“Revenue piracy” threatens Davis budget

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Headline: Revenue piracy threatens Davis budget

Layercake: Council gets head start on next year’s budget

By JEREMY OGUL

Aggie News Writer

 

There is not a large shortfall in Davis, but the state budget crunch is threatening local funding.

California’s $16 billion budget deficit gives legislators the option of taking funds from local agencies. In a budget workshop Tuesday, city leaders discussed potential impacts from the state budget and other challenges for the upcoming fiscal year.

Davis faces a projected budget shortfall of $854,000 for the fiscal year that begins July 1. The shortfall is not projected to increase over the next five years.

We’re probably not exactly where we want to be, but we’re not too far afield from [where we should be], said City Manager Bill Emlen.

While the city’s budget shortfall is not enormous, councilmembers and city staff did express concern over the possibility of losing revenue to the state. Emlen said the impact so far has not been significant, but could be.

We may see further cuts from the state, said councilmember Don Saylor. There [is] revenue piracy that has happened in the past. I want us to be poised for that.

There are several ways the state could end up taking cash out of city coffers.

One of the options legislators are looking at is the possibility of shifting public safety funds from cities to counties. This would represent a local revenue loss of $450,000 per year.

Additionally, the proposed state budget includes a delay of $550,000 in gas tax payments to the city of Davis for the current fiscal year. Payment of that money cannot be delayed past Sept., but given the large deficit California faces, there’s no guarantee that Davis would actually get that money on time, city finance director Paul Navazio said.

However, the issue of local funds being taken for state purposes is nothing new.

It’s not the first time that the pirate ships have rolled up to our doors trying to take booty from us, and it won’t be the last time, councilmember Stephen Souza said.

California voters passed Proposition 1A in 2006 to protect local property taxes from being appropriated by the state. Navazio said Davis will begin to see the additional revenue from this law in the upcoming year.

Prop 1A also includes an exception that allows the legislature to borrow up to 8 percent of local property tax revenues as long as they are repaid within three years. The legislature could consider making use of this option to reduce the deficit, Navazio said.

Emlen said Davis would be prepared if it had to give up revenue.

We are thankful that we have a healthy reserve of 15 percent that we fully intend on maintaining, he said. That would help us weather any significant hits from the state as they try to balance their budget.

Tuesday’s meeting was a workshop to introduce the budget framework to the council. No actions were taken. City staff will spend the rest of March and April developing a detailed budget to present in May. Proposals and amendments will then be evaluated in May and June with final adoption by the end of June.

 

JEREMY OGUL can be reached at city@californiaaggie.com. XXX