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ACTION: League Encourages City Officials to Submit Budget Action Letters

May 30, 2014
The League is calling on city officials to submit letters on pending budget actions related to transportation funding, mandate repayment and multifamily housing.
League Supports Assembly Transportation Funding Proposal
In light of increased state revenues, the Gov. Jerry Brown has proposed millions in Highway Users Tax Account (HUTA) repayments. The taxes directed to HUTA are used to construct and maintain public roads and mass transit systems. 
Following the adoption of the Fuel Tax Swap in 2010, the Legislature reserved $328 million in excise tax revenue for future appropriation. All other and future revenues are allocated by formula — 44 percent for local streets and roads, and 56 percent to the State Transportation Improvement Program (STIP) and State Highway Operation and Protection Program (SHOPP). The Governor’s FY 2014-15 transportation budget proposal would repay the HUTA revenues loaned in 2010 ($328 million loan plus $9 million in interest).
In addition, the Assembly 2014 Infrastructure Plan appropriates an additional $163 million that is currently sitting in the State Highway Account (SHA). The total amount of $500 million is proposed to be appropriated using the 44 percent to local streets and roads and 56 percent to the STIP and SHOPP. The following breakdown compares the Assembly and Governor proposals: 
Transportation Infrastructure Investment ($ millions)
                                                     Governor’s Plan Assembly Plan
City and County Projects 100 220
SHOPP Capital Payment 110 110
SHOPP Traffic Management 100 100
Highway Maintenance 27 70
Total $337 $500
The League supports the Assembly budget action because it is appropriate given the historical formulas used for HUTA revenues and the high SHA balance. City officials are encouraged to send support letters on this budget item by using the League’s sample letter.
League Joins Local Government Coalition Calling for Repayment of Mandate Obligations
Following the release of Gov. Jerry Brown’s FY 2014-15 May Revise, the League joined the California Association of Counties, the California Special Districts Association, the Urban Counties Caucus and the Rural County Representatives of California in supporting the proposed repayment of pre-2004 mandate obligations owed to local agencies.
Prior to 2004, California law allowed the state to avoid reimbursing local governments for mandates by paying in small token amounts and ‘promising’ to pay later. As a result, local governments amassed millions in unfunded mandate debt due to insufficient reimbursement payments from the state. A solution to this problem was included in Proposition 1A, which voters approved in November 2004. Under Prop. 1A, the state is required to either fund legislative mandates on local agencies or suspend the operation of the mandate.
Currently, $900 million is owed to local agencies for pre-2004 mandate debt that is supposed to be repaid by FY 2020-21. The May Revise outlines a proposal to repay $100 million of the $900 million owed to local government for these mandates. 25 percent would go to cities and be appropriated based on the percentage of debt owed; 73 percent would be directed to counties and the remaining two percent directed to special districts. While the use of these funds is completely discretionary, the Governor’s May Revise states the “Administration expects that most of the spending will be focused on improving implementation of 2011 Realignment and public safety.”
As the Legislature continues to negotiate the terms of the FY 2014-15 budget the League will monitor the progress of this proposal and inform members of any significant changes. City officials are encouraged to send support letters on this budget item using the League’s sample letter.
Assembly Multifamily Housing Proposal Provides Local Flexibility
Last week the Assembly proposed a 2014 Infrastructure Plan which includes $200 million split evenly between the Multifamily Housing Program (MHP) and its supplementary Supportive Housing Component (MHP-SH), both administered by the California Department of Housing and Community Development.
The current structure of the MHP provides bond proceed funding for new construction, rehabilitation and preservation of permanent and transitional rental housing for lower income households. Under the Assembly proposal, MHP restrictions will be relaxed to allow the proposed $100 million in program funds be spent on operating expenses of existing housing structures.
Similar to the MHP proposal, the Assembly MHP-SH plan expands the use of proposed program funds. Currently, the program provides low-interest loans for the development of low-income rental housing containing supportive housing units. In addition to offering housing to homeless or low-income residents, the program provides on or off-site support services to tenants. The Assembly plan loosens program restrictions and allows proposed funds to be spent on enhancing services provided by the program.
The League supports the additional investment and increased flexibility proposed in the Assembly plan. City officials are encouraged to submit support letters on this budget item by using the League’s sample letter.   

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