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A push for regional unity: Legislation seeks to end competition for sales tax funds via development

By Jim Sanders

Bee Capitol Bureau

April 5, 2001

Hoping to spark regional cooperation, a Sacramento assemblyman has proposed legislation to fundamentally change the way sales tax revenues are distributed in six local counties and to reduce the competition over massive auto or shopping malls.

Assemblyman Darrell Steinberg said his goal is to eliminate a situation in which cities and counties feel pressure to compete for big-bucks commercial development even if it would worsen regional traffic, sprawl or pollution.

"We can't and don't want to impede progress, but cities and counties have to work together to make sure that what makes this area so special remains that way," the Democratic lawmaker said. "I fear if they keep competing, rather than cooperating, we'll lose that."

But even supporters of Assembly Bill 680 say it won't be easy to win consensus within the region, where serious concerns exist that cities and counties could be left holding the bag if the bill is approved now and the Legislature later changes the terms.

"This will undoubtedly be controversial," said Martin Tuttle, executive director of the Sacramento Area Council of Governments, which has not yet taken a position on AB 680.

"I think any time you deal with local government finance, you're dealing with a bread-and-butter issue for a city manager or county administrator," he said. "If you want to tweak the formula, they're going to be sensitive."

AB 680 targets Sacramento, Yolo, Placer, El Dorado, Sutter and Yuba counties. Removing the sales-tax competition would lead to "smart" regional planning that would produce both aesthetic and monetary benefits, Steinberg contends.

Specifically, Steinberg said AB 680 is a four-part proposal that would:

<> Pool all sales tax revenues and distribute them equally based on the population of a city or county, not its commerce.

<> Require the state to reimburse any jurisdictions that would lose money by changing the current sales-tax distribution system.

<> Trigger regional planning that would reduce urban sprawl, thus qualifying the region for new air-quality credits that could be used to pave the way for construction of local power plants.

<> Place money generated by the sale of new air-quality credits into a trust for purchasing additional open space in the region.

"This bill is for the Sacramento area, but I think there could be statewide application to linking smart planning to air-quality credits in addressing one of the state's top priorities -- energy -- now and in the foreseeable future," Steinberg said.

The assemblyman drew praise from political, government, business and environmental officials for sparking debate about regional planning, but many warned that passage of AB 680 is far from certain.

"There are certainly a lot of challenges ahead for the proposal, but I think there is merit to the marrying of some of these concepts," said West Sacramento Councilman Christopher Cabaldon.

Concerns of some city and county officials included:

<> If sales tax revenues are distributed per capita, cities and counties may push for more housing simply to ensure themselves additional money for police, fire and other local services.

<> Nobody is yet certain what regional planning measures need to be undertaken to earn air-quality credits.

<> Business officials want to make sure AB 680 doesn't lead to overregulation or to a situation in which local governments have less incentive to respond to business needs because of the sales-tax changes.

Steinberg said he welcomes debate and is optimistic that a consensus can be reached.

Preliminary estimates by the state Air Resources Board indicate that enough air-quality credits could be generated by regional growth planning to make the four-part plan viable, he said.

Regional air-quality credits could be used now for three pending local power plants if AB 680 would replenish them in the future to support local economic growth, according to Steinberg.

Additional modeling will be done in coming weeks by the Air Resources Board and by the California Energy Commission, he said.

Roger Salazar, a spokesman for Gov. Gray Davis, said the governor has not yet had time to study AB 680.

Depending on their ability to attract large commercial development, local governments have been divided into winners and losers under the current sales-tax distribution system.

If sales tax revenues had been pooled throughout the six-county region, cities and counties would have received $112 per capita in fiscal 1999, according to the most recent state statistics available.

By comparison, West Sacramento received $266 per person that year under the current formula. Placerville received $250, Roseville $261, Auburn $202, Yuba City $162, Folsom $142, Marysville $123 and Sacramento $118.

Much lower sales tax revenues were received by Lincoln, $64; unincorporated El Dorado County, $45; Wheatland, $43; Winters, $30; unincorporated Yuba County, $27; and Live Oak, $17.

If AB 680 had been in effect in 1999, for example, Roseville and Winters would have pooled their sales tax revenues and each would have received $112 per person for municipal services.

Roseville would then have been reimbursed $11 million by the state to cover its lost revenue.

Mayor Claudia Gamar said she has "serious reservations" about any new tax-distribution formula that would force Roseville to count on the state for reimbursement.

"How concerned are they going to be about backfilling to us if there's another money shortage?" Gamar asked. "I think it's our job to protect our jurisdiction's fiscal health."

If AB 680 becomes law and the state later pulls the plug on reimbursement, the pooling of sales-tax revenues would cease and distribution would revert to the current system, Steinberg said.

"I plan to put a trigger in the bill about that," he added.

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