---

Originally published Thursday, October 28, 1999

---

By Jim Sams
Capitol Bureau Chief

SACRAMENTO -- The quality of local government should be determined more by the value of your home than the quantity of your purchases.

A panel appointed by Assembly Speaker Antonio Villaraigosa, D-Los Angeles, reached that consensus Wednesday as it worked toward recommendations that could lead to sweeping revisions in the way Californians pay for city and county services. Members of the Commission on State and Local Government Finance agreed the state should reduce sales-tax income to cities and counties, and increase property-tax revenues so local officials aren't inclined to approve new shopping centers and auto malls just so they can afford to hire police officers and firefighters.

"Many times there's no rhyme or reason for the location of these facilities," said commission member Steve Szalay of the California State Association of Counties.

Villaraigosa's 29-member commission is one of several trying to reinvent the state's contentious state and local government finance system.

Jon Coupal, president of the Howard Jarvis Taxpayers Association, said recommendations from the speaker's group are likely to be the most palatable to the Legislature, because so far they do not require major revisions to Proposition 13, the 1978 ballot initiative that capped property taxes and limited assessment increases.

In contrast, a panel headed by state Sen. Steve Peace, D-El Cajon, has proposed an overhaul of Proposition 13 so tighter limits would be placed on sales taxes, which are not deductible on federal income-tax forms, than on property taxes, which are.

Even lawmakers who find the proposition too restrictive say it will be difficult to change.

"A small number believe that Proposition 13 was written on stone tablets and handed to the Legislature," Assemblyman John Longville, D-Rialto, told the commission Wednesday. "I don't think it's a sizable number, but unfortunately some of them have been elected to the Legislature."

Members of city councils and county boards of supervisors have been complaining for decades that they are strapped for funds because the Legislature in 1992 shifted property taxes away from their treasuries to pay for schools. That revenue shift amounts to $3.6 billion statewide this year and cost San Joaquin County and its cities $66 million in fiscal 1998-99, according to a report by state Controller Kathleen Connell.

Much of the discussion Wednesday focused on how the limited amount of property taxes left for local governments reduces the importance of homes as a revenue source, leaving commercial development as the best bet for paying the increased costs of providing services, commission members said.

Southern California cities have engaged in bidding wars to land new Wal-Mart and Costco stores. But most communities around the state are approving far fewer housing developments than are needed to keep up with population growth, said commission member Jean Ross, executive director of the nonprofit California Budget Project.

The commission proposes a dollar-per-dollar swap of property- and sales-tax revenues. Half of the 1 percent sales-tax rate that goes to cities and counties -- $3.5 billion last year -- would go to the state instead.

The cities and counties would be given an equal amount of property-tax revenue from the share that now goes to schools. The state would increase its general-fund contribution to schools to make up the difference.

Cities and counties would continue to get some sales-tax revenue, but that would be split among the cities and counties within a geographical area by regional councils instead of staying in the cities where the money was collected. The amount of money going to each community would depend on how much affordable housing is provided, how well city and county governments are coordinating services and whether housing development is approved near industrial areas to reduce sprawl and transportation costs.

San Diego Mayor Susan Golding told the panel that doling out tax revenue according to conformance with state housing goals conflicts with the group's stated goal of giving local governments more control.

"Some of the recommendations I've seen seem to come from the illusion that Californians are willing to be told where they should live and where they should work," she said.

The panel hasn't worked out details, such as the exact criteria for splitting up sales-tax revenues and whether organizations such as the San Joaquin Council of Governments or larger regional bodies would be in charge of judging compliance with the criteria.

The commission meets again Nov. 9 in Los Angeles and Dec. 7 in San Francisco.