With Cuts, Cities Fear Being Taken for Ride

The 25% cut in car registration fees passed by the Legislature last week may please drivers, but it worries officials at city halls throughout Orange County.

More than 90% of those fees have gone to cities and counties since 1935, helping to pay for police, firefighters, road improvements and other costs. Now, local officials fear, their agencies’ incomes may decline, despite assurances from Sacramento that the difference will be made up.

“Do I trust them to continue to provide the backfill?” said Ronald Bates, president of the League of California Cities and mayor of Los Alamitos. “As long as the economy stays strong.”

But when it goes south, Newport Beach City Manager Kevin J. Murphy said, cities are vulnerable.

“The reality is that cities are perceived as easy pickings by the state,” he said. “We’re not as politically influential as schools and teachers.”

State officials, however, say a provision in the budget guarantees that any losses to cities and counties from cuts in the vehicle registration fee--next year and every year thereafter--will be made up from the general fund.

“I feel comfortable that the state will continue to give local governments the full amount of the car tax,” said Assemblyman Fred Aguiar (R-Chino). “I imagine their concern is that the state has a history of shifting revenues like property taxes from local governments.”

City leaders say that is exactly their concern. They fear a repeat of the early- and mid-1990s, when the state raided their property tax allocations to balance its budget.

“With a $4.4 billion surplus, it’s obscene that the state didn’t give local governments the money it took years ago,” said Brea Assistant City Manager Tim O’Donnell. “We think it’s a travesty that the state took away money from local government in the early ‘90s, so why in the hell should we believe them when they say we won’t lose any money this time? The credibility is zero.”

H.D. Palmer, assistant director of state finance, said that in this case, there is little to worry about. Replacement funding for lost registration fee money, he said, is “continuous.”

“The only way you’d blow this up is if you blew up the car tax package,” he said.

That package, which will save car owners $1 billion next year, would gradually keep reducing the registration fee, by up to 67.5% in 2003. But those further cuts go into effect only if the economy stays strong. Tax revenue must exceed forecasts by several billion dollars or the reduction stays at 25%.

Cities and counties, said Assemblyman Dick Ackerman, “are in no worse position than they were before.” Ackerman (R-Fullerton) said he partially blames the League of California Cities’ campaign against cutting the car registration fee for convincing city managers and council members that their funds are threatened.

“The state league did not do a good job keeping their members advised,” he said.

But Greg Beaubien, acting city manager for Buena Park, said history has strained the state’s relationship with cities.

“When you’ve eaten at a restaurant and had bad service three times, you are not likely to go back a fourth time,” he said. “All cities feel the experience with the state has been very negative.”

Local officials are also worried that the state will attach conditions to future allocations from vehicle registration fees or the general fund.

“Frankly, the financial part aside, the greater concern is really the loss of local control,” said Costa Mesa City Manager Allan L. Roeder. “The moment you become part of the state budget process, the tendency is to put lots of requirements on what you can do to receive those allocations.”

Assemblyman Thomas McClintock (R-Northridge), who voted against the 25% cut, said cities have cause for concern.

In February, he proposed eliminating the registration fee, with constitutional guarantees of 100% replacement funding for the cities. The League of California Cities is preparing a referendum for the 2000 ballot that would provide a constitutional guarantee.

Meanwhile, McClintock said, cities “have every right to be mistrusting.’

Times correspondents Lesley Wright and John Pope contributed to this story.

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Cities’ Losses

Vehicle registration fees, which go directly to cities, will decrease 25% in 1999. The following shows each city’s operating budget and the amount it will lose in registration fees. Lawmakers in Sacramento, however, say they will make up the difference.

Anaheim

General fund: $149.3 million

Car Tax Loss: $3.1 million

*

Brea

General fund: $31 million

Car Tax Loss: $375,000

*

Buena Park

General fund: $30.3 million

Car Tax Loss: $800,000

*

Costa Mesa

General fund: $71 million

Car Tax Loss: $1 million

*

Cypress

General fund: $16.8 million

Car Tax Loss: $442,000

*

Dana Point

General fund: $14.2 million

Car Tax Loss: $450,000

*

Fountain Valley

General fund: $23.3 million

Car Tax Loss: $575,000

*

Fullerton

General fund: $46 million

Car Tax Loss: $1.3 million

*

Garden Grove

General fund: $50.3 million

Car Tax Loss: $1.7 million

*

Huntington Beach

General fund: $109 million

Car Tax Loss: $1.9 million

*

Irvine

General fund: $67 million

Car Tax Loss: $1.3 million

*

La Habra

N/A

*

La Palma

General fund: $6.3 million

Car Tax Loss: $150,000

*

Laguna Beach

General fund: $22 million

Car Tax Loss: $1 million

*

Laguna Hills

General fund: $10 million

Car Tax Loss: $400,000

*

Laguna Niguel

General fund: $18.4 million

Car Tax Loss: $725,000

*

Lake Forest

General fund: $15.5 million

Car Tax Loss: $845,000

*

Los Alamitos

General fund: $7 million

Car Tax Loss: $130,000

*

Mission Viejo

General fund: $27.8 million

Car Tax Loss: $925,000

*

Newport Beach

General fund: $72.1 million

Car Tax Loss: $700,000

*

Orange

General fund: $53 million

Car Tax Loss: $450,000

*

Placentia

General fund: $14.2 million

Car Tax Loss: $427,500

*

San Juan Capistrano

General fund: $11.9 million

Car Tax Loss: $300,000

*

Seal Beach

General fund: $13 million

Car Tax Loss: $280,000

*

San Clemente

General fund: $23.7 million

Car Tax Loss: $475,000

*

Santa Ana

General fund: $145.7 million

Car Tax Loss: $3.26 million

*

Stanton

General fund: $10 million

Car Tax Loss: $350,000

*

Tustin

General fund: $31 million

Car Tax Loss: $675,000

*

Villa Park

General fund: $1.6 million

Car Tax Loss: $67,500

*

Westminster

General fund: $30 million

Car Tax Loss: $775,000

*

Yorba Linda

General fund: $16.8 million

Car Tax Loss: $572,500