The Metropolitan Forum Project Reviving Citizen Civic Engagement
Inland Empire Area Subregional Groups' Findings

Draft Recommendations

January 22, 1998

FINDINGS:

  1. Government closest to "the people" seems to have the least control.
  2. The public has very little understanding of who does what and how it is paid for.
  3. Pre-Proposition 13, residents were allowed to tax themselves (through representative local government) to shape and plan their own community.
  4. Fiscal issues have become the dominant factor in land use decisions leading to dysfunctional competition between communities.
  5. Laws and rules relating to local government are subject to constant change.
  6. Services are related to where people live; Local revenues are related to where people shop.
  7. "Suburban flight" creates significant costs to urban centers.
  8. "Suburban flight" also creates huge up front infrastructure costs, and ongoing transportation and public transit challenges and costs.

RECOMMENDATIONS:

  1. Develop a financial structure which avoids pitting local jurisdictions against each other in unhealthy competition for tax dollars.
  2. Clearly identify the public service responsibilities of government at all levels.
  3. Clearly identify the revenue sources of government at all levels.
  4. Permit local jurisdictions to prioritize the delivery of their public services according to locally defined needs.
  5. Eliminate the restraints upon the privatization of services.
  6. The system of government finance at all levels must be accountable to preserve public trust.
  7. Equitable revenue sources are needed.
  8. The system of government finance should not distort public decision making.
  9. Revenue sources should be elastic.
  10. Develop a financial structure in California with clear linkages between the sources of revenue and the service that revenue provides.
  11. Reform efforts should develop a realistic transition timetable which takes into account the past actions of local jurisdictions to develop a reliable tax base under previous rules.
  12. Develop service benchmarks to increase accountability.
  13. Initiatives and referendums should not be the primary manner in which public policy is set. If, however, initiatives continue to be the manner in which public policy is set, then local governments should be allowed to advocate and publicize the impact to their jurisdiction.
  14. Unfunded state mandates upon local governments must be stopped.
  15. The State Legislature should return to part time status.

Statewide Impacts

  1. An unintended but important impact of taxpayer initiatives, particularly the property tax limitation initiative Proposition 13, has been to increase state power over local revenue sources and strongly reduce local governments' control over their financial affairs.
  2. When the state had a budget surplus in the late 1970's and the 1980's, it was able to partially offset local governments' losses of property tax revenue. However, during the recession of the 1990's, the Governor and the Legislature used their increased access to property tax funds to permanently shift $3.6 billion in local revenues to maintain state spending. Other funds have been returned only to be used for purposes specified by the state and federal governments.
  3. Local governments are left in the following situation:
    A.  Increased reliance on sales tax revenue. Increased competition between local governments for "big box" revenue sources (retail, auto malls, etc.)
    B.  Distortion of some local land use decisions.
    C.  Heavy increase in local usage fees, utility taxes and assessments districts.
    D.  Sharp reductions in spending on libraries, parks and recreation and reduced, deferred or eliminated budgets for maintenance of infrastructure.
    E.  Less discretionary spending, particularly at the County level.
    F.  Many local governments and special districts are now on the verge of bankruptcy, and many have sharply reduced non-public safety services.
    G.  Some local governments have experienced an increase in bonded indebtedness, with the obligation of heavy ongoing interest charges in present and future budgets.
  4. Subsequent initiatives (Proposition 62 and 218) have further restricted local government efforts to respond to these changes and have changed the underlying principles of citizen government by changing majority votes to super-majorities and setting up a system of property owners voting on assessment districts. Residents, however, have little understanding of these issues.
  5. Most voters did not contemplate these consequences when approving ballot initiatives. Most citizens do not know that local government no longer has power over many of the decisions which impact their local communities.

Inland Empire Impacts

  1. Property taxes returned to cities varies greatly with ranges from 2.8% in Rancho Cucamonga, to 4% in Chino Hills, 10% in Moreno Valley, etc. The average rate of return for property taxes in the Inland Empire is approximately 12%.
  2. Utility user taxes were imposed in many jurisdictions to offset losses due to the ERAF tax shift.
  3. Current property tax return covers only a small percentage of public safety (police and fire) costs.
  4. Significant revenue differences exist between cities making solutions difficult.
  5. Sales tax revenue reliance may have profound long term impacts:
    A.  Land use decisions are often driven by financial needs not highest and best use;
    B.  Industrial/housing designated land is often changed to commercial zoning;
    C.  The growth in Internet and catalog sales threatens sales tax revenue;
    D.  Competition between jurisdictions benefits companies and hurts communities;
    E.  Cities pursue sales tax revenue growth because it is the one significant revenue source over which they have some control.
  6. New cities face the need to install infrastructure without sufficient revenues.
  7. Numerous assessment districts are being used in newer cities
  8. Proposition 218 has caused landscape and lighting districts to be absorbed, abandoned or threatened. Many cities, particularly low property tax cities, are highly reliant on the revenue from assessment districts to provide public services, (R.C. gets $13 million annually from these districts).
  9. A Moratorium on new development has been discussed in Chino Hills.
  10. Redevelopment agencies vary drastically. Many cities rely on them to promote and subsidize retail, while other communities do not even have redevelopment agencies despite the fact that their residents pay the same basic rate of property taxes. This adds to the difficulty some cities have competing with their neighboring cities for revenue producers.
  11. Since 1992, cut backs in many cities has reduced library hours, parks and recreation programs and significantly hurt employee morale which leads to poorer service delivery, (Riverside has lost 450 employees, Rancho Cucamonga lost 20 in one year).
  12. Revenue sources are unpredictable.
  13. Revenue sources tend to decrease as demands increase.
  14. Funding for infrastructure lags well behind the revenue to provide it.
  15. High growth/low cost communities often have less revenue but require more services.
  16. Disconnect exists between land use planning and transportation planning.
  17. Every new home in Chino Hills will create a $141 deficit in that City's annual budget.
  18. Some public officials have discussed the concept of development fees creating an "Endowment" on new home construction to offset the cost of public services.
  19. The funding for infrastructure is paid for by fees and lags well behind the need.



Metropolitan Forum Project
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