Commission Meeting #2 Minutes

February 24, 1999
SCAG Headquarters, Los Angeles

Synopsis

1. Call to Order

The meeting was called to order at approximately 10:45 a.m. by Chairperson David Abel. Southern California Association of Governments Executive Director Mark Pisano briefly addressed the commission, welcoming the members to SCAG and thanking them for getting involved in the important work of fiscal reform.

Chairperson Abel then asked Mr. Pisano to share some thoughts on fiscal reform with the Commission. Mr. Pisano described SCAG's Regional Transportation Plan (RTP), which addresses, to some degree, a number of relevant topics. It lays out the scope of infrastructure problems in Southern California and identifies solution options.

Pisano went on to pose a series of questions: How do we create a financing structure that incentivizes good, instead of bad, economic growth? What are reasonable user-based strategies? How do we cope with the requirement for 2/3 voter approval of many measures that might be helpful?

He noted that financing mechanisms should relate to the impact on growth and development. "Democracy is about providing steerage, not services," he stated, adding that a pure market-based system cannot provide all services.
Democracy must be employed to decide which services can be provided and at what price, then identify the inequities and seek solutions to those. Voters are the customers of public services, but when it comes to decision-making in
a democracy, they are also the equivalent of corporate owners. Pisano closed by noting that infrastructure is the basic support for society to do its business and poor service delivery is hurting our ability to collaborate.

2. Introductions and Welcome

Chairperson Abel asked commissioners to introduce themselves.

In attendance:

David Abel
Luis Arteaga
Ruben Barrales
Alan Bersin
Ed Blakely
Amy Dean
Joel Fox
Linda Griego
Lee Harrington
William Hauck
Norman King
Lily Lee
John Maltbie
Richard Morrison
Charles Nathanson
Kevin Scott
Dwight Stenbakken
Steven Szalay
Dean C. Tipps
Ron Unz
Carol Whiteside
Absent:
Ed Avila
Martha Davis
Robert Foster
Susan Hammer
Gary Hunt
Sunne Wright McPeak
John A. Pérez
Jean Ross
Chris Townsend

3. Organizational Business

Commission consultant Fred Silva conducted this item. He opined that detailed meeting minutes would not be necessary until
the Commission reached the point of formulating its policy recommendations; in the meantime a synopsis would suffice.

He then deferred to Chairperson Abel, who referred to a letter from Speaker Antonio R. Villaraigosa regarding the election of "regional co-chairs." The letter suggested three, William Hauck of Sacramento, Sunne Wright McPeak of San Francisco/Concord and John A. Pérez of Los Angeles/Orange County. The Commission concurred. A brief discussion about choosing additional co-chairs ensued and commissioners from the San Jose and San Diego areas expressed interest in the concept. The Chair asked them to make recommendations at the March meeting in San Francisco. Chairperson Abel opined that the co-chairs would be instrumental in helping to coordinate the activities of the Commission, including helping to plan meetings in their regions.

Mr. Silva then resumed his discussion, moving to the question of a timetable for Commission activities. He said a discussion of goals and policies doesn't
have to wait for a mission statement. Silva then discussed a timetable that would find the Commission formulating preliminary recommendations by July, 1999, and final recommendations by November. Commissioner Whiteside noted that there was not much time before the preliminary recommendations would have to be ready. Silva acknowledged that the Commission might have to adjust the schedule and also noted that there was no need to formally adopt it.

Mr. Silva discussed some other organizational concepts, such as the possibility of creating subcommittees and holding unstructured meetings dominated by more policy discussion amongst the commissioners. He said his own bias was against creating subcommittees to formulate recommendations to the whole body. Commissioner Nathanson suggested that the regional approach could be used to take policy ideas to the public for airing. Commissioner Hauck suggested formulating a sense of where the Commission "wanted to end up" and then working back from there to determine a game plan for how to achieve that
end.

Commissioner Fox made a formal request for a Legislative Analyst report on the projected status and viability of sales, income and property taxes in the coming years. (Note: This request was formally forwarded to the Legislative Analyst by the Speaker on February 26, 1999.)

Consultant David Myers made a presentation to the Commission on the Commission's new website: http://speaker.metroforum.org/. He noted that it would become a repository for a variety of information relating to the Commission, including commissioner photos and biographies, meeting synopses, summaries of testimony, policy recommendations and so forth. He requested that commissioners submit photos of themselves as soon as possible.

4. Presentations:

a. Dean Misczynski, California Research Bureau

Mr. Misczynski, a long-time Capitol expert on fiscal policy, presented his paper, "Reform School: California and Its Local Governments." He described seven over-arching issues he believes the Commission should consider:

1 - Adequacy of revenues;
2 - TheState using counties as fiscal "shock absorbers;"
3 - The fiscalization of land use;
4 - The evisceration of home rule;
5 - The purpose and viability of counties;
6 - Allocation rules;
7 - Local tax rate autonomy.

He added five other issues the Commission might want to look at:

8 - The importance of regions;
9 - Redevelopment;
10 - Control and financing of schools;
11 - Finance of development infrastructure;
12 - Special districts. He then added a couple of issues not discussed in his article:
13 - The formation and de-formation of cities;
14 - The portion of State revenues not deductible from federal taxes.

Commissioners then engaged in a lengthy discussion with Mr. Misczynski covering a number of issues: the cost of increased development density, the desire of local governments to regain more discretion, comparisons between State and local revenue growth in recent years, the importance of utility taxes since Proposition 13 passed, the importance of school finance, the threat of declining sales tax revenues, allegations of public disinterest in the work of local government, public frustration with the loss of home rule, the limits of the popularity of home rule if raising taxes is involved, and the long-term viability of counties and cities.

b. The Metropolitan Forum Project

This Southern California-based non-profit effort to foster public discussion and understanding of fiscal issues brought a series of presenters to provide their perspectives to the Commission.

Rick Cole, City Manager, Azusa
It is more important to ask the right questions than to find the right answers. The former will lead to the latter. The three questions regarding fiscal policy should be: What is the effect on quality of life? What is the effect on standard of living? What is the effect on democracy? Until policy connects on those levels, reform is impossible.

Gwen Norton Perry, Mayor, Chino Hills
Poor jobs/housing balance negatively impacts bedroom communities such as Chino Hills. Such cities need a higher proportion of funds from the State.

Michael Colantuono, City Attorney, various cities
The property tax sharing formula is irrational. A goal should be to make property tax accountable, transparent and functional. Cities now must rely too much on niche revenues, user fees, use taxes and sales taxes.

Keith Comrie, Chief Administrative Officer, Los Angeles
There is a need to stabilize local revenue base and re-establish home rule. The tax base should not be changed without home rule for cities, counties and school districts. The State's ability to reallocate (and commandeer) local revenues at any time makes local governance difficult.

Robert Pinzler, Councilmember, Redondo Beach/President, Los Angeles County League of Cities
The success of cities in coping with Proposition 13 has left them without further means to cope with new challenges such as "e-commerce." E-commerce will amount to $1.3 trillion by 2003, all untaxed. Capturing tax revenues from e-commerce will require an equitable means of determining where the transaction occurs. Cities need revenue security, revenue growth to match local economic growth and the de-fiscalization of land use. Policies should establish greater equitability, trust and coordination between State, regional and local entities.

Barbara Zeidman, Fannie Mae, Los Angeles
The viewpoint of the investor should be considered. The fiscalization of land use is killing housing production and affordability. Economically vital regions such as Silicon Valley are losing jobs due to housing unaffordability. Our fiscal policy is too whimsical and needs both certainty and consistency.

Jacki Bacharach, former Councilmember, Rancho Palos Verdes
Fiscal reform requires education of the public on these issues. We require flexibility of revenues (like block grants) and financial incentives to consolidate services in a region. Lowering the voter threshhold to 50%+1 on some bond measures would help. The Constitutional Revision Commission's recommendation on "home rule community charters" was promising.

Shirley Bailey, Boardmember, Rossmoor Community Services District
The present fiscal system makes enemies out of neighbors. Small communities such as Rossmoor have to tax themselves additionally and also use volunteers to provide adequate services since Proposition 13. The fiscalization of land use has local government officials saying, "I can't afford to be a good neighbor."

Pamela O'Connor, Mayor, Santa Monica
The whole region is interconnected ecologically, making far-flung cities neighbors. Lack of local control is at the heart of the problem. Good local behavior should be incentivized; for example, use distribution of income tax revenues to attract good job creators.

Dan Wall, representing David Janson, Chief Administrative Officer, County of Los Angeles
Only four percent of the County budget is discretionary. L.A. County is no longer maintaining its physical plant/infrastructure adequately. It needs both stabilized and improved funding, and equality of exposure to the business cycle relative to the State. The dependence on sales taxes is a holdover from an obsolete agrarian society; we now have discontinuity between the source and benefits of economic activity. Our revenue model no longer fits the economy.

Michael Jimenez, member, Los Angeles County Economic and Efficiency Commission
Home rule is necessary. Taxpayers may not understand the
intricacies of fiscal policy but they understand there is a problem; they articulate it simply as "government does not work." Home rule constitutes discernible control over level of services and a more reliable level of funding.

Susan Williams Guerra, Southern California Gas Company
Public education must continue and expand. The public is not stupid, but it is ignorant about a lot of fiscal issues. A goal should be the fiscal health of cities and reduced bureaucracy.

5. Public Comment:

a. Dan Silver, Executive Director, Endangered Habitats League, Los Angeles

Fiscal reform will change local government behavior by design or default. Currently the fiscal system does so by default. We should seek positive outcomes. We cannot afford to neglect people and the environment: affordable housing, preservation of agricultural land, transportation-oriented development, investment in cities and schools. The environmental perspective
on fiscal policy is crucial to fiscal reform.

6. Closing:

Chairperson Abel noted that the March meeting would be held in San Francisco at the offices of the James Irvine Foundation on March 24. He asked Bay Area commissioners to work with Regional Co-Chair McPeak on agenda recommendations. The April meeting was assigned to San Diego during the last week of the month. Commissioners Bersin and Nathanson were asked to work on logistics for that event. (Note: the date has now been chosen as April 28.) The meeting was adjourned at approximately 3:50 p.m.

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