future direction of the state. The summit was originally proposed
by the League’s board of directors. 4
Summit participants will:
• Hear from experts;
• Consider whether we need a constitutional convention; and
• Work with peers to create a plan for reform local governments need.
Details
Registration for the summit is $80 for elected and senior appointed city and county officials and
school board members, $120 for others.
Register online at www.cacities.org/events. County officials should register through CSAC and
school board members through CSBA.
Hotel reservations can be made through Hyatt. Call (800) 233-1234 and ask for the special Local
Government Summit room block rate of $99 (reduced from $124) plus taxes for the night of July
17.
_____________________________________________________________________________
‘HR1521’ Continued from Page 1…
HR 1521 (Lofgren, D-CA) and S 1192 (D-OR) are two bills that purport to promote “fairness” and
seek to prohibit new state or local “discriminatory taxes” on the wireless industry. In effect,
however, both of these measures provide a special carve out exemption by imposing a five-year
moratorium on any new taxes on this industry.
Approximately 150 California cities currently impose local voter approved utility users taxes,
which typically apply to local utility services, which often include water, sewer, electricity and
telecommunication services. Collectively, these taxes provide $1.7 billion in revenue funding for
public safety and other critical local programs, of which about half comes from
telecommunications services.
While the bills are structured to preclude any new taxes on wireless services, they may be
interpreted to limit efforts of California cities to modernize their existing ordinances to keep pace
with changing technology. By limiting the options of any community that may be considering
adopting a local utility user’s tax, the bills will compound the difficulties faced by California cities.
Mobile telecommunications is one of the fastest growing and successful industries in the world. If
the industry is successful in obtaining a carve-out from taxation, this could open the floodgates for
Congress to grant additional exemptions to other industries who will question why they have been
left out.
The League remains concerned that these bills are gaining momentum. Supported by the
influential telecommunications lobby, HR 1521 has already picked up 132 co-sponsors, and S
1192 has six.
In addition to Rep. Zoe Lofgren, the following members of the California Congressional delegation
are listed as co-sponsors of HR 1521: Rep. Lois Capps (D-23), Rep. Jim Costa (D-20), Rep.
Daniel Lungren (R-3), Rep. Doris Matsui (D-5), Rep. Kevin McCarthy (R-22) Rep. Joe Baca (D-
43), Rep. Brian Bilbray (R-50), Rep. Mary Bono Mack (R-45), Rep. Dennis Cardoza (D-18), Rep.
Anna Eshoo (D-14), Rep. Darrell Issa (49), Rep. George Radanovich (R-19), Rep. Lucille Roybal-
Allard (D-34), Rep. Edward Royce (R-40), and Rep. Jackie Speier (D-12).
The League encourages cities to contact their congressional representative on these bills.
A sample HR 1521 opposition letter can be found on the League’s Web site at:
http://www.cacities.org/resource_files/28166.Oppose HR 1521 Cell Tax Moratorium Bill
sample.doc.
Sample S 1192 opposition letters for Sen. Boxer and Sen. Feinstein can also be found on the
League’s Web site at: 5
http://www.cacities.org/resource_files/28170.Oppose S 1192 Boxer.doc
http://www.cacities.org/resource_files/28173.Feinstien s 1192.doc
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American Clean Energy and Security Act Moves to the U.S. Senate
Last Friday, the U.S. House of Representatives voted 219-212 to pass HR 2454, legislation
aimed at creating clean energy jobs, achieving energy independence, reducing global warming
pollution and transitioning the U.S. into a clean energy economy. Authored by Reps. Henry
Waxman and Edward Markey, HR 2454 includes a number of provisions that are designed to
reduce greenhouse gas emissions including:
• A requirement that electric utilities meet 20 percent of their electricity demand through
renewable energy sources and energy efficiency by the year 2020. This requirement
applies to utilities that sell more than 4 million megawatt hours (MWh) of electricity to
consumers. Based on 2007 information from the Energy Information Administration,
approximately 21 public utilities produced more than 4 million MWh.
• A reduction of carbon emissions from major U.S. sources of 17 percent by 2020 and over
80percent by 2050 compared to 2005 levels.
• Investing in clean energy technologies and energy efficiency, including renewable energy
($90 billion in new investments by 2025) carbon capture and sequestration ($60 billion),
electric and other advanced technology vehicles ($20 billion) and basic scientific research
and development ($20 billion).
Amendments to HR 2454 include a provision to accommodate states, such as California, that
have preexisting renewable electricity standards and authorization for the U.S. Department of
Agricultural to establish a program governing the generation of offset credits from domestic
agricultural and forestry.
Although the League agrees with the premise of the legislation, we continue to have two main
concerns.
HR 2454 does not go far enough in assisting local government in efforts to mitigate the effects of
global warming. The League unsuccessfully sought an amendment which would dedicate a
portion of revenues generated by this legislation to support the Energy Efficiency and
Conservation Block Grant (EECBG). The EECBG Program funded under the American Recovery
and Reinvestment Act has been a significant help to local governments attempting to meet
energy efficiency and climate change goals.
HR 2454 does not effectively deal with financial support for energy efficient transportation
solutions. The transportation sector accounts for nearly one third of the nation’s greenhouse gas
emissions and actions are being taken to increase fuel efficiency and decrease vehicle miles
traveled. To this end, a dedicated funding source is needed if cities and towns are going to be
able to create more sustainable communities while strengthening our economy.
The League will continue to monitor this important legislation and will provide further updates. HR
2454 will next be voted on by the Senate.
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Federal Stimulus Funding Workshops Scheduled—Register Now!
With the state expected to receive more than $85 billion in federal stimulus funding in the next
two years, the California Commission for Jobs and Economic Growth will be hosting conferences
on how to transform California's share of federal stimulus funding into new jobs.
Conference organizers expect the events will include local, regional, state and federal experts
from transportation, education, broadband, workforce training and energy. Held in collaboration
with the Governor’s Recovery Task Force, the conferences are being designed to give
stakeholders guidance on how local communities, including public agencies and private
employers, can access some of California’s share of the stimulus funding. 6
The workshops are scheduled as follows:
• Central Valley, Wednesday, July 8 – California State University, Fresno
• Southern California, July 22 – Anaheim Convention Center
• Bay Area, Thursday, July 23 – San Jose State University
Registration Details
Registration is $20 and $30 for participants who also register for a boxed lunch.
To register for the Fresno conference, please visit:
http://www.acteva.com/booking.cfm?bevaid=185157
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Observations on PERS Rates and Impacts of Pension Obligations on Local
Budgets
Public agencies are expecting an increase in the cost of providing employees with CalPERS
pension benefits because of the impact the challenging economy has had on the system. The
June 15 issue of the PERS Public Agency Coalition’s Alert included some observations on the
situation that may be of interest to City Advocate Weekly readers. Instead of reprinting the entire
piece, we are printing a selection of points that provide at least a partial answer to these pension
questions that were made in the original article.
What is rate smoothing and is it working?
• …most pension plans utilize some sort of rate smoothing to mitigate swings in employer
rates. PERS uses a 15-year smoothing policy, one of the longest in the industry…For
purposes of calculating required employer contributions, investment gains and losses
(i.e., changes in market value) are spread over 15 years. So the June 30, 2009 valuation
would, in theory, reflect one-fifteenth of the investment losses from FY 2008-09 plus one-
fifteenth of the gains or losses from each of the previous 14 fiscal years.
• PERS says that…its 15-year smoothing policy has worked exceptionally well. For the
past four years, smoothing kept year-to-year changes in employer contribution rates
within 1 percent of payroll. Any increases larger than that were due to benefit
increases.
• …given a hypothetical loss [In PERS’ investment portfolio] of 30 percent [this year] rate
smoothing would cause a –2 percent [loss] to be allocated to each of the next fifteen
years. [To counter this loss] PERS keeps warning employers that unless large investment
returns are posted in future years, employer rates will continue to rise steadily over time
because each future year would continue to recognize another –2 percent of the current
year’s losses.
Self inflicted wounds?
• A plan with rich benefits or earlier retirement ages will have a higher volatility index, so as
a general rule, safety plans have higher volatility indexes than miscellaneous plans. And
when benefits are improved, you not only increase your costs, but also your plan’s
volatility. Most public agency miscellaneous plans have volatility ratios between four and
eight [on PERS’ index] and most public agency safety plans have ratios between six and
10…Knowing this figure is key to determining how your own employer rates will be
impacted when the current year’s investment losses are factored into the rates.
• PERS says that of the 2,000 plans it administers, all by 49 have ratios of ten or less.
Those 49 plans are going to be shocked when they see their rates. So how does one get
a high volatility index? Primarily from improving benefits, because more assets are 7
needed per person employed. And this only seems relevant to retroactive benefit
improvements, although almost all benefit improvements are applied retroactively.
• The PERS Chief Actuary said that the pension fund staff is currently working on
123 local agency requests for contract amendments...only SEVEN of those
contract amendments are for benefit reductions. What are the other 116 doing?!?
Longer-term Issues . . .
• Even if the pension fund were to earn its 7.75 percent annual invest returns [the amount
used in the system’s actuarial calculations] going forward, employer contribution rates will
not come back to current rates within our lifetime. The PERS Chief Actuary said that
without a market recovery, many safety plans will go up to 40 percent of pay over the
next 30 years.
• Once investment losses for the current year are considered, PERS estimates that the
funded status of the pension plan will be about 60 percent. Although PERS Chief Actuary
also said that while it’s important to keep an eye on the funded status, this figure along is
not indicative of dire circumstances.
For more information from the article, please contact PERS Public Agency Coalition at
www.publicretirementjournal.org.