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2012 Legislative Year In Review


Dan Carrigg is legislative director for the League and can be reached at dcarrigg@cacities.org.


The past few years have not been the best of times for the Golden State. A grueling economy caused a painful setback for both the private and public sectors. Job and revenue losses forced many tough decisions at kitchen tables and in city council chambers and the state Legislature. But perhaps the worst is behind us. With foreclosure rates falling, revenues stabilizing and employment slowly improving, the state’s economic decline has stopped, which provides a foundation for recovery.

In 2012 cities began to move on after redevelopment was eliminated. The League focused on protecting and assisting its membership with redevelopment dissolution issues, which included filing a lawsuit to protect city sales and property tax and to improve due process for successor agencies dealing with the Department of Finance (DOF). Early in 2012 the League Task Force on the Next Generation of Economic Development Tools began work to identify a variety of options for cities, and the League collaborated with several legislators on alternative tools for infrastructure and economic development. A vigorous defense of local control was also launched on a variety of fronts, and a bright spot emerged with the passage of pension reform.

Redevelopment and Its Aftermath

A few days prior to the start of 2012 the California Supreme Court issued its ruling in California Redevelopment Association v. Matosantos upholding AB 1X 26, the redevelopment elimination measure. This ruling meant redevelopment agencies were eliminated Feb. 1, 2012. The California Redevelopment Association (CRA) and the League made a legislative effort in January through SB 659 (Padilla) to delay the elimination date so that alternatives could be explored, but that effort failed to gain traction in the governor’s administration. Thus, Gov. Jerry Brown achieved his objective of eliminating redevelopment agencies, the tool that had so extensively supported urban development and affordable housing in California.

Losing redevelopment devastated many communities, but cities accepted the court’s decision and prepared to move on. The League worked on AB 1585 with Assembly Speaker John Pérez on cleanup to AB 1X 26 to address local implementation issues, which included preserving the remaining affordable housing funds and requiring the repayment of city-agency loans. However, after the measure passed the Assembly in March with an urgency clause and bipartisan support, it did not receive a hearing in that form in the Senate.

The dissolution of redevelopment agencies also meant closing the doors of CRA and dissolving its staff of 13, who had for years served as chief representatives and information conduits. The League stepped in to fill the void, and its general counsel convened a working group of city attorneys and redevelopment specialists that meets weekly to compare notes on various pending legal actions and activities of DOF. In addition, the League hosted several webinars to provide information and guidance, where possible, to successor agencies. The League also retained CRA’s former
lobbyist to assist with redevelopment-related lobbying efforts.

After the Senate failed to hear AB 1585, the redevelopment issue was folded into the budget process. In conjunction with the governor’s “May Revise,” DOF released redevelopment trailer bill language aimed primarily at improving the state’s leverage over successor agencies. The League testified against this proposal and submitted alternative language to legislators to expand due process and promote equitable resolution of outstanding disputes, repay city-agency loans, and allow for the use of unexpended bond funds and other provisions.

DOF staff and representatives of Senate and Assembly Democratic leaders began meeting privately to draft language. The result of these discussions was disappointing when AB 1484 was released on June 25.

Despite severe time constraints, the League reviewed the language, identified problems and drafted proposed amendments. Cities’ greatest concerns included the policy and constitutional issues raised by the clawback provisions and unrealistic deadlines for successor agencies to make payments (including a provision for billing the agencies on July 9 and imposing penalties for payments not made by July 11). It was also unclear whether the “benefits” — such as loan repayment and expenditure of unspent bond proceeds — would actually be realized.

The Senate Budget Committee convened for an evening session on June 26. Legislators raised concerns and said that they would not vote for the bill without specific changes. The bill was then put over. After some overnight arm-twisting by the governor, the principled statements and objections made the evening before vanished the next morning. The bill was approved without change and signed into law on June 27.

Without viable legislative recourse, the League filed litigation against the state on Sept. 24 over various aspects of AB 1484, including the clawback mechanisms that could divert local sales or property tax.

Next Steps on Economic Development and Infrastructure

Creating new tools that cities could use for economic development and infrastructure became a top priority. The League Task Force on the Next Generation of Economic Development Tools, chaired by League President Bill Bogaard, mayor of Pasadena, met several times in the spring to develop options and ideas.

Beyond accumulating and distributing information to cities on possible options and alternatives, the task force focused on examining making the Infrastructure Financing District (IFD) law a useful tool. The IFD law, which had been on the books for 22 years and rarely used, had many problems. While it allowed the use of tax increment to fund infrastructure, it required two public votes at the two-thirds vote threshold, both to establish a district and issue debt. These dual vote requirements deterred most agencies from looking further. In addition, legal questions remained unresolved over whether the constitutional debt limit applied to these districts and the fact that the law did not permit funding rehabilitation and maintenance of infrastructure. Thus, much had to be done to make the law functional.

The League worked internally with its attorneys and in partnership with the California Building Industry Association to craft a series of changes to SB 214 (Wolk) to make IFD law a useful tool. Ultimately the League supported the measure and requested a signature from the governor. However, Gov. Brown vetoed the measure along with several other measures, including SB 1156 (Steinberg), which would have reauthorized redevelopment in a more limited form. The governor’s veto messages stressed his desire to keep cities focused on dissolving redevelopment. While disappointing in the short run, the veto messages leave room for returning to these issues in 2013.

Progress in Other Areas

The League worked proactively to craft and support a major pension reform package, position cities to receive future funding from cap-and-trade revenues, provide enhanced communication opportunities with water boards, assist jurisdictions in the Central Valley in addressing concerns with 200-year flood plain issues, and help small cities with a regulatory problem with a state agency. These issues are summarized briefly below.

Pension Reform. Achieving substantive pension reform was a top League priority and reflects the culmination of several years of internal work developing and refining policies. While implementation issues with AB 340 (Furutani) will naturally occur, this is a positive step toward restoring state and local fiscal stability over the long term.

Cap-and-Trade Revenues. The League worked on developing policy to guide future distribution of expected future revenues derived from cap-and-trade auctions of allowances for greenhouse gas emissions. AB 1532 (Pérez), supported by the League, contains guidance for an investment plan for cap-and-trade revenues that will likely include funding for local government transportation, energy efficiency and SB 375 implementation.

Water Boards. The League supported several bills addressing issues with state and regional water quality control boards. SB 965 (Wright) addresses the Administrative Procedure Act exemptions and prohibitions on ex parte communication between members of the state and regional boards and the regulated community.

Flood Control. Implementation of recent flood control mapping was creating much concern for cities in the Central Valley. The League worked extensively with the Department of Water Resources to help its staff understand the impacts of their proposed regulations and supported SB 1278 (Wolk) to address these issues.

Small Cities and Community Development Block Grants. Eighteen small cities were facing difficulty after their applications for state Community Development Block Grants had been incorrectly scored by the Department of Housing and Community Development (HCD). The League led a lobbying effort to help them get their applications rescored, which included drafting and circulating a letter to the HCD director signed by all the affected legislators and meeting with the director.

Evaluating League Progress On Strategic Goals

The League board of directors outlined three strategic goals for the 2012 legislative session:

  1. Support sustainable and secure public employee pensions and benefits;
  2. Promote local control for strong cities; and
  3. Build strong partnerships for a stronger Golden State.

As always, the cornerstone of the League’s political strength and success begins with the commitment and dedication of the many city officials who devote their time and energy to serving within the League’s divisions, policy committees, special task forces and board of directors.

Support Sustainable and Secure Public Employee Pensions and Benefits

The League has been concerned about the sustainability of public pensions in California since 2005, when it published its White Paper on Pension Reform. Cities were dedicating increased revenue to cover retirement and other benefit costs — and reducing current services to pay for them. The crisis expanded in 2008 when a collapsing economy dramatically reduced local revenue and earnings on retirement investments.

In 2011 the League updated its pension policies in the Pension Reform Action Plan, an effort spearheaded by the League’s City Managers’ Department and refined by the League policy committees and board of directors. Pension reform was a League strategic priority in both 2011 and 2012.

But could the Legislature deliver? Despite the dire fiscal forecasts of pension systems, concerns of taxpayer groups, admonishment by editorial boards and indefensible examples of pension spiking and bloated compensation packages, most political observers doubted whether the Legislature could ever muster the fortitude to make substantial reforms to state and local pensions.

An opportunity appeared, however, with Gov. Brown’s push for voter approval of a tax increase. Realizing that voters were skeptical, the governor said the Legislature had to enact tough cuts to state programs and make real reforms to public pensions. The governor produced a 12-point plan for pension reform in 2011. This plan matched the League’s principles in many respects.

After various stalled attempts, negotiations became serious at the end of the 2012 session. The Governor’s Office asked the League to help shape portions of the final agreement. The passage of AB 340 (Furutani) is a major step forward and is expected to save billions of dollars for taxpayers and state and local agencies over the long term. As expected, there will be many implementation issues and future cleanup, but progress was achieved on a major League priority. Looming next on the horizon are the massive state and local liabilities for other post-employment benefits (OPEB) for public employees — another area where the League will focus.

Promote Local Control for Strong Cities

Promoting and defending cities’ local authority is the cornerstone principle of the League. “Local control” means local democracy in its purest form; this core tenet unites all cities. City officials believe that solutions to problems are best addressed by letting the local democratic process work at the community level, where the people have direct access to their government and can hold their elected representatives accountable for decisions and the quality of local services. Cities resist rigid, top-down, “one-size-fits-all” solutions that cannot be changed or adjusted to match local circumstances.

When dealing with a Legislature that introduces more than 2,000 bills each year, the League must maintain a strong and sustained defense of local control. It is always important to keep as many problematic bills as possible off the governor’s desk and to limit the number of requested vetoes. In 2012 the League successfully defended local flexibility on many fronts. The following are examples of bills that were either stopped or amended to address League concerns during the session.

Protecting Local Flexibility: SB 375 Implementation. The League worked on several fronts to defend local flexibility under SB 375. Prior to 2012 the League met with the California Air Resources Board (ARB) staff to reiterate its position that regions should have local flexibility in deciding how to meet assigned greenhouse gas reduction targets. Western City published an article, “Trailblazing a Sustainable Path,” that describes how local flexibility was critical to the success of plans developed by the San Diego Association of Governments, and the League sent a copy of the article to all legislators and key administration officials. The League also helped stop two bills — AB 1627 (Dickinson), which prohibited local land-use approvals unless they complied with state vehicle miles traveled (VMT) reduction criteria; and AB 904 (Skinner), which imposed a uniform parking standard in all local transit-intensive areas.

Land Use. As always, it was a busy year on land-use matters. AB 2231 (Fuentes) sought to shift liability for sidewalk repairs to cities, but it was defeated. Amendments were secured to AB 1897 (Campos) to remove provisions that would have imposed an unworkable one-size-fits-all planning requirement for local agencies to identify “food deserts” in their community. In addition, the League initially sponsored SB 1498 (Emmerson) to address some costly planning requirements for disadvantaged communities imposed on cities, then later worked to insert language into an omnibus bill that will reduce planning costs for cities. Finally, the League stopped AB 2312 (Ammiano), which proposed a problematic structure for marijuana regulation to override local zoning and building and business license ordinances.

Municipal Bankruptcy. The League worked to stop AB 1692 (Wieckowski), an effort to unravel the pre-bankruptcy mediation process under AB 506 of 2011.

Public Records Act. The League opposed earlier versions of SB 1002 (Yee) to amend the California Public Records Act (PRA) in a way that changed its fundamental premise and imposed costly burdens on public agencies. Amendments later removed League concerns.

The Brown Act and Litigation. Early versions of SB 1003 (Yee) exposed local agencies to needless litigation by allowing lawsuits under the Brown Act about alleged “past actions” — even if the alleged violation was no longer occurring. The League worked with expert city and county counsel to craft amendments to the bill that addressed these concerns.

Employment Applications and Criminal History. The League took an “oppose unless amended” position on AB 1831 (Dickinson), which prohibited cities and counties from inquiring into criminal history on employment applications. The bill later died in the Senate.

Local Coastal Program Mandate Repeal. The League worked with other organizations to successfully oppose a budget proposal by the governor that would have removed local approval authority for projects in the coastal zone.

Build Strong Partnerships for A Stronger Golden State

While building partnerships to reform state governance and promote transparency was a League strategic goal, opportunities were limited in a year when most of the organization’s resources were expended defending and assisting cities on post-redevelopment issues and protecting local authority in a volatile legislative climate.

Several meetings of the League’s policy committees and board of directors were dedicated to reviewing California Forward’s proposed ballot initiative. Titled the “Government Performance and Accountability Act” and labeled Prop. 31 on the November 2012 ballot, the measure proposed many changes to state and local budgeting. California Forward incorporated some suggestions, but opted not to accept several major League amendments. Based on concerns over how future implementation could affect local governments, the League adopted a “No Position” on Prop. 31.

With regard to transparency, the League worked to resolve issues with SB 186 (Kehoe), sponsored by the state controller. The legislation would have given the controller new authority to investigate and audit local agencies under specific circumstances and establish a voluntary financial review committee composed of state and local government representatives. This measure was later held up over unrelated matters, but its content could be revisited in 2013.

The most significant legislative reform measures for 2012, however, were implemented in the November legislative and congressional elections. Three measures enacted in recent years are now at work for the first time:

  1. Legislative redistricting by an independent panel;
  2. The open primary system, which places the two candidates receiving the most votes in the primary on the General Election ballot; and
  3. The results of recently enacted Prop. 28, which expands term limits and enables all newly elected legislators to serve up to 12 years in one house.

The 2013–14 session will reveal if these reform proposals combine to produce a more accountable and less partisan Legislature.

Going Forward

The passage of Prop. 30, the governor’s tax measure, establishes an improved tone for the 2013 legislative session. While state budgetary challenges are not completely resolved, the Legislative Analyst’s Office (LAO) projects a budget gap of less than $2 billion — a significant improvement from the $26 billion deficit two years ago when Gov. Brown took office. According to the LAO, if the governor and legislators hold the line on spending it can lead to revenue surpluses in the near future and permit the state to establish a prudent reserve fund. Maintaining such discipline will be a challenge.

How will Democratic legislators exercise their complete budgetary and policy dominance in the Capitol in the 2013–14 session? For the past two years, as a result of Prop. 25 of 2010, legislative Democrats could adopt budgets with a majority vote, but they could not pass tax increases without a two-thirds vote and agreement with legislative Republicans. However, the November 2012 elections removed this obstacle: Democrats now hold more than two-thirds of the seats in both houses of the Legislature. This gives the Democrats the ability to adopt tax and fee increases, enact urgency legislation, reduce existing tax exemptions, override a governor’s veto and place measures on the state ballot.

And how will a new class of legislators — elected from redrawn districts and from top-two primaries with the opportunity to spend up to 12 years in the Assembly or Senate — conduct themselves? Will they be more focused on developing policy expertise and working in a bipartisan fashion than their predecessors? Or will it be more of the same, where legislators vote in lockstep with their caucuses most of the time?

For cities, unwinding their redevelopment agencies will continue to play out both in the DOF administrative process and numerous pending court actions. At some point, legislators and the governor may also awaken to the serious policy problems created by sweeping the Vehicle License Fee from newly incorporated cities and inhabited annexations. Those clamoring for sustainable development and affordable housing will have to become much more serious about developing solutions and tools to address the loss of redevelopment and challenges of rebuilding existing urban areas.

Whatever challenges lie ahead, cities must remain unified. For 114 years, the League’s strength has been the power of cities working together with a common voice and agenda. While the past several years have tested those bonds, they have not broken. By maintaining our internal strength and building strategic alliances we will regain lost ground and shape a better future for our communities and California.


Unfinished Business

In every legislative session significant work is expended on projects that will be continued in the coming year. Here are several areas of the League’s unfinished business.

City Vehicle License Fee (VLF) and Incorporations and Annexations. Through SB 89 of 2011, the Legislature swept $130 million in city VLF funding as part of a budget plan to fund realignment. This raid caused severe hardships for recently incorporated cities and cities that had annexed inhabited areas. The League assisted the recently incorporated cities in various legislative efforts including an end-of-session push on AB 1098 (Carter), which the governor vetoed. Meanwhile the League is awaiting a decision on its litigation that is pending in Sacramento Superior Court challenging the constitutionality of the 2011 VLF funding sweep in SB 89. Future legislative action on this issue is expected.

Local Utility User’s Taxes (UUT) Revenues and Augmentation. The League has been involved in a discussion involving wireless companies and retailers over the challenges of collecting both state add-on rates and local UUT from the sales of prepaid wireless services. Cities may be losing $100 million in local UUT revenue due to the difficulties of collection. After significant consultation with UUT cities, the League developed and submitted amendments to AB 1050 (Ma), the vehicle for the discussion, but that measure ultimately did not move. Negotiations are expected to resume in 2013. Any agreement needs to be structured in a way that protects affected local agencies from legal and political risks over the long term.

California Environmental Quality Act (CEQA). After 18 bills were introduced on CEQA reform, the League worked with city attorneys to identify issues and convey concerns to legislative staff and other stakeholders. No major legislation on CEQA passed in 2012, but action is expected in 2013.

Enterprise Zones. Gov. Brown was unsuccessful in his 2011 effort to eliminate enterprise zones due to the opposition of many groups — including the League — and a legislative two-thirds vote hurdle. The state Department of Housing and Community Development launched a regulatory effort in 2012 to alter enterprise zone requirements, and the League supported legislation that would have provided temporary extension to two expiring zones. The League will remain active in reviewing HCD regulations and supporting enterprise zones.


                

Governor's Final Bill-Signing Decisions: Waiting for Consistent "Subsidiarity"

The ability to sign and veto legislation is a powerful tool. Governors set a policy tone with their decisions. Veto messages are always read closely, and a governor’s propensity for vetoing bills is also evaluated. In 2011 Gov. Brown vetoed approximately 14 percent of bills, but in 2012 that percentage dropped to 12 percent. Some vetoes can be attributed to avoiding decisions that could undermine the governor’s tax measure at the ballot box. Whether Gov. Brown reverts to his track record of the 1970s, when he vetoed only 4 percent of all bills over eight years, remains to be seen. Should he return to such practices, keeping bills harmful to local control off of his desk will be even more critical.

The first half of this governor’s term has had one notable high (pension reform) and some deep lows (for example, redevelopment dissolution) for cities. In 2011 the governor’s sign-veto decisions were consistent with the League’s request just 56 percent of the time, and he signed some of the most controversial League-opposed bills, such as AB 438 (Williams), limiting contracting for library staffing and AB 646 (Atkins) requiring compulsory fact-finding.

In 2012 the governor’s decisions were improved, but this also reflects that the League was more successful in keeping controversial items from reaching his desk. The League appreciated his veto of AB 2451 (Pérez), which proposed costly, expanded death benefits to the descendants of firefighters and police. Yet the governor also vetoed SB 214 (Wolk) and several other bills that would have provided additional tools to local governments to develop infrastructure and pursue economic development.

Each year Gov. Brown shares concepts derived from his Jesuit education. In 2012 he described the “principle of subsidiarity” when vetoing AB 2242 (Dickinson), a measure that would have undercut the ability of school districts to handle disruptive students. About that bill he wrote, “The principle of subsidiarity calls for greater, not less, deference to our elected school boards, which are directly accountable to the citizenry.” To city officials, this mirrors a definition of “local control.” It would be welcome if the governor applied this principle to bills on his desk in a consistent manner during the final two years of his term.