On Friday, I had the opportunity to participate in the Housing Summit put on by the Silicon Valley Manufacturing Group. Mike Garvey (City Manager, San Carlos) & I spoke on a panel entitled "Got Revenue?" along with representatives from Santa Clara County and the State (both staff and members of the various State/Local Revenue panels). To put it mildly, each group had very different views on how to deal with the current State/Local Revenue issue and how to create incentives to bring more high paying jobs and housing to Silicon Valley and throughout the State. Here are some quick highlights of key thoughts from each group: STATE VIEW * The State should divert a portion of the Sales Tax they give to cities and give it back to cities who meet their State Housing Goals * Cities that need additional revenue should increase their TOT tax since it doesn't affect residents * Cities should "stop whining about losing money from ERAF" * Cities and Counties are "units of the State" and should be viewed in that light * We should look at lowering the vote requirement on local taxes and bonds from 2/3 to a majority COUNTY VIEW * State should cap ERAF take from Counties, Cities and Special Districts * Need legislation to increase the percentage of RDA Tax Increment that goes to housing from 20% to 30% * Cities should use the authority in Prop 211 to share sales tax among agencies in each county (avoids competition for desirable development) CITY VIEW * Prior to 1992-93, the State received NO local property tax revenue; now they receive 18 cents of the dollar * In San Carlos, the State now receives twice as much local property tax (18 cents) than the City (9 cents) * A residential home in San Carlos generates $180-$540/yr in property tax to the city depending on the purchase date * The cost of sending a police car is $300/call and a fire truck is $3,000/call. Clearly there is a gap between res service and revenue. * Cities spend all of the money that they receive for services (Institute of Public Policy Study) * Because of the many revenue types that the State has taken over the last 2 decades, cities now depend on 4 major revenues instead of 10 or more. The result is the remaining funds are "revenues on steroids" * To create more high paying jobs, Arizona gave cities 15.8% of the Income Tax. California should consider a similar policy if high paying jobs are desirable. * To eliminate the gap between serving new housing and revenue, the State should return Revenue Generated by Population that formerly went to cities but was taken by the State (ERAF, Alcohol Bev, Aid to Local Gov, Bus Inventory, Highway Carrier, Trailer In Lieu, Cigarette Tax) * ERAF needs to be capped and then returned so that cities are not penalized for approving new housing and development * Any shift in revenues need to be constitutionally protected, otherwise the State will eventually take and keep all of the funds (the "sticky fingers" problem) CONCLUSION As you can see, the upcoming discussions in Sacramento about redistributing City and County revenues will be lively. Let's hope cities are active in the process before we lose the one remaining major revenue we still have (Sales Tax) !
