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Legislature Set to OK Return Of Property Taxes to Cities

But Davis says infusion for local governments would be costly to state

Greg Lucas, Sacramento Bureau Chief
August 25, 2000, San Francisco Chronicle

Sacramento -- A bill that would eventually give cities, counties and special districts $300 million a year is headed for approval by the Legislature.

If signed by Gov. Gray Davis, the bill would be the first major infusion of discretionary money that local governments have received since 1992, when the then cash-poor state began taking $3.4 billion in property tax revenue to pay its share of public school costs.

"This is the right thing to do. Local government money goes to pay for cops, mental health programs, safety net stuff. We should leave more money there on the front lines, so to speak," said the bill's author, Senate President Pro Tem John Burton, D-San Francisco.

Counties and cities have been clamoring for money since 1992, when California was in the depths of recession.

Although the state has increased its share of local trial costs and spent $100 million to beef up local law enforcement agencies, it has shown no desire to return any of the property tax revenue.

This year, the state had $12.3 billion more than it anticipated, yet lawmakers and the governor chose to give only $200 million in relief to local governments. The money still hasn't been distributed.

Davis' Department of Finance opposes the Burton bill because of its cost to the state.

A spokesman for Davis said the governor had not made a decision on the bill but pointed out the measure is "highly expensive."

Davis has already been generous in state aid to local governments, the spokesman said.

But cities and counties claim the bulk of the aid given by the state is earmarked for specific purposes like mental health programs, road improvements and crime prevention.

What local governments say they lack is discretionary money to improve other local services.

"Local services were starved in the early 1990s. The areas of greatest cuts were parks and recreation, libraries and planning," said Chris McKenzie, executive director of the League of California Cities. "This bill would help restore some of those services."

It was in 1992 that the governor and Legislature approved taking $3.4 billion out of local property tax revenue to meet the state's financial obligation to public schools. The money was taken primarily from cities and counties.

Because the assessed value of local property has increased since 1992, so has the state's take.

This year, the state rakes off slightly more than $4 billion in local property tax revenue.

Burton's bill would stop the amount of property tax money the state takes from increasing. The cap would be phased in one-third each year for three years, starting in the fiscal year beginning July 1, 2001.

The means that the first year, cities and counties would receive approximately $100 million in new money, $200 million the next year and $300 million the third year.

Originally, the bill would have fully capped the growth of the property tax take beginning this year.

But Burton said he wanted to "lessen the financial hit" to the state.

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