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6:30 P.M.

INVOCATION: Reverend Tania Kleiman, Olive Branch Ministries.

The Courts have concluded that sectarian prayer as part of City Council meetings is not permitted under the Constitution.

FLAG SALUTE:

ROLL CALL:

JOINT MEETING WITH THE CITY COUNCIL:

1. CONSIDERATION AND POSSIBLE ADOPTION OF RESOLUTIONS ADOPTING FINANCIAL PRINCIPLES ADDRESSING PROPOSALS FROM THE STATE TO REDUCE LOCAL GOVERNMENT REVENUES, SPECIFICALLY ADDRESSING THE GOVERNOR�S 2003-04 BUDGET PROPOSAL, AND URGING THE CALIFORNIA LEGISLATURE TO REJECT THE GOVERNOR�S PROPOSED SHIFT OF LOCAL VEHICLE LICENSE FEE (VLF) REVENUES:

At the January 28, 2003 City Council meeting, Council Member Golonski requested staff to return at the February 4, 2003 meeting with a draft set of financial principles for both the Redevelopment Agency and Council to consider in addressing the City�s response to proposals from the State to reduce local government revenues and more specifically the Governor�s Proposed 2003-04 Budget.

On January 10, 2003, the Governor released his Proposed 2003-04 Budget, which revealed that the State General Fund revenues from the major tax sources are expected to fall to $64.8 billion, resulting in a $34.6 billion budget shortfall in the current and 2003-04 Budget. It is the belief of most California cities that the Budget proposal places an unfair burden on local governments and is bad for California and it�s struggling economy.

There are two main components of the Governor�s proposal that are harmful to cities. The first is the elimination of $2.9 billion of the Vehicle License Fee (VLF) backfill payments estimated for Fiscal Year (FY) 2003-04. This proposal would eliminate all of the VLF backfill going to cities, leaving funding only from the remaining VLF base. This would impact Burbank by an estimated $4,045,355 and represents approximately 3.6 percent of Burbank�s recurring revenues.

The VLF was first enacted in 1935 and replaced the property tax on vehicles with a 1.75 percent fee charged against the value of the motor vehicle. In 1948 the rate was increased to 2 percent. Subsequently, in 1986, the voters overwhelmingly voted to constitutionally dedicate the proceeds of the VLF to fund city and county services. Then in 1998, a period of strong economic growth, the VLF payment to the consumer was reduced. However, the legislature and Governor agreed to provisions that would "trigger" restoration of the VLF if the State General Fund could no longer afford the "offset" or backfill from the General Fund to pay for the "VLF holiday" to the consumers. It is the position of local cities that if the State is in such a dire budget crisis, they should keep that vow and restore the VLF.

The other harmful proposal is the ongoing shift of $250 million from redevelopment agencies to pay a portion of the State�s school obligation. The Budget includes a statement of intent to continue to increase this shift until 50 percent of the tax increment is diverted to supplant the State�s commitment to schools. Estimates on this total are as high as $1.2 billion. The State will use these funds to support schools; they become part of the Education Revenue Augmentation Fund (ERAF) shift of local property taxes that has so dramatically altered local government�s ability to provide services and plan for future growth. The ERAF shift for FY 2002-03 for Burbank was $912,097 and the estimated impact for 2003-04 is $3,099,920. The Governor has stated his desire to increase the proposed 2003-04 shift until 50 percent of the tax increment has been diverted from redevelopment agencies to the State to fund its school obligation.

While the Governor�s State speech emphasized jobs, jobs and more jobs, it would appear that taking redevelopment funds would be counterproductive to that stated goal. Redevelopment agencies are a principal source of economic development and construction jobs in the State. With historic low-interest rates, many redevelopment agencies are poised to finance public infrastructure improvement and housing projects that will help jump-start the State economy.

It is also worth noting that an additional proposal by the Governor, unveiled in December 2002, would have swept approximately $500 million in "unencumbered" balances in the low and moderate income housing funds into ERAF accounts. This could have a detrimental impact on our Redevelopment Agency�s existing and future projects. At this point it is staff�s understanding that this proposal has not garnered support from the legislature, however, it is too soon to think that the funds might not still be in jeopardy as they are still part of the Governor�s proposal.

Due to the necessity to place this item on the agenda on short notice, it is staff�s intention to have a report and draft set of principles addressing the City�s response to proposals from the State to reduce local government revenues and more specifically the Governor�s Proposed 2003-04 Budget for the Council and Agency to consider Tuesday, February 4, 2003. In addition, staff will present a resolution for the Council to consider urging the legislature to reject the Governor�s proposed shift of local VLF revenues.

Recommendation:

It is recommended that the City Council and Redevelopment Agency consider the draft set of principles addressing the City�s response to proposals from the State to reduce local government revenues and more specifically the Governor�s Proposed 2003-04 Budget. The principles are incorporated into draft resolutions, however, if the Council and Agency are comfortable with the resolutions as drafted, they can be adopted at the meeting. Otherwise, staff could be directed to return at the following meeting with the resolutions for approval.

It is further recommended that the Council consider adopting a resolution urging the California Legislature to reject the Governor�s proposed shift of local VLF revenues and to honor the 1998 commitment to restore the VLF.

RECESS to conclude the City Council meeting.