After meeting privately with Gov. Arnold Schwarzenegger on Tuesday, the mayors of seven big California cities emerged to say they had been reassured they would not lose billions in car tax revenue that helps pay for police and fire protection.
The mayors spoke to Schwarzenegger in his office for about 45 minutes, warning that his rollback of the recent car-licensing fee increase could trigger local government layoffs and service delays unless the state comes up with another source of money.
Although Schwarzenegger had already pledged to do that, the mayors seemed intent on pooling their clout in a well-publicized visit to the Capitol. They said they wanted to impress upon state officials that their cities simply cannot afford to lose their share of the approximately $4 billion generated annually by a tripling of the vehicle license fee -- the car tax.
"He was very approachable and very agreeable to what we had to say," said Long Beach Mayor Beverly O'Neill. "We were very encouraged."
She was joined in the meeting by fellow Mayors James K. Hahn of Los Angeles, Dick Murphy of San Diego, Ron Gonzales of San Jose, Curt Pringle of Anaheim, Miguel Pulido of Santa Ana and Heather Fargo of Sacramento. Fresno Mayor Alan Autry took part by phone.
In a push to narrow a $38-billion budget gap earlier in the year, former Gov. Gray Davis tripled the state's vehicle license fee, with the additional revenue going to local governments.
When Schwarzenegger undid the increase last week immediately upon taking office, he set off a scramble among cities and counties around the state. Since car-tax receipts are earmarked for local governments, reducing the levy throws their budgets out of balance.
The mayors' plea -- and the governor's promise -- is to make the local governments whole through a direct transfer from the state general fund. In Sacramento-speak, that transfer is known as a backfill.
"If the backfill is not restored, it becomes very difficult for us to provide services," said Hahn, who served on Schwarzenegger's transition team. "We would have to have cuts involving layoffs, and you don't want to have that."
In the city of Los Angeles, repeal of the tax increase produced a shortfall of $175 million, with about two-thirds of that amount allocated for police and fire services. Los Angeles County would lose $700 million a year if the state does not replenish the car-tax revenue.
Hundreds of cities and counties across the state face a similar dilemma. They use 60% to 75% of their car-tax allocation money for public safety, according to Pat Leary, a Sacramento lobbyist for the California State Assn. of Counties.
At the meeting, Schwarzenegger asked the mayors -- most of them Democrats -- to support his proposed bond issue of as much as $15 billion, some of the mayors said.
The governor is drawing a link between the car-tax revenue and the bond initiative: Passage of the bond measure would make it easier to replace money lost through repeal of the car-tax increase, according to the governor's office.
"He didn't talk specifically about where the money would come from," O'Neill said. "He did mention the [general obligation] bonds."
Hahn voiced skepticism about the borrowing plan but said he was not necessarily opposed.
"This is not something I usually would support ... one-time borrowing to balance the budget," Hahn said. "This may be that extraordinary circumstance that necessitates you deviating from that. And I told the governor I'm very open to looking at that. It may be the only way out this year."
Schwarzenegger wants the Legislature to put the bond measure on the March ballot.
Hahn later pressed his point in meetings with the Assembly's outgoing and incoming speakers: Herb J. Wesson Jr. and Fabian Nunez, both Los Angeles Democrats.
The Legislature has an important say in the matter. Senate Republican Leader Jim Brulte (R-Cucamonga) has introduced a bill in the special legislative session now underway that would appropriate $3.6 billion from the state general fund to reimburse local governments for loss of car-tax revenue. Democrats say the money isn't available and will require program cuts.
Rob Stutzman, communications director for Schwarzenegger, said after the meeting that the governor would make good on his promise to the mayors.
"There's no question that local government needs to be made whole," he said. "It's not their fault that the wacky way we fund local government is through a car tax."
"It doesn't make any sense. And so we're committed -- this governor is committed -- that the essential services that local governments provide, that they're going to be able to continue to provide them."
Times staff writers Gregg Jones and Sue Fox contributed to this report.