It’s not as bad as some feared, but the state budget signed by Governor Arnold Schwarzenegger last month will have a negative impact on the city’s budget.
The state budget for fiscal year 2009 will impact redevelopment funds, transportation money and grant funding for Davis law enforcement. The total impact on the city’s budget will be $760,000.
Assistant city manager Paul Navazio gave a presentation to the Davis City Council on Tuesday night outlining the local impacts of the state budget.
By far the biggest hit is with the Davis Redevelopment Agency, which will be required to pay the state $662,000 over the next year.
The Redevelopment Agency, which is governed by the Davis City Council, exists to improve struggling areas within the city by investing tax dollars into new development there. The idea behind redevelopment is that better land use results in more tax dollars, which are used to pay for more redevelopment elsewhere.
According to the Davis Enterprise, the city receives almost $10 million per year in redevelopment revenues.
Navazio told the council that the city may be able to mitigate a short-term loss of redevelopment funding, but it wouldn’t be so easy if it became a consistent takeaway.
“While the current budget largely spares local government from some of the significant direct impacts that had been contemplated … cities and local governments in general remain concerned,“ he said.
The reason for this is that the state still has significant structural problems that were not resolved this year.
“It just buys them time until they get back to working on it,“ he said.
There are also concerns about what will happen to state and local budgets as a result of this fall’s economic downturn.
“I’d be remiss if I didn’t mention that the other area that we’re looking at very closely is our own local tax revenues in terms of property and sales tax,“ he said.
Though high, the $760,000 is significantly less than what the city was preparing for. When the budget was being developed, city officials warned that government takeaways could result in as much as a $3 million impact on the city’s budget.
The question is whether the cuts will continue into the future.
“We’re already seeing signs that the state budget is falling out of balance,” said city manager Bill Emlen.
The city will also be losing $31,555 in law enforcement funding due to cuts in grant programs and booking fee reductions. Prop 42 funding for local streets and roads is also being cut, resulting in an ongoing $67,724 loss to the city.
The redevelopment funding grab is affecting many other cities as well as Davis.
The West Sacramento Redevelopment Agency will lose over $1.3 million. The Fairfield Redevelopment Agency will lose $2.5 million and in Vacaville the number is $1.9 million, according to documents from the California Redevelopment Association.
The League of California Cities issued a release criticizing the state budget, saying, “we strongly oppose the fact that part of the legislature’s final budget effectively steals $350 million of local redevelopment funds that are so essential to the vital community infrastructure investments that generate both high-paying construction jobs and substantial state and local revenue.“
Navazio will be back before the council in November to give a budget update on the first quarter of the fiscal year.
JEREMY OGUL can be reached at firstname.lastname@example.org.