Don’t Force Cities to Beg for Revenue

To Californians under the age of 30, it is almost inconceivable that a city might have roads that are properly maintained, well-equipped libraries that keep regular hours, parks that are well-groomed and emergency systems that respond quickly. That pretty much described life in many California cities until the late 1970s. Yet since the passage of the Proposition 13 property tax measure in 1978, it almost seems like a dream.

The purpose of Proposition 13--to contain property taxes so that people could afford to stay in their own homes--was worthy. Yet the measure’s strict limitations on property tax increases came with an intended consequence: The power to allocate property tax revenue was taken away from local government and given to Sacramento. This shift of power from city hall to the state capital is little understood by municipal taxpayers, but it has a profound effect in how their cities are run.

In the next several weeks, the state Legislature and Gov. Gray Davis will decide how to spend a huge state surplus created in large part by city residents or by enterprises housed in and nurtured by cities. Now is the time to give cities back a fair share of their property tax.

The sad fact is that in California, formerly one of the strongest home-rule states in the union, cities are forced to beg to get back a pitifully small share of the property tax revenues that are contributed by their own city residents.

In the last two decades, cities have been forced to make up for this revenue in other ways, ranging from hotel and utility taxes--which adversely affect tourism and high-tech businesses, respectively--to encouraging retail development in the hope of boosting sales tax revenues. The latter would have been better handled on a regional basis, so that traffic congestion, blight and employment problems could have been minimized.

Now, in hindsight, it seems almost inevitable that the state Legislature would divert local property tax revenue during the recession of the 1990s, essentially balancing Sacramento’s budget by busting the budgets of most California cities. The shift of revenues away from cities to pay for education continues to this day, despite the fact that Sacramento is awash in a $12.3-billion surplus. While in recent years the Legislature has provided occasional funding relief to cities, the current system, on balance, costs local governments about $1.4 billion a year, according to the nonpartisan state legislative analyst.

The Legislature and the governor must restore a significant share of local property taxes to local government and protect this share in our state’s Constitution. Don’t order cities to provide more housing; give local government back our property tax revenues and we can do it. Don’t lecture mayors and city council members about the evils of “big box” retail stores; give us back our property taxes and the development of other than retail businesses will become financially rational again.

Cities must have predictable, discretionary funding to halt the decline in essential services. With the state awash in surplus funds, this should be the year. If not now, when?