2004 AGN MAY 04 I17 - Laserfiche WebLink

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Item #17 CITY OF COLTON AGENDA REPORT FOR COUNCIL MEETING OF May 4, 2004 TO: HONORABLE MAYOR AND CITY COUNCIL FROM: DARYL PARRISH, CITY MANAGER SUBJECT: RECOMMENDATION TO JOIN CITY OF CERRITOS "TRIPLE FLIP" LITIGATION AT NO COST DATE: April 19, 2004 BACKGROUND: In August 2003, the State adopted a budget proposal which redirected substantial amounts of local sales tax, redevelopment tax increment revenue, and the "backfill" portion of local government vehicle license fees ("VLF"), which has been labeled as the "Triple Flip" scenario. The "Triple Flip" uses an estimated $15 billion in debt to "balance" the State budget and proposed to fund that debt with a half -cent statewide sales tax. To obtain support for the proposed sales tax, the Legislature simultaneously reduced the portion of local sales tax given to cities by one half -cent. The Legislature has promised to somehow make up the lost revenue to local governments. Supposedly, the State budget would "backfill" the local sales tax losses with an equal amount of property tax. However, to date the State's promise to make up lost revenue has not been fulfilled and the State's ability to keep such a promise is questionable, at best. DISCUSSION/ANALYSIS: The City of Cerritos recently requested support from all general law and charter cities for its lawsuit against the State of California to challenge the State's ability to take away sales tax money from local charter cities and, by extension, general law cities. Unlike a request to join as an amicus curiae, the City of Cerritos' request was for all cities to join as co - plaintiffs. General law cities were requested to join in name only, with no financial commitment. Although Cerritos may have amended the complaint to add additional parties by the time Council considers this matter, there may yet be an opportunity for the City to join as a co -plaintiff. Cerritos is concerned that if the "Triple Flip" is implemented, the State would assume control over local sales tax for the first time. In addition to all of the practical and fiscal reasons for opposing this action, the "Triple Flip" is a dangerous precedent that could lead to total State control of local government finances. Furthermore, there is no constitutional protection for local government revenues within the proposed sales -for -property -tax swap. The proposal addresses only the State's needs and places local government revenues at risk in an irresponsible manner. The bottom line is that many cities such as Cerritos are