Prop 1A Borrowing Proposed by Governor, LAO

With the state budget deficit pegged at $21.3 billion and no easy solutions left, a bid to borrow property tax revenues from local government may be imminent.

The May revision of the state budget released by Gov. Arnold Schwarzenegger proposes borrowing $2.1 billion in local property tax revenues from cities, counties and special districts to help fill the gap. The funds would be borrowed under Proposition 1A of 2004.

Last week, the Legislative Analyst’s Office recommended that the state take more than 25% of the $2.1 billion from water and wastewater enterprise special districts alone – resulting in a hit of at least $500 million just for water and wastewater districts. The LAO noted that enterprise water and wastewater districts “typically depend on property taxes for less than 7 percent of their operating revenues and have broad authority to increase fees or reduce programs.” Borrowing more from them “would allow the state to borrow less from agencies with less fiscal flexibility,” the LAO said.

ACWA opposes any attempt to take property tax revenues from water agencies at a time when California is facing severe water challenges. Staff is working with member agencies and local government allies to re-educate legislators, the Administration and other audiences on the negative consequences of borrowing local property tax revenues.

Dear [ Decision Maker ] ,

(Your agency's name here) opposes the recent proposal by the Legislative Analyst's Office (LAO) to borrow more than $500 million in local property tax revenues from water and wastewater enterprise special districts as part of a one-time borrowing of $2.1 billion total from cities, counties and special districts to help bridge the state's budget deficit.

The LAO proposal unfairly targets water and wastewater districts to provide more than 25% of the total loan amount of $2.1 billion at a time when local water districts are facing severe water challenges.

Water districts already are being forced to raise water rates dramatically due to ongoing water shortages and the impacts of regulatory actions under the Endangered Species Act. They also face an array of potential new water-related regulatory fees proposed by the LAO as another way to balance the budget.

Taking revenues away from local water districts such as ours will make it significantly harder to finance and move forward with critically needed local projects and infrastructure improvements to the statewide water system.

(Add concrete examples of how your water district would be financially affected. Identify actual projects and programs that would be delayed or shelved and describe how that would affect your ratepayers. Mention rate increases you may already have instituted due to water shortages or will have to institute as a result of this loss of revenue.)

(Your water district's name here) stands with ACWA in opposing the inequitable LAO-proposed borrowing formula that would take at least $500 million in property tax revenues from water and wastewater special districts. We urge you to oppose this proposal when it is heard and voted upon as part of the state budget.

Sincerely,

Campaign Launched:
May 27, 2009