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Governor Vetoes Bills for New Cities, Annexations

September 29, 2014
Gov. Jerry Brown on Sunday declined to sign bills that would have restored funding to recently incorporated cities and cities that have annexed inhabited areas.
For more than 50 years the majority portion of Vehicle License Fee (VLF) revenues went to cities to provide for local resident services. Newly incorporated cities and inhabited areas annexed by cities were included in these allocations and received a share of VLF revenues based on population growth. However, after the 2004 VLF-property tax swap agreement, the amount of VLF revenues cities received was significantly cut after the VLF rate was reduced from 2 percent to 0.65 percent. To make up for lost revenues, city budgets were backfilled by additional dollar-for-dollar property tax revenues. The 2004 swap legislation failed to provide compensating property tax revenues to annexations and new incorporations.
AB 1602 (Chapter 556, Statutes of 2006) solved this issue by using some remaining VLF funds; however, the Legislature’s approval of SB 89 (Chapter 35, Statutes of 2011), which occurred in a matter of hours with no public hearings, swept this away. 
The authors of SB 69 (Roth) and AB 1521 (Fox) sought to address a change in the law made in 2011, when the state shifted away from cities a key source of revenue to pay for law enforcement grants as part of prison realignment.
SB 69 would have shored up the budgets of California’s newest cities, Jurupa Valley, Eastvale, Menifee and Wildomar, by folding them into the vehicle license fee/property tax swap. That 2004-05 budget deal did not provide compensating property tax in lieu of license fees to either newly formed cities or cities annexing inhabited areas.
Under AB 1521, the state would have allocated more property tax dollars to 140 cities that after 2004 redrew their borders to add existing neighborhoods.
As a supporter of both bills, the League is disappointed by the Governor’s decisions. It remains unclear if other policy issues associated with the legislation resonated with him, as he focused on cost in his accompanying veto messages.
Dozens of other bills remain on the governor’s desk with a midnight Tuesday bill-signing deadline approaching.

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